Expedia Resets the Business to Improve Margins and Speed Up AI Investment

Expedia Group CFO Scott Schenkel said that the company had “radically changed the direction” of the business over the last six to nine months. He said the shift reflects a broader effort to improve profitability, tighten execution, and reinvest more selectively in AI.

He said Expedia introduced new performance metrics, stricter return targets, and faster decisions on where money should be spent. He described the move as a broader operating change under CEO Ariane Gorin, rather than a single cost-cutting program.

What Expedia is changing

Schenkel described a more disciplined operating model in which Expedia reviews spending more closely and reallocates budgets faster toward areas with stronger returns. The company is also raising the performance bar for internal investments, which means teams are being measured more tightly on outcomes and expected returns.

He also said Expedia has reduced costs in areas such as sales, vendor contracts, and cloud spending, while making broader functional cost reductions across parts of the company. Some cuts affected product and technology teams, and Expedia is using part of those savings to support machine learning and AI initiatives. He also said management is trying to balance marketing efficiency with growth.

Why Expedia is doing this now

Expedia’s recent results help explain the shift. The company reported strong overall growth, but performance across segments is uneven. In the fourth quarter of 2025, Expedia said B2C and B2B gross bookings grew 5 percent and 24 percent, respectively, showing much faster momentum in the partner business than in the consumer business. That puts added pressure on management to improve performance at brands such as Expedia and Hotels.com.

Profitability is another major reason. Expedia reported a 23.8 percent adjusted EBITDA margin for full-year 2025, while Booking reported 36.9 percent, leaving a sizable margin gap with its largest OTA rival. Schenkel has signaled that narrowing part of that gap is a key management objective.

The latest update and what to watch next

Expedia has tied this strategy to clear 2026 margin targets. The company said it expects 3 to 4 points of adjusted EBITDA margin expansion in the first quarter of 2026 and 1 to 1.25 points for full-year 2026, giving investors a near-term test of whether the tighter operating model is working.

The next few quarters will show whether Expedia can expand margins while also improving momentum in its consumer brands and protecting its role in travel distribution. Another issue to watch is the longer-term AI versus OTA question: as hotel groups and travel suppliers experiment with AI-driven direct booking tools, OTAs may face more pressure to prove value through pricing, loyalty, merchandising, and supplier services—not just traffic volume.

Photo by Jonathan Kemper on Unsplash