On a call about quarterly earnings, investment analysts grilled Expedia Inc CEO Dara Khosrowshahi about how his company would respond to challenges and opportunities on several fronts, such as the rise of TripAdvisor, Airbnb, Google, CTrip, tours-and-activities, and rail distribution.
When addressing each concern, Khosrowshahi's main theme was that the company could adapt to all of the challenges, with a jujutsu-style mix of yielding to some pressures while being assertive in other directions.
TripAdvisor's instant book
A few analysts asked about the CEO's response to Priceline Group's recent decision to participate in listing hotel inventory on TripAdvisor's instant booking metasearch functionality.
Having previously said participation in TripAdvisor's tool was off the table, Khosrowshahi said joining with TripAdvisor was now "on the table." But he wouldn't say if or when.
"Priceline is our largest competitor. They are a very strong one. They're awfully smart. We take everything that they do with a great deal of interest. We'd be stupid to act otherwise.
So we'll take a look at how they participate in instant book. And they will certainly enter into our calculus. But I just can't tell you what the answer's going to be."
Trivago's instant book tests
Khosrowshahi seemed to imply at a few points that, just as Expedia now has many customer reviews (copying a page from TripAdvisor), it could similarly one day offer a melded metasearch model with instant booking of its own.
He touted tests by its metasearch brand Trivago of a product that looks like TripAdvisor's instant booking as an option for hotels for most users of its site in Germany. He noted that instant booking would roll out to English-speaking Trivago sites next year.
He noted that Trivago is "very very focused" on optimizing the booking path rather than gathering consumer data to upsell them on other stuff. Many Expedia brands are participating, but not Priceline Group brands. He added:
"We've [also] tested with meta-like product on the OTA path. So I think a lot of these experiences are getting melded together.... We don't know where this melding is going to shake out. But we're trying to optimize for our customers and suppliers."
Brushing off short-term rentals
On Airbnb, the fast-rising short-term rental platform, the CEO said:
"Any effect that Airbnb has had on us is immaterial at this point.... That said, Airbnb does bring more inventory into the market...
Our belief is that it will put pricing pressure in certain markets where you see significant amounts of Airbnb inventory. We have heard sporadically from some of our market managers that there are certain periods that used to be peak periods that aren't quite selling out now (due to the Airbnb inventory)."
Room for growth
One of Khosrowshahi's themes was that there was still plenty of more market share to be seized by Expedia Inc. Its growth rate remains torrid. Online travel agencies have been around more than 15 years in the US, and yet Expedia is still seeing domestic room night growth of about 25% a year. The CEO said:
"I think the bigger players will keep growing. This is an extremely fragmented market....
While you have to believe in the law of large numbers that online penetration is going to slow down, our brands are becoming more relevant, our supply is getting better, our sites and apps are getting faster, our service is improving, so it does look like we're taking share from some of the smaller players that can't make the kinds of investment in technology and marketing and customer service and loyalty that we can....
If there is a highwater mark, we haven't hit it.... The tools we're offering hoteliers are improving rapidly, too, on the supplier side. We're just getting started on this side."
As far as Google's decision to move into commission-based hotel bookings similar to Expedia's, the CEO said he was mindful of it but unconcerned.
"We have worked with Google very closely on parts of their hotel product. It is our intention to test and learn with Google on the Book on Google -- the branding, clarity they sent to consumers is right on. We'll let the data drive the long-term decision there."
On the news that Chinese travel companies CTrip and Qunar were getting closer, Khosrowshahi had warm things to say.
"Our admiration for the CTrip team has only increased because of the deal. It's strategically super-super-smart. The team is executing well not only on the ground but also strategically.... We have a very strong relationship with CTrip as part of the eLong deal and also we have been doing business with Qunar on the outbound Chinese traveler business."
On the rise of tours-and-activities bookings on its own brands and on other platforms, like TripAdvisor-backed Viator, the CEO said:
"We are very very very excited about our tours business. It's growing at triple-digit rates. The product has improved, front and back.... It's available on mobile, we feature it on TV.... This product was really launched and revamped on our new tech platform only this year. We're very early in improving the core product."
On the expansion front, Khosrowshahi said Expedia is working on a new rail product.
"Rail is super-important in Europe. It's very important in the APAC regions. It's not as important in the US, but we're hoping.
It's been underinvested in as far as OTAs go because there's not much money in the product itself. But as we build out our attachment platforms, and now that we're getting more context about where a traveler is going, that will all give us lots of upsell opportunities.
We also think increasing our touches with travelers, especially on the mobile side, can really boost brand loyalty and repeat business....
Rail could be really big over three to five years.... We'll start small."
The CEO's comments suggested that rail would be rolled out across its brands and the geographies it covers. The company has worked with the product in small ways before. In the UK, it’s been selling Eurostar for a few years on the Expedia.co.uk flagship brand. It's corporate travel division Egencia has also been selling rail for a few years.
Overall, Khosrowshahi emphasized what he called the progress in his company's strategy. Three or four years ago, the company was focused on product conversion and reaching into variable channels. But now the focus is on increasing its supply base and its repeat customer base.
"Improving our repeat rates is a very nice contributor to the core profit engine of the company."
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