Travel is Picking Up: So Why Are Expedia’s Bookings Declining?
Hot Travel Season
Following a couple of years as pandemic shut-ins, many Americans are heading out of town this summer. It seems there is plenty of pent-up demand, even as soaring inflation has made travel more expensive. A recent survey by travel site Vacationer revealed that 80% of respondents plan summer trips, with nearly half planning more than one. Expedia (EXPE) CEO Peter Kern previously predicted this summer’s travel season will end up being the busiest ever recorded.
The World Travel & Tourism Council has backed up that prediction, anticipating US travel and tourism will generate $1.1 trillion in revenue. Operators in the space see juicy profit potential after a challenging couple of years.
Trouble for Incumbents
Despite the traveling trend, companies like Bookings Holdings (BKNG) and Expedia Group may be keeping the champagne corked, as a new threat to their bottom line has emerged. Last year, Alphabet’s (GOOGL) Google stepped onto the playing field. The tech giant now allows travel operators and hotels to list on its platform for free.
The heightened competition is especially challenging for incumbents Expedia and Booking given consumers’ heightened price sensitivity amid high inflation. Brand loyalty may take a back seat to the best price. Since last year, Booking and Expedia saw their status as the low-price leader decline from more than half of all such bookings to just 28% of the time in 2022.
The Justice Department sued Google in 2020, alleging the company breached antitrust laws by reducing options in searches. Google countered that it actually expanded choices. The free platform may be especially beneficial to smaller travel booking sites.
The popularity of the platform seems to be taking off. Google Travel snagged fewer than six bids for hotel auctions on average in 2020. This year that number jumped to more than 26. Consumers may well benefit from the increased competition for higher-margin hotel bookings, resulting in discounted lodging. But for those looking to save on airfare, the bargains may be scarce to nonexistent, given industry consolidation and less differentiation.
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