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Editor’s Note: Skift published a series of interviews with online travel CEOs talking about the Future of Travel Booking, and we turned it into our first e-book. It was only fitting that Darren Huston, the guy who as the top guy at the Priceline Group generated so many headlines in 2014, closed out the series with a flourish.
Here is his interview, which is now online in full for the first time.
Darren Huston, the CEO of the Priceline Group, admits that he and his team are data junkies and in parsing the data, he points to Google as the Group’s most efficient marketing partner.
More effective than Bing, Yandex, Baidu and, by implication, even Kayak.
Still, Huston says the Priceline Group’s Booking.com, Priceline.com, and Kayak have supplemented digital marketing with television advertising, where data metrics are less transparent. “It was a natural outcome in some ways because Google is having harder times growing as fast as we need to grow, so we’re sourcing demand from more and more varied places,” Huston says.
In a sit-down with Skift in Los Angeles in November about the future of travel booking and related topics, Huston says he’s as gung-ho about the Priceline Group’s acquisition of Kayak as his predecessor, Jeffery Boyd was, and he mentions that “Kayak has actually, if anything, proven to be a more important part of the Group than I would have ever thought.”
Still, Huston is fairly dismissive of price-driven metasearch in general and the now-you-see-it, now-you-don’t pricing games that are endemic to lot of metasearch sites.
In that regard, Huston compares Booking.com to Amazon, offering that metasearch isn’t the optimum marketing arm for either. “If you’re a player like Booking.com, just like Amazon doesn’t love book metas, it’s not that the largest player on accommodations would love to sell his product through hotel metas,” Huston says.
On other topics, Huston says the Priceline team respects companies, such as Uber and Airbnb, that are in “high gear” and takes motivation from them; is in “constant discussions” with HomeAway about working together but “It just takes time and the bar that we’re holding out is that things [vacation rental bookings] need to be instantly confirmable, immediately bookable,” and is bullish about the Priceline Group’s entry into the digital marketing and technology side of the hotel business.
On the OpenTable acquisition, Huston says the purpose wasn’t “to say we’re going to own all of travel” — as TripAdvisor is trying to do — but was very complementary with Booking.com. OpenTable was “built on B2B that needs B2C competencies. For Booking, we’re really B2C and we’re building out B2B competencies for the long tail with Hotel Ninjas and Buuteeq and these other acquisitions. It’s a really nice marriage in terms of we’re both trying to learn and build going forward.”
An edited version of the Skift interview with Huston follows:
Skift: One of the questions I had, of course, was about mobile. What are the opportunities that you see in terms of owning the customer and also the challenges in terms of conversion and people booking shorter stays than they might be on desktop. How do you look at it?
Darren Huston: There’s one theory that mobile is a highly incremental channel. There may be some truth to that when you get to last-minute booking because maybe the person would just have walked into the hotel in the past. Really it’s much less about the incrementally of the channel because I think now you’ve gone from the reality of a single device world to a multi-device world for most consumers.
I always viewed mobile as like a computer in your pocket. If everyone’s got a computer in their pocket, which has become a reality in a very short period of time, that creates all kinds of opportunities. That’s always the place to start in just assuming that most people are showing up experiencing travel with the computer in their pocket.
Certainly there’s been a lot of shift of bookings that originate on mobile versus originate on desktop, but most of our guests are connecting with us more than just during the booking. They’re also taking the confirmation with them and they’re wanting their mobile devices to do more things. That’s really the opportunity looking forward and it’s still very early.
An article recently came out rating Booking.com’s mobile apps as the best apps in travel. That’s very satisfying to me because we’ve invested a lot of time on the plumbing. It’s not a small amount of work. It’s one thing to just create an app, it’s another thing to make it actually work and connect itself in this multi-screen world. Like if you book on the desktop, my iPhone will shake because I’ve made a booking and it’s registering in my app.
Now, a lot of that great plumbing — and that’s across the brands — is mostly done. Some of the smaller brands have more work to do to finish the plumbing, but the next wave we’re focused on is how do we innovate in terms of the end-to-end experience and what are the innovations that are critical for the customer beyond just a transaction.
Skift: Expedia and Orbitz just announced that they were using Checkmate to send hotel confirmations to the customer, who can tell the hotel when they are going to check in and their preferences. Is that in the cards for you as well?
Huston: Kayak actually also is doing some things with Checkmate, but I think of that as a scenario among many scenarios. We were working on lots of things trying to figure out what the right thing is. When you do things with technology that require the front desk to do something, it’s even more challenging because front desks are not all made alike. There’s a lot of turnover and there’s a lot of training that needs to be done to provide a consistent experience from a hostel to a high-end hotel to a B&B. There’s a little bit of that that always makes me a bit nervous, knowing the practicalities.
We tried many, many things, but there’s a lot of scenarios that don’t necessarily require the front desk, including insider guides, which we now have for many of our destinations. It includes things like I arrived at the train station, how do I get to the hotel? It includes things like great restaurant reservations and other things that don’t necessarily require front desk engagement. I think it’s really early to know what are going to be the main things that make a difference. We certainly intend to be one of the scale players to make it happen.
Skift: In your third quarter earnings call you talked about the Priceline Group’s TV advertising as being a breakthrough because it reduces your reliance on Google. One question I have is do you think that was overstated in terms of reducing your reliance on Google given the amount that you still spend on Google paid search? And the other thing is the TV space is so competitive and now we’re seeing that millennials are changing their habits about watching TV, so how do you see this whole thing playing out?
Huston: It’s overstated as being anything sudden. It’s certainly overstated that people think that we don’t have a huge and very critical relationship with Google. It’s overstated if they think that what we were trying to do was to lower our reliance on Google. It was a natural outcome in some ways because Google is having harder times growing as fast as we need to grow, so we’re sourcing demand from more and more varied places. That includes now doing offline marketing which is another form of demand generation. We, as a company, love Google search.
Skift: You sort of have it down.
Huston: Yes, because Google is the most data-driven, the most sophisticated advertising marketplace for people who have products that are really good products that convert well.
When you go down from Google and you even get into Bing or Yandex or Baido and then you get into the metas and things, the marketplace has become less good. Each of them is improving, but they are harder to buy from and then you go all the way to the extreme offline marketing, which for us is like … We’re data junkies, so offline marketing is like this thing … We ultimately want tons and tons of data.
TV advertising was a natural outcome because Google is having harder times growing as fast as we need to grow.
Even now, I don’t feel so comfortable if you came to me and said, OK, take your couple of billion dollars and shift it all onto TV. That’s not a bet I would want to make today. We like it. We have a pretty good sense of how it’s working, but it’s never a replacement for us from really great marketplaces for direct response marketers, which has really been the strength of the company.
Skift: Speaking of metasearch, what role do you think metasearch plays in the future of travel booking given what it seem like the relatively measured pace you’re taking in investing in Kayak and its international growth? I get the feeling, tell me if this is wrong, that you view metasearch and Kayak as less central to the growth of Booking.com and Agoda than perhaps then-Priceline Group CEO Jeffery Boyd did when he acquired it in 2013.
Huston: No, Kayak has actually, if anything, proven to be a more important part of the Group than I would have ever thought. Partly it’s they’re not just an accommodation meta. They’re really a primarily flight meta that has other elements to it. They’ve got a very large audience. They do extremely well in mobile. They’ve got a great product. They’ve got great engineers. As being part of the Group, it’s been fantastic for us. Luckily, they also like to operate profitably. We’ve never believed that any of our businesses, whether it’s meta or Booking.com or Priceline.com, that the right strategy was to try and lose a bunch of money to then build a big audience to then hope to make a bunch of money. That’s just never been …
Skift: Which is different than some of your competitors.
Huston: Yes, exactly. That’s the environment we operate in. We have to kind of stick to our own knitting. We obviously defend very aggressively in all the channels to make sure we get our fair share and increasing share. We’d like to win not through constantly buying customers, but more creating experiences that customers want to have. That’s been the belief.
I think that across the Group we believe in creating great products that people actually want to use and great customer experiences. That will, at the end of the day, carry the day. That’s a more valuable way to create a long term sustainable business than being in the market every year having to re-buy your customers. You could call that a philosophical difference in terms of us versus a lot of others in the industry. But in terms of Jeff’s and my view of meta, it’s not too different.
If you’re a player like Booking.com, just like Amazon doesn’t love book metas, it’s not that the largest player on accommodations would love to sell his product through hotel metas. If things are just coming down to price, we have great pricing, but we have a lot more to offer than Joe Blow’s hotel company X. Because we’ve got now an end-to-end experience. We treat our customers well. We’ve very honest in our pricing. A lot of pricing on meta is, when you see price differences, a large majority of it is not real. It’s taxes, exchange rates. You click through and it seems to be a different price than what the display was. It tends to have a lot of games. There’s some real savings there, but there’s a lot of games that go on. We like blue links. We like selling experience versus selling things. We also believe there’s a large body of customers who are looking for value more than just saving a dollar on a hotel room.
Skift: It’s funny. I interviewed Qunar CEO Chenchao “CC” Zhuang and he said it’s all about price. Customer loyalty is about price and customers’ wallets.
Huston: To some degree, at the extreme, everyone would say that. The other thing about travel, which is a nuance, is that if you want to go stay in Paris and you’re trying to do it on a budget, does it matter more that a specific hotel is 220 Euros, 218 Euros or 216 Euros, or that you’ve got 4,000 hotels to choose from and you want to find the exact one that may be 150 Euros.
It’s not like buying the Harry Potter book and there’s just the Harry Potter book. Savings on travel comes through assortment and being able to find the right thing at the right price. It’s critical for everyone, but it’s not so narrow as saying I absolutely have to stay in this place so then let me find the cheapest way to stay there. It’s almost more about I want to have enough assortment to make sure I find for my needs the right place to stay.
Skift: You mentioned end-to-end booking or end-to-end solutions. Now, you have OpenTable in your portfolio. You got the restaurant reservations now or you’re building restaurants but one hole seems to be in tours and activities. Do you envision filling that gap? Is that important to you or is it more of a distraction in terms of the growth of Booking.com?
Huston: I think, first of all, it’s important to differentiate between end-to-end experience in terms of a traveler looking, booking and staying, which is within a product. Then somebody will refer to end-to-end as being that I want to own all the pieces of travel.
We’ve always believed that the specialty store approach was stronger than the department store approach because by having the world’s leader in rental cars, the world’s leaders in accommodations and then letting them buy an EasyJet or Ryanair, that’s a way people travel which would be more like a specialty store versus saying I’m going to own all the pieces so whatever you need, you want a taxi or whatever, you just pick from it.
It’s not to say that that isn’t necessarily a strong strategy and there are people who play that strategy, but our move into OpenTable was really not primarily to say we’re going to own all of travel. That’s why the activities question is an important question which is that’s another interesting point to travel. Does the customer want to buy that when they buy their hotel? And what are the things they want to buy when they are at their hotel?
It’s not like buying the Harry Potter book and there’s just the Harry Potter book. Savings on travel comes through assortment and being able to find the right thing at the right price.
I could see if I’m buying a lodge by a ski hill it would be really nice to pre-book my ski lift tickets and I’ll just stand in line. That’s a value-added thing, but do I necessarily want to buy the hop-on hop-off bus when, as soon as you walk out your door, there are 17 people standing there with machines and it takes about five seconds? That’s the thing that has to be thought through.
But we really entered the restaurant space not because of the link and the cross-sell. It was much more a really large marketplace with very familiar characteristics to the long tail of accommodations, cash flow businesses, businesses in need of great software, a company that was really built on B2B that needs B2C competencies. For Booking, we’re really B2C and we’re building out B2B competencies for the long tail with Hotel Ninjas and Buuteeq and these other acquisitions. It’s a really nice marriage in terms of we’re both trying to learn and build going forward.
Skift: I wanted to ask you about Buuteeq and Hotel Ninjas and what you’re doing there. What are your ambitions there and how is it going? Do you see yourselves competing with Sabre Hospitality, Micros and TravelClick in the hotel tech space?
Huston: We don’t think about who we’re competing with. We think about, as we say OK, we’ve got a lot of hotels that still do stuff, either on paper or they want us to fax the things. They have very little technology expertise or they’ve been sold by a bunch of vendors and they got all these disconnected systems. They’re all client server and they’re just confused and kind of angry about it.
We thought that instead of being just being another player that does that, why don’t we try to move a step forward because we’re an Internet company and we’ll try to build a software stack that is connected at a lot lower cost than exists in the cloud, particularly for lower-end accommodations, but also for chains. Could we start with amazing websites that help people be proud of their site, but also be able to do some bookings directly because a lot of them struggle with this, and do that across multiple screens. That’s the beginning of it.
The longer-term vision is, what are the other elements of the software stack? Can we do it in a way that can save hotels a lot of money? Is there a large group of partners who are willing to lean in with us on that proposition? Right now, we’re basically consolidating the teams. We’re figuring out to make sure we’ve got a great next version of the product, testing sales rhythms, things like that, and then early in the New Year there’ll be more to talk about.
I’m very bullish about it. It will be a good line of business, but more importantly, I think it will help deepen our relationships with our partners. I think a lot of people who are leaning in to our model trust us to say, hey, these guys know a thing or two about websites. If it’s my brother-in-law to build my website, maybe I should …
Skift: Think about it?
Huston: Maybe I’ll take a run with somebody else. It also shows we’re not afraid. The outcome is not all bookings go to Booking.com. There’s always going to be a strong direct business and hotels deserve to get some of that. We hope to be a trusted partner from a software standpoint in helping them bridge towards that.
Skift: Do you go to new hotel customers with both products i.e. we’ll build your website and provide distribution? Is that how it’s going to work?
Huston: Yes, the primary rhythm is always distribution. Our account managers are spread all over the world. They’ll be able to do the basics of saying, by the way, who built your website? Would you be interested in seeing some things that we’ve done and join us for a call and get a better understanding? Then we’ll have specialist that know what they’re really talking about in depth in terms of making that happen.
The early signs of this are very, very positive. It’s the people. The world was complex enough when it was just a website, but now when it’s like mobile and everything else and all these vendors selling in from left and right and center, people want somebody to be able to explain this to them and find them a cheap way to really feel like they’re participating in this changing industry.
Skift: Right, so they can focus on running the hotel.
Huston: Yes, and at the end of the day, when a hotelier is saying, what does it take? First, you want to get all of that out of the way. If you really want to win just run a great property because the Internet is so transparent now. If you run a great property and get great reviews, we will bring people from everywhere in the world. You’d be surprised. People will show up from China, from Indonesia, Canada, wherever, and they will show up at your doorstep. It’s not because your website is amazing or anything. It’s because you run a great property and you differentiated yourself.
If you run a bad property, the Internet is very … In the old world I might just visit the hotel once in my life and if I had a bad experience, there were no repercussions. Now, if people have bad experiences and they do verified reviews, it can be quite penalizing. For consumers, it’s great because staying is getting better and better and better because the reviews and everything are a self-reinforcing mechanism that rewards great product.
Skift: Alibaba just invested $457 million in a hotel tech company and Alibaba rebranded its travel product as Alitrip. What do you expect out of them in travel? Do you think they’re going to be a major player in China and elsewhere?
Huston: I don’t know. What I do know is that travel is way harder than people think. Sometimes really large players get into it and then it takes some hard knocks to figure out what it takes because it’s different than selling a physical product. In a way, your product is something that somebody else controls and there’s a lot of work that has to be done to manage expectations, deal with customer service etc.
I know for sure China is a very dynamic environment and all the big players there, Alibaba, Tencent, Baidu, they all have different stakes in the game. What we are proud of is we’ve partnered with Ctrip, which are the other people who really do the hard work. The Ctrip folks know exactly what it takes. That’s why they’re winning because they know that it is at the end of the day about customer service, a great product, about how you balance demand and supply.
By the way, I think Alibaba will play in travel. They’re a huge source of demand. We’ll see where it all ends up. They’ve been with Taobao Travel for awhile. They basically just rebranded it. There’s a lot of work to do and we’re more than willing to work with them, as well, if they’re willing to work with us in how to figure some of this out. It’s just not as easy as setting up a store front and opening up a warehouse and starting to ship stuff. It’s a very different business.
Skift: I don’t really know how to ask this, but I just will.
Skift: What do you think of HomeAway? I’m always curious. Do you view HomeAway as not really a kindred spirit to the Priceline Group in terms of their lack of technology prowess or the number of properties that aren’t bookable online?
Huston: No, not at all, actually. I have a lot of respect for what they’ve done. They’ve been basically on a roll-up strategy. I think Brian [HomeAway CEO Brian Sharples] runs a great company. We’re in constant discussions. It’s not like they don’t want to work with us or something. It just takes time and the bar that we’re holding out is that things need to be instantly confirmable, immediately bookable. That’s a pretty high bar in the vacation rental industry, but we want to stick with that bar because we think that is ultimately what the consumer wants.
We’re in discussions all the time on how do we achieve that together. We happen to start most of our vacation rental efforts in Europe and they are much stronger in the United States. I think there’s plenty of potential for us to work together. I don’t know a lot about the company in depth, but the model they have seems to work. Brian knows totally that the model they have reflects the industry of today and he needs to transform to where the industry is going tomorrow. I respect him for that. The vacation rental market is far over-supplied. There’s too little demand. If you try to book it, it becomes very difficult.
Now us coming down with the Booking.com model, Airbnb coming up from the bottom with this peer-to-peer model, and HomeAway sitting there with the largest inventory, it makes it interesting. I think for sure the vacation rental space in the next, let’s call it, three to five years, is going to transform dramatically. Brian and his team aren’t sitting still on that. I respect that.
Skift: They’re getting very aggressive about trying to bring people online. Sharples will say it — forcing them online almost.
Skift: I remember a year ago, when Jeffery Boyd was still CEO, we were talking about Airbnb. He seemed to take sort of a standoffish approach in terms of, yeah, they’re interesting, we’re definitely interested, we’re watching them, but until the regulatory issues are worked out, we’re not going to touch something like that. Has anything changed in the last year or do you feel that way as well?
Huston: Certainly we have a different approach to the product we put on our site. It’s hard to play in gray. We don’t just say, hey, you guys have to deal with it, the guy said he was legal. If governments, others, tell us that this product isn’t legal, then we have to take it off.
The benefit that Airbnb is giving us is that world has always been kind of gray. It’s sort of, what are the rules? Even different branches of different governments have different opinions on whether things are legit or not. In a way it’s helping us because they and HomeAway are rewriting the rules. If the rules can get at least everything black and white, then we’ll know what’s white in the sense of legit. That helps us go down the pyramid into that space. So in that respect, it’s very helpful.
I have a lot of personal respect for all the companies in the sort of new consumer-to-consumer commerce area. I think they work hard. I think they’ve got a great site. That keeps us going because we’re always looking for people in high gear. It motivates our team and it is like, OK, these are guys that we want to keep pace with and continue to move.
The world of Silicon Valley always talks ahead of itself. Our company always talks behind itself so we don’t announce new things we’re doing. We’re not boisterous about we’re going to do this, we’re going to do that, we’re going to own the world. We like to build it up so we’re here …
Skift: You’d rather own it first.
Huston: Yes, we are very different, personality-wise. By the way, Jeff and I are both very similar in that way. I’m a very understated … We just do our jobs and then we deliver and then we talk about what we’ve done. We don’t say we’re going to do this and let’s see if we get there. I always have respect for companies in high gear. In the Internet, if you’re not in a high gear, you can think you’re great, but very soon you won’t be so great, and that’s the most important thing.
Skift: Uber is certainly in high gear.
Huston: Yes, yes.
Skift: It’s incredible the way they’ve transformed how we get around.
Huston: Yes. That is a disruptive move even more than others I’ve seen because I think of the taxi waiting area at the airport. I think of those poor souls sitting there for three hours to pull up and then somebody says I’m just going to the hotel around the corner. The times I’ve done that, I feel so bad. You can even see them get visibly angry. They’ve been sitting in the taxi waiting area for three hours and they get like eight bucks or the guys who stand to wait for the plane and the plane is an hour late and all that. It’s an amazing play using mobile that is really disrupting an industry and we’ll see where it ends up.
Huston: Yes. There’s not high barriers to entry. There’s a lot of players, but I respect it. They created a nice buzz around the opportunity.
Skift: Absolutely. How long are you going to be the CEO of the Priceline Group and CEO of Booking.com. Don’t you have enough to do with running the Group?
Huston: My mother and my wife accuse me of always taking on too much. To be honest, I’ve learned that it provides a really unique perch in the way that the Group has evolved. We are a portfolio of six brands, but Booking is so much bigger than the other five brands that being at the head of that helps identify the synergy that can help the other brands.
Even though we run things very independently as a team, there’s more and more cases where maybe we should help out this way. Maybe it’s translations. Maybe it’s an office. Maybe it’s something. And I’m in a good position to judge. Going from the extreme of saying, everyone just operate on your own, to doing a little bit of connective tissue. I’m in a good position to understand how far do we take that without compromising what’s made the Group great.
As one of the bigger questions that I have as the Group CEO is what is the balance of significant independence with just a little bit of smart connection between the brands? I don’t find the Group work that taxing. I have a great COO at Booking, Gillian Tans, who really runs the day to day and that’s given me an opportunity to also be a good sparring partner with the other CEOs. Our culture is they don’t really listen to me, but we have really good …
Skift: I don’t believe that, first of all.
Huston: The truth is they really don’t, but we have good … I don’t get forced to break ties that often. We actually have a lot of fun as a group. We talk about deep topics. This is a very competitive industry and these guys are all self-made in their own way because they’ve all built up companies that then got purchased. We’re a good group of people to be thinking through some of the tougher issues that we face as the industry continues to evolve. I’m humbled, frankly, to be the leader of that group of people, but it does feel like a group of peers versus a standard reporting relationship.