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Expedia Group CEO Peter Kern, who has been busy reshaping his far-flung company over the last couple of years, doubts Booking.com’s connected trip strategy, thinks Airbnb’s use case is “one dimensional,” and argues that Expedia has more upside potential than both.
“We’re like a great athlete where the upside is enormous,” Kern told Skift in a phone interview to discuss a few things that might be topics at September’s Skift Global Forum. “And Booking is like just like working on the tip of the pen kind of thing. We’re getting a little better each time, but they’re really good already. They don’t have as much upside in my opinion.
Kern contended that the CEOs of these rival companies are more promotional than is his style, and are out there selling their respective companies’ stories. Of course, we are sure that at Airbnb headquarters in San Francisco, and at Booking Holdings’ central office in Norwalk, Connecticut, there would be ample disagreement.
“Airbnb is interesting, but it’s still kind of the one-dimensional use case.” Kern said “And well, I don’t doubt that (Airbnb CEO) Brian (Chesky) believes that nobody will ever stay in a hotel again and everyone’s going to stay in little cabins in the woods forever. I think in his heart of hearts, he can’t believe that we’re not all going back to Paris. And the majority of us are still not staying in hotels.”
Kern discussed these and other issues, such as Vrbo’s strategy, and Expedia’s business to business push, in the following Skift interview, which has been edited.
Skift: So I have kind of a fun question: Who scares you more Airbnb or Booking.com? And why? And also can we get your take on the Airbnb earnings call where CEO Brian Chesky said Airbnb is leading the travel recovery, and they’re the best position to lead the recovery because of the changing nature of travel. So you agree with all that, right?
Peter Kern: Absolutely. Brian’s never wrong. I mean, just ask him. No, listen, I have total respect for Brian and to (Booking Holdings CEO) Glenn (Fogel). I think they’re both a little more promotional than I am. If you listened to our (earnings) call, you have to talk about the good stuff, but I’m also not going to shy away from the bad. I think everyone else felt a little more like they were selling a story.
But look, I think, I would say, they both scare me and neither scares me in the sense that they’re formidable competitors. They each have their advantages. Booking has the perfect tactical weapon. They’re very good at what they do, performance marketing, promotional stuff, that’s their super power. Airbnb has great brand and unique space. A lot of that nice direct traffic, which is good for them.
And they own inventory and things and places where some of the rest of us don’t. So, that’s an advantage. Our advantages are we serve everything. I mean, as I keep joking with our team, who might mention Booking’s connected trip. I always say, ‘You mean a trip?’ C’mon, a trip is a trip. What the hell is a connected to trip? So I think we have much more potential broadly and strategically. I think each of them is really kind of uniquely good in their own space. But we cover a big space to ourselves, which is we serve everything. We go everywhere. We’re really strong in certain categories, international travel. We’re stronger in air than anybody by a mile. Those are all opportunities for us.
As I said to one investor, we’re like a great athlete where the upside is enormous. And Bookings is like just like working on the tip of the pen kind of thing. We’re getting a little better each time, but they’re really good already. They don’t have as much upside in my opinion.
And Airbnb is interesting, but it’s still kind of the one-dimensional use case. And well, I don’t doubt that Brian believes that nobody will ever stay in a hotel again and everyone’s going to stay in little cabins in the woods forever. I think in his heart of hearts, he can’t believe that we’re not all going back to Paris. And the majority of us are still not staying in hotels.
So I think, it serves as his narrative. And I do think more people got to use the alternatives and it’s an interesting use case. And there will be more people who adopt it as an alternative too when they travel. But we hardly think is going to take over the world. And I think we’re going to fight both of them. I mean, in the swamp, we’re going to be at the head beating each other up, but we each have a place to go.
Our place is we think we have way more upside on the consumer side, on the brand side, on the stickiness side, on the total product side, offering soup to nuts and everything in between. And we have a huge opportunity in the B2B (business to business) space. And not the same for those guys.
And I think that the pie will expand too. So we don’t have to fight for the last booking.
Skift: On Vrbo, where do things stand these days with in terms of the competition with Airbnb? So you talked about going after the markets where you think there’s opportunity. Any update on that? And then there’s also the fact that Vrbo doesn’t have a full-time CEO. So, doesn’t Vrbo deserve a full-time CEO or president?
Kern: Not anymore than Hotels.com deserves one or Expedia.com deserves. I mean, that’s what got us into where we were. Now, do they deserve teams that are focused on their particular use cases, and their brands … ? Does that need to be coordinated at a high level with our new head of brands and his team in terms of how they work together, how they fit together, how they compete, or don’t compete with one another? Yes. I think they can’t just live in isolation, just set out there and compete with each other.
That’s what put us in a position we were in before. We believe that they can be more valuable sort of working together in an ecosystem that makes some sense. And as far as having a CEO, there’s no shortage of intent, capital, will, anything that we would put behind Vrbo, and the opportunities that Vrbo has. But they’re not necessarily discrete from the overall company.
But what about the opportunity to drive vacation rentals through our B2B (business-to-business) partners? That’s a big opportunity. It’s not about Vrbo being a standalone thing. It’s about Vrbo being part of our ecosystem. What about the vacation rentals through the OTAs (online travel agencies)? Again, that’s being part of our ecosystem. So the unique situation of can I just drive my one brand and one use case across the globe, which Airbnb has and will run with, that’s fine. Our advantage is that we serve everything and we can serve everything. And we have to use our advantages to our advantages, and let other people play their own games. So, I don’t think who owns Vrbo or leads or drives it, it does not lack for attention. It does not lack for intent.
We’re going to stick to our knitting, stick to the whole home … We are less concentrated in big cities. And as things open up that will help Airbnb more than it helps us, leisure and beach, and other things have helped us more, but we can keep into those. And we think people will continue to lean into those uses over time. And we’re going to be aggressive and continue to drive our business where we think it can grow.
Skift: I have a friend who’s an Airbnb superhost in Ireland, and she’s saying, what happened with this Vrbo incentive program that you rolled out in the U.S. to Airbnb superhosts? You are blowing a freaking opportunity. People are dying to join Vrbo in Europe and it’s just not happening. So where is that? And what was your take on how that program turned out so far?
Kern: Well, I think the program has been a huge success. And I will admit, we were going where the money was, which is to say, the U.S. travel market rebounded much sooner, much bigger, and had much more concentration and issues of supply in the Vrbo market. So we were very focused on, we know if we can unlock more supply, there’s massive demand. I think in Europe, demand has been good, but not as strong and not as not quite in the same way where we felt compression, and we couldn’t fulfill the needs. But it’s a totally fair point. And we are going to continue to use our best plays in every market where it makes sense.
Skift: So are some European markets coming in terms of the incentive program?
Kern: I’m sure our plan is to use it more broadly. I mean, honestly, we went from a broad acquisition strategy to Covid with no acquisition strategy. And then we focused on compressed markets. And now you’ll see us widen out again, I think, and go everywhere with our best programs to bring the right kinds of content onto the platform. So I’m sure you will see that in other parts of the world.
Skift: So your new emphasis on B2B, how is this different than how Expedia approached it in the past?
Peter Kern: Well, I think the major difference is, in the past we built our platforms and we had many of them as for ourselves. And then we saw the business opportunity to help other people. And we started building on top of those platforms to essentially configure them for business partners. And we built a terrific business out of it.
But I think as we started to look at the opportunity of consolidating into one technical platform, building in a new way, and building everything for multi-tenant and to be externalized on both, it gives us the opportunity to expand the pie and then a bigger opportunity to help more partners.
And now we’re getting to a place where you can have it all. You can have small pieces, you can have multiple pieces. And we can give it to you in ways that allow people to do much more with it, and use just what they need. And not run into these circumstances where we built it for these big enterprise partners, but it doesn’t work for small partners, or it doesn’t work for developers or whatever. So, that’s the real opportunity that aligns with our plan on the technical stack. And it allows us to be much more flexible for way more partners in the future.