Making a powerful case for loyalty, Expedia Group is focusing on growing its mix of loyalty members and app users who book at higher levels than any other consumer group.
Reporting earnings for the fourth quarter of 2022 ended Dec. 31, Expedia Group Vice Chairman and CEO Peter Kern talked up the migration of Expedia’s brands to a unified tech stack, taking a “one key” approach to better leverage loyalty and grow its most profitable users.
The online travel agency (OTA) saw performance hurt by disruptions to air travel in Q4, between Hurricane Ian that hit in late September, then by December winter storms that led to widespread delays, cancellations and calls for more accountability across air travel generally.
With a portfolio that includes Expedia.com, Hotels.com, Vrbo, Travelocity, Hotwire.com, Orbitz, Ebookers, CheapTickets, CarRentals.com, Expedia Cruises, and Trivago, Kern told investors that “our strategy of investing in and retaining high lifetime value members is showing accelerating improvement across our business for the fourth quarter of ’22 versus [2019].”
“Our new customers that became loyalty members grew over 60%, and we entered ’23 with a record number of active loyalty members, which is 10% higher than any prior year. Just as importantly, our quarterly active app users increased by approximately 40%.”
Kern pointed out that loyalty members drive double the gross profit and repeat bookings over an 18-month period versus nonmembers, adding that “our app users each drive 2½ times the gross profit and repeat business over the same period. When you combine these two and have a loyalty member who also uses the app, this drives the highest production of all, and that group represented the fastest-growing customer cohort for us in 2022.”
He continued that, “In the fourth quarter of ’22 versus ’19, Expedia U.S. grew new customers that became loyalty members by over 300% and enters ’23 with nearly 70% more active loyalty members than any prior year, and almost 60% more active app users. Expedia U.S. was able to deliver almost 20% revenue growth in ’22 as compared to ’19.”
That will impact marketing strategy in 2023, as Kern said, “You will see us maintain a higher mix of marketing spend to channels that attract desirable long-term customers rather than just chasing short-term transactions. Therefore, the parameters of when and who is worth marketing to and winning as a customer will be different. We have clearly proven the value of attracting and retaining the right customers, and increasingly, our P&L will reflect that.”
See also: Expedia Offers BNPL as Consumers Cut Back on Holiday Spending
He said the reopening of China bodes well for the OTA, although issues with navigating around Russian airspace will remain a challenge for the immediate future.
Meanwhile, responding to an analyst’s question on the use of artificial intelligence (AI) in predicting travel trends, Kern said, “We already use a fair amount of AI and machine learning [ML] in all kinds of products” including voice-based AI in customer service, adding that, “We’re already experimenting with that in creating content and answering queries for customers, but we’re using machine learning across the board in terms of personalization, in terms of how we sort for you what we serve up to you, and will use it in direct consumer communications over time.”
He noted that the most impactful uses of AI and ML to date involve search and trip personalization, adding that, “I think we are by far at the forefront in our category in terms of how to use it, and how we can use it to best improve the customer experience.”
See also: Expedia Group Names Ex-Williams-Sonoma CFO Julie Whalen as its CFO
Expedia reported top-line revenues of $2.62 billion for the quarter, and it was widely reported that the stock was trading down on lower-than-expected Q4 numbers.
CFO Julie Whalen explained that starting in Q1 2023, Expedia “will discontinue disclosing like-for-like numbers next quarter, the first quarter of ’23, as we move away from comparing our financial performance to 2019 levels and move towards standard year-over-year comparisons.”
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