Expedia Group CEO Interview: Our Tech Was an Anchor Thwarting Innovation
Online Travel This Week
Expedia Group CEO Peter Kern thinks Google’s vacation rental metasearch offering won’t work because the big partners, such as Expedia/Vrbo and Airbnb have opted out, and he believes that Expedia’s legacy technology held back innovation over the years.
These were among the points that Kern made during a Skift interview at Expedia’s partner conference in Las Vegas last week.
When it comes to innovation, Kern argued that competitors have likewise not been innovative, and all have done much to program travelers to look for low prices instead of more value.
The interview, which has been edited for length and grammar, follows:
Dennis Schaal: I have a friend, who’s pretty smart. She said to me, “Expedia is your grandmother’s or grandfather’s online travel agency. What have they really done in recent years that’s innovative?” And to that, you would say?
Peter Kern: It’s hard to be super innovative when everything takes six times the work. I mean, to be fair. On which brand? Was Expedia innovative? Hotels.com innovative? Vrbo innovative? Which thing are you asking to be innovative? So, it [Expedia Group’s lack of tech integration] was an anchor a little bit on our ability to innovate because there was no one innovation that you could deploy across everybody and everything.
Today, you’re going to see we’re launching Smart Shopping, which is a new capability where it’s easy to compare hotel products because every hotel defines their universe differently. Like, “Oh, this is a queen superior, and this is a junior suite.” Most customers are looking at a Marriott and thinking I don’t know what it comes with. Now we’ve taken all the zillions of bits of data and worked it down into an easy way to compare what you get with each room.
It gives you a way to easily compare things. So that’s an innovation that will be great for anyone shopping for a hotel on any brand, on anything. But we would’ve had to deploy it a million times in the old format. Now as we get consolidated, we can deploy it one time. Expedia first, I think. Hotels.com will have the benefit of on a lot of their traffic. The best experience where it’s going to be is through the app.
By the way, to your smart friend’s comment, Booking’s sites, as I say to our team, we’re not competing with greatness here. I think we all have room to be a lot better in terms of a shopping experience. That’s what we want to innovate around to make it better for the traveler. We also want to be focused on making sure travelers have great outcomes. We’ve all contributed to over-commoditizing the marketplace around price.
Booking.com had billboards and other advertising in Las Vegas last week trying to woo short-term rental hosts to its platforms and as a rebuff to the Expedia Explore 22 conference taking place in the city.
Schaal: Speaking of Booking, have you seen the billboards?
Kern: I would say it feels pretty cheeky, but be careful what you wish for.
Schaal: Oh, why? What are we going to see?
Kern: Look, we want to be aggressive in going after markets where we have historically been weaker than them. We don’t feel like we’ve had a particularly tight strategy in terms of that in places like Western Europe and other places. I’ve said it on earnings calls and other things, and we’re going to be, very tactical and aggressive to try to win back and learn and figure out ways to win real share in those markets. They’re being cheeky coming after us at our partner conference, and whatever. It’s a billboard who cares? But I think in general they’re doing what I’d expect them to do, which is they’re looking for growth where they can, and we’re going to do the same. Unfortunately for both of us, that means we’re each coming after each other.
Schaal: You’re probably sick of talking about Airbnb, but anything that you take from their earnings announcement. Anything stood out?
In response to a Skift question at a press conference the next day, May 5, Kern said Expedia group has historically had “a vanilla strategy” in Europe, treating all of the countries similarly. Kern said Expedia will be more intentional about focusing on a smaller set of European markets. While his predecessor Mark Okerstrom focused on adding more supply in Europe to compete against Booking, Kern said he would have “an end to end strategy.”
Kern: No. We weren’t terribly surprised by that. I think vacation rentals have been strong. Cities are coming back and they’re a big beneficiary for vacation rentals in cities because we don’t really compete in that. We thought their numbers would continue to be strong. I think the whole industry’s numbers will be strong. I thought our numbers were pretty strong.
In terms of the recovery’s coming, the recovery’s coming in pretty much every sector. Some things are trailing, but they’re all up and to the right, with the exception of countries at war and things like that. There’s no reason why we won’t all see continuing good numbers, and Airbnb definitely benefits from more city travel. Although I don’t know if it matters to them, but we benefit from more international. We benefit from more from city travel. We benefit differently because we benefit in cities and hotels.
Schaal: You said during your earnings call that 50 percent of Vrbo’s business or customers this last quarter was new customers. So what do you attribute that to? Well, you’ve been focusing on performance marketing for Vrbo, right?
Kern: We do some, but we got out of Google [Vacation Rentals metasearch] and some of those other things. No, I would say it’s two things. One it’s adoption during Covid. The brand became more known. We invested in brand, we invested in much more than we ever have in awareness. I think that has snowballed. It’s the benefit of a great product fit at the right time, along with good marketing and driving the advantage. So I think we’ve had the tailwind and we played into that tailwind well, and that continued adoption and people becoming aware of it.
Schaal: Is there anything new in the way you’re approaching Vrbo’s supply strategy?
Kern: No. I think during Covid, we all pulled back a little bit in terms of trying to grab more stuff because we all contracted. And then as we un-contracted, we were focused on compression markets, places where we were going to sell out, where we knew we had excess demand. I think now that things are getting to more normal times, we are getting broader about our general property supply acquisition approach, and we will start to more broadly roll out new marketing, new property acquisition approaches.
That’s another area where we have a lot of opportunity, on the B2B marketing side to suppliers. We used to do it as kind of hand to hand combat. We used to have our hotel team separate from our Vrbo team. The marketing teams were split. We’ve consolidated all of that so we can use that manpower across all categories and use use the marketing more efficiently. We think we’ll get that machinery going.
Schaal: When we were talking about performance marketing and VRBO, you casually mentioned pulling out of Google. To what degree did you pull out of Google?
Kern: Google has a homes meta product that we pulled out of a year and a half ago. The product wasn’t great and we didn’t think it was incrementally valuable to us. So we decided to leave. We’re not in it, Airbnb’s not in it. I don’t know who’s in it. I don’t think that product’s going to really work for them because if you don’t have more than one player, it’s not really a marketplace. I don’t think there’s much going on there. I’m sure they’ll keep trying, but we’re not religious about this stuff. If the products work, they work, if they don’t, they don’t, and we’re not going to chase bad business. It was the product wasn’t great and we didn’t think it was incrementally valuable to us. So we decided to leave. We’re not in it, Airbnb’s not in it. I don’t know who’s in it.
Schaal: You announced an Expedia Group Open World platform to enhance partners’ products and services from Expedia. Tell me more about that.
Kern: We had done a bunch of this work. We do white label templates with partners like AARP, we power rewards programs. It’s been a growing business, a great business for us. We have APIs to partners in various places and other things. We had to build that technology and those integrations were quite hard because the technology underneath it wasn’t really built for that use. In the course of rebuilding our technology and re-architecting the whole plan, what we realized was we had the opportunity to build the platform in a way that would allow us to externalize all the pieces of the platform.
We wouldn’t have to just go to enterprise level partners, we could bring it down to easy, smaller-midsize partners, even an influencer who wanted to be in the travel business could now, “Man, it’s a pain in the butt to do service and payments and all these things, and my CTO keeps asking me for more people and it’s so expensive.” It’s like, “No, you should leverage our technology.” If you want to take our payments capability, or our service capability, or our fraud capability, or pick whatever. You’ll be able to take those pieces and leverage them in your own business.
Full Video: Expedia CEO Peter Kern at Skift Global Forum 2021
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