Being second biggest in its market doesn’t consign a company to mediocrity.
Indeed, rental car company Avis (NASDAQ: CAR) bragged about its No. 2 status behind Hertz (NASDAQ: HTZ) for decades. Beginning in 1962, Avis used the advertising slogan “When you’re only No. 2, you try harder.” And it continued with a variation of that phrase through 2012.
Expedia (NASDAQ: EXPE), the world’s second largest online travel agency, is another company doing just fine in its runner-up role. It has a market capitalization of $37 billion, dwarfed by the $149 billion market cap of Booking Holdings (NASDAQ: BKNG). Expedia’s brands include Expedia, Hotels.com, and Vrbo. More than 80% of its revenue comes from lodging.
“Booking is probably a better company,” Scott Black, founder of investment firm Delphi Management told Barron’s. But he and others still like Expedia.
“It has built a leading network of online travel services, which has driven a strong user base that we expect to remain over the next decade, despite AI and competition,” Morningstar analyst Dan Wasiolek wrote in a commentary.
“We see its powerful network advantage driving healthy direct traffic (which has no marketing costs), allowing the company to offset pressure from indirect channels like Google and potentially mass-market artificial intelligence products.”
The big two
Expedia and Booking combine for a majority of their market’s share, making life rough on competitors. Expedia’s stock performance actually creamed Booking’s over the last one-year and three-year periods, rising 46% and 183%.
Expedia’s earnings illustrate its strength. Revenue jumped 14% in the second quarter from a year earlier, and profit soared 166%. The adjusted EBITDA profit margin surged 196 basis points, to 25.9%. The company also raised its earnings estimates for full-year 2026.
Its B2B performance was particularly impressive in the second quarter, with that revenue climbing 23%. B2B represents other companies selling Expedia’s inventory of hotels, flights, car rentals and activities through their own platforms. Expedia gives them use of its back-end technology and data.
B2B accounts for 22% of the company’s revenue. The majority (70%) comes from direct-to-consumer sales, which gained 8% in the second quarter. And the remaining 8% of revenue emanates from advertising.
B2C strength
In the B2C arena, Expedia worked in recent years to migrate technology, data, supply, and loyalty rewards capabilities onto a unified platform. That move away from a silo approach “will support the company’s network advantage and drive operating margin expansion,” Wasiolek said.
“This investment will give platform users more content choices, the ability to accrue and use loyalty points across brands, and more targeted offerings.” Individual brands will no longer compete with each other, and marketing spending can earn a higher return, he said.
Booking dominates the online-travel-agency field overseas, but that gives Expedia room to grow. “Its investments to expand its international presence should support its network advantage [over smaller competitors] over time,” Wasiolek said. “Also, in emerging markets, the company has a collaboration with Trip.com (NASDAQ: TCOM), the leading online travel agency in China.”
Huge tech companies such as Alphabet (NASDAQ: GOOGL), Meta Platforms (NASDAQ: META) and Amazon (NASDAQ: AMZN) could bring formidable competition to Expedia beyond the next 10 years, he said. That’s because they have the customer traffic and budgets to build large networks, including AI models.
In the near term, Wasiolek doesn’t see AI as a major threat for Expedia, as it will likely just pull data from direct suppliers and aggregated platforms.
So Expedia may just keep chugging along as the No. 2 player in its field.
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