Dara Khosrowshahi admits that Expedia Inc's investment in Chinese subsidiary eLong was a money pit, and that he was glad he sold his company's stake in it for $671 million earlier this year.
In a reversal of grand strategy, the online travel conglomerate says it will now expand in Asia Pacific under its own brand rather than through autonomous local businesses.
Last week it debuted an Expedia-branded website in China. That move followed a couple of recent Expedia-branded launches in Korea and Taiwan.
Across the region, the company has also been hiring aggressively, and it has been building up local inventory, especially in Thailand.
Khosrowshahi, the CEO of the American tech giant, spoke about the strategy last week at the Phocuswright Conference, during an on-stage interview.
He represents one of the five travel giants that are vying most intensely for Asia Pacific dominance. Besides Expedia Inc, there's Priceline Group, TripAdvisor, Alibaba Group, and some possibly looming combination of Qunar and Ctrip (with a central role played by Baidu).
During his talk, Khosrowshahi explained that his company hadn't given up on Asia. Quite the contrary, the company is doubling down.
After his talk, Khosrowshahi spoke with Tnooz to answer a couple more follow-up questions about the company's Asia-Pacific strategy, particularly around China.
Tnooz: What's your test-and-learn strategy for Asia?
Khosrowshahi: Well I think part of it is to really truly have the leadership of the company have a real sense of what's happening on the ground. Part of that is putting leaders out there.
Greg Schulze is the head of our transportation and tour business for us on a global basis. He's going out, and he's going to be living in Singapore.
Expedia didn't have any global leaders in APAC, so the idea is for us to take one of our headquarters global positions and put that person in the region.
That's a very big external and internal statement. It tells our team that you've got to get out there. You have to understand what's happening in Asia.
Aman Bhutani, president of Brand Expedia, grew up in India. John Kim, our chief product officer, has prioritized trying to understand Asia-Pacific better-- he even committed a couple of years ago to only vacationing that region so that he could learn more, even though he's based in Bellevue.
A lot of the key players at our company have a proclivity towards Asian business that I believe the average company doesn't.
Tnooz: Okay.
Khosrowshahi: Once you put the leadership there, you really understand what's going on. They kind of create the connections in Asia. So much of Asia is about personal relationships, meetings, et cetera.
As they make those connections, our leaders will put that part of the business together with the technology that we can build. We think it's a giant opportunity.
No one else is trying to build an Expedia of Asia. You can argue that Opodo is an Expedia in Europe. There are other players who are building this continental full service OTA. No one's even trying to do that in Asia.
Part of the reason is because it is hard. But we like hard problems because if you crack them, you tend to have big rewards at the other end. So, it'll take years. We're clear-eyed about it. But we think the rewards could be pretty significant.
Tnooz: It can be okay to be a western brand coming in? I mean, some brands like Reuters, for example, are extremely successful as brands in China. But other foreign brands are less popular than their home-grown competitors. Foreign brands are seen, like, "Why don't I deal with the local instead ..." Yet you feel confident with the new website, Expedia's brand will appeal regionally.
Khosrowshahi: Over a period of time, the service and the product takes over.
If a service and a product are terrific,... You know, WhatsApp is a Western brand that's doing really well in Asia. There's an analogy there for travel.
This is a big enough market. We always say that travel's not a winner-take-all market.
So, Asia will always have its mix of Asian local players and global players. We certainly are well positioned to be one of the global players that succeeds. Doesn't mean we'll succeed in every country, but the market is enormous and this will be a big, big part of our business.
Tnooz: You have these leaders going abroad. Is there anything in terms of repatriating information back in? Is there anything you can do organizationally or systematically to make sure that knowledge gained about distant markets is brought in from the periphery to the core?
Khosrowshahi: You have to be careful not to systematize too much because that can leave you vulnerable to holes that the system doesn't perceive.
Tnooz: Okay.
Khosrowshahi: I'd say, in general, we have a very transparent culture. We are not hierarchical. It can create some difficulty because anyone can communicate to anyone else, but it's work for us and it's part of our core culture.
It's the getting leadership out there, being very transparent as a company, and then our being in the market all of the time.
We had an Asia Pacific QBR (Quarterly Business Review) on the supply side. I was there, all of our senior team went out there in market, sat down there, spent time in the market. It really makes an impression. It really makes a difference.
Expedia Inc's new APAC leader
During his Tnooz interview, Khosrowshahi mentioned his appointment of
Greg Schulze, the head of brand Expedia's tour and transport, to become the company's point person for Asia Pacific.
So Tnooz had a couple of conversations with Schulze, who was also at the conference, to find out more about the promotion and Expedia's plans for the region.
Tnooz: What will you be doing in this new position in Singapore?
Schulze: I'll help my colleagues, my leadership team around the world to understand better APAC. Then I also want to help our regional leaders there understand how to work within the global Expedia group. I'm a ten-year veteran of the company, so I know a thing or two about the organization.
Tnooz: How long do you expect to be in Asia?
Schulze: In my case, I have no plans to come back to the U.S.. We do in fact intend to stay there as long as we need to and are expecting it to be a long and exciting opportunity for us.
Tnooz: Fantastic. How will things change?
Schulze: We are a global company, but we do have some heavy centers. Seattle is one, so there's always a tendency to make the times convenient for Seattle, to make the meeting places convenient for Seattle.
As an example, my first leadership team meeting in 2016 is in Singapore. Convenient for me, not as convenient for my Bellevue colleagues.
Even just something as simple as meeting times will change. It's currently a 15-hour time difference ... 16-hour-time difference now without daylight savings ... to Singapore to Seattle.
So we'll be helping our teams in Seattle really understand that doing two a.m. phone calls three times a week is not sustainable. We need to help our company operate as a global organization and think more globally.
Obviously, we do have Americans and Europeans and various Asian nationalities already in Singapore. We're a global company with a lot of international people. My move is just about having a stronger presence. Someone senior like me can more easily say, "No, I'm not going to do that call in the middle of the night", and that may empower other people in the organization to ask for more compromises as appropriate, too.
Tnooz: What message do you want to get out about Expedia in Asia, in APAC?
Schulze: Expedia has a really successful growth story in Asia over the last few years. We're the only multi-product global travel agency that's competing effectively against the very strong local competitors.
We have a structural advantage in that we invest hundreds of millions of dollars in technology and we have certain capabilities that our scale allows us because we've learned a lot being a big multi-product global travel agency.
But there are really strong local competitors in India, in Indonesia, in Malaysia, Japan. We need to understand the local markets really well....
Tnooz: You mentioned one of Expedia's assets is it can compete structurally because of its scale, but what are some of the things it can help in the ground game, locally?
Schulze: The two biggest challenges are about payments and adding more domestic inventory.
We need to understand how the local traveler expects to purchase content. We need to do better at things like forms of payment that are preferred by locals and refining our on-site experience in a localized way.
Structurally, our technology is better than anyone out there. It's going to convert better, it is going to provide a better experience for the traveler.
The scale of Expedia's inventory is a huge advantage. We're selling more hotels globally than any of the local players, we have all of the airlines and activities.
That said, there are also unique types of inventory that we don't currently have and we're investing towards on-boarding that. We made a massive investment in hotel market managers in Thailand over the last few years, for instance.
We call it Go Big Thailand. We over-invested, really, to grow that hotel inventory and then really started to see the demand. It's just a reinforcing cycle.
If you look at Japan, a lot of Japanese use Expedia first to go abroad and then they learn, "Oh, I really like this user interface and I really like what I can do here and look, here's all this domestic inventory, too". You can capture both markets that way.
Japan's a great example, actually. The big shift that we've seen in Expedia in Asia over the last for years is Japan was our largest market, Hawaii was our biggest destination.
Now, Hawaii is not our biggest destination and in fact, most of the travel from Japan we sell is for travel within Asia.
Our growth and focus is not just on being an outbound channel to the U.S. or Europe. We are in fact, a local player that's leveraging a strong global technology.
Tnooz: Got it.
Schulze: We launched a new Expedia brand point of sale in Taiwan this year. We have a Korean point of sale that's selling hotels only, we're going to launch air next year in Korea. Last week we launched in China, as Dara noted.
Tnooz: What's the story with AirAsia? It's complicated for people who aren't following it closely, like me.
Schulze: I'm on the board for AirAsia and I also work with them as an airline partner, so I've been following it quite closely. Expedia has had a long, very good history with its partnership with Air Asia....
They've really given us a lot of local insight that's been invaluable.
Tnooz: eLong is much more complicated.
Schulze: We continue to have a presence in China focused primarily on the outbound traveler with partnerships with Ctrip and eLong.
It is very early stages, but I would say that our Expedia-branded site in China is the start of something big for us. We're committed to a local presence in China and we understand that it's a complicated market and it's going to take time and we're ready to be there for the long haul.
Traditionally, if you look at China and you look at how Western companies have gone into China, everyone is sort of bringing a knife to a gun fight. We don't know what we're supposed to bring yet, but we're arming up.
We're arming up and we're doing it in a way that's very Expedia. The eLong relationship was a little bit of bringing a knife to a gun fight.
We think that our latest moves are much more in keeping with the way that Expedia operates, testing-and-learning our way into China instead of just trying to go in with some big, grandiose plan that says, "Here's how we think we can conquer China".
That's one of the great things about Dara, and you've probably seen this, but such a long-term vision, instead of an eye only looking at quarterly numbers. It's not just, "We're going to do a partnership here, we're going to buy a company here."
We want to develop people, we want to invest in offices. We have an office in Gurgaon, India that has a thousand people, just over a thousand people now, that had a dozen people only a few years ago. We're investing in all of our engineering technology resources in the region. That's going to pay off for us in the long term.
Tnooz: Is there a technology company, not necessarily endemic to travel, that you think has done a good job in any particular Asian country? Someone inspiring to you or a leader, individual business person?
Schulze: I'll go to what I know best, which is air, car, and cruise.
Western cruise lines, actually, are making giant investments within Asia. One of the most amazing ships released in the last couple years is the Quantum of the Seas, and its owner Royal Caribbean International has put the latest and largest of this class of ship in Asia first....
And Norwegian just announced a ship in China. The cruise lines have a lot of capacity out of Singapore, and they do river cruises up some famous regional rivers. They adapt their ships to the local customers. Cruise lines have done a really terrific job of growing a business in Asia that didn't really exist in large part, say, five years ago.
That's a perfect example of exactly what we're trying to do, using the smarts and scale of an American company, but then applying it to a local customer.
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