OTAs see improved marketing effectiveness in Q2

Reserve credits, Expedia Group and Airbnb all increased their marketing spend in the second quarter of this year as the only travel giants tried to capture the attention and bookings of consumers keen on spring and summer travel.

But while overall marketing spend (reported by Airbnb and Expedia Group as sales and marketing) is up for all three online travel companies, they all saw a decrease in spend as a percentage of revenue – a key indicator that they brag to analysts.

Airbnb saw the most notable improvement in this metric, with sales and marketing spend of $380 million in Q2 this year accounting for only 18% of revenues ($2.1 billion). This compares to the second quarter of last year, when sales and marketing costs accounted for 24% of revenue.

The company says revenue growth outpaced the increase in sales and marketing expenses “due to the significant increase in the number of nights and experiences booked, combined with higher ADRs and reduction initiatives costs”.

In a call discussing the results with analysts, Airbnb Chief Financial Officer David Stephenson said, “One of Airbnb’s great strengths is our ability to market to both guests and hosts, to being able to bring customers with 90% of our traffic. remaining direct or unpaid. And I think that branding, really, it’s more of a product marketing strategy that we have, to market the features and capabilities that we have at Airbnb and what makes us different has been a huge strength for we.

An example of the brand’s efforts to capture unpaid traffic is its semi-annual product updates, latest in Maythat attract mainstream and social media attention.

Expedia Group saw its total sales and marketing spend (direct and indirect) increase from $1.2 billion in Q2 2021 at $1.7 billion over the same period this year, an increase of 43%. But as a percentage of revenue, those costs fell from nearly 57% in the second quarter of last year to 54% in the second quarter of 2022, with revenue in the quarter jumping nearly 51% from $2.1 billion. dollars in 2021 to $3.2 billion this year.

During the company’s call with analysts, CEO Peter Kern explains that the company is focused on allocating its marketing spend to getting “the right customers into the funnel, then turning them into loyal members and into app users” – because these customers generate the most bookings and profit.

“To be clear, we’ve evolved our customer approach from one that’s largely transaction-driven…to a future where we build more lasting, direct relationships with loyal, high lifetime value customers. That means we don’t ‘ve not chased all available traffic in performance marketing, regardless of the cost, and instead have focused on the pockets of consumers who we believe will derive the highest long-term value and better future shape of our business,” says Kern.

“Our contest was very promotional and very focused on performance marketing, but we are determined to grow our business better. And we are confident that as we build our base of high lifetime value customers, we will be able to buy the right customers more efficiently and grow revenue and share much faster and profitable way than ever before.

For Booking Holdings, revenue for the quarter nearly doubled year over year, from $2.2 billion in the second quarter of 2021 to $4.3 billion in the same period this year. Marketing expenses in the quarter (reported separately from sales) increased more than 75% — from $988 million last year to $1.7 billion this year — but declined as a percentage of revenue, from from 45.8% in Q2 2021 to 40.5% in Q2 this year.

However, Booking Holdings views marketing effectiveness as measured by marketing spend as a percentage of gross bookings, not total revenue. The company incurs performance marketing spend at the time a booking is made, but does not recognize revenue until the traveler has checked in, meaning cancellations can negatively impact efficiency marketing.

In the second quarter of 2022, marketing spend as a percentage of total gross bookings increased slightly compared to the second quarter of 2021, from 4.5% to 5% year-over-year.

David Goulden, Chief Financial Officer of Booking Holdings, said on a call with analysts: “We were pleased to see above-expected returns on investment in the second quarter and to leverage that marketing spend. This is obviously the most important line of our income statement.

“As you know, the calculation of ROI is based on many, many different variables. Some of the ones that made a positive difference in Q2 – having a lower cancellation rate contributed to ROI. We we saw some strengthening in the length of stays compared to what we expected and also compared to 2019, and some of the ADR trends helped us as well. There are other factors as well, but I would point out that these three factors certainly had a significant impact on the overall ROI environment.”

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