Declining Travel Demand Hits Expedia Group Hard
On Friday, Expedia Group revealed a setback in its financial performance, attributing weaker-than-expected revenue in the first quarter to reduced travel demand across the United States. This news has left many in the travel industry with questions about the future as broader economic trends begin to impact travel preferences.
The Landscape of Travel Reservations
Expedia, which owns several lodging reservation platforms—including Hotels.com and VRBO—alongside its prominent online travel agency, has become a bellwether for the industry. Its challenges mirror those experienced by other major players such as Airbnb and Hilton, who reported similar trends in their recent earnings calls. This collective slowdown is indicative of a larger issue affecting both domestic and international travel.
Broader Industry Trends
The economic landscape is shifting. If recent earnings reports from other travel giants are any indication, the once-booming travel sector is showing signs of strain. The slowdown is notable, with major U.S. airlines even withdrawing their full-year financial forecasts and planning to cut scheduled flights. The common thread? A decline in leisure travel bookings, particularly for economy passengers looking to spend their holidays away.
Economic Factors at Play
The U.S. Travel Association points to increased economic uncertainty as a critical factor, along with anxiety stemming from political issues such as former President Trump’s tariffs. In April, American consumer confidence dipped for a fifth consecutive month, reaching its lowest levels since the onset of the COVID-19 pandemic—a clear signal that uncertainty is weighing heavily on potential travelers’ minds.
International Perspectives
The issues aren’t limited to domestic travel. International visitors also appear reluctant to journey to the U.S. Widespread discontent regarding travel policies, especially concerning tourist detentions at the U.S. border, has created a chilling effect. Travelers from other countries are exhibiting reduced interest in American destinations, which tourism experts attribute to both political climate and economic concerns.
Visitor Statistics Tell a Story
Recent data showcases these trends vividly: only 7.1 million visitors entered the U.S. from overseas in the early part of the year, marking a 3.3% decline compared to the first three months of 2024. This statistic does not account for land crossings from countries like Mexico or Canadian travelers, many of whom have expressed displeasure over political statements regarding the potential annexation of Canada.
Diving Into the Numbers
Expedia’s performance numbers are telling. In the first quarter of this year, bookings into the U.S. fell by 7%, while bookings originating from Canada plummeted by nearly 30%. In a candid moment during an investor conference, CEO Ariane Gorin described the situation as "even softer" in April than in March, emphasizing the ongoing challenges facing the travel industry.
Shifts in Traveler Preferences
Interestingly, while European tourists are traveling less frequently to the U.S., there’s been a notable pivot toward Latin America. Gorin’s comments reflect a change in travelers’ preferences, suggesting a rebalancing of travel destinations that could continue as traveler sentiment evolves.
Financial Results and Market Reaction
Seattle-based Expedia reported a modest revenue increase of 3%, hitting $2.99 billion for the quarter, though this still fell short of Wall Street expectations of $3 billion. Following the announcement, Expedia shares saw a drop of over 7% in midday trading—a clear indicator of investor concern.
The Airbnb Angle
Airbnb’s recent declarations echoed those of Expedia, highlighting that foreign travel to the U.S. constitutes only a small fraction (2% to 3%) of its overall business. Even within that limited segment, Airbnb has noted declining interest in the U.S., especially as Canadian travelers shift their focus to domestic vacations and more popular international locations like Mexico, Brazil, and Japan.
Hilton’s Perspective
In the face of declining international travel, Hilton has adjusted its full-year forecast for revenue per available room—a crucial metric in the hospitality industry. The company now anticipates modest growth of 0% to 2%, down from a previous estimate. CEO Christopher Nassetta’s comments reveal a cautious yet optimistic outlook, suggesting that the uncertainty clouding travel could begin to clear in the upcoming quarters, allowing for a potential resurgence.
Looking Ahead
As the travel landscape evolves, industry leaders remain hopeful. While immediate challenges loom, the belief is that underlying economic strength may resurface, paving the way for a recovery in travel demand and a return to growth for companies like Expedia and Hilton. The narrative of the travel industry is in flux, but its resilience continues to shine through in the face of adversity.
