Expedia CEO Peter Kern on the Google Silver Bullet — or Lack Thereof

Online Travel This Week

Expedia Group CEO Peter Kern, on the job for five months but a board member there for a decade-and-a half, thinks Google is a “shark,” and that Expedia in the past “paid lip service” to reducing its dependency on the travel business formerly known as a search engine.

Asked at Skift Global Forum last week if he had the silver bullet to reducing Expedia’s reliance on Google, Kern said: “Google is a shark. Sharks have to hunt. That’s what they do. We are not going to stop them. Maybe the governments will get involved and curtail some of their activities. But, we by ourselves can’t do it. So we have to be good about all the things we can control.”

Skift Research estimated that Expedia likely paid Google some $2.7 billion for performance marketing in the 12 months up to September 30, 2019.

Kern said there is no magical solution to the high cost of marketing through Google, which he likened to skimming the ocean for a wide net of customers, and not making a lot of money on the catch.

He said the solution to getting a traveler to start their search in the Expedia app rather than with Google, and securing that direct visit, is creating a robust and more “sticky” consumer experience, which includes improving the Expedia and Hotels.com loyalty programs.

“That’s what we have to do,” Kern said. “It’s not a silver bullet. We are all trying to do it. But we haven’t done a particularly great job of it. Frankly, we paid lip service to it. But I don’t think we put as much effort into it as we could in terms of resources and care.”

At first, when Kern made the “lip service” comment, I thought he was taking a shot at his CEO predecessors, Dara Khosrowshahi and Mark Okerstrom — and perhaps he was. But I think Kern would readily admit that if Expedia fell too hard for the allures of performance marketing through Google over the years, then he was part of the problem, as well, since he’s been an Expedia board member since 2005, and vice chairman starting in 2018.

One also has to wonder, barring regulatory intervention, to what degree Kern and Expedia are chasing an unachievable goal. Sure, outliers like Amazon attract a ton of direct traffic, but the typical online travel agency customer is likely highly price-conscious and fickle, chasing the next bargain rate with brand loyalty a casualty.

Still, Kern isn’t trying to eliminate marketing on Google entirely, and if Expedia can get travelers used to its loyalty programs, then the savings in reduced advertising costs would obviously be beneficial.

Kern Making Nice With Airbnb

Although Kern thinks “Google’s gonna be Google,” as he said, and exhibits shark-like behavior, he has a lot of sympathy for Airbnb even while conceding that Expedia’s Vrbo vacation rental unit has “seen some benefit” from the Airbnb host backlash.

“We are all in a tough spot, everyone in travel,” Kern said. “Our goal is not to hit another player (Airbnb) while they are down. We are certainly down. We hope they don’t do it to us.”

In talking about his Expedia Partner Solutions business, which powers travel for the American Express and Chase loyalty programs, Kern repeated an earlier overture to Airbnb. Referring to Expedia being a third-party travel provider, Kern said: “We are definitely open to hoping to powering more of the industry so if there are opportunities that make sense for us and Airbnb, we’d certainly consider it.”

On Airbnb’s potential initial public offering, Kern noted that Expedia faces off against Airbnb in short-term rentals, and Airbnb may decide to increasingly compete on Expedia’s terrain, presumably in the hotel and attractions’ sector.

“I wish them well,” Kern said of Airbnb. “I’m sure they will be highly valued.”

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