Expedia CEO Defends B2B Partnerships as ‘Incremental’ to Consumer Businesses

Is Expedia Group’s $25 billion B2B business diluting its consumer businesses, including Expedia, Hotels.com and Vrbo, or is it a big advantage for the Group?

The question relates to Expedia Group’s partner business, the one that powers travel programs for Delta, American Express Global Business Travel, JPMorgan Chase, Marriott Vacations, Walmart, Trip.com, and 60,000 others.

Expedia Group CEO Ariane Gorin addressed the issue head-on at an investor conference last week. In a Powerpoint presentation and her remarks, Gorin said the B2B business is “incremental” to Expedia’s consumer businesses, largely because the partner business involves different use cases.

For example, Gorin said that in 2023 about 30% of the B2B bookings involved travelers redeeming their credit card points for hotels or redeeming airline miles “in a loyalty environment” on third-party websites – “so things that our brands wouldn’t do themselves,” she said.

In addition, some 60% of the bookings in the B2B business take place at points of sale on partner sites outside the U.S., she said. For Expedia’s total business, including its consumer brands, only 36.5% of revenue in 2023 was generated from outside the U.S.

And around 15% of Expedia’s B2B bookings comes from corporate travel, mainly travel management company partners providing Expedia hotel inventory to corporations. Expedia doesn’t have its own corporate travel brand, but has a long-term hotel partnership with Amex GBT.

“So all of those are really incremental to our consumer business,” Gorin said.

In a research note following Gorin’s talk, financial services firm BTIG concurred with her analysis. “B2B looks to be incremental vs. cannibalistic to EXPE’s B2C segment with bookings weighted outside of the U.S., to partner loyalty programs and to managed corporate,” the note said.

An Expedia Group spokesperson amplified that point on Tuesday.

“We work with world leading brands with unique member bases,” the spokesperson said. “For example, with one partner, we know that many of their shoppers are different from our brand customers. We also know that the average booking value of a trip made via this partner tends to be higher. This all points to the incredible power our partners have in attracting a wide array of customers who can then tap into our diverse and growing supply.”

Is Expedia Empowering the Competition?

However, Pranavi Agarwal, senior research analyst at Skift Research and the author of the report, The Past, Present and Future of Online Travel, had a different take on Wednesday.

“Regardless of B2B being a source of top line growth for Expedia, it doesn’t negate the fact that by powering the inventory of new entrants into the travel industry — especially credit card companies which are proving to become formidable competitors in their own right — Expedia is actively creating more competition against itself,” Agarwal said.

The Growth of Expedia’s B2B Business 2018-2023

Agarwal said that the commissions Expedia pays to B2B partners are considered a marketing expense, and are part of Expedia’s strategy to diversify its marketing beyond using Google.

“Between being forced to spend billions on Google or powering the inventory of formidable new entrants powerful enough to disintermediate legacy players, Expedia is stuck between a rock and a hard place,” Agarwal contended.

Do Expedia and Hotels.com Work at Cross-Purposes?

An analyst asked Gorin during her presentation how she wants to position Expedia and Hotels.com so the latter doesn’t end up cannibalizing Expedia.com’s business. Gorin said cross-selling was one of the ideas behind the One Key loyalty program, where Hotels.com users could redeem One Key cash for flights or car bookings on Expedia.com. After all, Expedia is a full-service travel site, and Hotels.com sticks to lodging.

“There are other countries in which maybe the Hotels.com brand is stronger than Expedia,” Gorin said. “We may lean into it. I would just say that as much as we would all love everyone to come to only one of our brands, people shop around.”

Competitors Would Want to Move Into B2B

Gorin said she wouldn’t be surprised by more competition in B2B.

While Expedia Group has the largest B2B segment in travel — $25 billion in gross bookings in 2023 — Booking Holdings is active in the business, as well.

“When we started to report B2B as a separate segment, it becomes obvious to people how that business is performing,” Gorin said. “And so if I were a competitor in this space, and I saw how Expedia is doing here, I would want to move into it as well.”

Gorin said a combination of factors makes Expedia’s partner business defensible, including its breadth of supply, “great technology,” and the quality of its account managers.

“I would say it’s not just one thing,” Gorin said. “I always talk to the team about [that]. It’s the wrapper of things together that brings the value to our partners.”