Expedia Group reported another steep drop in revenue in the fourth quarter, missing analysts’ estimates amid a surge in Covid-19 cases and new pandemic-related restrictions that weighed on travel in the last few months of 2020.
Revenue fell 67% to $920 million, marking the fourth consecutive year-over-year decline. Analysts had projected sales of $1.1 billion, according to data compiled by Bloomberg. Gross bookings were $7.6 billion, also down 67% compared with a year earlier, the Seattle-based online travel giant said in a statement Thursday, barely an improvement from the previous quarter’s 68% decline.
Before 2020, Expedia, which provides everything from airline tickets to hotel rooms, rental cars and cruises, had gone eight years without a revenue decline. But the travel industry was one of the worst hit as a result of the coronavirus and the global lockdowns, forcing Expedia and its peers to endure steep losses and eliminate thousands of jobs. While the summer months seemed to offer a brief respite and saw people beginning to take tentative steps back into travel, the fall and winter saw a resurgence of infections, prompting a new wave of lockdowns and travel restrictions.
“The fourth quarter brought signs of hope in the form of vaccine approvals, but rising cases across the globe and rolling shutdowns of various travel markets made an impact,” Chief Executive Officer Peter Kern said in the statement. As a result, the fourth quarter didn’t “show any real sequential progress other than some signs of modest improvement around the holidays that carried into the early part of 2021.”
On a call to discuss earnings with analysts Thursday, Kern said there are some signals of stronger demand in 2021, such as an increase in January gross bookings. He said their decline was in the high 40% range, compared with the 67% drop in the fourth quarter.
Kern was ultimately conservative in his outlook, telling investors to “expect things to be bumpy for a while.”
There are early indications that the market could improve later this year. Dr. Anthony Fauci, the nation’s top infectious disease doctor, said Thursday that an increasing supply of vaccines will allow for a “much more of a mass vaccination approach” in the U.S. by April.
Analysts at Deutsche Bank wrote in a note to investors before the results were published that the first half of the year “is going to be tougher than we previously expected given the scale of rising case counts globally,” but vaccines should help with demand in the second half.
Expedia’s home-rental unit Vrbo, which competes with Airbnb Inc., has weathered the pandemic relatively better than its parent. While flights and business travel ground to a halt and hotels shuttered, demand increased for regional vacations and work-from-home getaways.
People have been booking on Vrbo further out, reversing a pandemic trend of last minute decisions and signaling consumer confidence, Chief Financial Officer Eric Hart said. “We know there’s pent-up demand, people want to travel, and I think people are confident they’re going to be able to travel, at least domestically,” Hart said.
Expedia doesn’t break out Vrbo’s earnings and doesn’t plan to, Kern said when asked by an analyst.
Also this year, Expedia should start to benefit from painful restructuring measures it took last year, including eliminating 3,000 jobs. The cost-cutting effort may help the company moving into the second half, said Bloomberg Intelligence analyst Matthew Martino.
Expedia reported an adjusted loss before interest, taxes, depreciation and amortization of $160 million, while analysts were expecting a loss of $56.3 million. The adjusted loss per share was $2.64, beating the average analyst estimate of a loss of $2.06.
The shares fell about 2% in extended trading in New York after closing at $149.91. The stock has gained 13% this year.
Jim Hepple is an Assistant Professor at the University of Aruba and is Managing Director of Tourism Analytics.