Expedia (NASDAQ:EXPE) and Booking Holdings (NASDAQ:BKNG) dominate the online travel market and both have a suite of sites that offer a variety of different travel services. It's fair to say that Expedia is rooted more in a traditional model, where it operates as a sort of digital travel agent. The company also owns VRBO, which lets people rent private residences, and it has integrated that brand into a number of its other properties.
In this segment of Industry Focus: Consumer Goods, host Shannon Jones talks with guest Dan Kline about how Expedia and Booking Holdings stack up. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on Aug. 20, 2019.
Shannon Jones: Let's switch gears and talk about the other major player in this space, and that's Expedia, ticker EXPE. It's sporting a market cap right now of $19 billion. Smaller than Booking Holdings, but nonetheless a major player in this space. What can you tell us about Expedia, and how is it different from Booking Holdings?
Dan Kline: The companies are very similar, but I think it's fair to say that Expedia is more rooted in the traditional, let's call it a digital travel agency model. You go to a site, it shows you a bunch of choices, gives you the brands, and you book in a traditional way. Now, they own sites that don't do it that way. Hotwire is a blind bid site. But Orbitz, Travelocity, even CheapTickets, a lot of their sites are based in the old school model, just in a digital way. That said, they also own VRBO, which is Vacation Rental by Owner. I don't remember if that's actually their name anymore, but that's how it started. VRBO is an Airbnb-style service built around vacation homes or places you would stay on vacation, where you can go in and say, "I want to go to St. Petersburg, Florida. Can I rent a home for a week? I want three bedrooms, two bathrooms, I'd like a pool to be there," and it comes back and gives you prices, and it facilitates the transaction through generally not a brand, but a person. And they've integrated VRBO, which they bought for $3.9 billion along with HomeAway in 2015. They've integrated that into a lot of their core product, where, when you're looking for travel, it might also show you options or give you the option to choose options that are not traditional hotels, but residences or other properties that are through VRBO. So, it's a similar but different business model.
Jones: This actually intrigues me the most about Expedia because they have been putting so much focus on VRBO. I've personally used VRBO. I've used Airbnb before. This alternative accommodation market is continuing to grow. The fact that they have this under their brand and are really tapping into that, especially, I think, with a lot of millennial travelers who are looking for that home-like appeal, but aren't necessarily wanting to spend a ton of money, I think that niche right there is definitely met with Expedia and VRBO. I think, from Expedia, even though they're a smaller player -- granted, I guess you could say they've been hurt, too; their revenue and their bookings are, I guess you could say, stagnant at this point, Dan.
Kline: Yeah. In the most recent quarter, their bookings are up. Both companies follow a similar pattern, which is logical. It's also worth pointing out, Priceline does, on some occasions, or, various booking.com sites, offer you, let's call them Airbnb-style rentals. It's just in an unbranded way. The advantage that Expedia has is, VRBO, whatever you want to call it, it's a brand name, it's something you trust, it's integrated into their product. And as someone who travels a lot, it reminds you that that's an option. Sometimes when I visit the office, I travel with another Fool, usually Matt Frankel or Maurie Backman, both of whom have appeared on the show. When I do, sometimes it might come up and say, "Hey, you could rent this two bedroom condo that's walking distance from there." And you go, "Ooh, that'd be nice. Have a kitchen, a refrigerator, a living room, that'd be great." So, integrating it that way gives them another tool, another reminder, another way to get it done. And it's helped them. Their revenue has inched up $3.2 billion in the most recent quarter, that's up about 9%. Bookings are up 11%. That said, net income has been up, but it's maybe not as strong as you'd like it to be.