Expedia : Q1 2024 Earnings Call Transcript

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EDITED TRANSCRIPT

EXPE.OQ - Q1 2024 Expedia Group Inc Earnings Call

EVENT DATE/TIME: MAY 02, 2024 / 8:30PM GMT

OVERVIEW:

Company Summary

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MAY 02, 2024 / 8:30PM, EXPE.OQ - Q1 2024 Expedia Group Inc Earnings Call

C O R P O R A T E P A R T I C I P A N T S

Ariane Gorin Expedia Group, Inc. - Incoming CEO and President of Expedia for Business

Harshit Vaish Expedia Group, Inc. - SVP of Corporate Development, Strategy & IR

Julie P. Whalen Expedia Group, Inc. - CFO

Peter Maxwell Kern Expedia Group, Inc. - Vice Chairman & CEO

C O N F E R E N C E C A L L P A R T I C I P A N T S

Conor T. Cunningham Melius Research LLC - Research Analyst

Eric James Sheridan Goldman Sachs Group, Inc., Research Division - MD & US Internet Analyst

Jacob Hunter Seed TD Cowen, Research Division - Research Associate

Jed Kelly Oppenheimer & Co. Inc., Research Division - Director & Senior Analyst

Justin Post BofA Securities, Research Division - MD

Lee Horowitz Deutsche Bank AG, Research Division - Research Analyst

Mark Stephen F. Mahaney Evercore ISI Institutional Equities, Research Division - Senior MD & Head of Internet Research Naved Ahmad Khan B. Riley Securities, Inc., Research Division - MD of Internet Equity Research

Richard J. Clarke Sanford C. Bernstein & Co., LLC., Research Division - Research Analyst

Thomas Steven Champion Piper Sandler & Co., Research Division - Director & Senior Research Analyst

Trevor Vincent Young Barclays Bank PLC, Research Division - VP

Robert Valdes-RodriguezCiti - Analyst

Alec Bondolo Wells Fargo - Analyst

P R E S E N T A T I O N

Operator

Good day, everyone, and welcome to the Expedia Group Q1 2024 Financial Results Teleconference. My name is Lauren, and I will be the operator for today's call. (Operator Instructions) For opening remarks, I will turn the call over to SVP, Corporate Development, Strategy and Investor Relations, Harshit Vaish. Please go ahead.

Harshit Vaish - Expedia Group, Inc. - SVP of Corporate Development, Strategy & IR

Good afternoon, and welcome to Expedia Group's First Quarter 2024 Earnings Call. I'm pleased to be joined on today's call by our CEO, Peter Kern; our CFO, Julie Whalen; and our incoming CEO, Ariane Gorin.

As a reminder, our commentary today will include references to certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our earnings release. And unless otherwise stated, any reference to expenses exclude stock-based compensation. We will also be making forward-looking statements during the call, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions, which are subject to risks and uncertainties that are difficult to predict.

Actual results could materially differ due to factors discussed during this call, and in our most recent Forms 10-K,10-Q and other filings with the SEC. Except as required by law, we do not undertake any responsibility to update these forward-looking statements. Our earnings release, SEC

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MAY 02, 2024 / 8:30PM, EXPE.OQ - Q1 2024 Expedia Group Inc Earnings Call

filings and a replay of today's call can be found on our Investor Relations website at ir.expediagroup.com. And with that, let me turn the call over to Peter.

Peter Maxwell Kern - Expedia Group, Inc. - Vice Chairman & CEO

Good afternoon and thank you all for joining us today. As you all know by now - this will be my last earnings call. I'm excited to be handing the reins over to Ariane and we have reserved time for her to share some thoughts after Julie so you can get a sense of her ambition for the company going forward.

Ariane and I have been working closely these last few months to make sure she can take over without a hitch, and I just want to say I'm truly excited to see how she and our team bring this company forward and accelerate on top of everything we have built over these last several years.

As for the quarter, we saw a healthy but more normalized market environment for travel globally. North America remains the slowest growing geography relative to major international markets, but the gap is closing now that we are largely past the pandemic driven recovery. Adjusting for geo and product mix, prices held up in general for lodging but were under continued pressure in the Air and Car business.

Against this backdrop, our results for the first quarter of '24 met our guidance with a revenue and EBITDA beat but less robust gross bookings. Julie will get into the details, but revenue and EBITDA performance benefited from our mix of business, a strong performance in our Advertising business and our decision to invest more in pricing actions as opposed to direct marketing.

As for gross bookings, our B2B business continued its strong performance, and our B2C business excluding Vrbo was in line with our expectations. Unfortunately, that only partly made up for a slower than expected ramp up for Vrbo post its technical migration. As we discussed last quarter, we had pulled back on Vrbo marketing in the second half of last year while we went through our migration - and while we have been ramping that spend and the product has been improving, we have seen a slower than expected recovery.

Based on this and the overall trends in our B2C business so far in Q2, we expect growth to be lower than what we had initially anticipated for '24. We are therefore lowering our full year guidance to a range of mid to high single digit topline growth, with margins relatively in line with last year. We still expect to see broad improvement across '24 in our B2C business, with the best early indicator being the conversion gains we have seen driven by higher test velocity and feature roll-outs. Behind that we will continue to invest in Vrbo and our international growth markets to reignite those flywheels to set us up for continued growth in the years to come.

All in all, I'm pleased to say that while momentum is not yet back consistently in all the business lines, we are improving every day, wanting to optimize all of our new capabilities, and I have tremendous faith in our teams ability to extract the full potential of what we have built.

With that I will just close by expressing my profound appreciation to all our teams at Expedia for their dedication throughout our multi-year, often painful, transformation journey. When the returns from this work are fully realized, we will owe this determined bunch of people a great debt of gratitude.

I also want to thank all of you-our-existing shareholders, the analysts covering us, and the broader investor community - who have been with us along this sometimes bumpy journey. There's a reason most companies don't undertake transformation on this scale, and it takes patience and a commitment to understanding to come along for this journey. I'm very appreciative of all the constructive engagement over the years, and it has been a pleasure working with all of you. So with that, over to Julie.

Julie P. Whalen - Expedia Group, Inc. - CFO

Thank you, Peter and good afternoon, everyone. Let me start with the key metrics for the first quarter. Total gross bookings of $30.2 billion were up 3% versus last year. Growth was driven primarily by total lodging gross bookings, which grew 4%, led by our hotel business growing 12%. This

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MAY 02, 2024 / 8:30PM, EXPE.OQ - Q1 2024 Expedia Group Inc Earnings Call

strong hotel growth was partially offset by the ongoing softness in our Vrbo business that while improving is taking longer than expected to fully recover.

Revenue of $2.9 billion grew 8% versus last year, led by B2B, Brand Expedia, and our advertising businesses. The Revenue strength was driven by higher revenue margins which increased over 50 basis points, from a product and geo mix during the quarter, increased advertising revenue which contributes to revenue but not gross bookings, and the pull-in of stays in Q1 driven by the Easter shift.

Cost of sales was $356 million for the quarter, and $55 million or 13% lower versus last year, which, combined with our strong revenue growth, drove approximately 310 basis points of leverage as a percentage of revenue year-over-year. We are pleased to see our ongoing initiatives delivering transactional efficiencies.

Direct sales and marketing expense in the first quarter was $1.7 billion, which was up 11% versus last year. Sales and Marketing deleveraged this quarter as a percentage of gross bookings primarily due to the commissions to our partners as a result of our strong growth in our B2B business, with growth of 25%.

As we have stated previously, commissions paid to our B2B partners are in our direct sales and marketing line and are more expensive as a percentage of revenue than our B2C business. However, because they are generally paid on a stayed basis to contractually agreed upon percentages, the returns are more guaranteed and immediate.

In our B2C business, we also saw some marketing deleverage this quarter as we reinvested back into our Vrbo business to drive improving growth and our increased investments to drive our global market expansion one of our key strategic growth initiatives this year. Overhead expenses were $611 million, an increase of $23 million versus last year, or 4%, leveraging 95 basis points.

We were able to drive our costs below our revenue growth, particularly in our Product & Tech operations. And now that we are done with the major boulders of platform migration, we remain committed to driving further efficiencies across our P&L. To that end, in February, we announced cost actions that will impact approximately 1,500 employees through this year. We expect that these actions will unlock substantial savings on an annualized basis across capitalized Labor, cost of sales and overhead costs.

And, as a result of all of these factors, we delivered strong first-quarter EBITDA of $255 million, which was up 38% year-over-year with an EBITDA margin of 8.8%, expanding over 190 basis points year-over-year. This was higher than expected given the higher revenue we delivered and the leverage to the P&L that provides, along with lower cost of sales, both of which more than offset our marketing investments to drive future growth.

It is also important to note that EBITDA also benefited from a decision we made to invest more in pricing actions as opposed to additional direct marketing. These pricing actions are reflected in the P&L when the stay occurs. As a result, these investments will instead impact future quarters as contra revenue when the stays come in.

Starting this quarter, in addition to EBITDA, we are providing additional disclosure around our EBIT performance, which includes the impact of stock-based compensation, depreciation and amortization. In the first quarter, EBIT was negative $59 million with a margin of negative 2.1%, an improvement of $51 million or 205 basis points versus last year. The additional approximately 15 basis points of expansion as compared to EBITDA is driven by leverage from stock-based compensation.

Our first quarter EBITDA growth enabled us to generate another quarter of robust free cash flow at $2.7 billion. The year-over-year decline in free cash flow is associated with timing changes within working capital, which includes lower deferred merchant bookings primarily driven by the softness in Vrbo bookings this quarter.

Moving on to our balance sheet. We ended the quarter with strong liquidity of $8.2 billion driven by our unrestricted cash balance of $5.7 billion and our undrawn revolving line of credit of $2.5 billion. Our debt level remains at approximately $6.3 billion with an average cost at only 3.7%. Our gross leverage ratio at a further reduced 2.3x continues to make progress towards our target gross leverage ratio of 2x, driven by our ongoing strong EBITDA growth.

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MAY 02, 2024 / 8:30PM, EXPE.OQ - Q1 2024 Expedia Group Inc Earnings Call

Our strong cash position enabled us to continue repurchasing shares with over $780 million, or approximately 5.7 million shares repurchased year to date. And we continue to believe that our stock remains undervalued and does not reflect our expected long-term performance of the business. As such, we will utilize the strong cash generating power of our business and our remaining $4.1 billion share repurchase authorization to continue to buy back our stock opportunistically.

As far as our financial outlook, given the lower than expected growth in gross bookings in the first quarter, and the trends we are seeing so far in the second quarter in our B2C business, in particular in Vrbo, we are lowering our full year guidance to reflect the range of possible outcomes on the top line while we continue to invest in marketing to drive growth for Vrbo and international markets. As such, we believe our top line growth will now be in the range of mid to high single digit growth with EBITDA and EBIT margins relatively in line with last year.

In the shorter term, we expect our second quarter to deliver top line growth in the mid-single digits, which reflects a sequential acceleration in gross bookings from the first quarter as we expect Vrbo to continue to improve from our marketing investments. We expect revenue growth to be lower than the first quarter growth rate given the lower gross bookings in the first quarter, the pull forward of Easter stays into the first quarter and the contra revenue arising from pricing actions.

And with this revenue growth, along with our continued investments in marketing to drive growth, we expect some pressure in our second quarter EBITDA and EBIT margins versus last year. However, when combined with our first quarter outperformance, we expect EBITDA and EBIT margins to be relatively in line with last year to slightly above in the first half.

In closing, despite the lower guidance, we remain committed to the long-term opportunity that our transformation has given us to deliver profitable growth and shareholder returns. And with that, let me turn the call over to Ariane.

Ariane Gorin - Expedia Group, Inc. - Incoming CEO and President of Expedia for Business

Thanks, Julie. And thank you, Peter, for your leadership over the last 4 years, and for all I've learned working closely with you. I joined our company 11 years ago and most recently led Expedia for Business. This includes our B2B and Advertising businesses, both of which have consistently delivered double-digit growth. I also led our global supply teams that source inventory for our whole company, so I know our industry very well. And, having lived in Europe for the last 23 years, I've seen first-hand opportunity for us in international markets.

My immediate priority as CEO is to work with our teams to accelerate our growth, and to sharpen the longer-term strategy for our consumer business. Since our leadership announcement in February, I've spent time getting to know our consumer business in more detail. It's undergone extreme transformation over the last few years, from technical migrations and changes in our loyalty program, to changes in how our teams operate the business - so we've dealt with a lot of turbulence.

While we built new capabilities like our common front-end, we have less development capacity to build new features, and this, in turn, impacted the competitiveness of some of our brands and products. Expedia, which was our least disrupted brand, benefited a lot from our investments and has grown very well, while Hotels.com and Vrbo, which were the most impacted by our migrations, aren't where we'd like them to be.

To get the acceleration we want from our consumer business, we need to focus on the basics - driving traffic, increasing conversion, and expanding our margins through higher attach, take rates and more efficient marketing. Ultimately, this is going to come down to having great products and great brand value propositions.

Our platform now allows us to innovate at scale, and we're running more tests and seeing the benefits of AI across all of our brands. Which is great. But we're still learning to use all of this most effectively. For example, a recommendation algorithm gets smarter faster because of our scale, but it has to be trained on the differences between a traveler shopping on Vrbo compared to one on Expedia. And tests that work on one brand may behave differently on another. While we still have some work to fully complete our tech platform, moving forward we'll dedicate more of our development capacity to building great traveler experiences and making up for lost time.

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MAY 02, 2024 / 8:30PM, EXPE.OQ - Q1 2024 Expedia Group Inc Earnings Call

Looking ahead, while it's going to take somewhat longer than we'd anticipated to see the benefits come through in our numbers, the investments we've made rebuilding our consumer business will pay off. Our new tech platform gives us a solid foundation to grow our business. And we also have other real strengths to build on. We're leaders in the B2B segment and just posted another fantastic quarter, and there's still a big opportunity to win share.

Our advertising business is big, differentiated and growing, and I equally see lots of opportunity ahead here. We have strong relationships with our supply partners, and great supply for our travelers. And of course, our consumer business is the market leader in the U.S., with well-recognized and loved brands. And we're starting to get traction as we move back into international markets. As you know, we're also focused on driving efficiencies, and we'll continue to look carefully at every dollar we invest.

So, in closing, we have great consumer brands, a leading B2B business, a powerful platform and what I think is the best team in travel. We have lots of work to do to realize our potential, and I couldn't be more excited about the opportunity ahead. And with that, let me open the call for questions.

Q U E S T I O N S A N D A N S W E R S

Operator

(Operator Instructions) Our first question comes from Eric Sheridan with Goldman Sachs.

Eric James Sheridan - Goldman Sachs Group, Inc., Research Division - MD & US Internet Analyst

Wishing you the best going forward, Peter, and congrats on the new role, Ariane. Peter, maybe can we come back to Vrbo for a minute and just how do you think about that asset compared to where the competitive landscape is across travel and shared accommodation specifically?

And when you think about leaning into investments to potentially accelerate Vrbo and improve its positioning, what kind of signals are you guys as a team looking for to know it's the moment to sort of lean in behind some of those investments to get it back to more normalized growth?

Peter Maxwell Kern - Expedia Group, Inc. - Vice Chairman & CEO

Sure. Thanks, Eric. And for everyone's benefit, I've asked Ariane to chip in where she'd like along with these questions, in addition to whatever you have specifically for her.

But specifically to Vrbo, the way we see it is we are very strong in our core business of Vrbo, which does not compete with shared accommodations, it does not compete directly with some of our competitors in some geographies and some cities, and we are really focused on just being excellent in our space, which is the whole home space in certain markets where we have the right to win and a strong brand and strong supply, et cetera. So that is our core focus for now. We could always -- Ariane may expand that remit at some point, but that's where we're focused now.

As far as what we're seeing, as we talked about before, our spend down in the back half of last year, the migration we've been through obviously had a lingering impact on the product, and first quarter is an important quarter for Vrbo, so it's unfortunate that it wasn't as strong as we wanted there. But we are seeing real improvement in the products and we're leaning into investment to sort of spin up the flywheel to just get it going again.

So it's not so much that we see any flaws in it. It's just got to be re-spent into. And because VR is not as performance marketing-driven, we don't have that ability to just go into Meta and other places and ramp everything up. We've got to spend on brand and build it, and that's taking some time to lean back into. But we feel very good about the progress. We're hopeful that it continues, obviously. And we feel really good about the product improvement.

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MAY 02, 2024 / 8:30PM, EXPE.OQ - Q1 2024 Expedia Group Inc Earnings Call

So we will continue to invest behind that, but what we're really looking for is we know the spend is working, we know we're driving improvement, and it's just a question of how far, how fast and what's the timing and the seasonality differences, et cetera. But that's what we're spending into this year to get it back on a growth trajectory.

Ariane Gorin - Expedia Group, Inc. - Incoming CEO and President of Expedia for Business

And I would just add, again, yes, we have deep belief and conviction in Vrbo and also our other brands of Expedia and Hotels.com. We do sell some alternative accommodations on those brands, so we also have an opportunity to go after that market with those brands as well.

Operator

Our next question comes from Lee Horowitz from Deutsche Bank.

Lee Horowitz - Deutsche Bank AG, Research Division - Research Analyst

Great. I guess previously, your guidance for the full year seemingly expected share gains across your largest business lines. Is there any change to that view, given sort of the more cautious outlook for the full year? Or is this really all Vrbo-centric?

And then relatedly, when you think about the acceleration you're seeing in your non-Vrbo B2C business, what's ultimately going on there? Is it the market? Is it just the stacking of the things that you're doing? And how do you get comfortable that, that acceleration can sustain through the balance of the year?

Peter Maxwell Kern - Expedia Group, Inc. - Vice Chairman & CEO

Yes. So let me take a crack. Thank you, Lee, and then Ariane and Julie can jump in. But I would say that what we see in Vrbo and -- sorry -- so there were 2 questions, the non-Vrbo piece and the Vrbo piece. On the non-Vrbo piece, we've been making improvements in the product consistently. HCOM went through a migration a while ago, but still, we are making improvements and getting it back to -- on the best footing we can.

So we are seeing continuous improvement in the product. We are seeing big wins across the platform, whether it's coming from machine learning or other areas that are -- that we can deploy much faster across the entire slate of apps and products. So we're getting wins. We're getting product wins. We're getting conversion wins.

So that's what gives us confidence. And all of that ultimately leads to better conversion, more efficient marketing and everything else. So we would like everything to go faster, but we are feeling good that we are making progress on the non-Vrbo business.

On the first question -- sorry, Lee, the first part about Vrbo again? Can you repeat it? Oh, share gains. I'm sorry. I got it. I came back to it. On the share gain front, we're actually, other than Vrbo, seeing good share gains in our core hotel business across North America and all our major focus markets, or virtually all our major focus markets.

So in the hotel business, we're seeing really good product gains, and we feel quite good about that. Vrbo is its own thing. So when you look at lodging all up, Vrbo has obviously given up share, and both Airbnb and Booking are both in the VR space, particularly in those city-centric other kinds of accommodations, some much of which we don't compete in.

But if you just look at hotel lodging, we're making really strong gains there. And in all our other product lines, again, we continue to improve on product, we continue to believe those products will pay off, and we feel good about where they're going.

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MAY 02, 2024 / 8:30PM, EXPE.OQ - Q1 2024 Expedia Group Inc Earnings Call

Operator

Our next question comes from Richard Clarke from Bernstein Societe Generale Group.

Richard J. Clarke - Sanford C. Bernstein & Co., LLC., Research Division - Research Analyst

Just you mentioned you're deciding now to pivot towards more price investment. Just wondering, is that backing up One Key? Is that going into the loyalty? And maybe overall, what's just leading to that decision to do that rather than more marketing?

Peter Maxwell Kern - Expedia Group, Inc. - Vice Chairman & CEO

I'll take a piece and Ariane can jump in. I would just say, we've said it before, but we look at all our marketing, all our things to drive consumer behavior as one big bucket of capital. So that's direct sales and marketing, it's the pricing work we do, merchandising work, and it's our loyalty spend.

So what we saw was an opportunity, what we've been seeing is an opportunity to drive more into the pricing vein, where there have been good returns. We've seen good opportunity there. And this is basically just a way to modify prices, taking value out of our margins to drive more velocity, acquire more customers and do it more efficiently. So it's really just a rebalancing, a little bit, towards pricing, and that's what we've done.

Ariane Gorin - Expedia Group, Inc. - Incoming CEO and President of Expedia for Business

And I would just add, as Peter said, we think about those buckets of pricing, of loyalty and of marketing sort of as all buckets that we can use to invest where we see opportunities. And going forward, we'll continue to do that. So which of those 3 will drive the most growth, whether it's in international, regardless of what brand it is, I think the teams have a very dialed-in view of where they can invest in order to get the best return.

Richard J. Clarke - Sanford C. Bernstein & Co., LLC., Research Division - Research Analyst

Maybe just a follow-up on whether this is going into One Key program disproportionately, maybe matching one of your peers which has a more, I guess, price-oriented loyalty program rather than points loyalty program.

Ariane Gorin - Expedia Group, Inc. - Incoming CEO and President of Expedia for Business

Well, what I would say is part of our One Key program does include tiered member discounts. So if you're a silver member or a gold member, you'll get better discounts. And those are actually supplier-funded discounts. Those are when our hotels, for example, want to get access to the more valuable members who travel more, who spend more. So I don't know if that's what you're referring to, but that program is a supplier-funded program, and it's one of the benefits of One Key.

Peter Maxwell Kern - Expedia Group, Inc. - Vice Chairman & CEO

Yes. I think, Richard, just to think about it as clearly as we can give it to you, there's 3 opportunities. There's what Ariane just described, which is we've been able to get our customers more benefit, more tiered benefits, all of that provided by our suppliers akin to some of what you've seen from some of our competition. We also have discounting we do specifically that I mentioned to win on price and acquire customers efficiently.

And then in One Key itself, we have the opportunity now, which is awesome, to allow us to give benefit to One Key customers to create activity, create shopping, to give them incentives and other things. So there is a bit of that, that goes through that as well. But the big buckets are really the pricing and the core loyalty that are still strong, and those are the largest buckets of spend.

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MAY 02, 2024 / 8:30PM, EXPE.OQ - Q1 2024 Expedia Group Inc Earnings Call

Julie P. Whalen - Expedia Group, Inc. - CFO

And just to put a pin on it, obviously, we made the decision based on what is the best return. I mean at the end of the day, that's what we do. We look at everything and what are we going to get the best return for our spend, and at this moment, we saw that the pricing actions were going better than any other options.

And so obviously, it creates some noise in the P&L that you're seeing, but because it doesn't get impacted to the P&L until you actually have stay, so it's a little bit of a timing situation, but at the end of the day, that's what we're focused on, is driving the best return.

Operator

Our next question comes from Trevor Young from Barclays.

Trevor Vincent Young - Barclays Bank PLC, Research Division - VP

Great. Ariane, I think you commented that Hotels.com isn't where you'd like it to be. Can you expand on that a little bit and what you hope to achieve with that brand? And then bigger picture, what are the areas or opportunities you get most excited about beyond the next few years? Is it something like experiences in a more holistic interconnected trip? Is it AI driving a better consumer experience? Or something else altogether?

Ariane Gorin - Expedia Group, Inc. - Incoming CEO and President of Expedia for Business

Okay. Trevor, thank you for the question. Look, let me just start by reminding you that we run our consumer business as a whole portfolio. And so we invest behind where we see the best return. And so in some cases, that may mean some brands versus others. And Hotels.com was the most impacted by our migrations. And as I said, it's not where we want it to be. It's not growing.

And again, it was impacted by a number of things. So the first was the product migration, which, when we went through it, obviously had an impact on its performance. The second was we made a big change in the loyalty program. We're very excited about what One Key can and will deliver, but it's true that for Hotels.com, it is a bigger change in the loyalty program with less earn.

Also Hotels.com was the most international of our brands, so over the last few years as we've leaned less into international, Hotels.com has been impacted. And then as I said, when you have the change in the product, we were getting better returns, for example, on Expedia, so leaning in there.

The good news is that, one, we're seeing really great conversion gains on the lodging path, which, of course, benefits Hotels.com. Two, as we go back into international, because Hotels.com is our lead brand in a number of those countries, we're going to see good growth there. So I think the ambition is to get Hotels.com obviously benefiting from the platform and international growth.

And just in terms of what I get excited about, look, there are a lot of things. I think probably AI and opportunity with AI, and especially now with our platform, given that we have one platform across all of our brands so we can move faster in the way that we're learning, I think, is going to have a bigger opportunity than ever to deliver personalized experiences for travelers.

So of course, I can tell you I'm excited about advertising, I'm excited about B2B. There are a lot of parts of our business. But I think fundamentally, it's how is technology going to allow us to deliver traveler experiences that are truly personalized. And when we do that and as we're doing that, I think that will really differentiate us.

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MAY 02, 2024 / 8:30PM, EXPE.OQ - Q1 2024 Expedia Group Inc Earnings Call

Operator

Our next question comes from Conor Cunningham from Melius Research.

Conor T. Cunningham - Melius Research LLC - Research Analyst

Just back to One Key for a second. Can you just level-set with how that's performing today? I realize it's still really early, but the -- with the slower than expected results in Vrbo and in Hotels.com, is there any implications on the potential slower ramp on international as you look to do that this year, maybe into next year as well?

Ariane Gorin - Expedia Group, Inc. - Incoming CEO and President of Expedia for Business

So I'm happy to -- look, on One Key, as you know, we launched it last summer, and the goal was to get more members, have them repeat more and see them shopping across our brands. In terms of member growth on our loyalty programs, new membership is up 40% year-on-year, and we're really pleased with that. And we're seeing good repeat rates.

And when it comes to cross-shopping, what we've actually seen is that 25% of people who have redeemed their One Key cash on Vrbo, who had earned that cash on either Hotels.com or Expedia, are completely new to Vrbo. So I think that really sort of reassures us in this idea of being able to capture more trips from travelers because of the One Key program. And we will be -- we are looking to roll it out internationally later this year.

Operator

Our next question comes from Naved Khan from B. Riley.

Naved Ahmad Khan - B. Riley Securities, Inc., Research Division - MD of Internet Equity Research

So 2 questions. Maybe just on Vrbo. Can you maybe talk a little bit about if the issues you are kind of trying to solve for more of a top line -- sorry, top of the funnel traffic? Or is it conversion? What exactly are you kind of trying to refine? And what gives you the confidence that the rebound can ultimately come through on Vrbo?

And the second question I had is around international market. So I think you talked about kind of going into some new markets this year, and you were spending ad dollars in those markets. Wondering when we can start to see sort of the P&L contribution from those new markets.

Peter Maxwell Kern - Expedia Group, Inc. - Vice Chairman & CEO

Sure. Let me take that. So first of all, it's -- for Vrbo, it's largely a traffic issue. So as I mentioned, we spent down last year while the product was going through migration. That has 2 effects, which is, while it's migrating, it's not converting as well, and we're not spending as much to build awareness through that time.

As we're now rebuilding awareness, we're seeing benefit. The product itself is actually converting very well and improving very quickly because it is getting the benefits, as Ariane mentioned, of the single stack, right? All the -- many of those things that have won on our other products,are winners for Vrbo, and so we're getting more benefit more quickly.

So conversion continues to improve and is in good shape. We've got to rebuild back the traffic. And as Ariane said, One Key is helping with that. But One Key for itself in Vrbo, Vrbo customers don't travel 10 times a year typically. They travel once, if once, a year, sometimes once every 18 months or 2 years.

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