Expedia Group Inc. (EXPE)

A. Company Overview

Expedia Group, Inc. is a prominent online travel agency (OTA) that operates a comprehensive suite of travel-related services and products. The company is on a mission to "power global travel for everyone, everywhere," and believes in travel as a transformative experience that enhances human connections and promotes cultural understanding. Expedia Group utilizes a robust technological infrastructure to connect travelers with an extensive portfolio of lodging options, transportation, and additional travel services, enabling seamless research, planning, booking, and experiencing travel around the globe.

By the end of 2023, Expedia Group had over three million lodging properties listed on its platform, with over two million alternative accommodations available through its Vrbo brand and additional offerings encompassing more than 940,000 hotels and alternative locations. Furthermore, the company provides access to over 500 airlines, various package deals, rental cars, cruises, travel insurance, and activities.

Expedia Group facilitates the distribution and marketing of travel products through multiple channels, including mobile apps, websites, alternative distribution channels, partnerships with businesses, and customer support centers, reaching a global audience of travelers. It also offers advertising and media services, primarily aimed at travel providers, enhancing their ability to reach potential customers through its platforms.

B. Historical Development

Founded over 25 years ago as one of the first online travel agencies, Expedia Group has played a pivotal role in revolutionizing the travel landscape. Its early establishment paved the way for an online travel marketplace that empowered consumers to manage their own travel arrangements. The company has consistently evolved, adapting to shifts in technology and consumer demands while navigating substantial changes in the travel industry.

As an innovative leader, Expedia Group’s strategy has included several strategic acquisitions that have expanded its brand portfolio and service offerings, enhancing both scale and depth. However, as competition in the OTA market intensified, the complexity of its operations led to inefficiencies.

In response to these challenges, the company restructured its operations in 2020, adopting a platform operating model that enabled centralized marketing investment management and operational efficiencies. This transition reduced complexity and fostered a more streamlined approach across its brands, improving cost effectiveness and performance.

In 2020, Expedia Group made the strategic decision to exit certain non-core businesses, including the sale of Egencia, a corporate travel management service, to American Express Global Business Travel. This decision was part of a broader goal to concentrate resources on enhancing the travel experience for consumers.

In 2021, Expedia Group shifted towards nurturing direct relationships with consumers, emphasizing customer loyalty and increasing app adoption. This involved launching the One Key loyalty program, enabling members to earn and redeem rewards across multiple brands. Following a platform consolidation effort, the company also unified its technology stack for its core brands, increasing operational capacity and feature release velocity.

C. Market Opportunity and Business Strategy

As one of the largest online travel companies globally, Expedia Group has significant market potential, with gross bookings representing a single-digit percentage of the estimated $2 trillion in total global travel spending for 2024. The company is focused on leveraging its brand strength, supply chain capabilities, and technological advancements to drive value for travelers and business partners.

Key strategic focuses include:

• Brand and Supply Strength: Expedia Group capitalizes on a diverse portfolio of recognized brands like Expedia, Hotels.com, and Vrbo, alongside partnerships with travel suppliers to provide extensive travel products and services.
• B2C and B2B Segmentation: The company operates a business-to-consumer (B2C) segment, which offers comprehensive travel services to retail customers, and a business-to-business (B2B) segment that supplies travel technology and supply to a wide range of partners including airlines, travel agents, and corporate travel management companies.
• Advertising and Media Services: Through its advertising platforms, Expedia connects travel suppliers with a large audience of travelers, facilitating increased visibility and bookings for its partners.

D. Portfolio of Brands

Expedia Group's extensive brand portfolio is segmented into B2C and B2B categories.

B2C Segment

• Brand Expedia: A leading full-service travel booking site offering diverse travel products and services internationally.
• Hotels.com: Specializes in hotel accommodations, providing travelers with a dedicated lodging platform.
• Vrbo: Focuses on alternative accommodations, positioning itself as a trusted marketplace in this growing sector.
• Other brands include Orbitz, Travelocity, ebookers, and Wotif, though the majority of marketing investment is directed towards core brands: Expedia, Hotels.com, and Vrbo.

B2B Segment

The B2B segment serves travel and non-travel companies by providing travel technology solutions and access to a wide range of travel content. Tools offered include APIs, customizable e-commerce solutions, and travel agent booking systems. The sales of Egencia shifted some economic focus towards the lodging supply agreement with American Express GBT.

E. Technology and Operations

Expedia Group emphasizes technology as a core component of its strategy. The company has unified its technology teams across several disciplines, including data engineering and product development, creating synergies that support scalable service delivery and efficient operations. The migration to cloud computing enhances infrastructure flexibility and capacity while enabling innovative product development.

The customer service model integrates artificial intelligence to improve self-service capabilities for travelers, ensuring support channels are active 24/7 and capable of addressing diverse traveler inquiries.

F. Business Models

Expedia Group operates principally under three business models:

• Merchant Model: The company acts as a merchant of record for bookings, where travelers pay upfront and Expedia manages the transaction with suppliers.
• Agency Model: In this model, Expedia facilitates bookings as an agent, earning commissions from suppliers upon transaction completion.
• Advertising Model: This model generates revenue by offering advertisers access to travel audiences through various platforms.

In 2023, revenue distribution was predominantly from the merchant model (69%), followed by agency (24%) and advertising (7%).

G. Marketing and Promotions

Marketing strategies focus on enhancing brand recognition and driving traffic and bookings through a multifaceted approach that includes digital, offline, social media, and loyalty programs. The integrated One Key loyalty program is a central component, creating a unified rewards system across major brands, and fostering deeper consumer engagement.

H. Travel Supplier Relationships

Expedia Group maintains strategic relationships with a varied array of travel suppliers and global distribution systems, allowing it to offer a comprehensive suite of products. The company aims to generate consumer demand while minimizing costs for travel suppliers through innovative marketing strategies and technology solutions.

I. Competition

Expedia Group operates in highly competitive markets, facing challenges from both online and offline travel companies, traditional travel agencies, and corporate travel solutions. Differentiation is achieved through the breadth of product offerings, technology-driven consumer experiences, and loyalty programs.