Expedia’s CEO talks long-term strategy

Yesterday Expedia Inc’s chief executive Dara Khosrowshahi took a break at the Phocuswright Conference to speak with Tnooz about his company’s strategy.

Tnooz: As CEO you have to have the long-term vision beyond the quarterly view. What’s the next big wave in consumer technology behavior and adoption that Expedia needs to ride? In the past, metasearch was a wave. Mobile was a wave. What’s next?

“We think in terms of platforms and audiences.

“On an audience basis, social is a wave we still need to do better on. Facebook and others, and now Snapchat. These are giant audience platforms that are aggregating and are global in nature.

“Our number-one aim is to reach a global audience that wants to travel. So we are very aggressively experimenting in social at a big scale.

“We haven’t cracked the code on it. We really want to get from social interest to intent. We’re trying lots of different little experiments, some that are working well. Some on our own, some with partners.

“On a platform basis, voice interaction is very interesting. Interaction has gone from keyboard to thumb and now its going to voice.

“Voice is potentially challenging for us in that there is no structured interface. We have trained users to click their mouse in a certain way or put their thumb in a certain field to get a response. We’ve trained them to declare where they’re going to and when. We’ve trained them to search for a single product at a time.

“That training won’t be possible in voice. The consumer expectation will be, did I get an answer to my unstructured question?

“We need to build the capacity to handle unstructured voice search queries and produce structured search results. That’s a great challenge and opportunity. We’re one of the few companies that will be able to do it.

“The other wrinkle is that there are lot of gateways for voice search. Amazon, Google, Microsoft, Facebook, and others are working on it.

“We’re early-to-mid on social, and we’re very early on voice….

“My Alexa is entertaining for my kids for a good 15 minutes of every day. My kids love to ask it questions.”

Tnooz: There’s been a rise in corporate venture capital in its prominence in travel. There are risks and rewards for both sides, the corporations and the startups. How does Expedia look at this?

“We debate it internally all the time.

“I think what we’re very good at it is identifying companies we can bring in wholesale and create value for our shareholders. We’ve been consistent at being strong allocators of capital.

“We have invested — call it minority stakes — in various travel companies. [Alice, Checkmate, etc.] in areas we consider strategic or in technologies that are emergent but not necessarily ready to come under a big corporate umbrella or not necessarily fully mature. But that’s not our main approach.

Tnooz: Let’s talk about hospitality on the B2B tech side. There’s a lot of talk about shifting hospitality systems to the vertical cloud. Yet that isn’t a straightforward process. There’s a lot of fragmentation and legacy systems and questions about interoperability. What’s your view on how things are going to shake out?

“In the past, software solutions came with custom hardware configurations that required a level of field account management that made it very difficult for there to be scale solutions of any kind.

“Now technology has changed. Now the software solutions don’t require custom hardware configs. They can instead be carried through either browsers or apps, which I think, opens up the potential for SasS/cloud services at real scale — where platforms become more powerful over time instead of fragment over time.

“There is enormous potential here. But there is an ugly amount of sausage making that has to happen for these hoteliers to pull themselves out of these legacy systems that have accumulated over time.

“Right now is a period of acute pain for hospitality. But I’m optimistic where the industry will go. Expedia will absolutely be a facilitator both for creating services that connect into these new services and building some of these services in-house and offering them to the travel ecosystem.”

Tnooz: Homeaway wants to retain its second-place globally — and possibly overtake first-place Airbnb — as the most-pervasive platform for alternative lodging. Is there a risk that Homeaway can’t build “a moat” to protect its position from being stolen by rivals?

“In the industry that we’re in, I tend to think less of “moats” — which are defensive in nature — and more about running faster than anyone else.

“Any internet business trying to create barriers to entry, etc., will lose.

“Homeaway is playing offense…. When we bought them, the platform was delivering about $15 billion of transactions a year offline. … Our job is to take that from offline to online….

“As we do that, customer satisfaction is improving. We see that in our net performer scores, which are going through the roof.

“The shift to transactional will allow us to market much more aggressively, not only in brand channels but also in variable channels like a Google or even metasearch at some point. That’s going to bring a whole lot more demand to our subscriber base.

“We’re investing ahead of the curve in technology to give homeowners much more robust tools to manage their homes with. We will provide better revenue management tools. Many homeowners have a casual approach to pricing, and we can bring a lot more intelligence to yield management.

“Step three is to take advantage of the network effect of the Expedia Interactive family of businesses. There, the opportunity is for Homeaway to make its listings available on all of our brands. That will increase the traffic being sent to homeowners.

“Historically, Homeaway has drawn traffic from customers interested in visiting, and supplying lodging in, resort destinations. By including alternative lodging across our full family of brands, we will shift. Supply and demand in urban areas will grow.

“In short, Homeaway subscribers and advertisers are going to get much more exposure and better tools without extra cost per dollar earned. Consumers will get a better experience, too.

“It’s not about digging moats, it’s about going faster than the rest.”

Tnooz: You mention providing tools to property owners to do revenue management. Self-management of properties isn’t for everyone, though. There’s an interest in hands-on property management services, such as housekeeping. Is there a line that Homeaway would draw in not getting involved in the provision of such services?

“We will start with the idea that it’s our job to build a liquid, frictionless marketplace. We need to provide the best data to customers to pick the best rental. And we want the homeowners or property managers to have the best data to capture as much demand as they can from the right customers they want. That is where we add value.

“There is an ecosystem appearing, with companies like Evolve, Luxury Retreats — apparently a company called Beyond Pricing won recognition at Phocuswright’s Battleground today. You could say these companies are adding chain-like functionality to alternative lodging. There is absolutely value there.

“We can help them grow as partners in our marketplace, as long as they are professionalizing the product and setting standards of expectations. We won’t do it ourselves, but we’ll partner.

“To look the other direction, is there any way the data that Homeaway can generate about supply and demand for alternative lodging in markets can be fed back to hotels to inform their yield management on traditional rooms, as a holistic market?

“There’s certainly that potential there. We’re building a lot more intelligence into Expedia PartnerCentral, our tool for hoteliers to be able to compare on a wide basis what their pricing and availability is versus their competitive set as defined by them or as we see it.

“As alternative lodging comes into that marketplace, we want homeowners to be able to have the full picture, so they can look up hoteliers as a competitive element. We want hoteliers to be able to look up what the homeowners and property managers are doing. We’re not there yet. But we want a level playing field for our parters.”

Tnooz: Investors have noticed that monetization is lower on mobile than on desktop in certain contexts. How is Expedia able to cope with that?

“For some time to come mobile will still be less valuable than desktop.

“The classic solve is you make it up by growing volume. The good news is that mobile volumes is exploding — it’s more than 50% of our traffic now.

“We’re investing in mobile innovation and aggressively optimizing our services for mobile. We’re investing at a pace that allows us to capture more than our fair share within the travel ecosystem as far as new consumers shift to mobile.

“While it’s not easy and the unit economics aren’t necessarily great, mobile is absolutely a net positive for us.”

Tnooz: The competitive aspect of hotels versus OTAs gets played up in the media.

“You guys love the drama. The drama makes for headlines.”

Tnooz: In light of the Red Lion partnership and the Marriott partnership, what is your perspective on the competitive element?

“We want to deepen our relationship with our partners, and the chains are our biggest partners. We think there is some duplicative activity. We’re a top-notch distribution and marketing company, and there are a lot of smaller scale players that are trying to build what we are capable of.

“If you look at our path as a company, we’re more and more opening up our marketplace to anyone who wants to use it.

“It started with our private-label EAN business. There were early debates in our company where we asked ourselves, if we’re acquiring all this inventory, should we really make it available to our competition with no restrictions other than make sure you’re doing what’s right for your supply partners. But we did it. We opened up that marketplace. That was very successful as partnerships go. EAN is now one of the fastest-growing parts of our business.

“In general we keep opening our marketplaces up more and more. That’s going deeper into our IT stack. Offering link-off advertising to hoteliers who value direct bookings more than indirect ones is an example.”

Tnooz: After the US presidential election, you tweeted a thought about it. Could you expand on your thinking?

“We consider technology to be a force for good. We think we’re lucky enough to be in travel technology, which is even more of a force for good — bringing people together, having them understand each other, helping people recognize their differences and respect those differences. All that makes what we do exciting.

“But I do think that we have to recognize that some of this technology is economically harming some people in this country who are not yet resourced or ready for the pace of change and are angry. I think that has certainly showed in this election.

“I think that taking the position that, “Oh, they don’t understand,” or “Oh, it’s inevitable,” or “if it’s inevitable it’s right” — none of that is the right stance.

“It’s been a tough election cycle. All of us has to make an attempt to reach out and learn about areas that we’ve been previously ignoring.”

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Sean O'Neill

About the Writer :: Sean O'Neill

Sean O’Neill had roles as a reporter and editor-in-chief at Tnooz between July 2012 and January 2017.

 

Comments

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  1. Sengtry Nol

    It is too long.

     
  2. JL Chretien

    Good job, Sean. He tells more interesting things than what he said on-stage.

     
 
 

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