Expedia CEO: Travel decelerating to normal post-COVID levels

Expedia (EXPE) President for Business Ariane Gorin is set to succeed CEO Peter Kern, the transition taking effect on May 13. Expedia CEO Peter Kern joins Yahoo Finance Live to discuss the succession plan, post-pandemic travel bookings, and where AI fits into the travel booking site's business.

"Really, Asia and Latin America have been driving this past year more than anything, and that's all slowing down. So everything is going to come back to a more normal level," Kern says. "There will be some outsized growth in some of those places. China is still growing a lot. But, it's really just a [deceleration] of the whole globe back to sort of more normal post-COVID levels."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

[AUDIO LOGO]

BRAD SMITH: A leadership shakeup announcement sent Expedia shares down over 20% following its fourth quarter results, its biggest decline since March of 2020. The change leaving the Street skeptical about the travel brand's strategic direction ahead. Peter Kern, Expedia CEO, joins us now, alongside Yahoo Finance's Executive Editor Brian Sozzi. Peter, great to have you here in studio with us.

PETER KERN: Good to be here.

BRAD SMITH: Absolutely.

PETER KERN: Thanks for having me.

BRAD SMITH: Let's focus on this earnings report first before we get into this transition that's going to be taking place.

PETER KERN: Sure.

BRAD SMITH: I mean, this was, as you mentioned in this report, a record result here particularly for this most recent quarter and the full-year guidance driving that. So ultimately here, as you're sensing and looking through this travel environment, what is the outsized catalyst that you're expecting for the course of 2024?

PETER KERN: Yeah. Well, I think for us, it's all the work we've put in for the last several years. I talked a lot about it at earnings, but we've been going through a massive transformation. I've talked to Brian about it a few times technologically how we go to market with our brands, our new loyalty program, service, everything, basically, over the last three years.

And so the catalyst for us is really that work is starting to germinate into real results. And it takes a little while to get going. It's not a light switch. But we've revamped the front end. All the technology has changed.

We can experiment and we'll launch features much faster to improve the consumer experience. We have AI and machine learning throughout the product, so we can personalize faster and faster and faster. And those things just get better all the time. So, the catalyst for us is our own internal work.

The markets are slowing a bit. The travel market is, you know, it's still growing, but it's the post-COVID thing. It's slowing down a bit. So the acceleration is lower. But as the market decelerates, we expect to continue to accelerate. And that's basically what we told the Street.

BRIAN SOZZI: Is the deceleration more overseas than the US or vice versa?

PETER KERN: Well, the US and Western Europe were the first out of COVID, and they grew a lot. But that slowed. And then Asia and Latin America, they relaunched. So, really, Asia and Latin America have been driving this past year more than anything. And that's all slowing down.

So everything's going to come back to a more normal level. There will still be some outsized growth in some of those places. China is still growing a lot. But, you know, it's really just a decel of the whole globe back to more normal post-COVID levels.

And again, we've been rebuilding ourselves while most of our competitors have just been steady as she goes. So we think we're in a place to start to accelerate out of this against a slightly tougher macro market than post-COVID, which was bananas. But we're really excited about where we're at.

RACHELLE AKUFFO: And Peter, I have to ask you about generative AI because it's also empowered a lot of people to not have to go through platforms to book some of their travel as well. How is Expedia viewing that? And what's the competitive edge that you think you have as a platform versus people planning their own travel that way?

PETER KERN: Yeah, so it's a good planning feature. It's not a booking feature. And we have it woven into the front end of our app as well so that people can basically get in and discover in our app or outside our app. But when you need to know what the price is, are there rooms on that day, can you get a plane on that day, can you get the seats you want, you need us.

And we have way more personalized data about travel and what our consumers have done and what they've booked, where they've been. So, if you want a truly personalized experience, yes, Google or ChatGPT might know some things about you through what you've asked it. But in terms of what you've done historically, what you really like, how we help you through the whole process, it's really a discovery tool more than it is a booking tool.

And so what we're trying to do is weave generative AI and all AI and machine learning throughout our experience. Sometimes you want to ask lots of open-ended questions. "I'm going to Paris. What should I do?" Other times, you're really asking much more specific things, where you're trying to compare things. You want personalized answers.

You like boutique hotels, I like resorts, whatever it is. And so we're able to do that. And in each case, we're using AI and machine learning to use the best tool for the problem and basically solve it through the journey for you, including service, which we've made huge strides in and have the best service in the category.

BRIAN SOZZI: I think you made a really great point, Peter, on the earnings call that you have reset the company, you and your team. So then why not partake in some of the benefits of that reset, which, theoretically, would come this year and next year?

PETER KERN: Look, it's a great company. I could stay here forever. I love the people. I love the team we've put together. I have complete faith in them. We've rebuilt the place.

We're 50% product in tech now. Where in '19, we were 30% product in tech. So we've totally refocused the company and put ourselves in a new place to compete and win.

But I had a four-year deal. I came off the board to do this. I was vice chairman, as you recall. I'm going back to being vice chairman, so I'm not going anywhere.

But really, as I saw where we were and particularly in the back half of last year, beginning of this year, as we're accelerating a lot technologically, I just felt like the company was in a good place for a hand off. And I'm a big believer in good transitions. You know, you don't want to outstay your welcome and you need to build a team that can keep going and going.

BRIAN SOZZI: What's critical to making a successful transition? Because we have a lot of examples out there-- Disney, you name it-- where the transition hasn't been very well.

PETER KERN: Yeah. Well, I think the company has to be ready. I think you need the right people at the right time. You know, I think what we just went through, I was the right person for it. You need to be tenacious.

We had a lot of messy things to do and we had to rebuild the right team and put in the right place. That's a combination of people who've been here a long time, like Ariane who's terrific, and a lot of new people who have added to the puzzle. So I think you've got to build it right.

You've got to set it up right. And in my opinion, you've got to go in the right way, which, in part, is this transition where I'm not going yet. I'm here for three more months. Ariane will take over and we'll get the company set. Everybody will be excited. And as I told the company, you know, I'm going to be busting my butt every day till I leave, and I expect the same from them.

BRAD SMITH: That's amazing. Well, we're going to be tracking, of course, that transition and continuing to track the company as well. One thing that we're also keeping tabs on right now is this issue that Boeing has had to move through and whether or not that's actually trickled through from the data that you can see to bookings.

As you look at the current quarter and where customers have perhaps soured because of the Boeing and the 737 MAX 9 issue with Alaska Airlines that now means that many of those aircrafts are grounded, many of the flight schedules are changed. Has that impacted in one direction or another travel from what you're seeing on the leisure side?

PETER KERN: Yeah, it's definitely had an impact. I don't think it's scared everybody off planes or anything, but there are fewer planes to fly. That becomes an issue. Some people probably were scared by it.

We saw some early reaction to it. We'll see how that comes back. But, you know, anything, a geopolitical problem, something like Boeing, all of these things tend to have a reaction. They can be different in different places.

But for sure, there's a little less supply in the airline market now and a little fear, probably. And it's had a modest impact. Air has been slowing particularly in North America. Price, it's the one place-- one of few places car rentals where prices have actually come down post-COVID. And so, that means there was more supply than the market really can absorb.

BRIAN SOZZI: Nobody wants those EVs.

PETER KERN: Yeah.

BRIAN SOZZI: They're just not inclined.

PETER KERN: Yeah.

BRIAN SOZZI: Come on, let's be honest. That's what it is.

RACHELLE AKUFFO: And in terms of the demographic that Expedia is looking at in this multi-year transformation, how are you factoring in-- obviously, a lot of people have very tight purse strings at the moment in terms of how they're spending this discretionary money. Are the particular demographics that you see the most value in?

PETER KERN: Yeah. I mean, one of the journeys we've made is to focus on lifetime value of customers. You've heard that a lot from technology companies, I'm sure. But we've really-- as we've combined our data and understood the customer better, we've gotten a much better ability to understand the value of a customer.

We're seeing across the board, travel is still quite solid, strong. You know, I said it's decelerating, but it's very solid still. And there's a little trade down in the bottom end of the market. There's a little more pressure there, as we've seen in other consumer goods.

The middle and upper part of the market of travel makes up a lot of all the travel dollars, and we're quite strong in there, always have been. So, I think that will continue to be true. That part of the market, mid and upper market, will be really strong. The bottom may see a little pressure.

But there's lots of solutions for people. There's lots of deals out there. We have member discounts. There's lots of ways for them to make their dollar go further. So, I think you're still going to see travel. You just might see some adjustment within it a little bit.

BRIAN SOZZI: You've mentioned, again, I think it was on the earnings call, your share count back to 2015 levels. Today, news came out that TripAdvisor is exploring alternatives. Do you think assets like yours are just undervalued because there is a consolidation opportunity?

PETER KERN: I don't think that's why, no. I think we're undervalued because we did some painful stuff that not everybody understood along the way, and we used the opportunity to just buy back our stock. Today, this week's reaction, to me, or whatever the Street was reacting to, just another opportunity for us to continue to buy our stock at an undervalued price. I think what people have to see with us, I think stories are different.

TripAdvisor has got a different set of assets, different things they're dealing with. For us, it was really rebuilding and seeing what that rebuild could drive. We believe it's going to drive share growth, it's going to drive share as in share of the market growth. We think it's going to drive accelerated growth compared to peers.

That's what we set ourselves up to do. We weren't in a position to do that before. And having to prove it's fair, we got to go prove it. But we obviously believe and that's why we've been buying our stock.

RACHELLE AKUFFO: And are you going to have time for a little holiday before the big move?

PETER KERN: I hope. Well, not before the big move.

BRIAN SOZZI: This guy's still working. Come on.

PETER KERN: After the big move, I'm planning a holiday. So I'll have a nice summer, I hope.

RACHELLE AKUFFO: Fair enough.

PETER KERN: I hope you do, too.

RACHELLE AKUFFO: Thank you. Appreciate you joining us this morning, Peter Kern, Expedia CEO, alongside Yahoo Finance's Executive Editor, our very own Brian Sozzi.