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When Expedia CEO Dara Khosrowshahi bolts to become Uber’s new boss, he can boast of a two-decade track record of success — well, mostly — but still leaves the company at an awkward moment with much unfinished business.
Expedia’s senior executive, Barry Diller, who controls the company, informed employees in an email Monday that Khosrowshahi intends to take the Uber job, although “nothing has been finalized.”
“As you probably know by now, Dara Khosrowshahi has been asked to lead Uber,” Diller wrote. “Nothing has been yet finalized, but having extensively discussed this with Dara I believe it is his intention to accept. I also know the struggle he has been having out of both his abiding enthusiasm for Expedia’s future as well as his loyalty to all of us. I know Dara would like to communicate now with all of you but I’ve asked him not to until this is fully resolved.
“If Dara does leave us, it will be to my great regret but also my blessing — he’s devoted 12 great years to building this Company and if this is what he wants for his next adventure it will be with my best wishes. I say that because he deserves nothing less and I say that also because he will leave behind a tremendously talented corps of executives. We both will be back in touch very soon.”
One of the biggest challenges Expedia faces with Khosrowshahi there or not is Expedia’s integration of HomeAway, which Expedia acquired in 2015 for $3.9 billion. Expedia officials have pledged that HomeAway, which operates a string of vacation rental sites around the world, would achieve adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $350 million annually by 2018.
In the first half of 2017, HomeAway has generated $45 million in EBITDA, although Khosrowshahi and Expedia CFO Mark Okerstrom maintain the vacation rental site is on track toward achieving the goal.
This is a transition year for HomeAway, with Expedia pushing it hard to take all of its bookings online and making them instantly bookable despite opposition from a segment of hosts. HomeAway officials are revamping their sites and sharing inventory with Expedia.com, and sister company Hotels.com. Presumably Expedia’s marketing backing for HomeAway would be ratcheted up next year.
But, Khosrowshahi would be observing from the wings in San Francisco as HomeAway and Expedia make this difficult transition.
Jury Still Out on Acquisition Spree
We characterized Khosrowshahi as sort of a comeback kid in early 2015 after he choreographed a multiyear transition, placing Expedia on a global technology platform for its efficiencies, and getting room night growth back on track after three years or so in the doldrums. Prior to that we wondered whether Khosrowshahi would be able to hold onto his job.
But, then he led the company on an acquisition tear, buying everything in sight, including Wotif, Travelocity, Orbitz Worldwide, HomeAway, and a car rental company in Europe, as well as taking control of a joint venture with AirAsia.
Indeed, in 2016 Expedia stumbled with its integration of Orbitz Worldwide, which proved more difficult than expected to blend with the other brands.
Meanwhile, the HomeAway integration is still a work in progress. Although Expedia dispatched its best product guy, John Kim, to lead HomeAway’s transition, there is still a lot of heavy lifting to do.
In 2015, officials at the Priceline Group, which had its own stumbles in acquiring OpenTable, publicly boasted that their company was growing mostly organically while Expedia’s organic growth was stalled.
Like many successful companies, the Priceline Group strives to keep its collective head down while working and executing without paying an excessive amount of attention to what the competition is up to. Still, Priceline Group officials are likely not very sad about Expedia currently having to deal with the distraction of the sudden departure of its well-respected CEO.
In 2017 Expedia seems to be past its difficulties in integrating Orbitz, with room night growth accelerating to 21 percent in the second quarter, up from 12 percent in the first quarter.
Another initiative on the agenda is expanding Expedia’s reach in corporate travel through its Egencia unit, which has grown to become the fourth largest travel management company globally. In July, Khosrowshahi said during an earnings call that building Egencia further would be a multiyear project, and a key goal for the parent company.
Making that happen doesn’t seem as big a challenge for an Expedia sans Khosrowshahi. The HomeAway integration, and rendering a positive verdict on the buying spree of 2014-2015 loom larger for Expedia.