Agoda's new CEO John Brown will be leading the company to increasingly push into Europe and the Americas, beyond its traditional online travel agency turf of Asia Pacific. The early numbers show that parent company Booking Holdings is putting its money where its mouth is.
Online travel agency Agoda has appointed a new CEO as part of a larger push to move the online travel agency beyond its original focus on Asia Pacific.
Brown replaces Rob Rosenstein, who was a co-founder of Agoda and has been its CEO since November 2010. Rosenstein will become chairman of Agoda and special advisor to Booking Holdings CEO Glenn Fogel.
Agoda — headquartered in Singapore but with its largest operational office in Bangkok —has been known as an Asia-focused online travel agency since its founding in 2005 and acquisition by Booking Holdings in 2007. It began early by specializing in discounted leisure hotel bookings across Asia.
But Agoda now has set its sights on a bigger goal of competing with its sister brand Booking.com on the global stage. The idea is Agoda would accelerate its expansion beyond Asia.
“The history of Agoda was APAC [Asia Pacific]to APAC,” said Rosenstein in a recent interview before the management changes.
“But even in the early days, Agoda sold rooms in Asia to Europeans, Middle Easterners, and Americans. As the business has scaled, it should come as no surprise that these have developed into more substantial markets and there’s a network effect.”
“So as you start to sell New York to Koreans, and Seoul to New Yorkers, you start to be able to do a decent job of selling that same New Yorker a room in New York,” said Rosenstein.
Glenn Fogel’s appointment as Booking Holdings CEO was a key factor here in the changes.
Almost immediately, Fogel challenged his team to find a way to strengthen the Agoda brand, sources said.
Massive Hiring Spree
Since early 2016, Agoda has been staffing up, but the speed accelerated in early 2017.
Today, Agoda employs 3,900 workers, a 70 percent jump from two years ago and up 200 since the start of the year. That’s a lot of so-called Agodans.
As of this writing, the brand is advertising more than 150 open positions.
While headquartered in Singapore, the company’s biggest office is in Bangkok with nearly 1,000 workers.
It has 41 offices, per Skift’s count. The company says it has “representation” in 53 locations in more than 30 countries.
In Europe, last year Agoda opened an office in Berlin, its third in Europe. It also has offices in the UK and Budapest.
In November, it opened a fourth office in the U.S., in Providence, Rhode Island, that can hold 200 workers. Its New York City office had grown so much that it had to expand the office space to bring in people who had exiled to a separate co-working space. That brings the company’s total U.S. offices to four, with others in California and Florida.
The company also opened an office in Sao Paulo as the first prong in a Latin American expansion.
“When you have an office on every continent except Antartica, as we do now, you can call yourself a global player,” claimed Tim Hughes, vice president corporate development, in an interview.
Booking.com Wasn’t Fogel’s Only Lucrative Bet
Fogel, who formerly oversaw Booking Holdings’ corporate development, was instrumental in acquiring Agoda. Last year he referred to the price as $15 million, which matches a financial filing.
But the parent company, then-named Priceline, paid related acquisition costs over time. A Skift analysis of financial filings estimates it paid an additional $64 million in cash to the sellers in later years.
Still, the purchase has probably delivered a huge return for the group.
Booking Holdings doesn’t break out its unit revenues. But Skift estimates Agoda generated $1.2 billion in revenue in 2017, an estimated gain of more than 20 percent over the previous year.
Our $1.2 billion estimate is conservative.
Agoda is the Booking Holdings brand that most relies on the merchant model, or wholesale, business model. The merchant model typically requires the guest to pay in advance. The property sets the net rate and the online travel agency can adjust the markup.
About one-fifth of Booking Holdings’ 2017 revenue came from merchant model sales worldwide. While some rental car and Priceline content also uses the merchant model, much of that volume can be attributed to Agoda.
“Agoda is a highly profitable company,” said Hughes of Agoda. “That may not seem like much to say in the U.S. or Europe. But to be a profitable e-commerce company in Asia is actually astounding.”
“Look at what some of our competitors are doing in Asia and what some of the e-commerce players broadly in Asia are doing,” Hughes said.
“They are taking venture capital and throwing it out the window and hoping some of it lands appropriately. Whereas we have the requirement as part of Booking Holdings to be a profitable and a properly leveraged company.”
Fogel’s viewpoint is that, in the online travel game, whoever has the most beds in the end wins, although he has said other factors such as adept marketing and having a site that converts well are vital, too. But inventory growth is a critical metric for all Booking Holdings brands now, it is believed.
Agoda touts that it lists 1.8 million properties when you add vacation rentals and bed-and-breakfasts along with hotels.
Until a few years ago, Thailand was disproportionately its biggest market as a destination, according to sources, with Korea and Singapore other critical markets.
Today, it claims to be diversified. “We don’t release market specific ranking, but generally we are quite diversified across all major travel markets and origins,” a spokesperson said.
But skepticism is in order. Industry leaders outside the brand say Agoda has much catching up to do on direct supply that is beyond a few specific Asia Pacific countries.
A key Agoda goal appears to be to have hotel suppliers upload their content, meaning room and property descriptions as well as rates and availability, directly — rather than rely on connections through third-parties like technology distribution company Amadeus.
Agoda said it has direct supply connections with hundreds of channel managers, or tools used by many independent hoteliers for distributing their room rates online, and direct connections to many hotel chains, including most of the top global ones.
In March, Agoda announced a partnership with Xiaozhu, a home-sharing platform, in which the companies would share inventory — resulting in about 100,000 listings on each platform.
Agoda also has a couple hundred vacation rentals, bed-and-breakfasts, and other alternative lodgings. In March, it announced it would shortly add 100,000 more such homestay and homeshare listings, mostly in China, via a partnership with online platform Xiaozhu.
Skift estimates rentals and non-hotel properties make up about half of Agoda’s listings, but the company disputed that without offering a breakout.
Agoda claims to have served more than 18 million customers over the past two decades. But that number has to be partly taken with a grain of salt. Some industry experts chalk up a significant part of that growth to its affiliate program rather than brand-building of Agoda direct sales that can encourage repeat business over time.
That said, Agoda is competing with TripAdvisor and Google on user-generated reviews. Its customers have posted 22 million reviews, which are only from customers who have stayed at properties while TripAdvisor allows anyone to post a review. That number represents a 22 percent jump that signals the company’s push in user-generated reviews.
Challenging Its Sister Brand Booking.com?
CEO Rob Rosenstein isn’t disappearing. He will become chairman of Agoda and special advisor to Fogel.
In that role, will there be any strategy challenges, such as Agoda stepping on Booking.com’s turf as it goes global?
“As a group, we’ve learned to tolerate a bit of internal competition as long as it leads to more growth and more innovation,” Rosenstein said. “The idea is that this leads to different sorts of experiments, user-experiences, different priorities, and ultimately more innovation. On the back-end, we share best-practices and encourage each other.”
Booking.com works instead on the agency model, which enables guests to pay at the hotel for most rate plans, with the rates set by the property at a fixed-commission rate.
The big advantage of the merchant model, particularly in international travel, is that the consumer knows the local currency cost they will get hit with. If Agoda says a room in Thailand costs, say, 2,500 baht per a visit, a consumer can lock that in up-front — which may matter in a time when currency values are fluctuating.
Yet other customers may not want their cards charged upfront, which makes the agency model interesting.
It is an ongoing experiment as to whether the Booking.com primary approach or the Agoda primary approach will appeal the most in Asia Pacific.
Most Asian Pacific travelers can use Alipay and Wechat Pay as mobile-first payment. Alibaba-backed Alipay has begun introducing post-stay pay for both hotels and alternative lodgings. Agoda is working to incorporate more of that payment model into all aspects of its business.
“Every single price we get beat on, every user experience that customers want that we don’t offer, embarrasses us,” Rosenstein said.
How is the parent company supporting this global growth?
“Agoda has benefited from sharing across the Booking Holdings,” Rosenstein said. “So you can find great Agoda deals on Priceline.com and on Kayak.com for example, which has helped our scale as a global entity.”
Earlier this year, Agoda and Priceline expanded shared offerings between
their platforms to better globalize both brands’ reach.
Thanks to parent company Booking Holdings’ $450 investment and commercial agreement with Meituan-Dianping, a Chinese e-commerce platform, Agoda is adding more hotel from that platform, too.
Agoda’s rapid growth in hiring does pose challenges, though.
“Big companies suffer because leaders have to deal with too much bureaucracy, too many hierarchical decision makers and things bog down in committees, matrices, and upwards influencing,” Rosenstein said. “The ability to execute flows from fast decision making, fast execution, and our model has worked well to empower that sort of execution focus.”
As Agoda expands more in the West, it may ruffle more feathers unless it hews more closely to Western norms of doing business rather than the anything-goes atmosphere of many Asian Pacific markets.
Exhibit A: Being straightforward with hoteliers.
Many hoteliers report seeing differing room rates displayed on Agoda’ search results. Skift’s random test searches backed up the arguments that something seems amiss, although the reasons are unclear. Agoda is too often undercutting hoteliers’ rates, presumably breaking with the spirit, or even the letter, of their contracted agreements with hoteliers.
Here are the current theories about how Agoda does it, according to TripTease, a London-based hotel tech vendor.
Theory 1: Agoda changes prices according to location, so a customer in, say, Kuala Lumpur, might see something different than one in London
Theory 2: The price moves based on the internet browsing session so your search history may affect the rate you see.
Theory 3: Agoda’s technology is buggy, or it relies on connectivity partners with problems.
The problem: Price fluctuations make it difficult for hoteliers to manage parity with Agoda. They can’t be sure if they are matching the online travel agency price across all of their channels, including their own direct ones.
Agoda has told some hoteliers: “Market conditions, changes in [hotel] strategy and availability are just a few reasons why you may experience this rate fluctuation.”
That is not the most illuminating explanation.
Agoda is not the only online travel agency with a reputation among some hoteliers for not always honoring rate-parity promises. Privately owned Amsterdam-based Amoma is among the others.
But when an online travel player is selling a hotel’s rooms for less than the hotel is, it chips away at customers’ trust in the hotel’s brand about direct booking promises.
Agoda’s Savvy Acquisition
Agoda had just been humming along until a few years ago when it made a savvy acquisition that significantly improved its digital marketing prowess.
In 2014, Agoda made its first acquisition, when for less than $20 million it nabbed a handful of data scientists in an acquihire of an Israeli startup called Qlika.
The Qlika team was working on how advertisers could optimize their bidding in online auctions such as Google AdWords for differences in supply and demand by market, media channel, and demographic group. Rather than bid in the same way in Brazil as in Mexico, the algorithms aimed to quickly figure out optimal prices and avoid overpaying.
Agoda put the team to work on its paid marketing campaigns, particularly on Google AdWords. It now has them apply machine learning to enhance Agoda’s decision-making of every aspect of the company’s processes, such as its marketing campaigns and payment pages.
Agoda stands out from its sister brands and its Western brands in one key metric: In 2017, about one out of every two bookings Agoda processed worldwide were through its mobile app.
While that may be an impressive mobile statistic to Western companies, that figure is laughably low for e-commerce companies based in China, Japan, and South Korea.
To boost its mobile engagement, the company has been more innovative than many Western companies by experimenting with letting users enjoy additional functionality.
Agoda boosted its mobile app skills by having acquired and absorbed Woomoo, a Taiwanese startup that had created a mobile app prototyping tool to help speed up mobile development.
All six of the company’s employees relocated from Taipei to Bangkok to work on more rapid user experience improvements in Agoda’s app. The deal’s terms were undisclosed. Woomoo had raised about $750,000 in funding.
A debate you hear in online travel is how people should display prices. Should it be with taxes or without, per night or full price?
The app allows guests to personalize what they view – be it total stay or average night (including taxes) or the base rate per night in a choice of 54 currencies.
Given that many travelers are visiting countries where they don’t know the local language, the app can display in big letters the name of a property in the local language.
So if a consumer needs to use a tuk-tuk or a taxi to get where you’re going, a consumer can show the name of the property in large print on their mobile phone screen, including the full address of the accommodation, in 38 local languages. The app also provides the location on a map.
Last year Agoda began building a suite of services called ‘Agoda Reception’ that lets guests communicate with hotel front desks for ordering room service, arranging transport to and from the property, and discovering local attractions, from within its app.
It’s early days. The company is still staffing up and creating a technical and commercial product roadmap for this “in-residence experiences management program.”
Experiments will include letting guests message in advance of arrival requests, like, “I want a twin bed” or “I want fluffy pillows.”
A company spokesperson said, “We are constantly looking for ways to improve the Agoda experience for our customers and our app’s Agoda Reception feature helps to achieve this. Early experiments have included options to submit special requests, contact the front desk, arrange airport transfers, book a tour, or call the hotel directly.”
In other words, the company plans to make the app a bit like a Swiss Army knife for travelers — something beyond a place for making and managing reservations. It has tested handling mileage points, for instance.
Traffic Is Mostly Flat
Agoda has not yet translated these digital marketing plans into gains, though, according to data from SimilarWeb, a digital consultancy based in Israel.
Agoda has seen relatively stable traffic, year-over-year, with first quarter 2018 traffic close to 140 million visits, worldwide
Interestingly enough, when it talks about going global, Agoda means something very different than the average company. For example, Airbnb’s global strategy means news and smaller markets after dominating the US, whereas for Agoda it means turning towards the major markets.
Also, for the U.S. specifically, SimilarWeb said it is seeing engagement rates, meaning users are staying on the site and clicking on more pages, improving around 30 percent, year-over-year, which is an unusual move compared with other online travel players during the quarter.
Average monthly traffic per quarter across desktop and mobile Web traffic, between first quarter 2017 and first quarter 2018, according to SimilarWeb. Traffic estimates combine local country URL (.co.id) and general URL (.com) data.
In the U.S., Agoda saw a 6 percent gain, to 1.8 million visits. But that was a tiny sliver compared to what Expedia and Booking brands garnered.
In India, Agoda saw year-over-year quarterly traffic jump 15 percent to 4.39 million.
It’s not all good news, though. Expedia-backed Traveloka is making gains in some markets.
Year-over-year, Agoda a loss in Indonesia of 29 percent, to 3.89 million visits, while Traveloka grew 41 percent to 22.7 million visits. Booking.com only gained 13 percent in the comparable period.
Like many parts of the world, Asia Pacific is prone to drama, from coups to typhoons. In 2010, civil unrest in Thailand led it to temporarily relocate its then 42,000-square-foot office in Bangkok.
Agoda was hurt by the events of the time, including the aftermath of the global financial recession that led to heavy hotel discounting.
But it has since diversified. While Thailand remains the most popular destination among its users, it is not the majority of its business by far.
“While a shock in Thailand would hurt, it wouldn’t be crippling at all,” Huges said. “Thailand is a very important market and we love it and are thrilled to be part of it. But we are diversified.”
We asked Rosenstein the same question. Like many parts of the world, your home turf of Asia Pacific is prone to drama, from coups to typhoons. How will Agoda cope with that?
“It’s a tough neighborhood we operate in with no shortage of drama or competition, and it defines us. This is exactly what helps us survive and adapt. Our job is to internalize the drama and try to reduce the drama for customers.”
Qlika and Woomoo are the only companies it has acquired in the past few years. But other targets present themselves.
Partner company Meituan claims to be used near daily use for food delivery, bus tickets, train tickets, by millions of customers, which raises the question of whether Agoda might move into other product categories besides places to stay and flights to take. To do that, it might make acquisitions.
Sources in the tours and activities industry speculate that Agoda has considered an acquisition of Klook and Musement to get tours-and-activities content to make use of the recent Booking Holdings’ acquisition of FareHarbor, a reservation software tool for operators.
Hughes dismissed this talk. “The fact that we don’t do tours and activities is an example of how we stay focused on our core proposition,” he said. “We keep saying ‘No’ to potentially good ideas to focus on the core. Saying no to a good idea is the hardest thing to do, but if you say yes to every good idea, you’ll spread your resources too thin.”
Corporate travel is another arena. Expedia’s Egencia has made an aggressive push in several markets, having won key contracts with local players in markets like Korea that Agoda is said to have lost.
Agoda is said to have just started customizing corporate rates at scale, a trick Ctrip is said to have led on in Asia Pacific. Agoda may have to eat their commissions to win corporate clients away from Ctrip.
Adding to the competition is that in March 2018, China’s leading hotel technology player Shiji took a controlling stake in Baoku — China’s leading corporate travel management company that Skift named as a startup to watch in 2017 and as a top corporate travel innovator in 2018. Shiji is, in turn, backed by ecommerce giant Alibaba.
Agoda said it is profitable, but won’t break out its numbers.
Staying profitable will be challenging, although Booking Holdings will likely insist on it.
The cost of digital marketing in Asia Pacific has been relatively cheap. As the company tries to compete in Western markets with Western brands for customer acquisition, it faces a sharp increase in costs.
A Skift search found that Agoda appears to be trying to do a lot of video advertising that is not on expensive broadcast TV and that is promoted via social channels as a less expensive workaround.
As of today, its marketing level is nowhere near the other Booking Holdings brandsor other major players in the industry. But at various public events, Booking Holdings officials have claimed that their price comparison brands Momondo and Kayak have strong traffic in Asia, and these might help send more referrals Agoda’s way — though they operate as independent business units.
Supply is another challenge. Specifically in China.
Despite years of trying, Agoda has relatively little inventory that sourced directly from mainland China. Its direct hotel inventory in China is something like a mere 16,000 properties.
It uses Ctrip inventory to plug gaps.
But that’s not enough. While Agoda has recently opened a call center for domestic business in China, it needs to step up its game there.
Despite having had offices in China for more than a decade, it’s inventory in the market is a fraction of what it needs to be to be a competitive player.
A spokesperson said, “We have thousands of listings on agoda.com through Agoda direct contracts and sharing inventory from other partners.”
Well, yes, but for Chinese mainland territory, Agoda has direct hotel inventory in China of only about 16,000 properties and it relies for additional inventory on its partnership with Ctrip, according to sources.
To help with its direct China push, last year Agoda added a couple hundred primarily customer service workers at a new center in Shanghai.
In 2017 Booking Holdings contributed a $450 million investment in the Beijing-based company’s $4 billion round, which included a commercial arrangement.
Expedia is not leaving Asia to Booking Holdings. Hotel groups said they’ve seen Expedia driving growing amounts of volume, comparable to Agoda’s levels.
The group is being helped by how fast-growing Indonesian online travel agency Traveloka uses Expedia Affiliate Network for its hotel listing more intensely after Expedia invested $350 million in the company.
Expedia-backed Trivago also made some inroads in Asia in 2017, sources said.
Having long been focused on leisure travel, Agoda seems to be increasingly interested in business travelers, too.
In Asia, Ctrip has a head start at handling corporate rates at scale. Expedia is also competing, on a small scale, via its travel management division, Egencia. Agoda may be eating some of its commissions to gain market share against both.
Last year Agoda opened new offices in Shanghai that offer a cafeteria with food from Shanghainese, Sichuan, Korean, and Western cuisines. Anything to whet the appetite for global domination, we suppose.
All the Western companies talk about needing to have “an Asia strategy.” How does Agoda fit in with Booking Holdings’ Asia strategy?
“Our retort is there is no such thing as an Asia strategy,” said Hughes. “You need to craft a strategy for each country.”
Analysts expect the company to make acquisitions to grow.
In 2014, Agoda made its first acquisition, when for less than $20 million it nabbed a handful of data scientists in an acquihire of an Israeli startup called Qlika. The terms and amount have not been disclosed.
In February, the company also announced in February that it has replaced its chief financial officer. Madeline Ling replaced Richard Holder.
CORRECTION: This article originally said Richard Holder was still the CFO. Apologies.
On Tuesday, Agoda said its chief product officer Omri Morgenshtern would become its chief operating officer.
Agoda claims to have served more than 18 million customers since its founding.
For years, Western companies have talked about their Asian strategies. The key word there is “talked.” Expedia’s eLong partnership hiccuped in recent years, Airbnb’s effort has gone sideways, and TripAdvisor’s attempt to penetrate China has stumbled, just to name a couple of examples.
“Our retort is there is no such thing as an Asia strategy,” said Hughes. “You need to craft a strategy for each country.”
The Agoda decision to expand globally — coming in the context of Alibaba’s successful traction with non-Chinese customers and Ctrip’s acquisition of Skyscanner and launch of Western-facing Trip.com — shows a kind of reverse twist on the idea of regional strategy.
Outgoing CEO Rosenstein offered this view:
“I think the bigger question is, ‘What are the Asian companies’ Western strategies?’ I don’t spend a lot of time thinking about Western companies’ Asian strategies.”
CORRECTION: This story originally said that Expedia-backed Indonesia-based online travel agency Traveloka does not always honor rate-parity promises. The company has since shown us evidence to the contrary.
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Photo credit: A photo of the entrance at Agoda's large Bangkok office. The company aims for global expansion. Agoda