Editor’s Note: Skift is publishing a series of interviews with online travel CEOs talking about the Future of Travel Booking, and the evolving habits and device preferences of travel consumers. Check out all the interviews as they come out here.

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When you think about the current state of travel booking in the U.S., it doesn’t take brain surgery to figure out that TV advertising and its brand-building powers are definitely an integral part of the equation for the largest companies.

But when talking to Steve Hafner, co-founder and CEO of Kayak, you learn about the inefficiencies of TV advertising and how it may be losing some of its punch given the preference of the younger generation — be they the much-wooed millennials, teens or pre-teens — for streaming programming on their own myriad devices.

Kayak, a travel metasearch site, isn’t abandoning TV, but it is looking to de-emphasize it a bit in favor of mobile and online advertising, which shouldn’t come as a huge surprise for a company that was acquired by the Priceline Group in 2013.

If that is somewhat contrarian, when you listen to Hafner discuss direct bookings within Kayak apps and on its websites and how the company, which pioneered such bookings within the metasearch context, is now downplaying this option, you want to scratch your head because Hafner’s saying things that are the opposite of what he might have said just two or three years ago.

Contrary to what just about everyone else in the travel industry is saying, Hafner says Kayak is now seeing increased booking conversions when it transfers users to airline or hotel sites instead of keeping them on Kayak, and he swears this changed outlook has to do with improvement by third-party sites and has little to do with the fact that Kayak is now part of the Priceline Group with its portfolio of booking sites.

As is his habit, Hafner can be fairly candid. Asked whether TripAdvisor’s launch of personalized hotel recommendations this week is a harbinger of things to come across the travel industry, Hafner says it is — but just not in the manual way TripAdvisor is doing it.

Skift spoke with Hafner about what he sees as the future of travel search and travel booking, and what life is like within the Priceline Group.

And edited version of the interview follows:

Skift: With so much TV advertising by the big online travel agencies and Kayak taking place over the last few years, is TV advertising becoming an integral part of the future of travel booking? Is it a must-have?

Steve Hafner I don’t think it’s a must-have for travel brands. I think it is a part of the marketing mix for a lot of companies. All companies are getting more sophisticated about where they spend their marketing dollars. If there is a return on investment for TV, then great, we’ll spend money there. If there’s not then we’ll shift the spend. TV historically has been a way to reach a mass audience; it’s for building reach. But it is not very focused, not very targeted, and it’s expensive. And that expense has grown over time as the audience has migrated away from TV.

Marketing dollars are still mismatched between where consumer behavior is versus where marketing dollars go. I suspect you’ll see total TV spend go up over time just because that is the only mass-audience medium that’s out there. If you look at Kayak, for example, we are trying to put more of our money online, not offline.

Skift: And that’s because consumers are moving away from TV?

Hafner: Ya, there’s a whole demographic that doesn’t watch TV in a standard format anymore. I’ve got 14-year-old daughters. They don’t watch TV. They watch programming but they watch it on their own devices. And they consume it when they want to. They don’t sit down for a 6 p.m. segment to watch a show. That’s great for marketers if they can figure out how to target those people based on the demographics on their devices and across devices it’s highly efficient.

Skift: And are you doing some of that targeting?

Hafner: We are trying. No one has yet solved the holy grail of one-to-one marketing to consumers across their devices and across apps versus desktop versus the offline environment. Facebook is the latest to try with their Atlas program. We are just as eager as everybody else is to have someone solve it.

Skift: Kayak was the first metasearch site to do direct bookings in your mobile apps as a way to solve the clunky handoffs to third-party sites and to increase conversions. How do you see direct booking on search sites evolving? What is changing about it?

Hafner: It’s funny as everyone else is rushing into it we’re backing off of it. At Kayak we never actually wanted to be the place where people finish their travel bookings. We only did that as an interim step because other travel partners’ websites and mobile applications were so bad. That’s really not the case anymore. The best place to buy an American Airlines’ ticket is actually on their own website or via their own app. It’s not to buy it on Kayak or on Expedia for that matter.

Skift: Are you backing off of it because Kayak is no longer independent and you are part of the Priceline Group, which has all these booking sites, including Booking.com, Agoda and Priceline.com?

Hafner: Not at all. I can see how outsiders might think that but actually what we are trying to do is to enhance conversion, which is the ratio of times a consumer completes a transaction versus starts to complete it. A year-and-a-half ago when we launched Kayak booking if you found something you liked through our app and wanted to book it and we handed you off to an airline site or a hotel website to do that the conversion was terrible because the handoff was clunky, not good. So we created the Kayak booking experience.

But what we found over the last year-and-a-half is that has really changed a lot. Now we actually see higher conversion if we hand them off to a third party for that third party’s inventory than if we keep them on Kayak.

Skift: That seems to be totally bucking the trend because lots of metasearch companies are moving toward direct bookings.

Hafner: Yes. It used to be if you used Kayak we tried to keep you within the Kayak experience. But a careful observer would look at our hotel results now and see that we don’t do that.

Skift: TripAdvisor launched personal hotel recommendations the other day. They had the beta for it for awhile. Do you think this sort of personalization will become the norm over the next few years and what are the challenges with that?

Hafner: It will become the norm but not the way they [TripAdvisor] implemented it. The reality is that the most effective personalization is when you don’t ask a consumer to do anything explicit. What they are asking you to do is to tell them you like four-star hotels that have a pool, that have free Wi-Fi or are in the city center. Most consumers don’t want to do that. What they’d rather do is scan through a list of hotels and then pick the one that they like. What you don’t know is why they picked that.

What we’re working on is the observational stuff, which is let’s look at the hotels and flights that consumers engage on and let’s try to derive machine-learning on what consumers are actually telling us by their behavior, and use that to inform what we show the consumer the next time.

Skift: Is that something you are doing now or something you are working on?

Hafner: We are doing it now but we are not doing it well.

Skift: So then what are the challenges with doing it well?

Hafner: The challenge is just scale. You have to get a lot of consumer observations before you can form a hypothesis to test. And that’s an area, frankly, where TripAdvisor has an advantage over us, which based on the current implementation it doesn’t seem they are capitalizing on. The more you use us the smarter we can get in suggesting hotels for you. Right now, due to cookie deletion and low registration rates we can’t always tell that it is you using us.

Skift: What about cookie deletions? What is going on there?

Hafner: Cookie deletion rates have stayed pretty constant over the years. The trend is that people are consuming content or conducting their queries over multiple devices and platforms. As a result it used to be your home PC got 50% of your queries and your work PCs got the other 50% and you deleted your cookies on both every 30 days. But now what is happening is you are doing a search on your home PC, then you go into your tablet, then you go into your smartphone, then you go to your work PC. Our ability to see all your behavior is a lot harder now than it used to be.

Skift: You referenced searching across multiple devices. What are the trends you are seeing there that will influence the future of travel search and travel booking?

Hafner: The big trend is that the desktop business is, if not fully mature, then declining. Consumer behavior is almost all occurring now on smartphones. Even the tablet market growth has slowed to single digits, at least in mature markets. All of our thinking is going into the mobile experience and being able to take advantage of the consumer’s location to inform the product and the features of that product.

Skift: Are the larger sizes of smartphones screens helping the product?

Hafner: It totally helps. You can always do more with a bigger screen. I think like with TVs, they just got bigger over time. It used to be that people thought a 13-inch screen was big, then a 20-inch screen, then a 27. Now we are looking at 70-inch screens and bigger.

I don’t think mobile phones will go that big [laughter]. I just upgraded from an iPhone 4 to an iPhone 6. There’s no way I would go back. My guess is that a year from now if I were using a 6 Plus there’s no way I’d go back to a 6. I think it is just natural that over time people will gravitate to a larger screen size and that’s good for all of us.

Skift: So in terms of travel booking then from what you are saying the role of the smartphone vis-à-vis the tablet and the desktop is changing?

Hafner: Tablets are for consuming content. People are in very couch-potato mode on tablets. They are not on e-commerce mode. Whereas on the smartphone, from what we see, they are in e-commerce mode. They are ready to look and buy. And given the advantage of knowing location for the consumer you can do a lot of fun stuff that we are just beginning to scratch the surface of.

Skift: I remember speaking to you a few months after the Priceline Group acquired Kayak and you were talking about how you thought you’d really get great advice on how to expand internationally and how to pick and choose your spots. I’m wondering about these mobile trends that we are talking about in terms of how they may differ from country to country as you try and build your business abroad?

Hafner: It is a huge difference. Take a market like Brazil, for example. People are skipping the desktop and going straight to the smartphone. I don’t think our Brazilian business is ever going to be majority desktop. That just means you approach the market differently from a product side and you approach the market very differently from the marketing side.

Skift: And that would hold true in places like India, as well, right?

Hafner: Yes.

Skift: What are some new things we’ll be seeing from Kayak? Are we going to be seeing some restaurant recommendations floating in there?

Hafner: You are alluding to the OpenTable addition to the Priceline Group, I presume. I don’t think people come to Kayak to look for restaurant recommendations or to facilitate that. I think we will have some of those touch points for cross-selling and up-selling where it makes sense. Booking.com may choose a different OpenTable integration than Kayak. But I don’t think you are going to see a restaurants tab on Kayak.

Skift: How about a vacations rental tab or do you already have that?

Hafner: We have that. Darren Huston, our Priceline Group CEO, every time he asks me about restaurant reservations on Kayak, I ask him about adding flights to Booking.com. There might be some synergies out there but I don’t necessarily think they will be between OpenTable and Kayak.

Skift: Kayak has been part of the Priceline Group now for something like 18 months. You are not naive about these sorts of things in terms of your experience. But what have been some of the big surprises?

Hafner: I had no real knowledge about how great a company Priceline was. That sounds sort of silly to say because their market cap is so big and the P&L is so big. But I really didn’t have a feel for the management team there and their processes until they acquired us. Until then they were just a customer of ours, and a big customer, to be sure. In many respects they were a competitor of ours, too, in terms of consumer eyeballs.

Interacting with them now on a management level, you just get such an appreciation for what big thinkers these guys are and their ability to execute on multiple priorities internationally. It is just amazing. I sound like a suck-up right now but it is very humbling for me. You know me; I have a pretty big personality. But these guys are far more skilled than I am and far humbler than I am. On a personal level, that’s been a major reset for me.

Skift: Anything you’d like to add about where Kayak is heading or the future of travel booking?

Hafner: My crystal ball is no clearer than anybody else’s. What we are trying to do here is just to stay on top of consumer sentiment and trends and develop a product offering that appeals to them. But it is still so early in all this stuff.

 

Photo Credit: Steve Hafner, co-founder and CEO of Kayak. Kayak