At first, Okerstrom emphasized continuity. But within weeks he made an emphasis to encourage more coherence across the online travel brand portfolio.
Fast forward to Friday and Okerstrom was highlighting one of his key pillars, which is to ensure that the global conglomerate’s brands provide “local relevance” in customer experiences.
“We’ve been expanding around the world for years but we haven’t created leadership positions in many of these markets, with the exception of the United States, Canada, and maybe the UK and Australia,” said Okerstrom at Skift Global Forum in New York City.
“We haven’t focused on getting the experience right in a locally relevant way for, say, the Taiwanese, or the Japanese, or the French customer,” said Okerstrom. “Instead, we had been expanding simultaneously.”
“Now we’re focusing on a handful of countries first to make sure we’re providing great content, translation, localization, perfect payment types, and thorough inventory including categories beyond accommodations and flights like car rentals and activities,” said Okerstrom. “We also are working to make sure our brands are consistently articulating what we’re providing in these markets.”
An example improvement in execution might be adding non-transactional, pragmatic tools to its mobile apps. Given that many travelers are visiting countries where they don’t know the local language, an app might display in big letters and images name of a property in the local language along with visual images and a map. Another example of localization could be making sure that the preferred payment methods of local users, such as QR-code based WeChat and Alipay methods that are popular with most mainland Chinese travelers, could be added to brands that work extensively in markets where those travelers are typically visiting.
Alternative Accommodations Go Mainstream
In alternative accommodations, the competitive pressures have been intensifying when it comes to online aggregation. In the past, Expedia Group-owned HomeAway had been one of the segment leaders along with Airbnb. But in July, Booking.com claimed to have become the leader in alternative lodging supply, with more than 5 million listings of homes, apartments, and other non-hotel lodgings.
Okerstrom touted the technology rebuild and tweaked commercial model that has taken a couple of years to implement at his company’s HomeAway and related vacation rental brands.
“We bought the Craigslist of vacation rentals in 2015,” Okerstrom said, referring to HomeAway. “In the past couple of years, we’ve basically doubled the revenue. Last quarter, our EBIDTA [earnings before interest, taxes, depreciation, and amortization, or a measure of profitability] doubled [year-over-year, for the segment], … and customers and hosts love it.”
“Phase two is going into urban short-term rental markets that the brands haven’t traditionally been as strong in and we plan to go into more international markets,” he added.
Okerstrom scoffed at the suggestion that alternative accommodations, which as a category tends to have lower average commission levels, or “take rates,” than hotels may lead to dilution of the company’s margins and profitability.
“We’re very focused on continuing to drive good results for hotels, but we’re an online travel agency and we’ve got to have all the categories of products our customers want,” Okerstrom said.
Trivago, one of the price-comparison brands backed by Expedia Group, ran into turbulence a year ago. But when asked if “metasearch is dead,” Okerstrom said no. “As long as you have customers who appreciate it and go to the platform, it is viable as a business model… in an industry where customers want choice.”
READ AN EDITED TRANSCRIPT OF THE INTERVIEW
Mark Okerstrom: Hello.
Skift: Hello, sir.
Okerstrom: Thank you, sir.
Skift: How are you?
Okerstrom: I’m good. Well, I don’t think I’ll be as smart as the last guy you spoke to (Uber COO Barney Harford, formerly CEO of Orbitz Worldwide). We’ll see about that. The genius. You know, we tried to buy him back.
Skift: You did.
Okerstrom: But (Uber CEO) Dara (Khosrowshahi) took him.
Skift: Oh, man. Corporate raider. Mark, you appeared on this very stage, I think it was that very chair, a year ago. We were very happy about that.
Skift: I think it was your first public appearance after becoming CEO.
Okerstrom: It was.
Skift: We’re very happy to have you back. It looks like you’ve been having a pretty good year. Stock’s been up since the beginning of the year. Company name changes are in vogue this year. Priceline Group became … What did they become? Booking Holdings?
Skift: You went from Expedia Inc. to Expedia Group.
Okerstrom:Yeah. Big changes.
Skift: What’s in a name? What’s in a name? You have all these brands. OK? You have Expedia, Orbitz, Travelocity. My girlfriend, by the way, says that Travelocity is way better than Orbitz.
Okerstrom: There you go.
Skift:You have Hotwire, HomeAway. So, is it important to define …
Okerstrom: Yes. Yeah.
Skift: … to tightly defined the mission?
Okerstrom: Yeah. Listen, I got some advice a long time ago, which is, if you become a CEO, the first thing you should do is change the logo. Joke. It’s like the last thing you should do, but what we had been, historically, was really kind of a holding, investment company, and that deserves a corporate logo that was designed in the early 2000s, and the Inc. at the end. But what we had become was something very different, and the direction we’re going is very different. Which is, the operation of essentially the world’s largest travel platform. No one can take any person from any place to anywhere, and give them an incredible experience like we can. We operate a huge two-sided platform, and that requires a new identity. And you can’t have an identity if you’re an Inc. but a group can have an identity. So, Expedia Group was all about a cool, new logo. But really, about defining for ourselves, for our investors, for our partners, who we had become and who we aspire to be.
Skift: There’s been a lot of talk about Amazon getting into travel. The funny thing about that to me is, Expedia is a 20-year-old company, and this year, I hear you talking about focusing on adding hotel inventory. How is Amazon going to do that? You’re onboarding alternative accommodations. Then, one of your focuses, foci, focuses? I’m a journalist. I don’t know.
Okerstrom: I like foci.
Skift: You want to become more locally relevant.
Skift: What does that mean?
Okerstrom: Well, it’s a great buzzword. That’s for sure. But listen, we have been expanding around the world, really, around the world, for many, many years. But really, when we looked at our business, we had not built, really, leadership positions in most major markets outside of the U.S., Canada, maybe the UK, Australia. And the reason was, essentially, we had never really focused on just getting things right for the Taiwanese customer, or the Japanese customer, or the French customer. Instead, we had been basically expanding all around the world simultaneously. What locally relevant on a global basis means is that, we are focused on a handful of countries. We’re going through and we’re going to get those nailed. Great content, great translation and localization, perfect payment types. All of the inventory. Yes, we’ll be hotel and alternative accommodations, but making sure we have car rentals and activities, and all of those things, and making sure that we have brands that are consistently articulating what we stand for in those markets. It’s about focus. It’s about building something that customers in these countries are going to love.
Skift: Great. A couple of years ago, HomeAway and Trivago were going to be the rocket engines of your growth. There have been a few curve balls. Trivago has had its problems because largely it was Booking Holdings that reduced their advertising spend in Trivago. HomeAway seems like a long-haul project. You’re still in phase one of integrating HomeAway. You haven’t really started international expansion or turning on the marketing spigots. So, why is that taking so long?
Okerstrom: Just to reset things.
Skift:I often have to be reset.
Okerstrom: Yes. Just to clarify, we bought the Craigslist of vacation rentals at the end of 2015. And today, trailing 12 months at the last quarter, this thing does $11 billion of bookings online. Revenue has basically already doubled. Last quarter, [inaudible 00:05:34] had doubled, and customers and hosts love it. We’ve done all of that in the last two years. We’ve got an incredible team there. They are a rocket ship, but we’re also investing for the long term. But we are just in phase one, and phase one was about taking Craigslist and turning it into an e-commerce machine.
Skift: I’m sure they didn’t think of themselves as to Craigslist.
Okerstrom: Well, it was a listings business.
Skift: Yeah. It was a description.
Okerstrom: I still use craigslist. I like Craigslist. I’m not disparaging that. But it was about taking an offline thing and making it online. Phase two, then, is about going into the urban markets, where HomeAway, VRBO have not traditionally been in the urban markets, and really stepping on the gas, internationally.
Skift: Right. One thing I’m interested in is, with HomeAway, with alternative accommodations, the take rate you have, the amount that you collect from both the host and the consumer, is less than the hotel business. So, you’re ramping up alternative accommodations for the long term. Booking.com doesn’t charge travelers a fee. You do. Airbnb charges much lower commissions to the host or the hotel than you do. So, how does this become a sustainable business for you, if there’s all this demand there, but you’re earning less per booking?
Okerstrom: Well, I think, first of all, a new booking that’s an incremental booking is a great booking. So, let’s start there, which is, right now. If you have a family of five who wants to go to, I don’t know, Myrtle Beach, we don’t have a lot of great alternatives for them on Expedia right now, because it’s hard. You got to find two rooms, or you got to pony up for the suite, and that’s really expensive. Enter HomeAway, VRBO inventory, and now you got the perfect place for them. So, whether the commission is “X” or “Y,” doesn’t matter. It’s incremental. It’s new, and our customers absolutely love it. Now, the other thing you raised, which is very interesting, is, how do you make your margin? There are consumer fees. There are supplier fees, and our solution to it is, we’ve got both. So, we’re able to monetize whatever way the customer is willing to pay, or the supplier is willing to pay. And at the end of the day, if you’ve got the perfect, most beautiful house in Hawaii, that everyone wants, how much do you want to pay? Not that much, because you’re going to fill it. Everyone loves it. But if you’re a customer and you want to book that hotel, and it’s just one, it’s beautiful, how much you willing to pay? A lot. That’s very different from a situation where, you’ve got a property manager with 100 units in a building, and they’re all equal, and there’s a hotel next door. In that case, they’re like, yes, I want to fill my hotel, so I’m willing to pay. So, our approach has been, let’s have a flexible model and we can adapt it how the marketplace needs.
Skift: Do you think consumers are going to realize that, they can book the thing over on Booking.com without a fee? Or, is the inventory so different?
Okerstrom: Yeah. Well, I think that, the type of inventory, it was the first to go online, on our competitor. A lot of it was professionally managed stuff, like the one I spoke about. 100 units in a building. And in that case, we’re going to have, essentially, the same monetization model as other platforms. But I think, again …
Skift: So, the models will change.
Okerstrom:I think the models are just going to evolve over time. Remember, the only thing that’s happening here is, if you take a customer that says, “Listen, I’ll pay $200 a night,” and they’re choosing this place versus that place, this is that place. At the end of the day, they’re willing to pay that. The supplier is going to say, “Listen, I want at least $175.” So, now you’ve got that $25. Whether the supplier pays you or the consumer pays you, in the end, it doesn’t matter.
Skift:Do you worry, though, that that incremental booking, as alternative accommodations go mainstream, dilutes your hotel business?
Okerstrom: I think we’re very focused on making sure that we continue to drive good results for our hotel partners. Absolutely. But at the end of the day, we’re a travel agent. We’re in the business of …
Skift:A travel advisor. No, you’re a travel agent.
Okerstrom:But listen, we’re in the business of being a travel agent. We’re just, essentially, automating all of the things that a travel agent used to do. And just like a travel agent would say, “Dennis, where do you want to go? What kind of place are you looking for?” If you tell me, “I want to stay in a big house, I just got to have that.” That’s our approach. In the end, we run a big marketplace. We’ve automated the traditional role of the travel agent, and we’ve got to have everything.
Skift: Mergers and acquisitions. If you want to announce any today, we’re all ears. But one thing I’ve been thinking about is a Thomas Cook.
Okerstrom: Thank you.
Skift: You have a partnership with Thomas Cook. I believe they’re using your vacation rental inventory. And I was thinking, this sounds like the SilverRail playbook. You partner with them and then you buy them. Then, one insider told me …
Okerstrom: Now I’m curious. What are you going to say?
Skift: Thomas Cook has the issue of … they have all these storefronts and offline agencies, which you probably wouldn’t be too crazy about. But on the other hand, there’s a big customer base that you probably don’t tap. But anyway, the insider told me, not an insider, a travel industry wag told me, “Mark’s not going to do something like that now, because Dara bought all these companies, and didn’t really execute as well as he could. But Mark is focused on execution.” So, Thomas Cook, are you buying it? And M&A? What’s your attitude these days?
Okerstrom: Well, first of all, you do know who was running M&A for the last 12 years at Expedia.
Okerstrom: It’s in the DNA. We’re always going to look at stuff. Dara executed brilliantly on those deals and he is a visionary in so many ways. So, I would never say that he didn’t execute well. He executed brilliantly for the strategy we were on. And we’re going in a new direction, because we looked at what we had built and we said, wow, this is an amazing platform that we’ve got, and let’s just operate it like a two-sided platform. Whether we need to buy Thomas Cook or any other player to augment some consumer segment that we can’t get at … Listen, all this stuff is on the table, but our partnership with Thomas Cook is really about us externalizing the technology and centralizing the benefits of the platform to an iconic brand which Europeans love.
Skift: What does externalizing mean?
Okerstrom: Yeah. We’re providing them with the technology platforms that our agents can basically book on our platform. We’re providing them with our hotel and all this other inventory that we can provide them. We’re providing them with API connectivity, so they can plug things into their own tools. We just got so many assets across the platform, and we’re opening them up to them.
Skift: What about Despegar in Latin America?
Okerstrom: I like Despegar.
Skift: When are you going to pull that trigger?
Okerstrom:Listen, we have a minority position in Despegar, as you know. We’re on their board. We’ve got a great relationship on the supply part of the business. We’re also building big businesses in Hotels.com and Expedia in Latin America. And listen, we will, at some point, if the time is perfect and the price is perfect, we would look at it. But we’re only going to do something if it’s additive to the platform. Again, we really believe in these global brands that we’ve got, Expedia and Hotels.com, particularly, HomeAway, so we don’t need to buy anything.
Skift: Right. What about?
Okerstrom: Did I talk around your question enough?
Skift: No, it was pretty close.
Okerstrom: OK, thanks.
Skift:What about Amazon and Google? They keep you up at night?
Okerstrom: So much keeps me up at night. That’s my job, being paranoid. Yes, absolutely. The big tech players who have tremendous capabilities, I think about them a lot. But I think, as you mentioned, right from the start, we’ve been at this for 20 years. We have 6,000 of the brightest product and technical engineers in the industry that work for us. We’ve got some of the brightest AI talent and data scientists, certainly in this industry, working at Expedia Group, and we are stepping on the gas. If we were standing still, saying, “Gee, I’ve got to protect what I’ve got,” I’d be a lot more worried. But the answer for us is, move faster, be more focused, focus on the customer. Because in the end, if you deliver an incredible product to the customer and you have a platform that your partners get real value from, and you move fast, you’re in a great spot.
Skift: What about the issue of regulating Google? The EU is regulating Google in the shopping arena. People have told me, well, it really hasn’t done very much. And now, there’s all this talk in the U.S. that President Trump wants to regulate Google, Facebook for political bias. Do you think there needs to be more regulation of Google in the U.S?
Okerstrom: Well, listen, I think that, these big tech platforms, Google, Facebook, Alibaba, certainly Amazon, they have tremendous power. I think, as we realize, with our position in the travel industry, with great power comes great responsibility. So, I think that, provided that these players behave in a way that is befitting of the responsibility to society, I think we’ll be fine. But the reality is that, in many cases, the things that have happened to Facebook, for example, those have not been as a result of like miss-deed or them trying to break the law. It’s, these are just massive businesses, with huge network effects and uncontrolled activity that just have to take time. I actually don’t think that, a regulatory mandate is necessarily required for someone like Facebook to start to get these things under control, because it’s in their business interest to do it. This is hard. So, now they’re focusing on it.
Skift: OK. I think, in this chair last year, you said tours and activities needed to be a higher priority for Expedia.
Skift:Now, we see Airbnb is doing experiences, and TripAdvisor is really growing with experiences, and Steve Kaufer of TripAdvisor thinks it can be a really gigantic business. What kind of priority does it have for Expedia?
Okerstrom: It’s up there. It’s definitely top 10.
Skift: It’s so competitive now.
Okerstrom:It is. But listen, this industry is competitive. The reality is, there’s just so much activities business that is out there. It’s a well over $100 billion segment. Fraction of it is online, and there’s a huge amount of opportunity. Of course, we’re focused on doing what we have structural advantages on. And one of the structural advantages we have is that, because we’re a full travel agent … We’re not just a traffic arbitrage or hotel only player. We have the ability. We know where people are. They’ve got our apps installed, and we’ve got a lot of advantage. Now, TripAdvisor has got … I love that business, too, by the way. And I think they’re going to do very well on it. But we’ve seen this. There’s room for two, there’s room for three. And I think, here in the US, particularly, people talk about, oh, it’s saturated, it’s mature. Nothing saturated, nothing’s mature. We’re like 6% of the travel industry. Indonesia is coming online, and Japan domestic is opening up. There’s so much opportunity ahead, in activities, and just honestly, in the industry in total.
Skift: Do you think metasearch is dead? When one or two players, including yourself, can make or break a company?
Okerstrom: Yeah. I don’t think it’s dead. Here’s why. I think that, as long as you have a number of advertisers that are interested in being in the platform, as long as you have customers that actually still go to and appreciate the platform, there’s a real business there. And that exists right now at Trivago, that exists in TripAdvisor’s hotel product, that exists in the Google Hotel Ads product, that exists in Skyscanner, to some extent. They’re much more flights focused. Customers like it. Advertisers are looking for ways to get new customers, and that has real value. Now, we were in a situation where, the two big global players were basically paying above the market for new customer acquisition on these channels. Our competitor moved down, the auction cooled off, we stepped down with them, and now it’s a much more level playing field. And the only thing that’s really happened is, we’ve essentially taken some excess industry profits that went to some of these platforms, and brought them back where they belong. But we’re going to grow from here.
Skift: Audience questions. How will you maintain profitability as bigger and bigger and bigger and bigger chains push direct booking?
Okerstrom: We’re doing OK right now, and direct booking is a … I know why they’re doing it, by the way. I’ve been trying to do the same thing. It hasn’t hurt our business. In fact, we’re as profitable and growing as nicely as we ever have. So, I’m not really thinking about them as a competitor. I’m thinking about them as a partner. We operate a massive platform, and there are so many ways that even for the biggest of chains, which, by the way, the biggest chains has less than 10,000 properties. We’ve got 750,000 live, by the way, in an industry where customers want choice. So, we’re just in different businesses. We want to partner with these partners. We want to introduce them to new customers. We want to sign up loyalty members for them. We want to give them technology that we’re already using, that we could give them for free, in many cases, like our Rev+ product. We think there are so many ways that we can work together, and that’s what I’m focused on.
Skift: Why should a cost-conscious millennial — definitely not like myself —use HomeAway instead of Airbnb?
Okerstrom: Well, I think that’s the question. That is the question that HomeAway, VRBO are driving for. There’s a few big reasons. I think, one that there’s just a difference in the inventory set. And listen, there is some overlap, absolutely. But there’s a difference in the inventory set, generally, in the way it skews. Which is HomeAway, VRBO are generally for the larger resort, big groups, and Airbnb skews to smaller shared units. Over time, we’re going to be moving into that shared unit, urban space. Then, if you’re a millennial, heck, why not try something new? If they experience the same … you’re open-minded, you’re a millennial. Try something new. At the same time, maybe you had an amazing trip that you booked on Expedia, and you’ve got your Expedia Rewards points because you’re cost-conscious. Everyone loves the points. And now you see that same property that’s on Airbnb, on Expedia. Why would you not book that? It’s the same thing, and you get points, and by the way, it’s on your application, and you could fly there. It’s all there. And while you land, we’ll give you an incredible activity that you can do. It sounds awesome. I think millennials love it.
Skift: What are you doing with voice? Has the buzz about voice quieted down?
Okerstrom: Listen, everything quiets down, once it’s been around for a while. But the focus and the use case have not. What we’ve been working on is, building, essentially, what we call the conversations platform, which is able to take, either written text or spoken text, and translate it into actions in an automated way. It’s a big area of focus for us. There are absolutely voice applications to it. There’s absolutely chat bot applications for it. We need to do it. It’s going to be important. It’s already important in many places, but you got to do it right. You got to build the AI and the automation underneath it, because, at the end of the day, all of the voice commands end up in a human reading them in text, and doing something on a computer. It’s not very scalable.
Skift: Yep. Really quick. How’s Expedia Add-On Advantage doing, where you could tack on a hotel room?
Okerstrom: It’s great. Customers have been loving it. It kind of lives up to what Expedia promises. There’s a real benefit to getting all of these things together. Not only do you have it all on one app, but also, you can get special deals. And we’ve got partners who, guess what, they also love it. It’s hugely targetable. You know the person’s flying to the place. You know it’s not published, and you can actually fill up your hotel. So, it’s been great.
Skift: It’s good to see someone doing something different, I’ll say that. Thank you very much.
Okerstrom: Thank you.