The Priceline Group is in the catbird seat in online travel — for now — while Expedia is a much smaller company with so much ground to make up. Expedia's Okerstrom is laudably talking tough about his ambitions to propel his company forward. But 2017, so far, has been anything but easy for the two newbie CEOs.
The CEOs of the Priceline Group and Expedia have been top executives at their respective companies for years, but both are relatively new to the top slot at their firms.
Glenn Fogel of the Priceline Group became CEO January 1, taking over from interim boss Jeffery Boyd, and Mark Okerstrom is only a little more than two months into calling the shots, finding himself in the proverbial corner office after predecessor Dara Khosrowshahi left to steer Uber.
Both have tough acts to follow as their predecessors — especially Boyd at Priceline — took their companies to new heights.
Fogel and Okerstrom will face challenges that the entire online travel sector will likewise have to confront in coming years, including everything from artificial intelligence and voice-based search to perhaps blockchain as a distribution game-changer and disruptive up-and-coming companies. These unruly influences might come in the form of Airbnb, Google, Apple, Facebook, Ctrip, Alibaba, and many others, both known quantities and as-yet unidentified ones in the wings.
The duo, though, will have to deal with company-specific headwinds as they try to break through them, and craft solutions in their own images.
Glenn Fogel’s Agenda
Priceline’s Fogel, who has been at the company since 2000 and headed strategy, as well as business development for many years, took the stock price from $1,466 per share at the beginning of 2017 to $2,063 in early August when the company’s valuation broke through the $100 billion ceiling.
The share price plummeted soon thereafter when the company reported second quarter earnings, and offered guidance for the third quarter that was weaker than analysts’ expectations. The share price was below $1,900 heading into Monday although the Priceline Group reports third quarter earnings late Monday afternoon and things could change.
While the Priceline Group seems to be humming along with margins that rivals would die for, it faces increasing competition from Airbnb and Expedia’s HomeAway in the accommodations sector. And the 21 percent increase in room night growth that the company notched in the second quarter was its slowest jump in several years.
Fogel faces the challenge, which company officials have warned of for years, that its growth marks will decelerate because of the company’s sheer girth.
The company’s acquisition this year of the Momondo Group, which falls into fellow-metasearcher Kayak’s domain, points to another issue that Fogel will have to confront. The Priceline Group largely rode its Booking.com unit to top-dog status in the online travel sector over the last decade, but what about the company’s other brands?
The once-flagship brand Priceline.com has been in the doldrums for the last couple of years; Kayak isn’t turning any heads, and the Priceline Group took a $941 million write-down last year on its $2.6 billion acquisition of dining reservations platform OpenTable two years earlier.
Is the Group really getting the wallop from its portfolio brands that it should be getting? What does their performance say about the execution prowess at Booking.com’s sister brands if none is really a standout?
And is Fogel poised to put his own stamp on the Group after so many years waiting in the wings?
Okerstrom Hasn’t Had an Easy Initiation
For his part, Okerstrom inherited some early turmoil when he transitioned into the CEO role with a month to go in the third quarter.
After the company announced third quarter earnings October 26, Expedia’s stock price plummeted. It was down 16.5 percent since the earnings announcement to $123.05 before Monday’s opening of trading.
Expedia took a significant hit from the hurricanes in the third quarter, and investors were disappointed by the $8 million profit slump at recently rising-star Trivago. Officials at the Expedia subsidiary envision lackluster performance through 2018 as Trivago deals with a platform transition and consequent advertiser retrenchment.
Then there’s the path forward for HomeAway. During the September quarter earnings call, Expedia officials announced that its HomeAway brand would not be meeting its long-articulated 2018 profit targets as more investment would be required.
Throughout 2017, now-former CEO Khosrowshahi and then-CFO Okerstrom had pointed to Trivago and HomeAway as two growth drivers for Expedia Inc. But, now, it seems, each have stumbled. It’s hard to tell at this juncture if these are momentary pauses or signs of greater trouble.
With Khosrowshahi out of the Expedia operational picture, although he retains a board seat, Okerstrom took the opportunity of Expedia’s third quarter analyst call to enunciate his own vision for Expedia’s future.
Among his tweaks, Okerstrom pledged to reverse course and prioritize organic growth over sometimes-messy acquisitions — Orbitz Worldwide might be an example — and vowed to emphasize on-boarding hotel supply and deeper technology investments in local markets.
“So we know what to do, and we’re now in a position where we’ve got these global platforms in place,” Okerstrom said. “And it’s about more so going deep as opposed to going wide.”
Quarterly Blips Versus Long-Term Trends
Okerstrom of Expedia and Fogel at the Priceline Group seem to have much in common. They both were key executives for years at their respective companies, and were highly involved in strategy and all the big acquisitions.
While quarterly ups and downs go with the territory, investors and other stakeholders expect each of them to own their companies’ futures in the face of technology and competitive disruptions.
Okerstrom is only two months on the job, and Fogel has a mere 10-month tenure as CEO, but when you get paid the big bucks at these two high-profile online travel companies, there isn’t much of a honeymoon anymore.
Analysts want to know: What have you done for me lately?
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Photo credit: Mark Okerstrom (left) became Expedia Inc. CEO in early September while the Priceline Group's Glenn Fogel was appointed CEO effective January 1, 2017. It hasn't been an easy beginning for either executive. Buy Tourism Online / Skift