Expedia's Revenue Miss Signals Vulnerability in U.S. Travel Demand: What Investors Need to Know

Expedia Group’s first-quarter 2025 earnings report delivered a stark reminder of the fragility of the travel sector, with revenue and bookings missing analyst expectations by significant margins. The $2.98 billion in revenue and $31.5 billion in gross bookings fell short of Wall Street’s projections, sparking an 8% stock decline and a renewed focus on the company’s exposure to U.S. domestic and international travel demand. This miss, coupled with worsening trends in inbound tourism and shifting consumer behavior, raises critical questions about Expedia’s near-term prospects and the broader risks facing travel-related equities.

The Earnings Miss: A Closer Look

Expedia’s Q1 2025 results underscored a deepening demand slump. While revenue narrowly missed estimates, gross bookings fell $300 million short of expectations, a gap that CEO Ariane Gorin attributed to “weaker-than-expected demand in the U.S. and into the U.S.” Two-thirds of Expedia’s business is domestic, making it particularly vulnerable to U.S. economic and policy headwinds.

The decline in inbound international travel was especially acute, dropping 7% year-over-year. Canada, a key market, saw bookings plummet 30%, as travelers reacted to U.S. policies like President Trump’s “51st state” rhetoric and tariffs. This shift has redirected tourists to Mexico and the Caribbean, further straining Expedia’s ability to capture cross-border demand. Meanwhile, U.S. domestic travel weakened as well, with Las Vegas reporting a 7% visitor decline and California anticipating a 9.2% drop in international arrivals this year.

The "Trump Slump" and Its Economic Toll

The resurgence of the “Trump Slump”—a term coined during the 2017 dip in international visitors—has taken a severe toll on U.S. tourism. Federal policies, including restrictive visa processes and anti-immigrant rhetoric, have deterred travelers. The U.S. Travel Association estimates each 1% drop in international visitors translates to $1.8 billion in lost annual export revenue. With inbound travel down sharply, this could mean a staggering $21 billion loss in 2025 alone.

Expedia’s shares have fallen 16% year-to-date, now trading at $155.72—a stark contrast to its $194.24 average analyst price target. Yet, the company retains $4.48 billion in cash and equivalents, which could buffer against near-term pressures. However, its debt-to-equity ratio of 235.58% remains a red flag.

Industry-Wide Softness and Macro Risks

Expedia’s struggles are part of a broader industry downturn. Hilton and Airbnb both downgraded guidance, citing shorter booking windows and consumer caution. Airlines, too, face headwinds: post-tariff bookings dropped 6%, with carriers preparing to cut capacity and discount fares. These trends highlight the interconnectedness of travel demand to macroeconomic factors like trade policies, inflation, and geopolitical sentiment.

Conclusion: A Tough Slog Ahead, but Potential for Recovery

Expedia’s Q1 miss and subsequent guidance cut paint a grim near-term picture, exacerbated by its heavy reliance on the U.S. market. With inbound travel demand down sharply and domestic sentiment weakening, the company faces a dual challenge: regaining traveler confidence and navigating policy-driven headwinds. The $1.8 billion-per-1%-drop revenue loss metric underscores the scale of the problem, while Expedia’s high debt/equity ratio adds urgency to its need for stabilization.

However, the company’s $4.48 billion in cash and analyst optimism (average target of $194.24) suggest investors are betting on a recovery. Should U.S. travel demand rebound—perhaps through easing trade tensions or policy shifts—Expedia’s scale and liquidity could position it to outpace rivals. For now, though, the path is fraught. Investors must weigh Expedia’s structural vulnerabilities against its long-term resilience in a sector where every 1% of visitor decline carries a multi-billion-dollar price tag. The next few quarters will test whether Expedia can pivot quickly enough to outlast the “Trump Slump” and its economic cousins.