Key points
- Expedia's strong third quarter and raised outlook still saw shares fall 14% on moderating demand and geopolitical events.
- Expedia's B2B grew 19% with almost 20 straight quarters of double-digit growth, while consumer grew 7%.
- Ariane Gorin calls AI agents like Muse an opportunity, but AI traffic is tiny and economics remain early.
Expedia's B2B engine powers a quarter the market punished
Expedia's centre of gravity is shifting from consumers to the businesses it supplies. B2B has compounded at double digits for nearly 20 straight quarters and now drives the growth, while consumer runs in the mid single digits. The selloff that followed earnings reflected a softer fourth quarter, which Gorin attributes to election-year caution and geopolitics. AI is the open question, and Expedia is positioning its brands to be found through third-party agents.
Takeaways
- B2B carries growth while consumer trails. B2B was up 19% last quarter and has posted almost 20 consecutive quarters of double-digit growth, against 7% in consumer. Two of Expedia's fastest-growing quarters came in the last couple of quarters, and growth accelerated in the US.
- AI agents are a channel, not a threat. Gorin calls third-party agents such as Muse an opportunity to put Expedia's brands in front of customers as travellers search more. In the Muse integration the agent does the work, and the traveller chooses whether to book on Muse or with Expedia.
- AI traffic is tiny and its economics unsettled. Traffic arriving through AI and natural-language experiences is still a very small portion of Expedia's total. Gorin says it is very early days and the economics are being worked out, though people who use the AI compare feature book more and book bigger-ticket items.
- Strong quarter met with a 14% selloff. Expedia posted 7% room night growth, 11% gross bookings growth, 12% revenue growth and 17% adjusted EBITDA growth, and raised its full-year outlook. Shares still fell about 14% on a softer fourth quarter, which Gorin ties to election-year caution and geopolitics.
- Strength sits at the high end of travel. Gorin says demand is concentrated among more affluent consumers, and people kept travelling and spending despite high fuel costs. Holiday flight prices are up almost 15% domestically and almost 20% internationally, and travellers are hunting deals and staying flexible on dates.
- Expedia brand is the fastest grower. Expedia is the fastest-growing brand and has been for several quarters, because customers can bundle hotels, vacation rentals, flights and cars. Hotels.com is a pure play whose loyalty programme is loved by unmanaged business travellers. Vrbo is positioned as the trusted vacation rental specialist.
- Europe softness offsets US inbound gains. Inbound travel to the US improved from Canada and Asia but stayed soft from Europe. Inside Europe, domestic and intra-regional travel held up while long-haul was much weaker, partly because of air capacity and fuel costs.