Skift Take

Expedia seems to be on a sensible course in 2016 as it seeks to make good on its 2015 buying binge. Acquisitions are the sexy part; now Expedia has to make the marriages work behind closed doors.

For Expedia Inc. last year might be considered the easy part since the company, as CFO Mark Okerstrom put it, was “able to check off some big want-to haves” by acquiring Travelocity, Orbitz Worldwide, HomeAway and some others for more than $6 billion.

“We are always opportunistic,” Okerstrom said in an interview with Skift last month. “The M & A (mergers & acquisitions) team is never closed for business. Listen, we are always on the hunt for interesting opportunities and we’re fortunate to have an incredibly strong core business, which gives us the confidence to go out and do some of these acquisitions that are a little bit more intensive.”


In this third article in a three-part series, Challenges in Travel Booking 2016, Skift examines company-specific issues confronting three major online travel players, TripAdvisor, the Priceline Group and Expedia, in the coming year. To find the stories in the series click here

While Expedia personnel will keep searching for interesting merger and acquisitions opportunities, the company will also be consumed in 2016 with doing the grunt work, integrating Orbitz Worldwide, HomeAway and their respective brands into the Expedia fold.

“I think this year you’re going to see both,” Okerstrom said. “It’s not going to be an either/or in terms of hunker down or look for acquisitions. We are going to be very focused internally on getting HomeAway to deliver on that $350 million 2018 adjusted EBITDA number” and most of the Orbitz and sister brand CheapTickets traffic has already been pushed onto the Expedia technology platform.

“Things are looking good so far but we’re going to continue on that path,” Okerstrom said. “We’re going to keep our eyes open for other deals. Whether we’re going to have another year of doing $6 billion-plus of strategic acquisitions? I think that’s unlikely but we’ll have our eyes open.”

TripAdvisor the Influencer

Of course, all bets are off if the rumors turn out to be true that TripAdvisor is in play and that the Priceline Group is “a potential suitor.” An acquisition of TripAdvisor would seem to be beyond Expedia’s means at this point and it’s an open question whether Expedia would be interested since it spun off TripAdvisor a few years ago and currently has a majority stake in Trivago.

Expedia, meanwhile, is already feeling an adverse impact — “probably 100 or 200 basis points” — in room-night growth from being shut out of TripAdvisor Instant Booking in light of TripAdvisor’s partnership on the feature with the Priceline Group. Okerstrom thinks the adverse impact will grow as TripAdvisor continues to roll out the feature globally although he characterizes the effect as “nothing significant” from “a profitability perspective.”

Dara Khosrowshahi, the Expedia Inc. CEO, said last year that he thought the Priceline Group would be TripAdvisor’s exclusive partner for an unspecified period but then Expedia would have the chance to join.

“I think if TripAdvisor continues to offer an Instant Booking product that is heavily branded [for partners] and where there is no confusion for the traveler I think this is something that we’re going to look at very closely and when the time comes we will evaluate whether it’s something we’ll step into or not,” Okerstrom said.

What About Google?

Okerstrom said during last month’s interview that Expedia is in talks with Google to participate in Book on Google, which enables consumers to book hotels on Google with online travel agencies or hotels handling the customer service in the background.

Expedia officials have been saying positive things for months about the slow-to-launch Book on Google, possibly as a hedge against TripAdvisor’s more aggressive rollout of a similar product.

“We think the product [Book on Google] so far — what we’ve seen of it, anyway — is very clear,” Okerstrom said. “Whether the booking is Expedia or it does not seek to confuse the traveler or steal the traveler from the advertiser and I think that’s the second channel that we’re interested in.”

HomeAway’s Business Model Bet

As Expedia integrates HomeAway, putting more of HomeAway’s vacation rentals onto Expedia and its other brands, and starts building up apartment rentals to better compete against Airbnb, there are a number of business model challenges coming to the fore.

HomeAway for the first time has begun charging travelers a booking fee, bringing it roughly on par with Airbnb and TripAdvisor, while has stuck to avoiding charging a fee.

At the same time, is insisting on instantly confirmable bookings for vacation rentals as it tries to keep the process similar to booking a hotel online, while HomeAway continues to give vacation rental owners and managers a 24-hour window to vet guests before confirming their bookings.

Okerstrom said Expedia will encourage professional property managers to enable instantly confirmable bookings for multi-unit properties where the properties are very similar but understands that some owners and travelers “want the opportunity to spend a little time setting up who the person is, finding out a little bit more about the property through some back and forth … ”

“Over the long term maybe this whole industry goes to instantly bookable,” Okerstrom said. “If that does happen and that’s what owners and travelers want, we’ll be right there to provide that. If it doesn’t, we’re going to be agnostic.”

This flexible strategy would appear to be more advantageous for Expedia in adding vacation rentals by owner than’s insistence on sticking with instantly confirmable bookings.

Did Expedia ‘Catalyze’ Hotels’ Marketing Push?

Hotel chains such as Marriott International and Hilton Worldwide have been very aggressive starting in late 2015 in advertising lower rates on their websites to loyalty program members than they offer online travel agencies such as Expedia and the Priceline Group.

Although some chains say they won these pricing concessions in negotiations with the online travel agencies, Okerstrom said Expedia has spurred some of these moves by launching its Accelerator Program and lowering commissions.

Okerstrom didn’t characterize these moves in this way but several of them are geared toward imitating initiatives that have been very successful for over the years.

Asked about hotels’ direct-booking push, Okerstrom said: “I think it’s something that we have, to some extent, catalyzed. We have transitioned our business over the course of this last year and we’re going to continue to transition in 2016.”

He said Expedia is becoming much more of a “marketplace” for hotels where they can “compete against each other for the vast amount of traffic and bookings that our booking platforms and fantastic brands around the world provide.”

In describing the Accelerator bidding program, which enables hotels to move higher on Expedia’s pages, Okerstrom said: “We are also offering up for hotels [the ability to] augment that quality nature of their listing with incremental economics, help give them a little boost.”

“I think we leave it to the various hotel companies to dictate for themselves how they use our marketplace and we would encourage them to do it in a way that maximizes what’s best for them,” Okerstrom said. “The best thing about it is that for our customers we’ve got a huge selection of hotels and we’re confident that they’ll find the hotel with the right price and the right room type and the availability that suits them well.”

China Exit?

After sustaining big losses, Expedia sold its majority stake in eLong last year to Ctrip and other investors but recently debuted an Expedia-branded website in China. The sum of the move amounts to a major downsizing of Expedia’s presence in China.

Okerstrom, however, downplays the significance of the reversal in strategy.

“I think China is a big opportunity for everyone,” Okerstrom said. “It’s a massive market but it is a long-term opportunity. It’s a market that has not been particularly profitable for anyone involved in it, at least on an earnings basis, for a number of years now.

“We’re optimistic. We’ve got an emerging presence there with our new [Expedia] brand. continues to make great progress there. We did enter into a long-term alliance with Ctrip at the time of our eLong sale and we’re working on developing that further. This is a long-term game.”

Priceline, though, has a tighter relationship with Ctrip than does Expedia. Priceline has the right to own up to 15 percent of Ctrip’s stock although Priceline states it doesn’t have significant influence over Ctrip’s activities.

Stock Market Volatility

Okerstrom said Expedia can’t be overly concerned about stock market volatility when making decisions about its business.

Said Okerstrom: “We’ve got some huge opportunities ahead of us and the successful integrations of HomeAway and Orbitz. We’re very focused on that. We’re not seeing anything in the macro environment that’s having an impact really on our business and so we’ll let the stock market do what the stock market will do. We’ll leave the stock picking and stock commentary to the professionals and we’ll do what we’re professional at — which is running this business.”


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Tags:, ctb, expedia, homeaway, otas, priceline, tripadvisor

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