Expedia’s earnings call last week gave us a glimpse into the state of the vacation rental business. May and June saw strong bookings, but July was flat. Market activity is intricately tied to restrictions, virus growth, etc., so this slowdown is expected given the growing number of Covid cases which have caused some cities to reinstate restrictions.
Expedia CEO Peter Kern is correct when he said recovery will not be linear.
We will have a bouncy recovery. There’s no question. We’ve seen virus numbers go up in certain places. We’ve seen new restrictions come into certain geographies. And it appears like that will be the state of the union until things change scientifically. And so we expect this not to be a linear recovery, obviously, and we expect some bumps in the road.
Key Takeaways from Expedia’s earnings call:
Vacation rental bookings slowed in July after strong rebound
“In June, the lodging side of that was down less than 60%. So all of that is a very good trend but still obviously well below anything we’d like to see in the business. As for July, it’s roughly in line with June, slightly off those numbers. Vrbo had a ton of business and has been a great leader for us in the recovery. As we got into summer, people obviously have a real interest in the whole home model and being able to have their families alone and not in shared space. But that compression has softened a little bit. On the flipside, the hotel business has been slightly stronger even into July.”
Expect vacation rental supply expansion
“On the Vrbo side, one interesting part is that we have seen historically when you get economic downturns, you often get more supply coming into the market. So we do have a hope that we will see and we have seen some early signs of more supply coming into the market. So that should help alleviate any inventory issues.”
No long-term consumer behavioral change
“I know there’s been a lot of comments out there from my peers and others about the future of travel. I don’t think we’ve seen anything to suggest that people’s travel behavior will materially change. I do think that to your question specific to Vrbo, we are getting a lot of people experimenting with and hopefully being very happy and satisfied with the alternative accommodation experience and in particular for us, Vrbo’s main emphasis on the whole home.”
“It (the pandemic) may make them open to things they weren’t open to before. But I don’t think we’re seeing some structural shift in people’s views about hotels or other things. It’s just a moment. And it’s just about their comfort and their safety and what they’re able to do.”
Expectation for the fall and Christmas
“I would say on the Vrbo part, we are focusing on the new realities around working from home. We have been pushing a variety of campaigns around helping people with that idea, homework, homeschool, the importance of WiFi and products like that in this changed world. And as many of you are probably experiencing, the question of the school year and how kids will go back to school varies greatly across the US, let alone the world. And so I think there will be kind of different and unique opportunities to capitalize on that. We do think the fall will be different than it has historically been. We do think the Christmas season could well be different whether it’s just longer or we have seen over the summer these extended booking windows where people are booking for longer periods of time as they just decamp to somewhere different with their family for a month. And I think we’ll still see some trends like that. But it’s too early to tell, honestly, what the fall will really look like. And I think candidly that’s because of all the uncertainty in the world that people still don’t know if their kids are physically going to go to school or not or are they going to need to go into work or not, all of those things. So I think as we get some clarity on that, which of course is coming in the month of August, in large part, I think we’ll start to get a better picture.”
Vacation rentals have been able to drive pricing compared to hotels
“We have seen pricing and propensity to pay, et cetera, and long duration very evident in the vacation rental business. People in compressed markets have been able to push what they charge, and – the suppliers that is, and people have, as I mentioned, been staying long. There has been, not the inverse, but there has been more pressure on pricing, and more discounting widely because people’s comfort and propensity to go to hotels has been less robust.”