Airbnb boosts marketing advantage over rivals in Q2

If one hadn’t gotten so used to it over the past few years, Airbnb’s business and marketing advantage over its major rivals would be staggering. Again, Airbnb widened this gap in the second quarter.

In the accompanying chart, Skift looked at the online travel and short-term rental players’ sales and marketing spend as a percentage of revenue in the second quarter, and the Airbnb brand advantage was blinding.

Airbnb spent just 18% of its revenue in the June quarter on sales and marketing, while Booking Holdings allocated 51.3% and Expedia Group 53.9%.

Airbnb executives regularly point out that, to the public, “Airbnb” has become a noun and a verb, and it shows when you see how relatively little Airbnb spends on sales and marketing. Expedia and Booking Holdings executives readily acknowledge that Airbnb has created a great brand, and they are working to get some semblance of direct traffic to their Airbnb-powered websites and apps.

Q2 online travel marketing spend as a percentage of revenue

Source: Financial documents

Airbnb v Booking Holdings and Expedia

Airbnb outperformed rivals by spending 18% of revenue on sales and marketing in Q2 while maintaining a substantial EBITDA (earnings before interest, amortization, and tax depreciation) margin gap over Booking Holdings and Expedia . Airbnb’s margin was 33.8%, Booking Holdings was 25.3% and Expedia Group’s was 20.4%, according to BTIG statistics.

One should not attach too much importance to the statistics of a few quarters; Airbnb Chief Financial Officer David Stephenson said Aug. 2 that the company’s marketing spend as a percentage of revenue is likely to increase in the second half of 2022, bringing it back to a level similar to last year, when it was down. almost 20%.

The story continues

But in the second quarter of 2022, Airbnb widened the gap in marketing spend as a percentage of revenue it clinched compared to Booking and Expedia a year earlier, although there are a multitude of factors at play, including divergent levels of travel demand based on geographies and product mix.

So Airbnb’s sales and marketing spend as a percentage of revenue was 32.8 percentage points lower than Booking Holdings in Q2 2021, and that widened to 33.3 percentage points in Q2. quarter of 2022. Airbnb’s sales and marketing spend was 31.2%. points less than Expedia in the second quarter of 2021, and this advantage increased to 35.9 percentage points in the second quarter of 2022.

All of these marks are subject to change and are complex. Booking Holdings, for example, said it had started looking at merchandising, or discounts, versus performance marketing (on Google and other search engines), and it’s hard to tell at this stage how this might impact sales and marketing spend.

And some of Expedia’s sales and marketing expenses rose in the second quarter as it paid more commissions to business partners, a revenue stream that is a priority for expansion. Expedia Group CEO Peter Kern said Aug. 4 that the company’s new strategy isn’t just about spending endless amounts of money on search engines and meta-searches to acquire customers who might book something. thing one day and never come back.

“This means we haven’t chased all available traffic into performance marketing, no matter the cost, and instead focused on the pockets of consumers who we believe will drive value over the long haul. highest term and best future shape for our business,” Kern said of Expedia’s second-quarter marketing strategy.

Trivago had the highest percentage of marketing spend

Another takeaway from the marketing spend chart is the wide disparity between online travel agencies based on business models and priorities.

Over the past few years, German metasearch company Trivago has spent a huge percentage of its revenue on sales and marketing. In the second quarter of 2022, Trivago, majority-owned by Expedia, allocated 63.8% of its revenue to sales and marketing.

Trivago said 92% of its sales and marketing spend in the second quarter of 2022 was on advertising.

But having large marketing spend as a percentage of revenue — whether from Booking Holdings, Expedia Group, or Trivago — isn’t necessarily a bad thing in and of itself.

Trivago, which ran summer TV and other brand campaigns in its core markets in the second quarter and also increased its search engine marketing, posted its highest ever adjusted profit.

Tripadvisor seeks deferred benefits

Tripadvisor’s core business is hotel price comparison, tours and activities through its Viator brand, and restaurant reservations through its subsidiary TheFork. In response to the increase in travel demand in the second quarter, Tripadvisor spent 52% of its revenue on sales and marketing, which was within the range of Expedia and Booking Holdings.

For Tripadvisor, its marketing spend, which rose 76% year-over-year in the second quarter, had deferred benefits in mind.

“So what you see in 2021 and 2022 is that these marketing investments have a negative impact on EBITDA in the year itself, but have a very significant tailwind,” said the director. Tripadvisor’s financier, Ernst Tuenissen, on August 5. “And we’ve seen the tailwind really come through this year in our recurring revenue and in our free revenue very, very clearly.

Vacasa has increased its workforce and distribution costs

Property manager Vacasa said its sales and marketing spending jumped 59% year-over-year in the second quarter, and it accounted for 20% of its revenue. The company linked this increase to an increase in the number of sales staff (an increase of $10.7 million), distribution fees paid to online travel agencies (an increase of $6.8 million) and advertising to attract owners (an increase of $5.4 million).

Sonder focused on getting cash flow positive in 2023

Sonder, which spent just 10.2% of its revenue on sales and marketing, the lowest among the companies we tracked, saw its sales and marketing spend increase 154% year over year. the other in the second trimester. The main reason was a $6.5 million increase in distribution fees it paid to online travel agencies to list its properties. It also recorded a $1.1 million increase in sales and marketing expenses related to the hiring of additional employees.

Sonder said the increase in fees paid to online travel agencies was in line with revenue growth.

“Although we don’t spend much on performance marketing [paid marketing on search engines like Google]we reduced our expenses by about 70% month-over-month in June by focusing on the positive cash flow plan,” Sonder chief financial officer Sanjay Banker said on Aug. 10.

Several online travel agencies, including MakeMyTrip, Trip.com Group, Despegar, Flight Center and Lastminute.com Group, have yet to release their June quarters.

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