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The new and the high tech are suddenly out of fashion, with the Nasdaq down around 23% this year. That sentiment change seems to have bled into the online travel sector, where the uncool is making a comeback.
There is no denying that longer-term trips in the most remote geographies are still seeing a lot of traction, but as even
pointed out in its first-quarter earnings report earlier this month, bookings to urban destinations are back to growth relative to prepandemic levels, and short-term stays are swiftly regaining favor.
As Omicron’s original wave fades and summer approaches, changing consumer preferences have precipitated a new land grab in a somewhat dated lodging sector. In the first quarter,
which also owns Airbnb rival Vrbo, spent nearly 60% of its revenue on selling and marketing. That was up just slightly from 58.9% in the first quarter of 2019. But at more traditional and global
Booking Holdings Inc.,
the proportion of revenue spent on marketing, sales and other expenses combined jumped to 55% from 33.6% over the same period.
Both platforms still managed to turn profits on the basis of adjusted earnings before interest, taxes, depreciation and amortization in the period—but at lower margins than Airbnb. Airbnb has enjoyed the comparable luxury of travelers organically flocking to its platform—many for the first time—amid the pandemic. Airbnb spent just 24% of its revenue in the first quarter on sales and marketing—even while those expenses included additional line items like overhead costs.
The comparison isn’t entirely fair: Airbnb grew sales 80% over the first quarter of 2019, while Booking and Expedia’s revenue remained slightly depressed. And for the legacy online travel agents, the investments at least seem to be paying off. For the week beginning May 1, Data.ai (formerly App Annie) shows downloads of Booking.com’s app rose 122% and weekly active users rose 95% over the first week in January. That data also show Expedia’s downloads had nearly matched Airbnb’s as of the most recent week shared.
Sensor Tower data show Booking.com’s world-wide monthly app installs were up 13% in April from January of 2020, while Airbnb’s declined by 12% over that period even off a comparatively lower base. In April, Booking.com had roughly 48% more monthly app installs than Airbnb.
Ironically, Booking has managed to reinvigorate interest in its namesake brand this year by promoting its tired image. A Super Bowl commercial for Booking.com featured “The Wire” star Idris Elba mocking the brand as having “never been accused of being sexy, flash or lit,” unless, he adds, “we’re talking literal.”
It isn’t just the ad, of course. As demand for traditional lodging returns, broader online travel agents are natural beneficiaries. Data from vacation rental data provider AirDNA predicts America’s largest cities will continue to see the largest growth in new bookings, noting urban areas are pacing 45% higher than at the same time last year for summer bookings. Urban demand means more opportunity for traditional hotel stays and, indeed, data from hotel data tracker STR shows occupancy of urban hotels has recently been making a dramatic recovery versus prepandemic levels.
It also figures that in the current inflationary environment, a more cost-conscious consumer would be lured by the relative affordability of hotels. Airbnb reported first-quarter average daily rates up 37% versus the same period of 2019, driven in part by a shift to larger accommodations, but also to price appreciation. STR’s data show the average daily rate for urban hotels globally as of April was still slightly below where it was in the same period of 2019, with rates for all hotel types up an average of less than 15%.
While Airbnb’s shares have lost nearly a third of their value over the last six months, Booking’s shares have eked out single-digit gains. They say sexy sells. Lately, not so much.
Write to Laura Forman at [email protected]
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