Bloomberg Talks
00:00:02 · S0, Ariane Gorin
[00:00:02] S0: Bloomberg Audio Studios. Podcasts, radio, news. Shares of Expedia getting caught in the downdraft today. This after reporting third quarter earnings. the K-shaped economy playing a role in those results with the CEO, Ariane Gorin, saying on the conference call, as in previous quarters, we saw strength with more affluent consumers. And we want to start there. She joins us now here in Studio 2 to talk a little bit more about that. And I do want to start off with some of the top line numbers here because, and just to go through them, we're talking about 7% room night growth, 11% on the gross bookings, 12% on top line revenue, 17% on adjusted EBITDA growth. You raised your full year outlook. Your share should be up 13%, not down. What's going on? [00:00:46] S1: Well, look, who can ever explain what's going on? What I would say is we had a very strong third quarter. Demand was resilient. You see it in the numbers. As you said, we raised our full year guide. Now, it's true that as we look into the fourth quarter, there is some moderation in demand. We often see that ahead of elections. And then in addition, there's the geopolitical events happening in the Middle East, some in Europe, that have put some moderation in demand. But, you know, overall, the travel sector is healthy, we're executing well, and it's an exciting time for us.
00:00:46 · Ariane Gorin, S0, S2
[00:00:46] S1: Well, look, who can ever explain what's going on? What I would say is we had a very strong third quarter. Demand was resilient. You see it in the numbers. As you said, we raised our full year guide. Now, it's true that as we look into the fourth quarter, there is some moderation in demand. We often see that ahead of elections. And then in addition, there's the geopolitical events happening in the Middle East, some in Europe, that have put some moderation in demand. But, you know, overall, the travel sector is healthy, we're executing well, and it's an exciting time for us. [00:01:16] S0: Well, I am curious about that, though, too. I mean, I know you guys talked a lot about how election cycles sort of disrupt the travel schedule, but give me a sense as to how quickly you tend to see a rebound coming out of these elections. I mean, are you seeing it already here on day two? [00:01:29] S1: Look, it really depends as you go, but the things we look for are What's the impact on consumer confidence? What's the impact on discretionary income? And to the extent that those move, people want to spend on travel. [00:01:43] S2: Well, so talk to us more then about what the travel landscape looks like, knowing we still see persistently high fuel costs. There are potential headwinds still when it comes to cost pressures that consumers even at the high end may be feeling. For how long can this go so long as we don't see a material crisis? slow down in the inflationary pressures.
00:01:43 · S2, Ariane Gorin
[00:01:43] S2: Well, so talk to us more then about what the travel landscape looks like, knowing we still see persistently high fuel costs. There are potential headwinds still when it comes to cost pressures that consumers even at the high end may be feeling. For how long can this go so long as we don't see a material crisis? slow down in the inflationary pressures. [00:02:00] S1: As you say, you know, the strength more on the high end. And despite the fact that there are high fuel costs, we still saw a lot of people traveling and people spending. They want to get outdoors. As we look forward to the holiday season, what we're seeing is that people who are looking for flights domestically, their prices are up almost 15%. If they're looking internationally, it's up almost 20%. So we're seeing people looking for good deals. They're more flexible on their dates. They're using more things like our flight price tracking tools. They're really trying to figure out how can they make their dollars go further for them. But right now, people are still spending. [00:02:33] S2: And you're saying people are looking at things like this, not AI agents, because you obviously have partnerships. How does that change the game for you?
00:02:33 · S2, Ariane Gorin, S0
[00:02:33] S2: And you're saying people are looking at things like this, not AI agents, because you obviously have partnerships. How does that change the game for you? [00:02:41] S1: Well, look, you know, These AI agents are really an opportunity for us. I would start by the third-party AI agents, whether it's Muse or others, these are opportunities for our brands to get out there. And as travelers are searching more, whether it's these new AI services, social or search, these are all opportunities for our brands to be put in front of customers. Then there's all the agentic work we're doing in our own products. Because it's true, people are getting more used to using natural language to have conversations. it's still a very small portion of the traffic that comes into us. And even in our brands, the natural language experiences we have are still a small portion of traffic, but we see that when people use our AI compare feature to compare different properties rather than going into each property card, they're more likely to book and they book bigger ticket items. [00:03:31] S0: Well, I am curious though, how does that change the complexion of your business as well? Because obviously there was an advertising relationship that you got off of, I guess, the traditional search model. How much does the AI search model, for lack of a better phrase, or agentic model, How much of that changed the economics for you?
00:03:31 · S0, Ariane Gorin
[00:03:31] S0: Well, I am curious though, how does that change the complexion of your business as well? Because obviously there was an advertising relationship that you got off of, I guess, the traditional search model. How much does the AI search model, for lack of a better phrase, or agentic model, How much of that changed the economics for you? [00:03:48] S1: You know, I'd start by saying that two-thirds of our bookings in our consumer brands, Expedia, Hotels.com, and Vrbo, come directly to us. So there's a third that starts elsewhere in these other search experiences and social and the like. Now, when it comes to AI, it's still very early days. The economics of this all is getting worked out. But I would say the way I think about it is we've always been good at working with these new channels and figuring out a way where it makes financial sense for us to be able to attract customers to our brands. [00:04:17] S0: I am curious though, but my understanding is of that third that was going through traditional search or whatever it was, my understanding is that the relationship that you had with the consumer was much more direct in that way. Is it as direct if I'm coming to you through an AI agent in some way, or is that sort of the benefit of that going to OpenAI or Claude or whoever?
00:04:17 · S0, Ariane Gorin
[00:04:17] S0: I am curious though, but my understanding is of that third that was going through traditional search or whatever it was, my understanding is that the relationship that you had with the consumer was much more direct in that way. Is it as direct if I'm coming to you through an AI agent in some way, or is that sort of the benefit of that going to OpenAI or Claude or whoever? [00:04:38] S1: So I would say it can be sort of the same. So if you were coming to us through Google or you were coming to us through an agent, By the way, in the integration we have with Muse right now, the agent can do all this work and then you can choose, do you want to book on Muse or do you actually want to come and book directly with us? But again, it's all quite fluid. [00:04:54] S0: When I looked at your results and I saw the growth that you had on the B2B side, which is outpaced 20 plus percent compared to 6% on the consumer side. Is that a reflection of some of the shift we've been seeing in AI or was that something that was already sort of in place prior to this? [00:05:08] S1: If you look at our B2B business, it was up 19% last quarter. It's had, I believe, almost 20 quarters in a row of really strong double-digit growth. Our consumer business grew at 7%. We've had two of our fastest growing quarters in the last couple quarters, and it actually accelerated in the US. They both have different exposures geographically. They have sort of different, I would say, complexions to those two businesses, but they both had really strong quarters.