Skift Take

These are cliches, but true: It's mostly about the team and their ability to execute. Business models help, too: As Priceline's Glenn Fogel says, "Good execution of an OK idea is a lot better than lousy execution of a brilliant idea."

In 2004 and 2005, Glenn Fogel, the Priceline Group’s head of worldwide strategy, planning and corporate development, came across Europe’s Active Hotels and Bookings B.V., respectively, which were operating what was then an out-of-favor agency business model.

Fogel thought the management teams were exceptional and was captivated by the business model, and Priceline acquired both companies. And the rest is history. Active Hotels and Bookings B.V. became the foundation for the juggernaut, and turned into the most successful acquisitions in online travel history.

Skift sat down with Fogel in Los Angeles last week and discussed a range of topics, including the things that competitors neglected to see about those two landmark acquisitions; the details of his role at the Priceline Group; the focus of the Priceline Ventures Group; what he sees as the innovations of the ride-sharing sector, and advice for travel startups.

Skift: What do you see happening in travel startup land? There’s always discussion about which is the way to go and what’s the most promising arena — B2B startups versus consumer startups. What’s your thinking about that?

Glenn Fogel: Everything is unique to the individual companies, but if you look at what gets all the buzz nowadays, and what gets the buzz is your article on Uber’s going to take X amount of money or Airbnb is going to get X and who’s going to sell shares.

Those are the sexy articles that people are reading about and want to see. That’s what the buzz is, but there’s a lot of stuff going on behind the scenes, plumbing that’s interesting that will help make, hopefully, everybody’s travel experience better.

Skift: A lot of the merger and acquisition activity this year has been on the B2B side. For example, Oracle acquiring Micros Systems

Fogel: I haven’t been looking at the numbers. I don’t know.

Skift: OK. Tell me a little bit about your job. How much of your job is looking for potential mergers and acquisitions? What keeps you busy?

Fogel: What keeps me busy?

Skift: Are you flying around the world all …

Fogel: I do over 100,000 miles a year. Holistically, the view is how can I help the company move forward, and that can be in any area. Obviously, as my role as head of corporate development, then obviously it means heading up M&A and looking for opportunities to make sure people on the team are looking at the right opportunities and bringing them up the chain. In addition to that, I sit on the Priceline Group management board, which is important in terms of trying to keep all the companies going, flying in the right direction.

Now, it’s an interesting thing. A pilot once said, and it’s probably been said in the industry for a long time, that a plane isn’t actually a solid thing. A plane is actually thousands and thousands of pieces that fly in very, very close formation. Our company’s not quite that way but we do give a lot of independence to each of the individual companies, but that requires coordination eventually at the top. That’s part of my job, too.

In addition, I head up what is known as our Priceline Ventures Group which is looking for early stage companies. They can, we think, make an investment, learn something from those companies, then that will help us in areas that aren’t necessarily travel but could be helpful.

Skift: I wanted to ask you more about that because there was never really any announcement about that. Is there a certain amount of money allocated to that or how’s that work?

Fogel: No, it’s not like Concur that had a set budget. Obviously, if we have a large amount of cash. We’re not constrained by funding. We’re looking for the right opportunities. It’s not something that is going to be something that at the end of the day people will see that’s how come our earnings were great. It’s not that type of thing. The key thing is we don’t want to lose money, obviously. We want to make a good return for our shareholders but the critical thing is finding companies that we believe we’ll learn something that we can apply across the platform and do well.

An interesting example is Yotpo, an Israeli company that puts a small widget on a person’s ecommerce site, generally for small- to medium-size companies, and helps them do a job of getting reviews for that website or for the products that they’re selling. Then they take those reviews, they distribute them through social channels. Well, everything you read about nowadays revolves around the importance of understanding how can you market through social channels.

I think I read an article yesterday where Expedia’s Dara [Khosrowshahi] mentioned how it’s [social media marketing] a critical thing to do but nobody’s really perfected it yet. I think it would be safe to say that’s correct. So by investing in Yotpo, we’re going to learn things about social, social marketing. That information and knowledge will help us go across our platform, we hope. That’s the reason for it.

Skift: So you’re doing investments short of acquiring companies that you think you’re going to learn something from?

Fogel: Right. We’re not going to acquire it. We would never. It’s not travel. It’s not core. But by being close, dealing with them weekly and monthly, we learn things.

Skift: Are there any other companies that you can name that you guys have invested in?

Fogel: I wouldn’t want to go through what we’re doing exactly and letting our competitors know.

Skift: OK.

Fogel: That one I can say because that’s out there public and it was announced and all that.

Skift: I don’t remember that one being announced.

Fogel: Yes, well, maybe not us but other people did. How about that?

Skift:  Are there a handful of companies like that that you …

Fogel: We’re looking. We look at it. It’s not something that is the largest amount of time for me but I make sure to keep an eye on things.

Skift:  Like this, it’s not just in travel?

Fogel: In fact, many times it won’t be travel. Many times because if it was travel and we thought it was good …

Skift: You’d buy it.

Fogel: Maybe we should buy it.

Skift: Are you seeing anything out there that you’re competitors are doing in the M&A field that you admire or think that’s crap?

Fogel: I would never say anything is crap. I would say people have different strategies, and it’s very hard to know until five years afterwards was that a good move or a bad move?

Skift: It’s like the NFL draft.

Fogel: Exactly. It’s very, very true. Again we look and read the paper or the analysts or reporters like you who are knowledgeable about the industry. It seems to be a great thing and a couple of years later it doesn’t work out at all and you’re wondering, “Gee, how did it go wrong?” Other things nobody even knew about or thought about and ended up being, “Wow, look at that.”

I’ll give you an example, Active Hotels and Those things were available for a long time. A lot of people came along and some people looked very hard and said, “No, I don’t want that.” Some people looked at us, “Why’d you buy an agency model? That’s horrible. You can’t do that. You’re not going to collect the money from the hotels. They’re not going to pay you.”

[Note: Through the agency model, which basically involved taking a flat commission from hotels and collecting after the guests’ stays, was able to scale its hotel business much faster than Expedia Inc. At the time, Expedia focused on the merchant model, which meant complicated and time-consuming negotiations with hotels over net rates and pre-payments from travelers. For more on how did it, read this.]

Skift: So what did you see at the time that made you look at it differently?

Fogel: This is one of the key things whenever we do an acquisition is the core team has to be someplace special. We want to see really smart people. The people at Active Hotels and were just, in my mind, just light years ahead of many of the other companies I had looked at. They were really smart people and they understood the market. They had some key understandings of online marketing, which was really superior.

And they also saw that you don’t have to go for all the big chains first. You can go out for some of the smaller hotels and provide a service for them because that small hotel doesn’t have the marketing capability of a big chain. So to get customers from other countries in different languages, could provide that service at a very reasonable distribution cost. In fact, significantly less expensive than many of the other ways they were trying to do it, so we were really providing a value.

Skift: So it was more the team than you saying, “Ah, the agency model. That’s going to be the key to our growth.”

Fogel: I did like the agency model a lot, too, but the one goes with the other. They’re really smart and they explained to me why the agency model is a good thing to be in. Now, again, everything is hindsight. When you look back, of course, that makes sense, but at the time it didn’t make so much and some people didn’t agree.

When you look back at the situation, the idea that the customer wouldn’t have to pay at the time until he actually left the hotel so therefore their credit card wasn’t locked up. With a lot of people’s credit cards, you have limits, etc. You go on holiday, you’re going to have a block of a lot of money on that. That’s a big issue.

Fogel: That’s one. Then go for another one. The hotels get paid the day the person leaves. They run that credit card maybe the next day, depending on which credit card. Some of the people who were doing the merchant model back then, they weren’t paying the hotels for a long time. For some people it was two months afterwards. Hotels are saying, “I need my money.” That’s a big issue.

Skift: Why would I want to sign on with them if somebody else could pay me faster?

Fogel: Exactly, and there were a bunch of things like that. It made perfect sense so, yes, that make a heck of a lot of sense. In addition, we had the merchant model already.

Skift: Right on

Fogel: Well, here’s another way to do it. And that’s when we went out to do Agoda in Asia we had, which was slowly moving out into Asia. Agoda was already in Asia. Agoda had the merchant model. As much as I just said about how I liked the agency model, we said, “Well, in Asia, we don’t know. Is the merchant model going to be better there or not?”

What about if we wanted to go into packaging someday? You can’t package an agency product. Again, maintaining a little bit of differentiation, having two cards instead of one card. It’s worked out well. Of course, later on Expedia went out and bought Venere so they could have an agency model.

Skift:  Do you believe that travel startups, to be successful, need to be completely original or can they build off the work of others? Can there be a OneFineStay that’s successful in working off the Airbnb model, but is doing something different? In other words, when you look at travel startups, do they have to be doing something that’s truly original and different than other things that you’ve seen?

Fogel: When you go and you look companies that are starting out, I would imagine most entrepreneurs when they start out, they think, “This is new and different. Nobody else is doing it.” Yet, when they come to the VCs, the VCs say, “Oh, I got four or five just like that.”

Skift: The travel startups say, “We have no competition.”

Fogel: Right, exactly. So is there ever anything truly completely off-the-wall original? Everything’s built on something else. That’s how it is. We take pieces from what came before and add or change slightly. And that’s along a continuum. Some things are a lot different and some things are just a little bit different. I think what you’re really asking is if it’s a lot more different, does it have a better chance of success? I think the issue is more is the idea a good idea?

Sometime it’s really good because it really is different. Sometimes it’s really different. The reason it’s different and no one else is doing that is because it’s horrible. Again, you can’t put them together like that. For example, let’s take the whole Uber, Lyft, GetTaxi thing. Well, there have been taxis for a long time. There were, of course, car distribution systems where you use your telephone and you’d call up and say, “I need a car.” If it was a taxi, they’d say, “OK, it’ll be there in 10 minutes or so,” and it’s one way to do it.

The combination of the coming out with the mobile phone and geopositioning, and putting those two together just did wonders. Now you have a much better, much more efficient system. How different is it? It’s using a communications method to talk between a driver and a supplier with something in the middle that chooses which one is the best one to get, and gives information to the consumer of when the car is going to show up. All those little odds and ends make it seem revolutionary. By just looking at the gross and valuations, people love it. Except, of course, for the taxi unions.

To answer your question about how original it has to be. Would someone say that is original, truly new and different or is it just a continuation of what was happening anyway?

Skift: I’d say it’s new and different.

Fogel: It’s all definition.

Skift: Do you have any other do’s and don’ts for travel startups that might not be obvious?

Fogel: I would say it would be a good thing for people who are starting anything, whether it be in travel or anything else, is take a really good look at what’s out there already. Because that issue about there being no competition, it’s remarkable how many times people come to me with an idea. I say:

“Have you looked at this one [another startup] because they’re pretty far ahead of you already.”

They reply, “No, I didn’t know that.”

That’s one thing that people don’t do. People should do their homework. The second thing I’ll say is that good ideas are easy. There are lots of good ideas. I have lots of ideas, too. The difference is execution. Good execution of an OK idea is a lot better than lousy execution of a brilliant idea.

What happens is that sometimes a brilliant idea goes out there, but it is bad execution and then maybe somebody else picks it up and they become the winner. You see that in all different industries. I sometimes also say some people should be very careful about being an entrepreneur in terms of the risk factor.

And I say this for people who come to me in the fairly early stage. I say, “You may want to think real hard. Is this the path you really want to take because most people will fail. It’s going to be really stressful, and you’re going to spend a lot of time. Even if you’re not putting your own personal money into it the opportunity cost of working two years with no compensation.”

Skift: Or more.

Fogel: Or three years and it never works out. Are you really ready to take that on because the odds are that’s the way it’s going to go. But, most people when they start, they feel that they’ll be the one out of whatever who become really successful. The headlines are mostly about the giant successes.

Skift:  We write about the failures, too.

Fogel: You are one of the few then, because people generally do not. There aren’t a lot of articles about the failures. People tried real hard. Well, they did but it just didn’t work out for them. That’s unfortunate.

Skift: It’s tragic.

Fogel: It is. It’s real life.

Skift: You see people who are really delusional about their prospects.

Fogel: I feel bad about them, too, but it’s not so much them. I feel worse for the people who are not delusional. They just miscalculated. They tried. They did the right things. Luck is so much a portion of success, which a lot of people don’t seem to accept.

My thinking is just whatever you want to call it whether it is luck, chaos theory or whatever. So many other things happen that produce that success so be thankful for it. Enjoy it and all that, but recognize that you can work as hard as you can. You can be the smartest guy in the world.

Skift: And fail.

Fogel: Absolutely.


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Tags:, priceline

Photo credit: Glenn Fogel speaking at at the NOAH 2012 Conference in London. NOAH12 London / YouTube

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