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May 20, 2020

Expedia sees first revenue loss in 8 years on COVID-19

The logo for Expedia Group Inc. is displayed on a laptop computer in an arranged photograph taken in the Brooklyn borough of New York, U.S., on Monday, May 11, 2020. In a matter of months, the coronavirus reset the clock on a decades-long aviation boom that's been one of the great cultural and economic phenomena of the postwar world. Photographer: Gabby Jones/Bloomberg

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Expedia Group Inc. followed its peers in the online travel industry in witnessing a staggering decline in business since the spread of the coronavirus, with total gross bookings down 39 per cent in the first quarter.

The Seattle-based company reported total gross bookings of US$17.89 billion, including a decline of as much as 90 per cent in the second half of March as the pandemic took hold. Revenue fell 15 per cent to US$2.21 billion, its first quarterly drop in eight years. The adjusted loss before interest, taxes, depreciation and amortization was US$76 million, or 1.83 a share, compared with a loss of 27 cents a year earlier. Analysts had projected a loss of US$1.45 a share on US$2.11 billion in sales.

“Like all travel companies, Expedia Group suffered a major reduction in business since the onset of COVID-19,” Chief Executive Officer Peter Kern said in a statement. “Fortunately, we were ahead of the game having implemented cost savings measures earlier this year, and with the added pressure from COVID-19 we accelerated and expanded our ambition on improving our long-term cost structure.”

The shares were up about 3.8 per cent in extended trading in New York after closing at US$79.58. They have fallen 26 per cent this year compared with an 8 per cent decline of the S&P 500.

Expedia withdrew its full-year forecast in March as lockdowns began to halt flights and travel around the world. The company had already been struggling, cutting 3,000 jobs in February to simplify what had become a “bloated organization,” as it faced increasing pressure from Google in advertising and nimble startups such as Airbnb Inc. As part of the company revamp, Kern took over as chief executive officer in April. At the same time, Expedia announced it was raising US$3.2 billion as the impact of the coronavirus began to weigh on the industry. In addition, Expedia made a “significant reduction” in costs for marketing and discretionary expenses and deferred certain capital expenditures, it said in the earnings report.

As the pandemic raged in March, Expedia saw “unprecedented” cancellation volume and moved to build self-service options for customers to cancel lodging and air bookings without speaking to an agent. As a result, cancellation inquiries for air travel managed without an agent increased to more than 95 per cent in April from 65 per cent in February.

“If there was an industry on the front lines bearing the full impact of coronavirus, I would say it’s travel,” said Naved Khan, an analyst at Suntrust Robinson Humphrey Inc. “It is one of the sectors that has been hurt the most and is likely to lag during the recovery because until there is a vaccine people will limit their travel activities.”

Airbnb and TripAdvisor Inc. cut a quarter of their workforces and Booking Holdings Inc. has been forced to apply for government aid.

Still, Kern said Expedia has seen cancellations stabilize and growth return in May. “What we’ve seen is green shoots in the areas you would expect, places where movement has become possible and people can start to think about their summer holidays,” Kern said on a call with analysts.