Expedia Inc. CEO Dara Khosrowshahi says the company has to take Google’s foray into travel “seriously,” but thinks Google Hotel Finder has potential benefits for Expedia because it is a more cost-effective channel and less competitive than paid search.
The competition is less acute in Google Hotel Finder because companies must have substantial supply to participate, Khosrowshahi says, adding that the hotel business is “turning into a scale game.”
“We participate in every way with Google because it is a big channel and a growing channel,” Khosrowshahi said January 5, in remarks at the Citi’s 22nd Annual Global Entertainment, Media and Telecommunications Conference in San Francisco.
About Google’s efforts in travel, including Google Hotel Finder and Google Flight Search, Khosrowshahi says as long as Google sticks to its pledge to remain a pure-play advertising company, “then we’ll be fine.”
On other fronts, Expedia sees substantial opportunities in international growth (international currently is 42% of revenue), mobile, social and flash sales.
For example, Groupon Getaways with Expedia is “a very profitable relationship and we are very excited about it,” Khosrowshahi says.
However, the jury is still out on Facebook, he adds, noting it is “too soon to tell” whether Facebook will be an effective marketing channel for Expedia, Khosrowshahi says.
Expedia is currently focusing on building an audience on Facebook and hopes to make it a transactional channel, he says.
“And we will worry about monetization three to five years from now.” Khosrowshahi says.
Booking.com has built an excellent product focused on Google optimization, says Expedia CFO Mark Okerstrom, explaining Booking.com takes consumer questions from Google and “answers them better than anyone in the market.”
With a $1 trillion market opportunity, Okerstrom argued that Expedia doesn’t “bump up against Booking.com” because both companies are relatively small players given the size of the global hotel market.
In response to a question, Khosrowshahi aknowledged that Priceline’s overall margins are more attractive than Expedia’s and he characterized the differential as “structural”: Priceline is largely hotel-only with less hefty capital expenditures than full-service online travel agency Expedia.
Expedia’s new global technology platform will help bridge the gap by increasing conversions and enabling Expedia to be more cost-effective in paid search.
Khosrowshahi said Expedia.com plans on migrating flights to the new platform in the first quarter of 2012 and vacation packages will be “flipped over” in the second half of the year.
Hotels.com transitioned to the tech platform in the second quarter of 2010 and has notched 40% growth in gross bookings, he added.