Fill in the blank: “Let’s rent a ______ on our next vacation”

Online travel agency, Expedia, is spending big marketing dollars to convince you to say Vrbo (pronounced “ver-boh”) instead of Airbnb.

It’s also looking to convince investors that Vrbo, Expedia’s home rental site that competes directly against Airbnb, could be enough to bring Expedia back to growth.

Sending the travel industry into survival mode

The online vacation booking space is dominated by Bookings.com and Expedia — which controls an estimated 90% of the industry in the US.

In 2020, COVID sent the entire industry into survival mode. Expedia’s sales fell 57% in 2020 and it raised $3.2b in April 2020 to survive the pandemic.

But Expedia’s problems go back even before COVID. In 2019, Expedia’s then CEO and CFO resigned after conflicts in the company’s strategy and years of slowing growth. Despite Expedia’s challenges, its stock is up 30% since the beginning of 2020.

With a new CEO in town and a new strategic focus, investors are placing bets on Vrbo to drive Expedia’s growth…

“Stay in a Vrbo” not quite as catchy

While Vrbo makes up just over 10% of Expedia’s 2019 sales and is a fraction of Airbnb’s business, it’s become Expedia’s only growing unit. To catch up with Airbnb, Vrbo’s spending big on marketing:

• Outspent Airbnb’s market budget by 10x in Jan. – Feb. of 2021.
• Launched a campaign in 2020 to poach hosts away from Airbnb

But a higher marketing budget isn’t necessarily better. While traditional travel sites built their businesses on paid marketing, Airbnb built its business on brand recognition and loyalty. In 2020, Airbnb spent only a third of its sales on marketing while Expedia and Bookings spent nearly 50%.

For investors… Google is secretly a travel company

According to a 2020 survey by RBC, Expedia used to be the most popular destination for travel planning but fell behind Airbnb and the unlikely competitor — Google, which secretly amassed a travel business estimated to be worth $100b.

• Google spent years selling billions in ads to Expedia and Bookings.com — whose businesses have become reliant on Google for marketing.
• And now, these same companies are worried about Google cutting off their businesses — and directly offering flight/hotel packages.

While the entire industry is expected to benefit from a spike in post-COVID travel, Vrbo (Expedia) could struggle to compete against Airbnb’s global brand and Google’s growing impact on the travel industry.

Read more: Airbnb is expected to be the first travel booking company to return to growth.