Expedia Inc. is in the process of transitioning Expedia brands to a new global technology platform, a move that the CEO says may pressure margins and is a risk.
The company reported its first quarter 2011 earnings yesterday, and saw its operating income diminished because of higher expenses associated with technology investments and international expansion.
"We will be surprised if it doesn't work," said Dara Khosrowshahi, president and CEO, referring to implementation of the new tech platform. "It is a risk we're taking, but we're very confident in 1) the patterns that we're seeing based on our experience with Hotels.com and 2) based on the Expedia team's ability to deliver."
Hotels.com last year transitioned to a new tech platform, a project internally dubbed 1H, and in the first quarter of 2011 Hotels.com saw its gross bookings rise 39%, more than triple the growth pace of the year-earlier period.
Expedia already has portions of Expedia hotels on the new platform and has rolled out new hotel search results, filters and a checkout path. With the new platform, which will take several years to fully implement, the company hopes to be able to innovate faster and increase conversions.
Khosrowshahi isn't promising that Expedia growth rates on the new platform would duplicate the success at Hotels.com.
"Are we going to see that kind of multiplier effect on Expedia after the fact? ..." Khosrowshahi asked. "I'm not counting on it, but an accelerator on Expedia would result in great top line and bottom line results for the company as a whole, and that's what we're betting on."
On other issues, Khosrowshahi said Google Places, which has Google preferencing its own results over organic results, hurt TripAdvisor's growth.
Third-party revenue for TripAdvisor jumped 32% in the quarter, but would have been faster without the Google Places impact, Khosrowshahi said.
Google Places "hurt us, but the TripAdvisor management team adjusted well" and the unit, which will be spun off into a public company in the Fall, experienced "healthy growth despite Google's actions," Khosrowshahi said.
"Rumors of impending doom for TripAdvisor's traffic have been entirely false," he added.
Khosrowshahi added that transitioning Expedia Inc. and TripAdvisor into two publicly traded companies will enable both to better focus on their missions.
Asked to comment on the closing of Google's acquisition of ITA Software, Khosrowshahi said it was appropriate for the U.S. Department of Justice to impose conditions, but he curiously acknowledged that Expedia "doesn't have the detail of exactly what the conditions mean."
He noted that the Federal Trade Commission and European Union may continue to probe competition issues related to Google's market power. "We don't think this is the end of the story."
On the rapprochement with American Airlines, Expedia acknowledged that its air ticket volumes were hurt by the airline's absence on Expedia and Hotwire sites during the quarter.
Expedia and American Airlines signed a memorandum of understanding April 4, and the airline's flights and schedules returned to those sites.
"I don't think either party can declare a victory," Khosrowshahi said.