Dara Khosrowshahi, CEO of Expedia Inc, has been attending the PhoCusWright Conference in LA this year, where he’s one of the star speakers.
Khosrowshahi took a break to speak with Tnooz about how Expedia has been performing well, where it could do better, why hoteliers should feel it’s a good value proposition, which startups it will be working more closely with, and what practical measures the compay has taken to amp up its metabolism.
How is metasearch performing in the Expedia Inc group?
Meta has been performing extremely well for us. Over the past year, we have been investing heavily in the Trivago brand. You see it all over the place.
Every time I go to the gym, the Trivago Guy is on every TV channel.
The Trivago guy is even more famous than we ever expected.
Outside the US, Trivago is the fastest growing scale metasearch player out there. It’s in 49 countries. It’s the biggest meta brand in Europe and we want it to be the biggest globally.
From our own core brands, Expedia and Hotels.com, metasearch is one of our fastest growing big channels. We have plenty of fast growing small channels for growing hotel volume, but you want fast-growing big channels, and Trivago is one of them.
On your third quarter earnings call, you said that the metrics have been good but that the company could up its game in a few areas. Could you elaborate?
There are a number of areas where we’re good but we could do better.
I would say globalization is one of them, a huge opportunity for us.
Over half of our revenue is from the US today. But when you look at global travel market, the US accounts for about a third of transaction volume, and that share will shrink as Asia grows faster.
So we continue to make substantial investment globally. You see that with our Wotif deal this summer.
It’s not just because Wotif is a first class brand, but also its hotel supply, which gives our family of brands a lift in Oceania and Australia.
Look at AutoEscape, for example, France's leading car rental portfolio that we acquired this summer. We want to build our European footprint on the supply side as well.
The other huge areas of opportunity is our investment in the breadth of hotel supply and in the breadth of our hotelier tools as well.
We have about 365,000 hotels available on our marketplace, more than 100,000 vacation rentals through our partnership with HomeAway. We think there’s a long way to go.
So last year we invested in Expedia Traveler Preference (ETP) to build a big platform that’s more flexible. This year we’re adding significantly to our market manager sales force, and expanding the number of hotels in our marketplace.
Is building up hotel inventory a door-to-door sales effort?
It’s feet on the street, but it’s also broadening our distribution with some mid-tier hotel brands we haven’t been doing business with yet.
But it’s also a bit long tail, going door-to-door and knocking on doors and talking to hotels and signing them up.
At the same time, we’ve taken the same product team that has built out our hotel functionality to consumers on brand Expedia, for example, and tasked them to now build out our tool sets for hoteliers.
We want the same, delightful easy-to-use experience that you see on consumer tools in our supplier tools. So hoteliers don’t have to train anybody in how to use it.
Right now, you have to train people to use the Expedia PartnerCentral (EPC). Our new system will be much easier to use.
Along with that will come arming hotel managers with much more actionable data on what’s going on with consumers, how their properties are being rated, how are hotels performing relative to competitors, and what can hotels do to boost their RevPar.
Some of those tools will come in late this year and early next year.
So the user experience for hotelier tools is being improved across the board?
More than that, for all of these hotelier tools, what’s vital is that they’re built on a platform that’s very flexible and that allows us to accelerate development on that platform.
Because we know we won’t be perfect on Day One, but we want to be able to move quickly to improve constantly and quickly.
The re-platforming that happened with Expedia and Hotels.com, it’s the same thing we’re doing with our supplier tool set.
The Hotels.com and Expedia re-platforming was a multi-year project, right?
It was a multi-year effort, and we learned from it. So we are able to shorten the effort this next round. We have bigger development teams and we have a more versatile platform to work on.
What’s one area Expedia could do a lot better in?
We talk about one-to-one marketing, but I don’t think that we have scale examples of it. Social is a perfect channel to explore that, and that’s something we’re investing in.
No travel company has cracked the social nut: maximizing Facebook, Pinterest, Twitter, etc.
We’re experimenting aggressively and we think it’s an opportunity for our partners and ourselves to connect with our customers in much more of a one-to-one manner.
Many investors in hotels believe that third party-distribution may generate revenue but it's coming at too high of a price. What would you say to them?
In general, I’d say any investor in the hospitality space, whether they’re investing in properties or brands or OTA distribution in the past five or ten years has done pretty well.
I think a lot of travel companies, while they struggled during the Great Recession, a lot of them came out really well.
From an investor’s perspective, every part of the equation has performed well, which to me, spells out a healthy ecosystem.
As for distribution goes, we’re offering global distribution based purely on variable cost.
There’s nearly zero fixed costs associated with getting your brand presented in front of millions of people across the globe, including in corners of the world you wouldn’t have the resources to reach on your own.
That was something that wasn’t possible in a cost-effective manner 20 years ago, and we think we’re bringing huge value, scale, and power to the small- and medium-sized hotelier.
We also enable mobile distribution that many hotels lack the capacity to do on their own.
At the same time, we do see consumers using our sites for search. For every consumer who books through us as a channel, there’s more than one equivalent who books direct with the hotelier’s platforms.
That allows hoteliers to do branding and to get business direct as well.
ETP has also helped in increased flexibility. We have become more flexible. We let hotels decide if they want the agent or the merchant model or both.
And this winter we’re rolling out a revamped version of the the user interface on Expedia PartnerCentral (EPC) too to be substantially better, to provide more actionable insights for a hotel that can be used for their direct business as well.
But what about costs? In the past couple of years, Tnooz has run several stories about how many hoteliers worry that the intermediary channel is too expensive for what it’s delivering. In one HEMA study, the cost of guest acquisition is racing upward at the same pace as the value of revenue gains.
Our pricing in general is coming down on a global basis. Call it the cost of distribution. In aggregate, it is significantly lower now than it was five or ten years ago.
On a per transaction basis. We’ve been very public about this. Our take rates, it’s called.
The third-party distribution channel has gotten bigger, but it’s only gotten cheaper.
To recap, our proposition for hotels is threefold and a pretty powerful combination: We give global scope to marketing. We charge variable, not fixed costs. And our channel has only gotten cheaper in the past decade.
There’s a bit of a dead space between when the transaction happens and when the guest shows up at the hotel. How is Expedia innovating in that space?
We’re certainly going to experiment in that space. We are investing pretty aggressively in our contact tool sets with our customers.
If you download the the Expedia brand app, you get a pretty delightful itinerary app, where we’ll remind you when is hotel check out, what gate is your flight leaving from, what baggage claim do you have to go to.
It’s about continuing the relationship with the customer via mobile, post-booking.
On the supplier side, I think you’ll see us testing and learning.
There are lots of companies innovating in the space, like Checkmate. We think that team is terrific. You’ll see us working more with them, for example, to test and learn to build win-win experiences for suppliers and consumers.
Any emerging sectors you’re keeping an eye on?
There are channels and sectors we're watching.
A lot of people talk about mobile being a huge channel. We’re bringing mobile very much into what we do on an everyday basis, and expanding incredibly fast on that channel.
As far as product set goes, certainly tours and activities, plus transport, are an emerging sector. Our LocalExpert business even has desks in Hawaii and Orlando and a nice online experience.
And we’ve been aggressively investing organically in what’s going to be a terrific technology platform and what will be a much bigger piece of our business in a going-forward basis.
For example, if you come to Expedia, and if you’re flying to LA for the weekend, let’s offer you up lots of stuff to do: a ride to the airport, tickets to an attraction.
We do some of that now, but we can do a much better job, especially when consumers are constantly checking in via mobile.
We are in a strong position to sell multiple travel products to our consumers at the ideal moment for each purchase decision.
Is B2B an avenue for Expedia Inc?
We’d consider B2B, but our first order of priority is B2C.
What are some of your secrets of being an effective CEO?
There are a couple of toolsets we use.
First, we try to decentralize decision-making as much as possible.
We’re at the stage of the Internet’s evolution where speed of decision making is sometimes more important than getting it right the first time. Because you may make a mistake but by learning quickly you can still respond to market changes quickly.
We’re setting up business and technology teams that partner up together really well and that then have the power to make decisions and move really fast.
It’s not that I want to avoid decision-making. It’s that I want to empower the teams to make decisions as much as is appropriately possible.
It’s all about speed. Move, move, move: we’re a shark — we want to keep moving.
The second area we look at is meetings. We want to be very clear about what the purpose of any meeting might be.
We don’t want people to be in meetings and have no idea what the heck is meeting for.
We encourage a structured process for setting up meetings. We encourage there being a meeting organizer who creates a goal for any meeting: Is it informational? is it to make a decision?
As an American and a CEO of a global company, you have your eye on the world. You also have an Iranian background. So you may have an opinion on how travel can be a way of promoting cross-cultural understanding. A recent Economist magazine special report noted that the West’s perceptions of life in Iran are quite outdated. Is there anything in the status quo you’d like to see change in the coming years?
Listen, not specific necessarily to Iran, travel in general is a power for good. And when I talk to employees at our company, I say we’re selling the best product in the universe. Travel can change the world.
As far as Iran goes, there’s a very significant disconnect between the religious leadership there and the young people of Iran, who weren’t really around when this thing called the Revolution was happening.
I will tell you the people of the country really have a strong like for Western culture, despite what happened historically. Opening up that culture can only lead to good things.
I think it’s got to be slow because the Powers That Be can feel quite threatened in relation to the pace of change.
MORE:PhoCusWright white paper (free): Online Travel Agencies: More Than a Distribution Channel