5 Travel industry majors: bleak numbers and the spin of hope
Booking, Expedia, TripAdvisor, IHG and Hilton have all announced predictably dire results which they tempered with talk of things getting better but a full recovery seems unlikely within two years
Jettisoning everything that has not proved it will make money is the route to survival in travel if financial markets are to be the judge. Above all, there is also talk about things getting better. This was made clear this month in the treatment of a whole clutch of industry majors – Expedia, Booking Holdings, TripAdvisor, Intercontinental Hotels and Hilton Worldwide – who announced predictably dire end-of-second-quarter trading results, and all saw their share prices rise.
First off was online travel agent and metasearch group Booking Holdings, which announced news of a 25% cut in its global staff headcount to counter a fall of 90.8% in gross bookings. That was far worse than the expectations circulating and reflected a drop of 86.7% in room nights, 90.4% in rental car days and 69.7% in airline tickets. Booking, also the parent company of Kayak, Agoda and Priceline, among others, says that the layoffs will only affect Booking.com. It announced that it will “finalise its plans and make announcements to employees on a country-by-country basis starting in September….”
Then came Expedia, which got in quickly that cost cuts and savings of $500 million were underway but then announced a second-quarter revenue drop of 82%, with retail down 80% and B2B down 90%. Lodging revenue decreased 78% on an 81% decrease in stayed room nights, partly offset by a 15% increase in revenue per room night. The latter benefited from an increase in the percentage of room nights contributed by Vrbo, which has higher revenue per room night than the rest of its lodging business. Air revenue was negative in the second quarter of 2020. Advertising and media revenue decreased by 91% due to declines at Trivago and Expedia Group Media Solutions.
Expedia has been closing and consolidating sites, shutting down short-term rental sites Pillow and ApartmentJet and folding its HomeAway brand in the US into its vacation rental site, Vrbo. The company’s website says it is also clearing its house and retooling its technology platforms. That includes more cloud computing, bringing in virtual chatbots to reduce the need for more human customer service reps, and migrating its advertising technology from a third-party platform in-house. Expedia also plans to develop more direct connections to customers.
Expedia also plans to develop more direct connections to customers
On a conference call with analysts, featured on the corporate website, CEO Peter Kern stressed that Expedia was seeing improved trading and that although the headline bookings number was down a horrible 82%, it exited the quarter with a fall of “less than 60%”. This improvement was predictably led by Vrbo, as opposed to hotels, with airline bookings coming in the weakest.
“By reshaping and simplifying our organization we have put ourselves in position to optimise our brands, our data, and our platform technologies,” Kern said.
Meanwhile, mega travel platform group TripAdvisor delivered bad news in spades, announcing a revenue fall of 86%, or $1.14 a share compared to profits of 24 cents a share this time last year, while the financial markets were hoping for losses of 82 cents a share. The company has sold eight of its Smarter Travel Media brands - Smarter Travel, Airfarewatchdog, BookingBuddy, OneTime, Oyster.com, Family Vacation Critic, What To Pack, and Holiday Watchdog - to the travel-marketing start-up Hopjump in a restructuring which includes laying off about a quarter of its workforce.
It gave a reminder that this was actually flagged up a few months ago when it warned it would retool its media business. Instead, it is pursuing consumer-oriented advertising on non-TripAdvisor branded sites, putting the focus on business-to-business advertising such as hotel and restaurant sponsored placements.
Also in the new business plan are non-endemic advertising opportunities, such as a sweepstakes for Stella Artois. “We are going out to target non-endemic clients, which we’ve never done in the past,” TripAdvisor Chief Financial Officer Ernst Teunissen was quoted by a number of news agencies as telling a Morgan Stanley technology and media conference in early March. That means 200 new clients at the end of last year that the company can now market to - brands like luxury goods or transportation that it hasn’t targeted before.
And the good news from TripAdvisor: “Monthly consumer traffic has started to recover. In April, May, and June, monthly unique users on TripAdvisor sites were approximately 33%, 45%, and 60%, respectively, of last year’s comparable period. We estimate July monthly unique users improved further, to approximately 67% of last year’s comparable period.”
A hospitality focus
Global hospitality group Hilton Worldwide President and CEO Christopher Nassetta was able to announce figures better than the worst fears, with second-quarter revenue totalling about $560 million, compared with about $2.5 billion a year earlier. Revenue per available room dropped 81% from a year earlier. He told investors last Thursday, as picked up by analysts at New York based brokers Zacks, that “global hotel occupancy is now running around 45%, just three months after hitting 13% in mid-April.”
Intercontinental Hotels (IHG) had also primed the market, so nothing was worse than expected and again the focus was on a strong stream of relative good moves. Disclosing a global hit toRevPAR of 52% for H1 and 75% in H2 (when occupancy was down to 25%), CEO Keith Barr moved swiftly on to the good news that a profit, albeit a small one of $74 million, was delivered at operating level. He added: “Small but steady improvements in occupancy and RevPAR through the second quarter continued into July, with an expected RevPAR decline of 58%, and occupancy rising to around 45%.”
The focus at IHG was on concentrating resources on the future, so tough steps taken include no dividend for shareholders and a plan to cut costs and save around $150 million by year-end. It opened “more than 90 hotels in the half and strengthened our pipeline with an average of one new signing a day, including almost 100 for our Holiday Inn Brand Family. We have also taken voco, our upscale conversion brand, outside of EMEAA, with initial signings in the US and Greater China.”
Explaining the seemingly very optimistic reaction of financial analysts, Steve Chiavarone, a fund manager at $576 billion-strong Pennsylvania investment group Federated Hermes, told CNBC’s Trading Nation programme on Thursday that they had also taken heart after the US State Department’s announcement that it would lift its global health travel advisory on “improving” health and safety conditions in some countries.
“I think for a lot of reasons, you’re still going to see travel levels down. I think you’re still going to see a preference for domestic travel,” he said. “But, hey, incrementally, the idea that there are parts of the world that have gotten coronavirus under control enough that we can start to lift restrictions, that’s a good thing.”
Yet the travel industry report from the Organisation for Economic Co-operation and Development, the 36-nation-strong economic think-tank, a few weeks ago was less sanguine: “Attempts to forecast the likely impact of the pandemic on the tourism economy have quickly been overtaken by the speed the situation has evolved as the pandemic has spread. However, expectations are growing that recovery to pre-crisis levels may take two years or more. The International Air Travel Association (IATA) predicts that airlines are unlikely to see a return to pre-crisis traffic levels before the start of 2021, while hospitality data company STR estimates that return to pre-crisis levels will not occur before 2022”.