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Expedia (NASDAQ:EXPE)
Q2 2020 Earnings Call
Jul 30, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good afternoon. My name is Frederica, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Expedia Group second-quarter 2020 conference call. [Operator instructions] I would now like to turn the call over to Michael Senno, vice president, investor relations, and treasurer.

Please go ahead, sir.

Michael Senno -- Vice President, Investor Relations, and Treasurer

Thank you. Good afternoon, and welcome to Expedia Group's Financial results conference call for the second quarter ended June 30, 2020. I'm pleased to be joined on the call today by our vice chairman and CEO, Peter Kern; and our CFO, Eric Hart. The following discussion including responses to your questions, reflect management's views as of today, July 30, 2020, only.

We do not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward-looking, typically preceded by words such as we expect, we believe, we anticipate, we are optimistic or confident that or similar statements. Please refer to today's earnings release and the company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release which is posted on the company's investor relations website at ir.expediagroup.com, and I encourage you to periodically visit our IR website for other important content.

Unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense and technology and content expense exclude stock-based compensation. And all comparisons on this call will be against our results for the comparable period of 2019. Please note that depreciation expense is now reported in a separate line item, and prior periods have been restated to reflect this change. And with that, let me turn the call over to Peter.

Peter Kern -- Vice Chairman and Chief Executive Officer

Thank you very much Michael, and good afternoon everyone. I hope everyone has been safe and sound during this difficult time. As we said in our release, the second quarter was obviously a very challenging one for the travel industry and for us. But we were pleased to see, generally speaking, that after April, we had consistent growth out of the trough.

And May and June got considerably better. I'd point out that we view this not simply as a positive for the business in the short term because obviously our numbers remain very challenged relative to prior periods. But I think it speaks to humanity's demand and desire to travel and that when they can and when the opportunity avails itself and when they feel safe and there are no restrictions, people are really dying to travel. And we've seen that this summer.

And I have every expectation that we'll continue to see that, hopefully, as the world opens up more. But we will have a bouncy recovery. There's no question. We've seen virus numbers go up in certain places.

We've seen new restrictions come into certain geographies, and it appears like that will be the state of the union until things change scientifically. And so we expect this not to be a linear recovery obviously and we expect some bumps in the road. Having said that, there's a lot of things there we can't control. And so as I said in our last call, we are keenly focused on everything we can control.

We're focused on helping our customers and suppliers obviously get through a challenging and complicated time. We're focused on our own cost structure and making sure we are being efficient. But more broadly, we're just focused on our internal functioning, our structure, our speed and agility and building for the future. And while we recognize it will take time for all of you to see the benefits of all that effort, that is really our focus.

So in a little bit here, Eric will take you through our second-quarter numbers. They are noisy obviously and frankly I don't think terribly telling. I would not try to dissect them. I think it's a waste of a lot of energy.

Most of what's happened is really a function of whatever is going on in the macro world, and we are a reflection of that. And we are keenly focused on our long-term fixes and strategy and less focused on the day-to-day tactics of finding another dollar in the marketplace. It doesn't mean we don't care. We just think there's so much more upside in doing the real foundational work that we need to do.

So if you don't see us chasing every last dollar, that's why we're doing that work. As far as the work goes, I just want to spend a little time on the things you can't see through the numbers which is we talked about simplifying, we talked about accelerating our business, we talked about pushing through initiatives during the COVID time that might be harder to do in regular times. And we've made a lot of progress on this front, and there are threads all over our company working toward this. But just to give you a sense, we took down our HomeAway brand in the U.S.

which was something that was scheduled to take probably another year to do. And we deprecated it just a few weeks ago and have moved all that traffic to Vrbo, and now we will be a single brand in the U.S., and it will allow us to go much faster and do more around Vrbo. We folded our car rentals business in Europe into Brand Expedia again a smaller initiative, but just a way to simplify and allow us to go faster and put our talent against more important projects. We sold Bodybuilding.com and shut down Pillow and ApartmentJet which were in our Vrbo business.

Again, just small distracting interesting things we tried but didn't have long-term benefit, we believe. And so we took the action to simplify the company. And that's really on the brand side and the business side. On the tech side, perhaps even more importantly, we were able to accelerate a lot of technical projects we had in the works.

And just to name a few here, our Media Solutions business had relied on a third-party vendor for its auction technology. We brought that technology onto our own platform just a couple of weeks ago here, that was about a quarter earlier than we expected to. And our teams were able to push that across the line and now we have that much more time to optimize that platform. And that's not just the cost savings from no longer licensing a third-party platform, but it also gives us much more latitude to grow that business and we believe there's a lot of upside there.

Our Hotels.com brand was able to move its mobile traffic to a new platform again a project that was scoped for to take another six -- up to another six months that we finished in about a month ago. Again, another opportunity to just accelerate, get things done during the virus and get to the other side. And finally, just to name one more. We've talked about the opportunity for our virtual agents to help us on the cost and the customer satisfaction side.

It's something you'll hear again and again because it's a big opportunity for us in one of our better platform technologies. But we launched that on our Egencia corporate brand. We launched it in the U.S. and France, and that was literally two years -- practically, two years ahead of schedule.

So we've just been moving on every front we can to try to accelerate. And that's really all about being faster, getting simpler and being able to move the business much more quickly and agilely. And that's because we really want to be able to attack our big strategic goals. And those revolve much more around how we use our platform, particularly data, where we have a unique competitive advantage with the best data set of travel data in the world, where we believe we can help our customers, our B2B partners and our suppliers make much better decisions, be happier and drive their own businesses or their business customers and help the customer -- the end customer just make better decisions that make them happier and make our products stickier, and generally drive the long-term appeal of our business to a third party.

So we are keenly focused on that. That is our long-term goal, and we have a bunch of tactical work we are pushing through the cleanup runway, if you will, to get there. And on the supplier side of course we continue to push to help our supply partners get stronger and come out of the COVID times. It's obviously been a challenging time for hoteliers and airlines.

We've put in a relief and recovery program for hotels to help them get back up and running, to help them better utilize our tools. And likewise, we are looking at air, and we're rebuilding our own air product in a large part to make it just a better, more fulfilling product for our suppliers. So we are driving a lot there, and we believe in obviously helping our supply partners get out of it. But longer term again we believe in helping these partners all make better decisions and drive their business through our platform.

On the more nuts and bolts of it, we know you're all interested in the cost side. We continue to drive our efficiency programs throughout the company. We've told you before that we had a target of $500 million that we expected to exceed. We've achieved about $400 million of that on a run-rate basis.

And again, we expect to do much better than our targets. The reason we're not being highly specific about how much better is that we're really attacking everything, and there are timing implications to a lot of what we're doing: contracts that need to be run out, things like releasing real estate and other things that just take time to come into effect. So rather than get caught up in some debate about how much and over what period, we feel strongly that we'll do better than the $500 million. And I would point out that there is much more to it than just the $500 million of cost savings that we scope to you before because that doesn't really take into account the variable side of our business.

And that's a place where we have the opportunity to drive efficiency through bringing down customer service costs with our virtual agents that we've talked about; bringing down transaction costs by focusing on our payments platform technology and opportunities there; and then of course bringing down our variable marketing costs, where we have recently put these teams together. As we've told you before, we've merged our brand groups. We've merged their performance marketing groups. And there's big opportunities ahead, we believe, in doing the work as a portfolio of brands and optimizing for that portfolio as opposed to optimizing each brand by itself.

Now that is hard work. It is foundational. Some of you may have noted that we gave up some share in some of the performance marketing lines in meta and SEM. That is something we willingly have done.

As I said, we are not worried about the nickels right now in a market where there isn't a lot of volume. We are much more focused on the long-term foundational work to drive the long-term benefits when the volumes really are back at full scale. But we will continue to refine that. I wouldn't get used to scale the share we were at.

I know there is often debate about can we grow and still be more profitable on the performance side. We believe, absolutely, we can. But there is a lot of foundational work to get these brands together, to get their strategies unified and their data unified, and we are doing that work right now as fast as we can. So as we come out, we will be in the best position to take advantage of that.

And finally, what is probably the main event to most of you which is, what is the recovery really looking like? And is there anything to glean from what we've seen? I would say, by and large, we've seen exactly what you'd expect. April was very tough for everybody. It was the bottom of the trough. We have seen consistent growth coming out of that.

We were down on a net basis 90% for the quarter. But by June, that was less than down 70%. And booking -- the lodging side of that was considerably better, down less than 60%. So all of that is a very good trend, but still obviously well below anything we'd like to see in the business.

As for July I would say it's roughly in line with June, slightly off those numbers. And just, Eric will get into it some more. But just to give you some flavor, what we've seen is Vrbo had a ton of business and has been a great leader for us out in the recovery. As we got into summer, people obviously have a real interest in the whole home model and being able to have their families alone and not in shared space, and so Vrbo really led the way for us.

There was a lot of compression in the early part of the booking window in the early part of the summer. And so as we've got into July, there's a lot of -- it's still quite a strong business for us and way ahead of our other businesses, but that compression has softened a little bit. On the flip side, the hotel business has been slightly stronger even into July. So there are some puts and takes and there's some geographical differences.

But in general, July has plateaued. Cancellation rates have stayed consistent. So we haven't seen a real rise in those in July, so I think the world has sort of stabilized here. And we'll see what the next few months bring in terms of restrictions, virus growth, etc.

And I think that will largely tell the tail. On the good side, I would just say, in addition to Vrbo being a great driver and the strongest part of our story. We also saw terrific new customer growth which is just -- this has proven a great opportunity to introduce a whole new group of people, the Vrbo experience. And I think that will pay longer-term dividends and help cement the Vrbo brand which, as you know, we pivoted to not that long ago.

And I think that's again a great opportunity longer term. So to wrap up, I would just say again we've seen nice recovery from the bottom. It was strong through May and June and flattish through July. We expect it to be bumpy.

Hopefully, we'll have some good and some bad in there. And it won't be linear. I happen to be a huge believer in the scientific community and expect them to, with all the great minds working on this, to save us all from ourselves. And we have seen clearly that the world and -- wants to travel again, wants to get back out and move around.

And we believe as soon as -- every time those opportunities become greater and safer, that people will indeed take the opportunity to travel. So with that again I would encourage you not to get too caught up in the ups and downs of small numbers. Broadly, we are focused on the longer term. And we believe we're making real headway, even though we acknowledge it will take a little while for all of you to see it in the numbers.

And I will turn it over to Eric. Thank you.

Eric Hart -- Chief Financial Officer

Thanks Peter, and thank you everyone for joining as well. As you can see, our financial results this quarter are indicative of the severe impact COVID-19 has had on our business and also the rest of the travel industry as well. As Peter mentioned, we've[Audio gap] a couple, maybe not even two months ago. So we will be ready.

We will have ample capital when the market's ready, and I think we will have much better brand separation and positioning for the future when we're ready to pull the trigger on all. So -- but certainly, we have many ways to do it. And frankly, each brand is effective in different ways and different lanes. So some brands have had great success with YouTube, others have been strong in classic television, and others have found other ways.

So we have a lot of tools to use.

Unknown speaker

Thank you.

Questions & Answers:


Operator

And your next question comes from the line of Kevin Kopelman. Your line is open.

Kevin Kopelman -- Cowen and Company -- Analyst

Thank you. So a question on the revenue trend. You noted that new bookings in June were down about 45%, and then, fell off a little in July. Can you help us translate that new bookings metric directionally into what it would mean for revenue given some of the puts and takes there?

Eric Hart -- Chief Financial Officer

Yeah. I'll take that one. I mean generally -- I guess there's a couple of components I would point to in there. Cancellations -- just going back in time and the impact of COVID, cancellations obviously spiked in the April and March time line.

Those have largely come back down to near but still elevated historical levels. I point that out because obviously that was a big driver of volatility in our P&L. There's -- when you look at the ADRs and revenue, rev per room night, the reason I'm pointing -- I'm pointing out a couple of current areas that may be different than historical so that there may be some noise. On the ADR side, you saw that go up or increase 1% and that 45% number that you mentioned.

That ADR is driven by Vrbo. ADR is higher because of strong demand, where mix in the Vrbo, but our -- that offsets double-digit decreases in hotel. And then revenue per room night has some of the similar impacts as well, so I would say that the P&L is going to be noisy. And I just gave you a few examples of how the amount of noise that has flowed through in Q2.

So I would love to say that it's got -- that whatever the range falls in July and for the rest of the quarter, we'll hit our P&L in a way that it has historically or as we've seen in last year, if you will. But as Peter and I both mentioned, there is a bunch of noise. I think Q2, at least the latter part of Q2, probably gives us some indication, but it's going to be a bit noisy over the next few months. So I can't give you a definitive answer, if you will.

Kevin Kopelman -- Cowen and Company -- Analyst

Got it. Thanks. That's helpful. And then if I could just ask one other question.

Can you talk about what you're seeing in Europe? And to what extent has Europe travel been picking up? And is that having a meaningful impact for Expedia in terms of offsetting their kind of recent role in the U.S.?

Eric Hart -- Chief Financial Officer

Yeah. Go ahead.

Peter Kern -- Vice Chairman and Chief Executive Officer

No. You go ahead.

Eric Hart -- Chief Financial Officer

Yeah. I was going to say -- I would say Europe was a bit slower than the U.S. to pick up. I think we've mentioned that a number of different times during the fundraising process, etc., where the U.S.

started rebounding earlier, particularly in lodging, particularly, as Peter mentioned, and the intersection of domestic drive to and whole homes, whereas EMEA was slower. Now we have seen EMEA, on the lodging side start to recover a bit. It's just more of a methodical improvement over time. I mentioned earlier on air, air is challenged more so than hotel in both geographies.

And I would say what we've seen thus far in Europe is -- continues to be quite challenged. There's a different mix between domestic and international in Europe versus the U.S. And even though in the U.S. air is still quite low; in EMEA, you just got the high rate of international travel and there's just a lot of uncertainty that remains.

So Europe continues to be pretty tepid on the air side. So good signals in EMEA. Time will tell. Slow on the air side.

Kevin Kopelman -- Cowen and Company -- Analyst

Thanks Eric. Thanks Peter.

Peter Kern -- Vice Chairman and Chief Executive Officer

Yup. Thanks Kevin.

Eric Hart -- Chief Financial Officer

Yup. Thank you.

Operator

And your next question comes from the line of Eric Sheridan with UBS and your line is open.

Eric Sheridan -- UBS -- Analyst

Thank you so much for taking the question. Maybe one for each of you. Peter, just understanding the industry dynamic, with demand where it is, anything you're seeing interesting on the supply side of either more alternative accommodations being listed broadly on a global basis or hotels more willing to work with the OTAs? Typically, if you go back and look historically, those are periods of time where the OTAs tend to gain some share of supply when end demand has never been as low as this, but low generally. So I'm just curious what you might be seeing on the supply side as opposed to the demand side, looking at the marketplace.

And then, Eric, you made a point in the 8-K of the merchant liabilities starting to improve. Wanted to just get a check in on the balance sheet, how you guys are thinking about merchant liabilities, is it a drag? Has that stabilized? And how should we be thinking about aligning the balance sheet against both your growth goals and your capital return potential goals over the medium to long term? Thanks so much.

Peter Kern -- Vice Chairman and Chief Executive Officer

Yeah. Thank you very much. So I'll take the first one and say it's a couple of different buckets. I mentioned the opportunity we think there is around more supply coming into the Vrbo rental base.

People are all looking for ways to monetize their assets and we do believe and we have seen some early signs, nothing -- not a tidal wave or anything, but some early signs that there is opportunity there. And we do market to that audience, and we do try to build that side of the platform. So that's ongoing. I think there's solid opportunity there, but it's relatively early days.

And I think again you'll all have your own views about what the economy will look like coming out of this and -- and globally, etc. But we think there's opportunity there. As for the big players on the air and on the lodging side, look, our main goal is to get everybody back in business and drive as much business as we can to all of those players. We are trying to be as collaborative as we can.

But I would say, yes, there is, by and large, a willingness and openness to work together on new ideas, things that have been sitting on the shelf for a while that have been talked about but never moved on. I think there's some interesting things we can do with some of our lodging partners that we're looking at. There's a lot of opportunity for air, and we're working to improve our air product. And we're working with our air suppliers, so they -- so we can make that good for everybody.

And yes, there is a general sense of collaboration and willingness to work on new ideas to drive business for everybody. And I would say that in times like this, you would expect and we are making up more share of everybody's wallet on the supply side. So we're not trying to put the screws to anybody, we're trying to collaboratively look at how we can grow their business, help grow our business, and we are keenly focused on that. So there is definitely opportunity.

Again, I don't think it's about leveraging a moment. It's really about an openness that you get at a time like this where everybody is in a bit of a crisis to look at opportunities, to work together to grow the business to improve both sides and that's what we're focused on.

Eric Hart -- Chief Financial Officer

This is Eric. I'll take the second half of the question, and thanks for the question. I'm going to get slightly longer update because I think there's a fair number of questions I suspect we'll get during the call. So let me try to give a bit of a holistic update on the balance sheet and cash.

So if you look at the deferred merchant bookings. And again, for everyone's edification, deferred merchant bookings is where we accept customers' cash. We then hold on to that and remit it to suppliers post stay, if you will. It did decrease $1.3 billion during the quarter.

But if you look at the trend over that quarter, it was a significant drop in April, a slight decline in May and then actually increased in June. The increase in June is driven by Vrbo which we've talked a lot about. The strong bookings growth actually year on year, that occurred in Vrbo. If you look at non-Vrbo within that deferred merchant booking, it was essentially flat between May and June.

So if you -- if we go in reverse and we look back and what we are observing in the April and -- March, April, May time line, where that DMB or that deferred merchant booking, was really declining, I would say we feel pretty darn good about how the latter part of the quarter looked from a deferred merchant bookings standpoint. If I then move to cash, I know a lot of this is in the financials that we published. But essentially, we started the quarter with $4.1 billion, essentially a change call it operating of net $1.4 billion. We then raised the approximately $4 billion of financing.

Obviously, it was a little -- a bit less than that from a net standpoint. So at the end of the quarter, we had $5.5 billion, and that's excluding the $1.25 billion incremental raise that we did earlier this month. And then lastly which is related to all of this is -- and I suspect there's a question coming just around the $275 million cash burn rate that we talk about over the -- what we've talked about over the last couple of months and quarters. Remember, this is effectively contribution-neutral, revenue less cost of revenue less marketing.

We assume that's 0. And then what is the cost to run the business, so i.e., what is the cost to keep the side up? What is the cost to keep the lights on? We had said previously that we would be at approximately $275 million burn rate per month, and we said we would get to that by the end of the year. I'm happy to say that we are operating broadly in that range right now. So we have achieved it faster than we anticipated.

Just one point of clarification because I know it comes up occasionally is it does exclude restructuring costs associated with our cost program. And then because we raised the $1.25 billion, we will have about $5 million of incremental interest expense. But sort of net-net, feel very good about DMB and where the trend is. We're in a strong cash position and feel really good about our overall cost program and what that burn looks like.

Eric Sheridan -- UBS -- Analyst

Great. Thanks for all the color.

Eric Hart -- Chief Financial Officer

Hope you got it. Thank you for the question.

Operator

And your next question comes from the line of Lee Horowitz with Evercore ISI. Your line is open.

Lee Horowitz -- Evercore ISI -- Analyst

Great. Thanks for taking the question. So sticking with Vrbo with -- obviously, booking trends remaining really strong through the pandemic I guess is there anything you're seeing there as it relates to traffic mix in terms of paid traffic versus direct to Vrbo? And how you would expect that to perhaps evolve over the course of this crisis?

Peter Kern -- Vice Chairman and Chief Executive Officer

Yeah. Absolutely. One of the things that I think I have heard other places as well is many of us retrenched that out of competitive advertising and out of the auctions to a large extent, when things got really bad in March and April. We have been waiting back in with all our brands, but much more delicately with Vrbo because, candidly, Vrbo has been the beneficiary.

We have a huge amount of direct traffic and essentially organic traffic. So the mix of business has been extremely profitable on a relative basis for Vrbo, and that has been terrific. We're not against using performance marketing in Vrbo, and we certainly are trying to use it deftly. But our mix and our returns on marketing are at massively higher levels than they -- we were historically running at in call it late 2019.

So yes, there's definitely been -- I don't want to say it's a structural shift, we'll see what the world look like when everything normalizes. But we have seen that the brand is quite strong, that people can find us and that we're important as an organic option and a great option for travelers. So I think the mix is terrific there right now. And no doubt as we grow -- as we continue to grow and other players get a little healthier, we may see that mix change a bit.

But right now, that mix is terrific.

Lee Horowitz -- Evercore ISI -- Analyst

Great. Thanks for taking question.

Eric Hart -- Chief Financial Officer

Yeah. Thank you.

Operator

Our next question comes from the line of Brent Thill with Jefferies. Your line is open.

Unkown speaker

Great. This is James on for Brent. Thanks for taking my question. I just had one for Eric.

Can you give us an update on what your capex spend is looking like for the back half of 2020 and then first half of '21? I know you have the headquarters which should be completed by early next year, but just want to know what your other capex spend might look like and how we should think about that from a modeling perspective. Thanks.

Eric Hart -- Chief Financial Officer

Yeah. Our capex, I presume you saw, was $206 million, of that $34 million was of headquarters. Again, we gave an update last quarter that we had restarted on headquarters and that's been $115 million for the first half of the year. Excluding headquarters, it's $172 million.

Just to give you the components up there at a high -- of it at a high level, the vast majority is in capitalized labor. That's essentially employees that are doing site developments. And we should see some improvement in that capitalized labor, just given the cost program and some of the actions that we've taken to date. We've got the data center.

As we continue to move more into cloud, that data center capex should moderate as well. And then essentially, the cap labor and data center captures most of it. So what I would say, not giving you too specific numbers, if you will, but for 2020, we should come in less than we were in 2019 with all the various moving parts. And then as we go into 2021, as that headquarters rolls off, we should be much more efficient.

We should require less capex and ultimately see better cash conversion. But hopefully, that gives you an order of magnitude on 2020. And then over time, it should get more efficient too.

Unkown speaker

Very helpful. Thank you so much.

Eric Hart -- Chief Financial Officer

Thank you.

Operator

Your next question comes from the line of Chris Kuntarich with Deutsche Bank. Your line is open.

Chris Kuntarich -- Deutsche Bank -- Analyst

Hi. Thanks. Maybe just start on the vacation rental side and then just kind of parsing out the difference of what's going on in vacation rental and hotel. I think you guys mentioned that Vrbo was growing, so just maybe for -- since you guys have seen sort of the plateau in July, is there any difference going on in the cancellation in new bookings from the two?

Peter Kern -- Vice Chairman and Chief Executive Officer

Yeah. I would say broadly, cancellation rates have stayed pretty consistent. We don't -- I wouldn't say there's anything noteworthy between how hotels and vacation rental was performing, except that hotels have taken longer -- is on a slower trajectory to recovery. Clearly, vacation rental was very strong.

We saw demand exceed prior years during some of these compression periods which, in a world like this, is great to see. And hotels have just been on a slower pace to recovery. But I think on the cancellation side, we haven't seen anything noteworthy. And again, broadly, cancellations have remained stable for the last -- for July, June, etc.

It's not -- there's no big uptick in cancellations that we've seen. So the real difference is that compression of early bookings that were in the vacation rental space that the hotels didn't see, I would say. And then the easing of that compression period into July and whereas the hotels have been slowly making up ground on a more linear basis.

Chris Kuntarich -- Deutsche Bank -- Analyst

Got it. And maybe just a follow-up. As it relates to cloud costs, I think you guys had called out previously that 2020 level should be below 2019. I was curious, as you guys have gotten further into the year, if you could put any bit of a finer point on that.

Thanks.

Eric Hart -- Chief Financial Officer

Yeah. I think the story remains the same. Just to recap for those that may not have the full story, we brought all of our cloud teams into a single unit. They have the ability to optimize, to rightsize the commute -- the compute, excuse me.

So we've been able to really push and accelerate that in the COVID environment. So it gave us some short term benefits, and we think that will really bear fruit over the long term as well, better economics and with our vendors, etc. But overall, FY 2020, we do expect it to be down. However, when volume starts to increase, it does obviously have a variable component to it.

And so as that volume comes back, you would expect it to grow along with it as well. But I think the sort of order of magnitude or the story that we told before still holds.

Chris Kuntarich -- Deutsche Bank -- Analyst

Got it. Thanks.

Operator

Your next question comes from the line of Brian Fitzgerald with Wells Fargo. Your line is open.

Brian Fitzgerald -- Wells Fargo Securities -- Analyst

Thanks guys. We wanted to ask -- test out a hypothesis. Generally, when consumers travel closer to home, I think you see shorter durations and less expensive accommodations versus when you're traveling farther and internationally. Is that valid? Is that valid in old days? But are you seeing those dynamics change now with more local travel coming back, replacing longer international trips? Do you see consumers trading up versus what they would normally spend staying longer on durations? Anything you could tell us about kind of the propensity to spend as local starts first versus international?

Peter Kern -- Vice Chairman and Chief Executive Officer

Eric, do you want me to go first? I'll take a whack at it, if you want.

Eric Hart -- Chief Financial Officer

Yeah. Sure. Sure.

Peter Kern -- Vice Chairman and Chief Executive Officer

There's a lot going on in that question. But I would say a few things. We have seen pricing and propensity to pay, etc., and long duration, very evident in the vacation rental business. People in compressed markets have been able to push what they charge and suppliers, that is.

And people, as I mentioned, have been staying longer and so that, if anything, is driving up. If you think about it from an ADR standpoint, etc. I think broadly, we find in the hotel space, there has been not the inverse, but there is more pressure on pricing and more discounting widely because people's comfort and propensity to go to hotels has been less robust. So it's kind of exactly what you'd expect from a supply and demand standpoint.

I think in terms of local versus nonlocal and duration on the hotel side, I don't know if Eric has any good data there. But I don't think we've seen dramatic change there. I think that's been similar. And yes, in terms of total wallet share, the domestic trip tends to be smaller than an international trip.

But again, I think this is just everyone's finding their opportunity. So of course, air is suffering more than lodging, even though, as far as I know, nobody has yet said they've gotten sick on an airplane. But air still is something people are less comfortable with, and so people are driving and finding other ways to get to hotels and things. And -- but I think domestic -- local domestic is sort of slowly filling up the holes of international.

So I think it's really just a volume game. I think the ADR question is really just a function of overall supply and demand. And it's acting exactly as you would expect it which is if you're in a compressed market on the Florida Coast and there aren't enough homes and a lot of interested people, you can push pricing, and you do. And if you're a hotel somewhere where not a lot of tourists are going, maybe like New York right now, you have to compete and therefore, you try to compete on price.

Eric Hart -- Chief Financial Officer

Yeah. Yeah. Peter, I think covered it. I'd be careful extrapolating too much on any of the trends you'd see.

It's really people solving for the travel that they can and still want to travel. I think the real positive though is that, and Peter mentioned it earlier, that we've just got a lot of people that are getting exposed to the Vrbo brand and alternative accommodations. And it's a bit of a fast toward in that exposure, and we're going to take the approach to build the relationship with those individuals. And I think people are having a great experience, at least that's what I can -- in my conversations anecdotally.

So I think that it's a very positive outcome for Vrbo from that perspective.

Peter Kern -- Vice Chairman and Chief Executive Officer

Yeah. And apologies. I would just triple down. Don't extrapolate too much from any of this.

I think this is really a unique moment. And I said it before, but I don't think this portends any difference in how people think about things. It may expose them more, may make them open to things they weren't open to before. But I don't think we're seeing some structural shift in people's views about hotels or other things.

It's just a moment, and it's just about their comfort and their safety and what they're able to do.

Brian Fitzgerald -- Wells Fargo Securities -- Analyst

Thank you Peter. Thank you Eric.

Peter Kern -- Vice Chairman and Chief Executive Officer

Thank you.

Operator

We will now turn the call back over to CEO, Peter Kern.

Peter Kern -- Vice Chairman and Chief Executive Officer

OK. Thank you everybody for your questions. I hope we gave you a good perspective on the business. I just want to reiterate, we're feeling really good about the internal work we're doing.

I commend our teams who have done amazing work in impossible circumstances, where everybody is working from home and everything is harder. So I can't thank all of them enough and appreciate all your questions. As Eric and I said, we hope that you'll see the benefit of all this hard work we've been doing as the numbers come back. And we look forward to talking to you in another quarter.

So thank you for your time. And everybody, stay safe. Take care.

Operator

[Operator signoff]

Duration: 63 minutes

Call participants:

Michael Senno -- Vice President, Investor Relations, and Treasurer

Peter Kern -- Vice Chairman and Chief Executive Officer

Eric Hart -- Chief Financial Officer

Unknown speaker

Kevin Kopelman -- Cowen and Company -- Analyst

Eric Sheridan -- UBS -- Analyst

Lee Horowitz -- Evercore ISI -- Analyst

Unkown speaker

Chris Kuntarich -- Deutsche Bank -- Analyst

Brian Fitzgerald -- Wells Fargo Securities -- Analyst

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