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With gloomy near-term guidance from competitors fresh in investors' minds, Expedia Group's (EXPE +8%) bearish Q3 and lowered FY24 forecasts are not setting off any alarms today. Over the past week, Airbnb (ABNB) and Booking Holdings (BKNG) discussed a rapid deterioration in demand that cropped up in July, driving soft quarterly forecasts and resetting expectations in front of EXPE's Q2 report. As such, instead of focusing on guidance, investors are applauding EXPE's several internal successes from the quarter, which reflected positively on the company's new CEO, Ariane Gorin, who took over in May.

• EXPE's Q2 performance resembled its peers. Headline numbers were sound, as the company had yet to face the heightened macroeconomic challenges that intensified in July. EXPE grew its bottom line by 21% yr/yr to $3.51 on a 6.0% lift in revenue to $3.56 bln. Gross bookings growth was the same at 6.0%, an acceleration from the +3.0% posted last quarter, while room nights increased by 10%, underpinning a healthy travel environment.
• Propping up bookings growth in Q2 was a substantial improvement in Vrbo, alongside sustained strength across other businesses, including advertising and B2B, which boasted 20% bookings growth. Traffic growth across each of EXPE's core brands -- Expedia, Hotels.com, and Vrbo -- accelerated by around 500 bps sequentially, supporting a nearly 400 bp jump in the company's consumer business, which enjoyed a 1% bump in gross bookings yr/yr.
• The recovery in Vrbo was a pleasing development given how long this business dragged down quarterly results, primarily from EXPE minimizing marketing spend during Vrbo's technical migration. In fact, Vrbo's success in Q2 stemmed from higher marketing spend, as well as improved supply. Management acknowledged that it still has work to do to help Vrbo realize its full potential but was excited about its early success thus far.
• The road ahead is where turbulence ensues. Starting in July, macroeconomic demand began to slow, consistent with ABNB and BKNG's remarks. Average daily rates (ADRs) held up on a like-for-like basis last month. Still, they were overshadowed by FX headwinds and consumers trading down to lower-priced properties. Air ticket prices also endured further pressures.
• As a result, EXPE expects Q3 bookings and revenue growth of +3-5%, marking a slowdown from Q2. Additionally, EXPE projected FY24 bookings to land around 4%, the low end of its previous mid-to-high-single-digits forecast and a bitter decline from the +10% posted in FY23.

EXPE's Q2 report was solid, but its guidance was far from picturesque. However, it mirrored the troubles its peers already warned about, taking the sting out of it. Meanwhile, EXPE delivered several silver linings during the quarter, particularly surrounding Vrbo, which appears to finally be on the road to recovery. It would not surprise us if travel demand remained sluggish for an extended period, especially as the cumulative effects of inflation linger. Still, it helps that EXPE's range of travel products provides a decent defense and that the headwinds from its technical migration are mostly behind it.