Expedia's vacation rental arm is a big player in the company's growth

Expedia Group Inc. has reported a jump in revenue after its vacation rental arm was rebranded, replacing the last two quarters of declines with a boost of growth, which could mean a new momentum in the travel giant's rapidly growing category.

Bellevue, Washington-based Expedia’s short-term rental unit reported revenue growth of 17% in the three months ended June 30. That’s more than the 14% in the previous period when it switched the division name to Vrbo, a moniker more familiar to Americans than the previous HomeAway label, which is more well-known in Europe. Total revenue grew to $3.15 billion, exceeding Wall Street’s forecast of $3.12 billion for the quarter.

Expedia has been plowing resources into Vrbo in a bid to challenge rivals Airbnb Inc. and Booking Holdings Inc. in the booming market for alternative accommodation. While Vrbo dominates the market in the U.S. for purely vacation-rental accommodations, Airbnb and Booking capture a much larger share of the broader global $34 billion alternative accommodation market, which also includes non-traditional hotels and home sharing.

Vrbo only pulls in just over 10% of Expedia’s overall revenue, but analysts and investors focus on the division because it represents the company’s best bet for growth.

“The reason we think alternative accommodation is so important is because it’s one of the fastest growing parts of the wider online travel sector,” Needham & Co. Inc. analyst Brad Erickson said in a recent interview before the results were published. “The stock’s multiple will be disproportionally tied to how they are doing in that category.”

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