Expedia Inc. held its annual partner event in Las Vegas this past week, bringing together the presidents and executive teams to share the realities, challenges and opportunities of the past year with their suppliers and partners.
Throughout the event, the various brand presidents, including Brand Expedia/Expedia Inc CEO Dara Khosrowshahi, provided corporate context to the year coming to a close, while looking forward to initiatives in 2014.
Overall trends in the travel business looking up
The travel business is clocking an impressive $1 trillion globally, and Expedia has gradually been biting off more of this market - on track to book $34 billion this year, up over the past 4 years from $17 billion in 2009.
With only 4% of the market, the company sees plenty of growth ahead, showing a consistent double-digit growth in quarterly bookings so far this year.
CFO Mark Okerstrom took the stage to share the growth trajectory:
Overall travel grew at 5.1%, at about $1 trillion. RevPAR has been growing in low single digits in the USA and is mixed around the world.
Traffic is up 5.0%, capacity up 4.3%, and load factors up .7% - the airline industry at its most profitable ever. Expedia outgrew the wider travel market by a factor of 3. US arrivals up 25% on Expedia POS, with 60-80% YoY growth in Mexico, China, Hong Kong
We think 2014 going to be a little better. There are a number of events happening in 2014 that could swing either way, as far as debt ceiling, Europe on the mend, World Cup in Brazil, China's growth path. A lot of these things we'll be watching to see what happens in the overall economy.
Forward bookings look promising: SF up 34%, Cancun up 28%, Bangkok up 49%, Paris up 30%, and with the $1 trillion global travel mark the question is: how can you outgrow the travel industry continually?
There is so much room to grow, and everytime we expand our borders, we are bringing consumers the power of freedom. Statistically speaking, someone in China is looking at a hotel room in this hotel on their phone - and they are probably going to book it.
CEO Dara Khosrowshahi had the following to say about the growth of the industry this year, and looking forward to 2014:
We are seeing demand patterns changing quickly. One, the growth of international visitors to the USA is significant, with 85 million by 2018 to the US. So we're investing in different language sites, with 70+ countries, 36 languages, and 150+ sites. We really think we can grow that share. Second, eyeballs are moving to digital and mobile. Finally, meta search exploding in popularity, with 28% now using meta-search to shop for hotels.
Technology as competitive advantage, from mobile to meta
One of the core themes for the company has been using technology to "revolutionize" travel.
The core of this focus was covered more completely in this article yesterday, and is basically a central thread through the various initiatives under the brand presidents. By using the available data - such as usage patterns from visitors across sites - the company can deliver more targeted, context-rich inventory to travel searches.
Another area that the company considers vital is the "test and learn" culture that delivers over 800 A/B tests each year. This constant iteration is how the company claims machine learning and continuous improvement makes their product better with each and every search.
This is in response to the culture of change that exists industry-wide, as CEO Dara Khosrowshahi highlighted in the morning keynote:
The change in the travel industry, the change we see in our company. Travel is one of the most dynamic industries out there. This change is a great opportunity to grow your business with direct relationships with a global audience. But if you're slow, it can mean trouble.
We let the consumer decide, which is why we have invested very aggressively in our technology. We have increased our spend in order to accelerate the pace of change to create world-leading technology. It's changed how we operate as a company internally. Instead of trying to predict the future, we are trying to build a company that is very agile.
We've built a company that can react to the future very very quickly. Instead of guessing what the consumer wants, we let the consumer tell us what they want by constantly making little changes to the site. All of these little versions of the site are fighting over each other trying to be the winner. The winner gets more challengers coming the next day, so on a early basis we have over 800 A/B tests. We built the company to be more agile and faster than it ever, ever has been.
One of these changes long-talked about is mobile, which continues to be a growth channel for the travel business. The company has been focusing on "post-Web" technologies that allow permission-based marketing, such as the Scratchpad feature discussed here.
These new technologies bring a seamless cross-device experience to users, while also setting up a cohesive platform geared toward sustainable growth as far as emerging platforms are concerned.
The company has seen growth of mobile room nights by 135% this year, with over 80 million app downloads. Partners in attendance were continually reminded of the investments the company has made in this arena, allowing partners to share in the technology without heavy investment.
Khosrowshahi had the following advice:
Partners should provide a dedicated handset experience with responsive pages. Apps are important but very difficult to scale, so take advantage of mobile channels and promotions as fragmentation only increasing. The mobile use case is different, so remove all distractions, and make bookings as simple and seamless as possible. Just don't try to re-create the PC experience on the handset.
Meta was also discussed, given the recent Trivago acquisition, although it was mostly in the context of increased availability of different sales channels for partners - and the work needed to make the popular-in-Europe brand a household name in 2014. This includes a robust - and expensive - traditional television ad campaign that is already being ramped up going into 2014.
In the context of 2013's profitability, meta did have an outsize impact on a difficult second quarter moving into an impressive third, according to a response given to Tnooz by Khosrowshahi:
One of the differences between Q2 and Q3 was that we decided to invest more aggressively behind Trivago, behind eLong – and we think those are the right long-term decisions to make. On a short term basis, investors didn’t like it but we think our long-term investors will think that was the right decision to make.
In Q3, those businesses brought in more profitability, timing-based, and our trends on TripAdvsior improved from Q2 to Q3 as TripAdvisor moved over to meta-search. And in general, we executed pretty well. Hopefully we’ll have more Q3s ahead of us than Q2s.
CFO Mark Okerstrom summed this thread up thusly:
We are putting out money where our mouth is. Over the past 12 months we have spent over $2 billion in sales and marketing to market to consumers around the world. Every year we spend more and more on sales and marketing. We can do this because we are confident, as we have made some significant investments in travel technology. No matter where you are, we have a product that opens up travel to you.
"Blurred lines" as an apt analogy for travel's new reality
Egencia's Rob Greyber delivered a fitting analogy not necessarily intended as a broad stroke on the travel industry: the concept of "blurred lines" when it comes to Millennial business travelers merging business and leisure travel in a way that blurs the distinguishing types between the different types of travel.
Increasingly, business travelers are emboldened by the technology that they have at their fingertips. A lot of business travelers are starting to behave like leisure travelers in terms of their expectations and demands. The question is not who, but "when" are they? They have different needs at different times of the week. It's blurring of the lines."
Business travel needs to be consumer-inspired. They want it to work like their consumer-facing sites, and they want it to be as easy to use and intuitive as what they have at home. They also have to be integrated, with tools that work together seamlessly with consistent data.
Finally, travelers are demanding to touch and work within mobile, regardless of the tech. [They want] enterprise versions of consumer experiences, because the future of the industry is in [the] travelers [expectations].
This concept, which has of course been the title of a popular - and controversial - pop hit by Robin Thicke, actually has applications and implications across travel.
The reality is that the lines are being blurred across devices, across travel cycles, across types of consumers. Change is the only constant, and therefore successful travel companies are the ones that can address these blurred lines head on.
Consumers don't necessarily care about the channel, or the device, or the style of travel, or even the type of travel experience - they are merging it all into a travel soup that can be stirred at a moment's notice. They are booking Airbnb stays for business travel, or flying into a city without a hotel and booking last minute. Patterns must now be tracked in real-time, with algorithms adjusting results on the fly.
The lines are less defined, and the experience is more fluid. Successful enterprises not only understand this fluidity but they relish and embrace the continuous cycle of change that is the new reality.
Focus on international growth, specifically in APAC
Growth in China is accelerating, and the company is investing heavily to be in a position to reap the benefits of this growth.
When asked about Asia by Tnooz, CEO Dara Khosrowshahi is optimistic about growth in the region:
China is already twice the size of the US market.China has surpassed everyone has far as visitors leaving, with 100M outbound travelers by 2015. This is growth of 10x in 5 years. eLong is growing room nights at 70% over the past 5 years.
We also have the fifty/fifty joint venture with AirAsia. They bring local expertise with our technology and we think that's a great combination. We’ve hired a former AirAsia person, Kathleen Tan, as CEO of AirAsiaExpedia. We think we can have the perfect combination of local know-how. We’re not Asian, we don’t quite understand [the continent]. We know online marketing, but we don’t understand offline marketing, social marketing in Asia, and Kathleen brings us those skills. Combine that with our technology and product, and we believe we can have best-of-breed. It’s still early, but we like the trends we’re seeing
In China, we have eLong which is the number two player to Ctrip. ELong has been growing room nights faster than Ctrip now for four years running now. We’re investing very aggressively; it’s a hugely competitive marketplace, and I think we’re in a good situation where Ctrip is the number one player and we’re gaining share on them as the number two player.
I don’t think it’s winner take all, and so can we take on Ctrip? Well, we’re growing faster than they have for some period of time. So we like our position in China. When you think about Western internet companies, there isn’t a single other Western internet company that has the kind of position that we have in China. We’re going to keep investing and we think we can be competitive.
We are now feeding in all of our Expedia inventory into eLong so that the eLong traveler can book that New York hotel, can book that hotel in Thailand, etc that’s available on Expedia or Hotels.com. That’s a really great synergy on the supply side, as eLong has all the supply that we do. And eLong is going to really focus on the outbound business in 2013, which is growing triple digits right now.
The hoteliers love it, because they now that the Chines traveler is a big growth factor for them, and eLong loves it because they have access to global content.
NB: Author's flight and hotel were provided by Expedia.