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When Skift asked Cyril Ranque, president of Expedia Lodging Partner Services, how likely it would be for an online travel agency like Expedia to launch its own hotel brand or soft brand in the near future, Ranque said, “Honestly, you can never say never.”
His comment reflects the ever-changing dynamics between hotel brands, hotel owners, and the online travel agencies — a complex relationship that continues to evolve in the wake of the direct booking wars, and the emergence of new distribution disruptors such as Google, Airbnb, and Amazon.
We spoke with Ranque about these changes at the NYU International Hospitality Industry Investment Conference in early June, and what follows are excerpts of our conversation with him.
The Possibility of an Expedia Hotels Brand
While Ranque doesn’t necessarily see Expedia launching its own hotel brands or soft brands anytime soon, he said the company does want to be viewed as a partner to hotels.
“I would look at it a bit differently,” Ranque said. “I would say, we are listening to our hotel partners and hotel owners, we have great relationship with independents, midsize, large size chains, and hotel owners, and we’re listening to everyone in the industry, again, with a goal to solve their problems and make them more effective.
“So, we’re building a series of tools and capabilities on the back of the Expedia platform that we’re making available to our hotel partners and our hotel owners to be more effective, again, on the Expedia marketplace and outside.”
Raque noted the development of the VIP Plus tool, for example, that gives hotel partners increased exposure on the Expedia marketplace with “some badging and branding,” along with tools that help hotels be better with marketing, distribution, operations, and media solutions.
“Now if you put all this together and you say, ‘This looks a lot like a soft brand’ … I’d say that’s your call,” Ranque said. “We’re doing it in response to the industry asking for this.”
On Being the World’s Travel Platform
While a number of companies are all vying to be the mega platforms — AccorHotels, Marriott, and Airbnb included — Ranque, not surprisingly, said Expedia is uniquely positioned to be just that, albeit in a slightly different way.
“We want to be the world’s travel platform” Ranque said, to which point, we said: “But everybody in the industry does, too.”
His response? “Yeah, well, we’re doing it.”
Whereas brands like Accor are competing against mega brands like Google and Amazon to have a direct relationship with consumers in their everyday lives, Expedia is more focused on being a full-service travel agency. Expedia’s strategy for becoming the world’s travel platform involves giving both consumers and its supply partners what they want and need.
Ranque also noted how the company is working with hotel companies like Marriott and Iberostar on white-label vacation packages, and how its investment in Alice is helping hotels with their operations.
Rather than just stick to distribution, Expedia, he said, is building product to solve pain points for its partners and consumers. A case in point? He said the company has tested out keyless entry at hotels — something that many major chains like Hilton are heavily investing in themselves.
“It’s an interesting product for the future to allow seamless check-in, etc.,” Ranque said. “It’s still very early days, so we decided not to push on this now but, over time, what we really intend to do is to provide a completely seamless experience to the customer.”
What Ranque described is, in many ways, the same frictionless experience that the hospitality brands are working to deliver to the same customer.
“So, in the end, you can imagine in the Expedia app or the Hotels.com app, a really integrated experience all the way from search, to booking, to checking in, to ordering room service, to leaving a review, to sharing with your friends, etc.,” he said. “That’s the ultimate goal because, frankly, the goal of a travel agency is to solve customer problems and to remove friction from the travel process, which can be pretty daunting. And through technology we’re really one by one tackling all these friction points and enabling the customers to have a seamless experience.”
And as seamless an experience Expedia wants to deliver to travelers, Ranque said it also seeks to do the same for its hotel partners.
What About the Direct Booking Wars?
As much as Expedia sees hotels as “partners” there’s no denying that both entities are competitors when it comes to their respective platform strategies, and when it comes to driving bookings.
Ranque, for one, sees the hotel brands’ effort to push direct bookings as an attempt to appeal to their owners.
“I take the term ‘direct booking war’ and the whole vein in the industry around, ‘We want direct bookings and high repeat business,’ and I compare it to a very populist speech, just like in politics,” Ranque said. “It’s an easy thing to say that some people want to hear — not too sophisticated — and what happens usually in a populist election is the people who elect the person get very disappointed with the results because the reality is different from the simple idea of populism. And I think it’s a bit similar with direct booking wars.”
And as much as the hotel industry bemoans having to use online travel agencies as a distribution channel, they are still the most “efficient channels” for acquiring first-time customers.
“Those hotels that [offer their loyalty rates] on Expedia andHotels.com actually gain share over the ones that don’t,” he said, referring to Red Lion Hotels Corporation and Red Roof Inn. “The ones that don’t offer the loyalty rates to our customers, they tend to lose share versus the ones that do. And it’s O.K., it’s their decision.”
And even though brands may think they are winning the direct booking wars, that may not necessarily be the case.
“So, when you read that the strategy seems to work, what happens is because they’re losing share on our marketplace, mechanically their share of direct versus OTA [online travel agency] is changing and at least the OTA share is growing less fast than it used to,” Ranque explained. “But it’s not necessarily because the direct booking strategy is working for new customers because they get less new customers from us.”
“I would say it’s not really discontent,” that hotels are feeling, he said. “I think hotel partners want more demand, more production at the lowest cost possible. And they see us more and more as a company that has assets that they could use.”
What About Google?
Ranque said that even though Google is, well, Google, it’s not a travel agency.
“They’re phenomenal companies with technology budgets that are even way higher than ours and although we spent $1.5 billion in the last 12 months on technology, they can probably outspend us quite significantly,” Ranque said of Google and Amazon.
“So, it’s not a question of money,” he continued. “For me it’s a question of focus and DNA and if you take Google, for instance, their DNA is the DNA of a technology company and it’s not the DNA of a company that manages customer problems like we do. We have thousands and thousands of call center agents really taking care of our customers.
“We have 4,500 in my organization, in lodging partnerships that work with hotel partners and vacation rental property managers every day,” Ranque added. “It’s people-intensive work to be a travel agency and Google is not setup to be a travel agency now. That’s why I don’t believe that they’re going to become a travel agency … I believe them when they say they have no intention to do this.”
He did note, however, that he is paying close attention to Google’s product expansion and whether it will constitute a “fair playing field.”
What About Airbnb?
Airbnb’s efforts to become more like an online travel agency and attract more hotels onto its own platform, Ranque said, have not had an impact on Expedia.
“It’s a very small number, with very specific categories, and they are expanding their scope towards hotels and I think Airbnb has been pretty vocal about being a full-service travel agency competitor and player in the market,” he said.
“It’ll be interesting to see how they develop,” he added. “The hotel market is a highly intensive and competitive market and it’ll be more of a challenge for them to run the same type of operating model that they run on with alternative accommodations as they do with hotels.”
While he noted Airbnb has “done a lot of traffic generation just through brand equity” — something Morningstar Equity Research also noted in a recent report — Ranque said hotels are a “more complicated” matter.
“I think the question for them is more about what do they stand for and what they’ve been built on,” he said. “Back to my comment on DNA, they’ve built on one principle,” he said, referring to homesharing. “Expanding it to selling everything may be a challenge for them.”
For Expedia, however, which owns HomeAway and VRBO, “expanding into alternative accommodations is more of a natural fit.”
“We’re responding to a customer demand and customers who travel, especially the customers who travel with their families, who want to stay longer, who want more rooms, and they are interested in having that alternative accommodation product.”
Another advantage Expedia has over Airbnb? Vacation property management expertise, something Airbnb has attempted to grow more of in the last year.
“Because we’ve acquired HomeAway, we’ve acquired a team of experts on that and they’re really building tools for the small property managers, tools that are completely 100-percent designed for that segment, which I think is really interesting for the future because it gives us an opportunity to be very relevant for hotels and very relevant also for vacation rental owners,” Ranque explained.