How Expedia Makes Money

Expedia Group Inc. (EXPE) is a global online travel platform that enables business and leisure travelers to plan, book, and enhance their travel experiences. The company makes available a variety of services provided by lodging properties, airlines, car rental companies, and cruise lines. Expedia operates an extensive portfolio of brands to respond to travelers' needs, including Brand Expedia, Hotels.com, Vrbo, Orbitz, Travelocity, trivago, CarRentals.com, and more.

Expedia competes with companies offering services to both leisure and corporate travelers. These competitors include travel agencies, tour operators, consolidators and wholesalers of travel products and services, travel metasearch websites, mobile travel applications, and social media websites. Major rivals include TripAdvisor Inc. (TRIP), Trip.com Group Ltd. (TCOM), American Express Global Business Travel, Airbnb Inc. (ABNB), and Booking Holdings Inc. (BKNG).

Expedia's Financials

Expedia announced in February financial results for Q4 of its 2021 fiscal year (FY), the three-month period ended Dec. 31, 2021. The company reported a net income attributable to its common stockholders of $276 million, a significant improvement from the $412 million net loss reported in the year-ago quarter. Revenue rose 147.8% year over year (YOY) to $2.3 billion.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), which Expedia uses as a profitability metric for its individual business segments, was $479 million for the quarter. It was a dramatic turnaround from the adjusted loss before interest, taxes, depreciation, and amortization of $160 million in the year-ago quarter.

Expedia generated revenue from four specific types of service during the fourth quarter. It received about 75% of total revenue from Lodging, which includes revenue generated through the facilitation of hotel and alternative accommodations. Air, which includes airline ticket sales, comprised just 3% of total revenue. Advertising and media, which primarily includes ad revenue generated by trivago, comprised 7%. Expedia received 15% of its revenue from car rental, insurance, destination, and other services.

The COVID-19 pandemic and the related drop in global travel has had a severe adverse impact on Expedia's business and financial results since early 2020. The company said that it experienced another significant disruption from the pandemic during Q4 FY 2021. However, it noted that the impact was less severe than during previous waves. Expedia expects the travel industry and travel demand to continue recovering throughout 2022.

Expedia's Business Segments

Expedia operates through three reportable segments: Retail, B2B, and trivago. The company provides a breakdown of revenue and adjusted EBITDA for these three segments. The breakdown is inclusive of revenue generated through intersegment transactions, which primarily consist of advertising and media services provided by Expedia's trivago segment to its Retail segment.

In order to reconcile Expedia's total revenue across these three segments with its total consolidated revenue, it is necessary to subtract $31 million related to the intersegment transactions from the total revenue across all segments. Similarly, it is necessary to subtract $119 million of unallocated overhead costs from total adjusted EBITDA across all segments to arrive at Expedia's total consolidated adjusted EBITDA.

Retail

The Retail segment aggregates a variety of operating segments and is focused on the provision of a range of travel and advertising services to global customers through a number of different brands. Those brands include: Expedia.com and Hotels.com in the U.S., as well as localized websites throughout the world. Retail also includes other brands such as Vrbo, Orbitz, Travelocity, CheapTickets, CarRentals.com, Expedia Cruises, and more.

Revenue for the segment rose 146.4% YOY in Q4 FY 2021 to $1.7 billion, comprising about 75% of Expedia's total revenue across all three segments. Adjusted EBITDA increased 37-fold to $481 million, making up more than 80% of the total across all segments.

B2B

The B2B segment consists of the company's Expedia Business Services organization. It includes Expedia Partner Solutions, which provides travel services to leisure travelers via third-party company branded websites, and Egencia, a travel management company that offers travel services to businesses and their corporate customers. Expedia, however, sold Egencia in November 2021 and will thus no longer have an impact on financial results in future periods.

Revenue for the B2B segment expanded 158.6% YOY in Q4 FY 2021 to $481 million, comprising about 21% of Expedia's total revenue across all segments. The segment posted adjusted EBITDA of $97 million, a significant improvement from the adjusted loss before interest, taxes, depreciation, and amortization of $52 million in the year-ago quarter. It accounted for more than 16% of total adjusted EBITDA across all segments.

trivago

Expedia's trivago segment is comprised of its hotel metasearch, or search aggregator, websites. The segment generates ad revenue primarily by sending referrals from those sites to online travel companies and travel service providers.

Revenue for the segment rose 160.5% YOY in Q4 FY 2021 to $99 million, comprising about 4% of Expedia's total revenue across all three segments. The segment posted adjusted EBITDA of $20 million, a significant turnaround from the adjusted loss before interest, taxes, depreciation, and amortization of $4 million reported in the year-ago quarter. The trivago segment accounted for over 3% of total adjusted EBITDA across all segments.

Expedia's Recent Developments

On April 4, 2022, Expedia announced that it has appointed Rob Torres, a long-time Google veteran, as senior vice president of Media Solutions. Torres spent more than 15 years with Google, most recently as the company's managing director of advertising and marketing. Before his time with Google, he worked for Expedia as vice president of strategic accounts between 1999 and 2006.