Excerpt from PhocusWire
Booking Holdings, Expedia Group and Airbnb all ramped up their marketing spending in the second quarter of this year as the only travel giants tried to capture attention and bookings from consumers eager to travel during the spring and summer seasons.
But while overall marketing spending (reported by Airbnb and Expedia Group as both sales and marketing) is up for all three online travel companies, they all saw a decrease in the expense as a percentage of revenue – a key indicator they tout to analysts.
Airbnb saw the most notable improvement in this metric, with sales and marketing expenses of $380 million in Q2 this year coming in at just 18% of revenue ($2.1 billion). That’s compared to the second quarter of last year when sales and marketing costs were 24% of revenue.
The company says growth in revenue outpaced the increase in sales and marketing expenses “as a result of the significant increase in Nights and Experiences booked combined with higher ADRs and cost-saving initiatives.”
In a call discussing the results with analysts, Airbnb CFO David Stephenson noted: “One of the big strengths of Airbnb is our ability to market to both guests and hosts at the same time, to be able to bring guests with 90% of our traffic remaining direct or unpaid. And I think this brand strategy, in fact, 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 us.”
An example of the brand’s efforts to capture unpaid traffic is its twice-yearly product updates, most recently in May, that attract attention from mainstream and social media.
Expedia Group saw its total (direct and indirect) selling and marketing expenses increase from $1.2 billion in Q2 2021 to $1.7 billion in the similar period this year, a 43% increase. But as a percentage of revenue, these costs dropped from nearly 57% in the second quarter of last year to 54% in Q2 2022, as revenue in the quarter jumped nearly 51% from $2.1 billion in 2021 to $3.2 billion this year.
In the company’s call with analysts, CEO Peter Kern explains that the company is focused on allocating its marketing spending to get “the right customers in the funnel and then turning them in to loyalty members and app users” – because those customers drive the most bookings and profit.
“To be clear, we have been evolving our consumer approach from being largely transactionally focused ... to a future where we build longer-lasting direct relationships with loyal high-lifetime-value customers. This means that we have not chased all traffic available in performance marketing, no matter the cost, and instead have focused on the pockets of consumers we think will derive the highest long-term value and the best future shape of our business,” Kern says.
Click here to read complete article at PhocusWire.