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Expedia Shares Fall as Home-Rental Business Vrbo Goes Slow

Olivia Carville
Expedia Shares Fall as Home-Rental Business Vrbo Goes Slow

(Bloomberg) -- Expedia Group Inc. reported first-quarter revenue that missed analysts’ estimates, with growth in its Vrbo short-term rental business slowing for the second straight quarter. The shares fell more than 3 percent in extended trading.

Sales came in at $2.61 billion, up from $2.51 billion a year earlier, the company said in a statement. Wall Street was looking for $2.69 billion, according to data compiled by Bloomberg. Revenue growth from Vrbo slowed to 14 percent. Last quarter it came in at 20 percent, which was the lowest rate for 2018.

Bellevue, Washington-based Expedia has been struggling to chase rivals Airbnb Inc. and Booking Holdings Inc. in the fast-growing and lucrative market for short-term rentals with its HomeAway and Vrbo services. The company has been investing to increase the profile of these two businesses, but Expedia still lags behind the roughly 6 million global listings in alternative accommodation that Airbnb and Booking each have.

Expedia said on Thursday that Vrbo gross bookings totaled $4.16 billion, up 5 percent from a year earlier. That was roughly half the growth rate of the main online travel agency business. The company ended the first quarter with more than 1.1 million properties on its core lodging platform, including about 460,000 integrated listings on Vrbo.

In an attempt to catch up with rivals, Expedia is shaking up its short-term rental unit, starting by changing the name of the division from HomeAway to Vrbo, which has more name recognition in the U.S. Over the next year, Expedia will plow more resources into Vrbo, launching new websites in fresh markets and re-branding existing sites, the company said Thursday.

“Through a phased roll-out, we will gather the data we need to determine how to best introduce Vrbo to the world,” Chief Executive Officer Mark Okerstrom said in a statement.

The CEO said the recent Vrbo deceleration was partly related to the streamlining of its home-rental brands and services. The changes have made it more difficult for these websites to show up as high as they once did in Google search results.

He estimated growth would remain relatively flat while the company rebuilds the Vrbo brand and drives consumers to the new sites. "It may take us a little while to get clear of that," Okerstrom said, adding that he expects Vrbo gross bookings growth to improve later this year.

Last month, Expedia released a new Vrbo logo and pronunciation. The company now wants people to say “VER-bo,” instead of the letter-pronounced acronym for Vacation Rentals by Owner. Vrbo was founded in 1995 and bought by HomeAway in 2006. Both were then acquired by Expedia.

The company reported a first quarter loss of 27 cents a share, excluding some items. That compared with an adjusted loss of 46 cents a share in the same period a year earlier. Online travel agents sometimes lose money in the first-quarter because fewer people go on vacation at the start of the year.

Expedia recently agreed to acquire Liberty Expedia Holdings Inc. in a $2.6 billion all-stock deal that simplifies the travel company’s ownership structure. Expedia’s shares have gained 14 percent this year, compared with a 16 percent increase in the S&P 500 Index. The stock closed at $128.23 in New York Thursday.

(Updates with CEO comments in eighth paragraph.)

To contact the reporter on this story: Olivia Carville in New York at ocarville1@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Alistair Barr

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