The Expedia Makeover Under CEO Peter Kern

In December 2019, Ariane Gorin, president of Expedia Business Services, moderated a fireside chat with Chairman Barry Diller and Vice Chairman Peter Kern at an all-hands employee meeting. Expedia Group had just parted ways with its CEO and CFO, and Kern would soon be named CEO.

On Thursday, in a surprise move, Expedia Group announced that Kern is leaving that post.

Gorin, who has worked at Expedia Group in various executive positions since 2013, will take over as CEO of the company – and it looks vastly different than it did at the time of that employee town hall four years ago.

Here’s a look at Expedia Group when Kern became CEO, which was at the beginning of the pandemic, versus the company today.

Expedia Employee Ranks: From ‘Bloated’ to Trimmed Down

In February 13, 2020, Diller characterized the company as “bloated,” and one where the workplace culture was “all life, no work.” That may or may not have been true. But less than two weeks later, Expedia Group, which only months earlier opened a new $900 million headquarters and campus on Elliott Bay in Seattle, laid off 12% of its workforce.

Kern said Thursday that Expedia Group today has 30% fewer employees than it did in 2019, and has closed 100 offices.

In 2019, he said, 30% of employees worked in product and tech. That figure is 50% today.

At the end of 2023, Expedia Group had 17,100 employees in more than 50 countries.

Expedia’s Brand Consolidation

In 2019, Expedia Group had more than 20 brands with many competing against one another and working at cross purposes. Under Kern, Expedia Group designated Expedia.com, Hotels.com and Vrbo as its three core brands. Although it varies by region, Kern said Thursday that the company invests in three or fewer brands in any given region.

Under Kern, the company sold some brands and shut down others. Among them were Egencia, Classic Vacations, SilverRail, Alice, Expedia Group Multifamily, and BodyBuilding.com.

“This wasn’t really a coherent company but more a collection of distinct trading companies with separate brands, strategies, tech stacks and staffs,” said AB Bernstein Managing Director Richard Clarke, referring to the pre-Kern regime. “What he has done to bring it all together is impressive.”

Expedia Consolidated and Simplified Operations

Prior to Kern becoming CEO in 2020 — he’s been vice chairman since June 2018 — Expedia’s workforce to some extent was organized by brand so there was a lot of duplication and inefficiencies. The Hotels.com marketing team would bid against the Expedia.com marketing team in Google auctions, for example.

“We eliminated dependency on 76 different [advertising] agencies around the globe and instead built an entire full-service marketing, creative and media-buying team internally,” Kern said Thursday during a conference call. “We consolidated all performance marketing into one group with unified data and tools, allowing us to optimize across brands and bring programmatic approaches to everything we do in metasearch, social, SEO and everywhere else. And we fundamentally shifted the business from transactional web arbitrage to app first, focused on acquiring and retaining the customers with the highest LTV (Lifetime Value) and return on investment.”

Expedia’s Technology Shift

In a multiyear effort, Expedia Group says it transitioned the front ends of Expedia.com, Hotels.com and Vrbo onto one common tech platform, a move the company said it completed in the fourth quarter of 2023. Vrbo, the vacation rental brand, is still woozy from the transition. Expedia said Vrbo’s conversions of lookers to bookers is still not up to speed, although he Expedia expects things to improve and accelerate throughout 2024.

Kern said the tech migration enables the company to speed up its test-and-learn experiments to implement product changes much faster than before.

During the conference call Thursday, Kern gave an example of the benefits of the tech migrations. He said the company recently launched offering cars on Hotels.com, a process that took just weeks to get up-and-running. “What used to take months, even years, now takes weeks and sometimes just days,” Kern said.

Clarke of AB Bernstein, however, called the example “a little underwhelming.”

Clarke argued that although there have been a lot of tech changes at Expedia Group in recent years, travelers likely can’t see any appreciable difference.

“They would also suggest they have completely changed the overall tech capabilities of the business, but … a casual observer might struggle to see exactly what has changed on Expedia.com or how this is moving them ahead of Booking.com or other peers,” Clarke said.

One Key Loyalty Program

In 2023, Expedia Group revamped its loyalty program as One Key. Kern said previously there were seven different loyalty stacks. For example, Expedia.com, Hotels.com and Orbitz all had widely varying loyalty programs, and Vrbo didn’t have one. Under One Key, travelers can earn points on one brand and spend them on another.

The jury is out on the effectiveness of the changes. Kern said travelers are now earning points on Vrbo and redeeming them on Vrbo or other Expedia Group brands. However, he said, results will take a while to see because people might only rent a house once or twice a year. “It’s not a switch you flip,” Kern said.

Expedia’s Financials Then and Now

Many of Expedia Group’s financials aren’t vastly different today to what they were in 2019.

“There are similar levels of investment in marketing and tech relative to revenue today as there were when Kern took over in early 2020. Overall adjusted EBITDA margins are slightly better today than at the start of Kern’s tenure,” said Seth Borko, head of Skift Research.

But, said Borko, you need to consider that he was running a travel company during a pandemic.

“So even the seemingly ‘simple’ act of navigating Expedia back to where it was in 2019 by 2023 deserves kudos,” Borko said. “For instance, Expedia had to raise a ton of debt in 2020. It’s net debt more than tripled during the pandemic, but today it is back to nearly 2019 levels. And on top of that, Kern laid out a new strategy for Expedia that focuses on combining its expansive tech, marketing, and loyalty infrastructure.”

All of that behind-the scenes work to remake Expedia Group over the past four years hasn’t appeared in the financials of 2023 versus 2019 “at least not in a big way,” Borko said.

“I would say that Kern kept the ship ‘Expedia’ afloat and has started to point it in a new direction,” Borko added. “But it may still be too early to see dramatic payoffs from those efforts. It will be up to Gorin to execute.”