Marriott’s Up 14%. Vrbo Flipped the Script on Airbnb.

0:00Brandreth Canaley: ZS is a global consulting and technology firm that partners with companies to improve life and how we live it. Working with the world's top hospitality brands, ZS brings together data, science, technology, and human ingenuity to transform ideas into customer loyalty. They're ready to help you elevate guest experiences, improve operations, and uncover preferences and motivations through their AI-powered solutions. With more than 1 ,700 clients in over 170 countries, ZS has built the expertise, fortitude, and vision to help you deliver impact right where it matters.

0:58Brandreth Canaley: Good morning. Happy Wednesday. Best day of the week. I'm Brandy Canale here with Jamie Lane and Michael Golden. How are you guys? I feel like I haven't seen you in a while, even though it's been maybe two weeks.

1:10Michael Goldin: We've been playing some musical chairs over the past three weeks. So good to have everyone back on one show. And Brandy, we saw you because we got your you're mailing uh brandy rant uh but uh you didn't see us yeah yeah yeah it was so funny i was just

1:27Brandreth Canaley: like that like i was like oh there's gonna be no one in the lounge it like literally just opened no there were people around and i was like so hi guys the influencer you are just filming videos at the lounge yeah yeah yeah it's uh it's a high flying life you know it was a great take and i

1:48Michael Goldin: I feel like that's a story that's going to continue to unfold over the next few months.

1:54Brandreth Canaley: Yeah, I definitely, I'm, I think I'll be able to bring, yeah, in a couple months, once all the operators have a time to digest what's going on, we'll be able to see like how this really, all these changes impacts operators at scale. And I'm hoping, I mean, we've all seen our LinkedIn's be super feisty. So I hope that some of our listeners, like once all these changes emotionally settle after they operationally settle? What is it actually looking like in your business? I think we'll be really interested to hear. Yeah.

2:25Michael Goldin: The LinkedIn warriors have been quieter the past seven days than the seven days prior. Surely it's not out of the news cycle entirely. There's so many operational changes that have to come into factor now. But Brandy, we look forward to digging into some of those with you over the next few weeks.

2:44Brandreth Canaley: Yeah, definitely. Well, I'm excited to get into our stories today. But before we do, this episode is brought to you by ZS, a global management consulting firm, helping companies turn strategy into results. So you can learn more about them at the link in our show notes. So today's a big Jamie day because it's three ornings.

3:11Michael Goldin: It's your time to shine and getting you back to your roots in the hotel world too. Yeah. And we don't get Expedia or Airbnb. We get Expedia this afternoon and Airbnb tomorrow. So we get two weeks of earnings. Oh my God.

3:28Brandreth Canaley: Is it Christmas already? Christmas early. uh so let's let's call today hotel earnings day and we'll call next wednesday um uh short-term rental earnings day uh but we did get over the past week we got marriott we got hilton we got hyatt and we got booking last night um and and chris nascetta always does a great job of sort of outlining the sort of overall macro picture for lodging. And I think ultimately it couldn't be better right now. Like globally, the major hotel chains were seeing about 6 % growth in nights and booking saw about 7 % growth in nights. And in the U S it was seven plus percent.

4:14So Hilton was 7 % RevPar growth. Uh, in the U S uh, Marriott was 7.4%. Like they really highlighted like strong growth in business travel. So transient, a lot of demand around all the AI data center build out, infrastructure build out that's happening across the country. Conference group travel was really strong. And then consumer sort of transient demand was was really healthy. And we did see a bit of World Cup impact in the U.S. in Q3, sort of a hangover from Q2. But looking across the sort of booking landscape outside of Middle East, which was still very much impacted by the war in Iran, in Mexico, which was still a bit impacted by the cartel violence that we saw earlier this year.

5:13It was a really clean, strong quarter for hotel demand and strong pricing power. So not much to be worried about there. Yeah.

5:27Michael Goldin: Everyone loves missing guidance if you're significantly above it. And we know no one wants to miss guidance, but how do you miss this big? I mean, it's a huge gap. And some of these things we knew, World Cup being one of them. but what are the things that we didn't anticipate that we're winning on? Yeah. And a lot of it is, I mean, they didn't know, like, if you think back three months ago, we were seeing a resurgence in the war in Iran. We had seen a bit of a break. Things were looking better. And then like the war sort of got going again, we saw gas prices really spike. So there was real big worry going into the summer travel season.

6:13Like, were we going to see gas prices increase to, or oil prices increase$125,$150 per barrel, which would have significantly curtailed. And we did see it hit 100, which doesn't help. inflation was definitely elevated this summer. So that had a potential impact on consumers. But ultimately, what we saw is consumers continued to spend, and they did that by paring down savings, and that they were essentially said, we're going to travel this summer, we're going to take our trip, that businesses were going to keep spending, keep putting people on the road, continuing to sell and that, um, and they're willing to, I give up other forms of spend to make sure that travel is happening.

7:01Um, and I'm, a lot of that was up in the air. So yes, I knew always I'm with elevated uncertainty, like I'm, I'm sort of, yeah, I'm, but I'm, uh, yeah, it was, it was a good summer for travel.

7:18Brandreth Canaley: Glad all of our conference travels really helped these hotels.

7:24Michael Goldin: Did y 'all not stay in rentals for Verma? No. Oh, come on, guys.

7:30Brandreth Canaley: Stayed at the conference center. You know this from conferences. Being out on site is necessary.

7:36Michael Goldin: Yeah. It makes it a lot easier. That's for sure.

7:41Brandreth Canaley: I also think it's interesting that we're seeing this kind of impressive performance when you see what the airline prices are like. I wonder when we have like a full year look back of information because I mean, just anecdotally, I, we don't have, I don't have airline data in front of me right now, but the prices are crazy. Like I, like, um, my professional scientific opinion is it's wild. I, the prices I'm paying to go, I'm, I'm paying almost$700 to fly to Indianapolis. Like that's, it's just, I'm so shocked. And, but then I'm booking a hotel. I want to get there. So there we go. Um, and so I'll just be interested to see with these big shifts in airline pricing has any impact on hotels towards the end of the year, especially as we go into the holidays, because it's kind of untenable, especially if you're traveling with the family.

8:30Brandreth Canaley: I mean, you guys have kids. Are you guys flying anywhere soon? Yeah. Oh, Jamie says yes. We did just book a trip between Christmas and New Year. So we're going to fly down to South Florida. Okay. Is that becoming an annual tradition? I took the boys to Key West, just the three of us last year. And now my extended family, my parents, siblings all want to go down there. So we're going to make a big trip out of it. We just booked a big Vrbo property for the week. Wow. Did you now pay later? We didn't book direct either, but they were solely on Vrbo. Well, another tidbit from all these is the owner tension, which I think is really interesting.

9:24Brandreth Canaley: I mean, we just talked about the performance that the hotel's having.

9:31Michael Goldin: Yeah, I can jump in here. Brandy's having a little audio challenges. Hotels, we saw Marriott crush their numbers in RevPar, but their incentive management fees rose 22%. And that tells a really good story across the board of the hotels that they're managing and operating are crushing their numbers. Yeah. And not only incentive management, but the credit card fees, like essentially, and the owners are seeing that Marriott's generating so much additional revenue through all the other things that they do. like come on like cut our fees uh give us some cut of that like and make it a bit more fair like they're they're doing their company looks so healthy and all the while the owners are seeing increased costs they're still seeing their fees go up and essentially calling for some some relief uh which i think maria acknowledged on the earnings call and they said they're going to try to make it more fair.

10:34I think it's yet to be seen what they're actually going to do there.

10:38Michael Goldin: Yeah, they reported better reimbursement for redemption stays on high demand nights, relaxed operating and renovation rules, and rebates for some well-reviewed hotels. But I think the ownership groups are still calling for more when the credit card fees are through the roof in Marriott's benefit. And that's not getting passed along to any of the onsite brands. Yep. And it's probably one thing now when it's like 7 % rev par growth, like owners are actually able to see some profitability gains more than likely. But if we get down into maybe three to 4 % rev par growth, which the major C-Corp's mayor at Hilton sort of called out as more expected long-term, that gets really tough to continue to grow and maintain profitability.

11:34Michael Goldin: Well, and debt rates have gone up as well. So if you're on a floating rate, then you've seen profitability get compressed already.

11:43Brandreth Canaley: Yeah, I think, well, let's see if this works this time. Apologies for that. But this also, there's a really great skiff piece earlier in the year about like a extended piece about the compression at hotels that the actual operators are having. And so if we go back, we can maybe link that in the show notes, but just kind of the details of how the operators are getting squeezed and how the brands are doing better. And this is like a very clear, this is like the data behind that. You can see that these hotel owners are well within their rights to want to demand some relief. And I also thought the conversion carrying was really interesting.

12:21Brandreth Canaley: Some brands, Marriott, 40%. I think IHG was 60%. That's a really interesting number. And I don't know if they have to disclose where they're converting those hotels from. But those are, I mean, are they all just swapping hotels, hotel flags?

12:39Michael Goldin: They all reported some growth on that front. What's not happening a ton is new developments. So these are brand conversions or converting from independent to a flag. Jamie can fact check me, but Jamie and I went to Hunter Hotel Conference earlier this year and new developments were like 1%, like super, super low.

13:05Brandreth Canaley: It's expensive to build.

13:06Michael Goldin: It's so expensive to build. But all the flags are still adding rooms, which is one of their key metrics. And that's coming from the shuffle around and or converting independence into flags. Yeah. And a lot of the growth is happening internationally for these brands. Like they're not seeing a ton of incremental U.S. growth. Brandy, I did pull the numbers for you just now on airline demand this summer. And it was down about two to three percent this summer compared to last summer. So definitely with higher prices and a bit less volume. But like when you look at the breakdown, like in the hotels called it out, the OTAs called it out like higher airfares and decreased long haul, like international travel was not as strong as it was.

14:07A lot of domestic travel was really strong for booking for the hotel companies. So domestic drive two held up and that drove a lot of the incremental growth where a lot of overall air travel was actually down this summer.

14:24Michael Goldin: And with domestic drive two up, I suspect Airbnb and Vrbo Expedia's numbers should be pretty solid. Yeah. So we didn't talk about it, but booking alternative accommodations accelerate. It was 4 % last quarter. It was 7 % this quarter. So they did accelerate and overall supply they saw, they reported 9 % additional growth in inventory for alternative accommodations. That's fantastic. They, they, they made headlines in other areas as well too. Less fun areas for the balance sheet.

15:00Brandreth Canaley: I mean, the, the number, the headline is booking takes$1 billion hit over possible FTC settlement. I don't know if I'm getting desensitized to billions, but that's a big number. And this was interesting. I didn't even really know that this was something that was lurking in the wings for them. And that's a pretty big hit. Yeah. So maybe a bit of detail around it. And they do, and my understanding was this is, was from their B2B business. And it was against Priceline. Against Priceline. So that ultimately, like if a partner that they're working with has deceptive practices in terms of their disclosure of fees or what they're doing in terms of driving bookings on their site.

15:55Like I'm booking is, it looks, and it hasn't been decided yet, but at least they think that they might be responsible for some, some number of fines associated with the activity from that company. So I, and it's, and what is it? Two years ago, we were talking about Expedia dropping Hopper because they thought they're doing deceptive practices and that might be a liability for them. So, and as B2B gets to be a bigger percent of all these businesses, is going to be really important of what they're actually, all these B2B companies or these consumer companies that booking is supporting is what they're actually doing on their sites.

16:33And it was called out, and I think Michael's going to be really excited about it, that booking is going to break out next year, B2B versus B2C in terms of their revenue and booking. So that could be a fun additional data point for next year.

16:50Michael Goldin: I love the B2B side of all the OTAs. And with AI, I think, and loyalty factoring in, I do think B2B is going to be a crutch for the OTAs to survive and thrive in the agentic world. Yeah. I think it's going to be... So listening to the booking call, there's probably like 10 questions and nine out of the 10 questions were about AI. So shocking. And then you listen to Hilton's call, Marriott's call, and it was like one out of the 10 questions was about AI. So really worried about AI and its impact on booking. But it will be interesting on how they sort of think about identic bookings and whether they're considered B2C, B2B.

17:42And they really think that they're going to be able to win, especially if the monetization models sort of change, if Muse wants to take a percent of bookings and if other sites aren't set up to be able to support that, then they will be and they're happy to pay. They're going to win by default if status quo

18:05Michael Goldin: doesn't change 100%. Yeah. And I do think that the loyalty aspect of this will factor in significantly because you know chat gpt instinct muse they learn how we like to travel what we where our credit card points are where our loyalty miles are and then they can help uh help us spin those the right way and a lot of times that that's gonna look in the way of redemptions on a b2b platform so yeah and that was that was the other two questions that weren't ai was around loyalty and how loyalty will ultimately be able to help their AI strategy. And Glenn mentioned that there was some exciting changes upcoming on their loyalty program and how it's going to impact or at least help them with the Gentic bookings.

18:57And the other number that I think Michael would find interesting was they, again, double down on less than 1 % of bookings are coming through the AI tools, whether it's ChatGPT, Muse, Instinct, it's still not meaningful for their business at all.

19:20Michael Goldin: There could be reasons why he wants to downplay that. Some probably very obvious reasons for booking to want to downplay that. But also, I don't think we had a chance to thank Glenn for coming to Burma this year. That's the first time that I'm aware of that Booking's C-suite has shown up and invested time and been on stage at Burma. So kudos.

19:49Brandreth Canaley: We do matter. They are paying attention. Well, yeah. So lots to talk about in the hotel and OTA space, but in the kind of short-term rental vacation rental booking platform space we've been going like ping-ponging between airbnb and verbo and stuff they've been doing in the last couple weeks so our second story today is verbo launching reserve now pay later but with a twist um and um i mean i think this is like you know this is what consumers want a lot of um so it's not surprising that they did um they are claiming to be more host friendly, which Jamie and I will discuss in a minute, but that you can still support your 60-day policy, your cancellation policy, and that you're going to get paid out seven days before the end of your cancellation period, but you're still not getting paid at the time of booking, which is the caveat there.

20:49Michael Goldin: Yeah. The back and forth is fascinating. makes total sense. Let someone else try it, see if it works. And if it does roll it out. Vrbo launched a weather insurance component a year ago. Airbnb launched that very recently. Airbnb launched buy now, pay later. Results were great. Vrbo launched it recently. So I mean, invitation is the highest form of flattery. If something's working, do it, roll it out. Consumers love buy now, pay later. Airbnb reported that people book further out for longer durations, for higher end homes. So it's great. And cancellation does increase, as you would suspect, but not, according to Airbnb, not substantially.

21:39Michael Goldin: I think by 1%. Yep. And I think the big question mark here is what happens and the difference between those on Vrbo payments. So those individual hosts that are using Vrbo and those and larger PMs that are and using a PMS that are merchant of record. And the release was sort of silent to how Reserve Now Pay Later would impact the different groups, like logically, like, and it would make sense and to apply to Vrbo payments because Vrbo's controlling the whole end to end and it would be harder for them to do it for not on properties that aren't. And then the question is, is properties not on Vrbo payments and without the ability to get on Vrbo payments, are they at a huge disadvantage on the platform because they, even if they wanted to, they can't offer buy now, pay later.

22:42Um, even if they wanted to, they can't get in some of the B2B ecosystems that I'm, um, or that Expedia offers Vrbo properties on. Like we're seeing maybe further divide between those properties that are on Vrbo payments and those that aren't, and those that aren't can't get on it. Um, right. And so far. Yeah.

23:05Brandreth Canaley: Like that's, this is the whole push, right? Like here, all the benefits that you get with being, um, on verbal payments, you get, you know, you need to buy now, pay later. You can appear in different, I don't know, different rankings, different programs that they're doing. It's all, it's makes a lot of sense. It's all the leverage that verbal slash Expedia has to get you to do verbal payments. And I, we said market for my prediction for 2027, but Vrbo is going to make everyone be on payments by the end of that year. That's what I'm calling. This is just another one of those pushes in that direction because I don't know how this will...

23:44Brandreth Canaley: They'll say it's not maybe going to impact your search ranking, but it probably is. What if now, what if we get some data showing that people are searching only for buy now, pay later properties? So you're not even an option that's showing up. um so i mean it's again really great stuff for consumers and hopefully this there is a lift for hosts but again i can i know that people are so the nerves are raw right now about just losing control of how you get to run your business and it's just i think it continues to feel like okay like what what's airbnb gonna do next week to punch back at verbo like it's just back and forth

24:25Michael Goldin: But Jamie, I've got one for you and you probably don't know this. Maybe you do. What percentage of direct booking sites have a function of buy now, pay later? I don't know, but I suspect it's pretty low. If I've gone and looked at all the sort of widgets that the big PMSs provide, very few of them have that functionality. And so if you're building out your own site, I'm building that functionality, sure. But but I don't think it's a ton of them.

24:56Brandreth Canaley: I mean, you would probably have to somehow embed like a Klarna or a firm or something to that nature. Or do it through Stripe. And I'm sure there's -

25:05Michael Goldin: Stripe can do it. And I think, I mean, it used to be pretty commonplace to reserve a property and then to pay in full later. But as we moved to online and instant booking, that went away. So consumers like it. They'd rather pay not today and kick the can.

25:23Brandreth Canaley: Well, especially when these aren't, I mean, there's all like the memes about people like doing buy now, pay later, like buy a burrito. But these are usually if you're doing a big vacation, these are thousands and thousands of dollars. It's like, yeah, I'd love to not have this$7 ,000 hit to my credit card happen all at once. So I get that. Yeah.

25:43Michael Goldin: So maybe as an industry, we should start offering that.

25:47Brandreth Canaley: Well, and it's like we were, but then there was, and this is again, the point to the, the, how the OTAs just kind of shift how you do your business, because then it became, oh, you can't do like requests or inquiry, which I get, like, that's just such a friction point. But then it's just like instant book, you pay immediately. And there still are the options to pay, like have some sort of breakdown in payments, but the OTAs and just the user experience pushed just away from that and now we're pushing back to it but it's all under the otas at like at their discretion under their control and so it's and it makes i mean i get why the otas are doing it but it also is like we were doing that and we still got them like you could you could give us a deposit and we got that cash now and then we got your cash 60 days before you checked in or whatever it was you know?

26:35Brandreth Canaley: So, um, yeah, it's just,

26:37Michael Goldin: it's all responses to increase conversions and ensure travelers have better experiences. So we touched on loyalty a second ago. We know Marriott is doing really, really well with their homes and villas product, but Brandy, you guys are, we're part of a headline this past week when Wyndham launches homes in Haven.

27:05Brandreth Canaley: Yes. Yeah, it's exciting that we get to be part of that. It's fun to be part of like the first cohort. We have a big ex-Wendom contingency at State Terra. And so, yeah, it's great to see. And I think that one of the, some of their promotional materials was using some of the Moving Mountains homes, which is great. I mean, those homes are just, they're sexy cell. They're so impressive. I mean, and some of our other brands too, but they're just like, they're usually very visually, just like so visually appealing. So yes, this is a great partnership. Another way for people to like burn loyalty points and come have an awesome vacation with us.

27:47And I did a LinkedIn post about this this week or last week, but come on, Lindem, like homes and havens, Hyatt's homes and Hyderabad, Marriott's homes and villas. Like, can we get a little bit more creative in terms of the namings of these vacation rental programs someone prompted claude once and was like that's fine

28:12Michael Goldin: no revisions well they couldn't use windham vacation rentals because that had already been used um but yeah they they are uh all starting to to look alike yeah yeah and it just shows

28:31Brandreth Canaley: we continue there's so many different parts of i mean globally like that where industries are blurring together and i think we see this on like we talked briefly about like the b2c aspect of where like a an agentic booking lies and then in the hotel and str world this has been blending for a long time but you're now you're really seeing the stayed industry titans veterans and hotels and very corporate like being like actually we do want your really nice ski house so your beach house and how do we how do we get rid of some of these loyalty points that are selling

29:05Michael Goldin: on our balance sheet and you know so yeah the term alternative accommodations hasn't been thrown around lately like it was for a decade amex now is partnered with airbnb a lot of the hotel chains have short-term rental inventory where people can burn points so i don't think we're any longer considered alternative accommodations unless you're forcing your guests to take out the trash and do their dishes and pick up their towels.

29:36Brandreth Canaley: I see one more person like say the Airbnb hosts are like having a temper tantrum about that. I just, I've taken everything. I know I'm not an internet commenter, but I've been like, that's not what it's about. I was going to make that comment to Michael though, that for Airbnb not having a loyalty program, our industry is probably one of the most loyalties options, like with Amex, with Marriott, with Wyndham, with Hyatt, with Bookings, Genius, with Expedia's One Key. If you're not earning or burning some loyalty programs or some loyalty points with your short-term rental purchases, you should be.

30:18Brandreth Canaley: Yeah. Beautiful. Well, it's great to be back on with the three of you or three of us. Will's in the background. He's there. But it's great to see you guys. And fun episode. I mean, you know, fourth or, yeah, I was like fourth quarter. What quarter is it? We're like things are getting spicy. So I'm a quarter at this. Well, yeah, sorry. I got home really late last night. But, yeah, it's giving us a lot of content. So this is exciting.

30:51Michael Goldin: And as we mentioned last week or the week before, I feel like it's only going to ramp up. Companies are going to shift, adapt, change, figure out how AI helps or hurts them, figure out how the LLMs or B2B. I mean, Airbnb's first B2B deal is a pretty big deal. But excited to dive into more earnings with you next week, Jamie. me.

31:18Brandreth Canaley: All right, guys. I'll be coming live from Barcelona, heading out there for the week. So if anyone's in that market and wants to meet up, let me know. Well, we're going to have some crazy time zones because I'm going to be in Park City. So amazing. Well, thank you everyone for tuning in and we will see you all next week.

32:03Brandreth Canaley: ZS is a global consulting and technology firm that partners with companies to improve life and how we live it. Working with the world's top hospitality brands, ZS brings together data, science, technology, and human ingenuity to transform ideas into customer loyalty. They're ready to help you elevate guest experiences, improve operations, and uncover preferences and motivations through their AI-powered solutions. With more than 1 ,700 clients in over 170 countries, ZS has built the expertise, fortitude, and vision to help you deliver impact right where it matters.