Priceline maintains focus on reducing friction for local experiences, no plans to become the next OracleNews / Distribution | TechnologyBy Nick Vivion | November 25, 2014Share This article was originally published on Priceline has been kicking it up into another gear over the past year, locking in acquisitions of OpenTable, Buuteeq, and HotelNinjas in a bid to improve the ultimate traveler experience.The company appears to be entering a new phase of growth, moving from simply connecting the world's hotels to stepping into personalization and end-to-end customer experience management.It's no longer sufficient to just serve inventory; the company sees its role more as a place that not only helps hospitality businesses access customers but also provide the tools to deliver the most memorable experiences possible. This then reinforces the Priceline brand, driving customer satisfaction and ultimately loyalty - a virtuous cycle that is not only profitable but ensures a consistent competitive advantage.It also differentiates the Priceline experience - for example, say a hotel stay booked on Priceline and supported by Buuteeq is then personalized with specific details for that guest. This makes the Priceline experience different from another OTA, and thus creates that demarcation in a consumer's brain and further enhances the value proposition.Tnooz sat with Priceline Group CEO Darren Huston to discuss all things Priceline, including the thought process on buying OpenTable, moving into brand.com hotel software, and becoming (or not) an enterprise software company.This last bit is especially interesting, as both SAP and Oracle have shown considerable appetites for entering the travel vertical with purchasing other enterprise-level offerings. Could Priceline's recent systems and distribution acquisitions signal a desire to compete as a broader, more horizontal enterprise software company?In some regards, the OpenTable deal was about the connectivity piece - getting access to these point-of-sale systems. How do you see this acquisition fitting into Priceline’s business?I think the connectivity is a sub-point. There’s the bigger point, which is that we’re leaders in building out an accommodation marketplace, and restaurants is another adjacent large marketplace. And there are a lot of similar characteristics related to what it takes to win in that marketplace.Certainly, large hotels are not like restaurants because they have revenue managers and people have different jobs. But when you get to smaller properties, they are a lot alike - there’s a single owner, and he’s the revenue manager, and the marketer and the sales guy. And they’re cash flow businesses that are often systems-challenged. Restaurants have a lot of that.In the case of OpenTable, to build their marketplace, they had to start with B2B software because restaurants didn’t have the technology. So they spent many years basically being a B2B software company that had to sometimes bring bookings in - really, just trying to get restaurants up to speed with technology. Now they are focusing more on the B2C side - how do we optimize and help guests find OpenTable restaurants?In a sense, Booking.com is a B2C company because the most sophisticated hotels have everything they needed and we just built an extranet - but now as we have gotten into longer-tail accommodations, we have to get more into B2B. And that’s why we bought Buuteeq, as we’re building a cloud-based software system. The match between what we’re doing as a company and what they’re doing as a company is quite tight.There’s other things of course, which include that they are very strong in America and need to be more global - which is what we are quite good at. And there’s a bit of it related to cross-promotion. Travelers are diners and if a restaurant is filled with locals, getting a couple extra tabletops during a night from some guys from China or from Canada could be seen as incrementally positive to the business.OpenTable was an adjacent marketplace that operates a heck of lot like the market that we’re in. Our whole company is about how you take friction out of local experience, and that’s how we think. That’s the kind of people we hire. And it’s a really strong cultural mesh with what OpenTable is trying to do.And will the integration piece include seamless booking - for example, restaurants nearby popping up in the mobile app for direct booking of restaurants?I don’t think it’s the simple one that everyone talks about - you’re going to book a hotel and then right after you book, it will suggest restaurants. I think that’s overly simple, and frankly probably not that powerful. You maybe not be in the mood - you just booked your hotel, do you really want to book a restaurant?As you get closer to the time of departure, we can send a pre-chirp email and say, “it’s three days away, you’re going to Malta, you get in at 8 at night. Do you want to reserve a table because the kids will be hungry?”Or in the guide - we now have guides to many of our cities called Insider Guides - one of the most popular parts is on restaurants nearby a traveler’s hotel. To be able to tell people that have already shown that they love to do things through the Internet, “here are a bunch of restaurants around your hotel, and here are three of them that you can book using this really cool tool.”That kind of cross-promotion versus trying to get a cross-sell is a more powerful set of scenarios. It’s also very complementary, because if you can find people a great place to stay, and then also a great place to eat, that’s a very real positive in terms of the emotional experience we hope to execute.You mentioned incrementality for the restaurants. Do you think that there’s a place for dynamic pricing in this? There’s a startup (here at Phocuswright) called TableGrabber that is attacking that. How do you feel about variable pricing for restaurants? Is that going to happen?It’s interesting. I think it may be a level of execution that we’re not quite ready for. But you would think that, at some point, dynamic pricing should play in.For many restaurants, there’s a basic issue about managing inventory - which is about table turns. In the short term, OpenTable has proven that to be most valuable. In the short term, things like pay with OpenTable are more valuable, as it gets more people through on one sitting. It’s how to fill the shoulder periods, such as before 6 o’clock and after 10, where it’s the most interesting.There are some startup ideas around the best places to eat, which is kind of interesting - should restaurants sell the seat as well as the meal or should they just be pricing the meal more so that they are not having an issue where they are sold out every single night? But I think that’s more down the road versus something immediate.Do you see more of a POS focus? Such as getting more hardware out by OpenTable for restaurants to use, such as a Micros-style play? It’s not the highest priority. We’d rather get good integration with POS.I was at Starbucks for 5 years, and I don’t know how many meetings I sat in on about the sophistication needed for a coffee shop POS, let alone a restaurant POS. I think there are some opportunities with cloud-based POS, maybe for the simpler businesses. Our primary focus is more on the demand systems that sit around the POS rather than the POS itself.What about tours and activities? TripAdvisor locked in Viator, in addition to La Fourchette. Do you feel any push to get T&A in an acquisition, or focus more on that piece?What I always say is: at the highest level, it’s more important what we are not going to do rather than what we are going to do.The amount of work we have to do, with some of the low-hanging fruit, is still in front of us. Tours and activities could ultimately prove to be an important part of the mix, but we bit off restaurants. I wanted to do it when the sun was shining, and we have a significant addressable market. But the amount of work we have to do with what we have is significant. So I’m really careful not to try to do too much.It’s not that I don’t find tours and activities interesting, it’s just that it’s not yet super clear what exactly people want to buy.That being said, things like pre-trip emails and Insider Guides can lead to platforms that make that interesting. And if we can find ways to help people skip the line or buy a City Pass that gets you into everything - not the menu-item approach but a very big consumer value add.I might be interested in the space then, not as much as something to make money on but to enhance the experience of the customer. We have a core business, but if we can do things around it that are special, that people remember and gets them out of the friction of doing tours and activities, then that’s great. The idea of selling hop on/hop off bus tickets when you can walk out the door and there’s ten people standing there…that’s not to me a huge value add or something that I want to chase to make money on.I am interested in the things that enhance people’s feeling of the experience they have with our brands.What are some of the low-hanging fruit that you are going after right now, in terms of OpenTable or elsewhere? What are your prioritizing in the immediate term?The number one priority is core execution. It has been, it is, and it will always be - that’s where it really happens. We have more than 1,000 people here in the United States, and what they do in the day to day to work with the hotels and to partner with them, get the availability, get the content right, and all of that - that is the bread and butter of the company.We have a priority list that we publish every quarter and number 1 on that list is always “execute the formula.”The formula is what we mean by the way the marketplace works and gets better and better. That’s always our number one priority. Internally, I call it be hungry and humble. Keep running faster, keep finding a higher gear, but do it in a way that you bring your partner with you. That they feel like they can win with us.If we can maintain that balance, then there are priorities two, three, four, five and six. And those include making OpenTable work right, it includes hotel marketing services. They actually do pale in comparison to the execution of the core formula.How do your approach things like the design and interface elements of OpenTable, some of which seem outdated? How do you create a unified front for the brand as you integrate these teams?One of the really great, fortunate things about OpenTable is that they have gone through some big system changes.At the time we bought them, there were two major things that were valuable. One, their old restaurant management system, which was a client server system, was re-built into a a web-based technology called Guest Center. It’s in the cloud and effectively has no equipment in the store, you need a password to access it, you can use different devices to access it and it’s constantly updated. Thats the beauty of that product.The other major architectural change is that their old website was a legacy product that you couldn’t run A/B experiments on. They had just converted that, and we just started rolling it out.It’s the first next version - the old version looked, let’s say, a little old - now they have a process where bottom-up empowerment, small teams and iterating to make that a better and better B2C experience. In many ways, we are fortunate that the whole company pivoted to the latest/greatest technology and we can move it forward just like we’ve move our other brands forward.Did those changes support the valuation of the company in your estimation?That was a lot of it. [The price] also reflects our belief in the promise of the company going forward.With things like Pay with OpenTable payments model and with globalization, we think the company will ultimately be worth way more than what we paid for it. If you look at the valuations of these things on the open market, they are huge.There were just some things holding OpenTable back, those are some of them, but also - if you ask the team - bringing them into the Priceline Group and exposing them to the performance culture that we have, the global nature of the way we do business…all of that should produce a really strong win for us.And now we’re committed to seeing it through. We did a lot of planning, and we’ve got positions posted all over the world. Co-marketing has started, we’re now into the process of experimenting and testing. It’s not a short-term thing, but it’s a medium- to long-term thing, where we’re on this great path where things are starting to click.The teams, the culture, we’re moving the team forward. It’s also breathing a lot of life into the OpenTable team - their eyes are lit up, they’re excited, they’re ready to go. A lot of cool things happening with that asset.Restaurants are not an easy space to make money in. Fortunately, OpenTable has a great position here in the United States. We’re the only company making money in the space, and we can take that and move forward. We’re not starting behind, where you’re losing money. It’s about expanding the profitable model around the world.And defining restaurants as officially a part of the travel ecosystem.It’s funny how these boundaries get defined in a certain way. Historically, it’s called hospitality. But in fact, it’s very related. It’s a very close cousin to what we traditionally do in travel.Restaurants also need partners at scale to help them, and we want to be partners like that. It’s always a middleman relationship, so you want to add way more value than they ever pay so they feel like these are great people to partner with. These people bring me demand, bring me insights and make it worth it at the end of the day.How does Buuteeq fit into all of this?Buuteeq fits with a new set of things that we are doing around B2B software on the Booking.com side.The reason for that is really recognizing that our partners are really challenged on all of the systems they have. Maybe their website was built by a brother-in-law, they’ve got vendors coming in from six different directions, they’re confused, they want to know how it all works. And they look at us as partners, bringing them a lot of traffic, and if we’re able to have enough trust with them to say, “let us help you with that other mess,” then we can bring a technology stack that can be powerful, with great insights, and at a much lower cost than what you are paying today. And we keep it constantly updated.That’s the goal with that. If we can have that kind of relationship with our accommodation partners, it becomes a lot more connected rather than just being someone who produces bookings out of the sky.For accommodation partners, I always tell them that the best thing to do to win is to run great accommodation. It’s not about what system or whatever - if you run great accommodation, and we can connect you to the pipes that bring all of these guests from all over the world, they will find you. But if you don’t run a great product, or its not differentiated, then it doesn’t matter how many pipes we hook up to it. No one’s going to want to come!The dream is that they can feel more trust with us, and we can be a partner to help make sure that they are well-connected to all the pipes to get as much business as they can and they can focus on running a great property.We’ve always been well-aligned with brand.com, because we want the same pricing as brand.com. When someone else has a price out there that’s $100 less because they inadvertently sold to a wedding partner that then wholesaled the inventory…that’s not good for us or them.In this way, it aligns ourselves with building a healthy direct business while we’re also building a healthy business, then we can build trust. And people realize we’re not just trying to own everything. It’s an acknowledgment that a lot of business will go direct, and let’s help you build that business.And it’s a hedge for you as well. A lot of hoteliers push back against squeezing at both ends - the intermediary taking a cut on both sides. How else do hoteliers respond to these new moves?Generally speaking, once they understand, most people say this sounds great. But they need to know who you are. They need to trust you, otherwise they’ll just be afraid that you are going to jack up the commissions or take all the data. You need to have trust in relationships to get through that.Our partners lean into us, as we can bring them a ton of business in an economical way. Those will be the ones that move with us. Hopefully we can add enough value early in that other partners will find value in that. We’re certainly sensitive that people might feel cautious and sensitive.In some ways, when you look at SAP/Concur and Oracle/Micros, Priceline could become an enterprise software company. What’s the evolution of the Priceline brand over time? Where’s this all going to go?I have the advantage that I am a software guy. I grew up in that world so I understand it very well. I’m also a consumer guy, spending time at Starbucks. So I have a balance between being data-driven and technology, but I love the consumer side of what we do.What Priceline is all about is being a company that takes the friction out of local experiences.Travel is a massive pie, and we’re still so small on a relative basis. If you think of Priceline’s transaction base at $50 billion this year, while it seems really big, travel is $1.1 trillion. So we’re still small in this space, and we need to do more.Our move into software isn’t to be a software player like Oracle. It’s just to help take friction out of the process. That’s our goal. And if it takes software to do that, and if we have to be the ones to do it, great. If someone else does, great. But overall we just want to continuously use technology to take friction out.And having our long-tail properties not getting a fax and then registering it in a white book - having technology helps us as it wires up accommodations of the world and then is a great story for our guests by creating seamless experiences.We’ll get smart enough in software, because we are a technology company and will create great products. But it will always be with a vertical view of the travel/hospitality/related services industry. It’s not with a horizontal view and being over there with dry cleaners and Wal-Mart…we’re not a horizontal company.We’re very much a vertical company, but in a very large space that has dotted lines around its definition that allow us plenty of room to grow as we look forward into the future.Any chance to go deeper into hotel software, such as HR software, to reduce friction in the back-end systems for hotels and make them run better?It’s whatever we can to make them run better - primarily, our focus in the reasonable future will be on demand systems because that’s what we’re all about. The things that matter to bring more guests to your property.We’re not going to have Booking.com shampoo, we’re not having sheets, none of that. This is all about the demand side of the equation, driven by technology. Our dream is that we can connect hotels to the world's demand even with the most basic plumbing.The more we have of that, the more we can do experientially. For example, Todd’s coming and we have Todd’s background that’s all electronic. Perhaps it’s connected to his LinkedIn profile, his Twitter account, and the small property owner can learn Todd’s preferences. All of those personalization scenarios rely on the plumbing being there. You can’t be getting confirmation faxes, that limits opportunity.How will that sort of "connected personalization" impact loyalty?That’s a whole other line. The internet went through the dot-com bubble with gimmicks and insane money to now, which has been all about scale and transactions - an e-commerce focus.Now we are crossing over into the new era which is all about experience. It’s no longer about just getting a book in the mail, or making a restaurant reservation or booking a hotel - it’s about how technology improves the end-to-end experienceEveryone is carrying a computer in their pocket, and that unlocks the opportunity to be more relevant to the consumer across their journey.And it doesn’t have to come at us taking extra rent by selling a hop on/hop off ticket - it’s a very low variable cost so it can make customers more loyal through great customer service, content and experience. All of those elements are what the smartphone unlocks, and that’s going to signify the next era for the bigger players in the industry.That’s where all the energy is. How do we use technology and the new multi-screen consumer to really pull our value proposition to a whole new level? And that then ultimately drives loyalty.People who book on the Internet would rather add a pillow to their room on the internet then phone someone for that pillow. They would rather go on the internet and be able to cancel. The future is to be able to use technology through the whole experience to make it as great as it can be. That’s to me the future that we aspire to.RELATED: A restaurateur's perspective on OpenTable/PricelineRecent Priceline earningsPriceline invests in CtripHow much could Priceline disrupt hotel tech?