Travel industry crisis as Expedia loses $2.7 billion in 2020

On 11th February, Expedia Group reported a net income loss of $2.7 billion for the year, compared to $903 million profit in 2019.

Expedia Group is one of the largest players in the tourism market operating under brands including Expedia, trivago, Orbitz, Travelocity and CruiseShipCenters amongst others. After seeing an 11% growth in room night bookings in 2019, the group saw these decline 55% in 2020 as demand dropped in the wake of lockdowns, international travel bans and reduced consumer confidence. Overall leading to a loss of $2.7 billion in net income for the full year of 2020.

The decline reflects booking losses each quarter, with Q2 declining 81% as the pandemic gripped the world. Most of the years growth was seen only in January and February. As the pandemic took hold from March, cancellations exceeded new bookings which fell 66%.

Expedia CEO Peter Kern said “Last year was an incredibly difficult year for the travel industry, and while not as hard hit as many of our partners, Expedia was not spared the broadly negative impacts of COVID-19. 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. As a result, Q4 did not show any real sequential progress other than some signs of modest improvement around the holidays that carried into the early part of 2021”

Amongst the biggest casualties to the crisis was air travel. Expedia reported an annual drop of 63% in air tickets sold, with a 67% reduction in revenue per ticket. A clear sign of the air travel crisis as ticket prices fell in attempts to stimulate demand.

In contrast, hotels and lodging saw lesser reductions. Whilst room nights booked dropped 55%, revenue per night increased 9% and Average Daily Rate by 3%. Altogether buffering revenue losses in this sector to 52%. It would seem that hoteliers increased or maintained rates in efforts to stay afloat, likely recognising little chance for demand stimulation through traditional revenue practices of reduced rates to increase occupancy.

In one note, the company states that bookings were moderating in the third quarter, after many countries saw declining cases and the impact of lockdown measures. The announcement of new variants and an increase in cases of the virus however negatively impacting once more in November. Further impacting revenues were claims via third party insurance, accounting for around 5% of revenue loss, hitting the company at the end of the year. It signals pre-paid rates as likely to be less attractive to travellers, owing to the processes involved to get money returned. It also indicates that at least, on the surface, insurance companies did hold good on their cancellation refunds, which will be a boon for those offering relevant COVID cancellation insurances.

In one glaring statistic for the year domestic travel reduced 49% but international travel reduced a whopping 68%. When tied to air travel and room nights it becomes clear that travellers were not strongly seeking international travel throughout the year. A trend expected given border closures and enforced closures.

As hospitality businesses contemplate the way forward, if these results are anything to go by, the largest challenge may be the return of corporate business. Whilst retail (leisure) business fell by some 55% over the year, the corporate market saw demand reduced by 64%. Potentially indicating that this segment has been harder hit than many hoped.

More businesses are yet to announce their results; TripAdvisor is already running at over $200 million in losses this year; bucking the trend though is Booking Holdings running at over $224 million net income making it one of the only profitable big players in the industry this year. If Expedia is any indication of results yet to come, the travel market has a tough few years ahead to reach profitability again.

The full Expedia Group financial report is available by clicking here.