The Expedia CEO Transition: The Challenges Facing the New Boss

Expedia Group’s Peter Kern is handing off the CEO title to Ariane Gorin on May 13 as the company’s annual partner conference is about to kick off in Las Vegas.

But Kern is also handing off more challenges than he would have liked.

On May 2, the company lowered its outlook for gross booking value and profit margin expansion: Executives pointed to subpar performance at its vacation-rental brand Vrbo and the need to up international marketing investments.

At Hotels.com, the switch to the One Key loyalty program meant its customers weren’t earning as much as when the brand had its own — some would say more attractive — loyalty plan.

Executives have touted a tech migration plan to bring many of its brands onto one platform for more than a year. It’s now complete, but the benefits haven’t arrived yet.

“While it’s going to take somewhat longer than we’d anticipated to see the benefits come through in our numbers, the investments we’ve made rebuilding our consumer business will pay off,” said Gorin during a call about Expedia’s first-quarter earnings.

Expedia’s Main Websites Crashed Last Weekend

Then last weekend, most of Expedia Group’s consumer brands experienced a widespread global outage that made its websites unavailable and disrupted some internal operations. Expedia initially blamed the outage on maintenance issues, but later acknowledged it was “a backend software issue.”

In February, Expedia announced that it would be laying off around 1,500 employees, or 9% of the workforce. Many of the affected employees had worked on the tech platform migration project. Expedia Group points out that tech outages can be a common occurrence for big brands, and challenged the notion that the issue was related to layoff.

Meanwhile, Expedia Group’s share price has swooned. Expedia’s shares closed at a 52-week high of $160 on February 8, and were 30% lower at around $112 on May 9.

Tech Migration Disappointment

In early 2023, Kern predicted that the platform migration would “become big unlocks for us in ’23.” That didn’t come to be as Vrbo’s integration went late into the year. Expedia Group lowered Vrbo’s marketing spend during this period – a step “back” to move forward, as officials described it.

It has been ramping Vrbo’s marketing spend back up, but it will take more time to see the gains. 

When Expedia announced its fourth-quarter earnings February 8, Kern said in a statement that “our work is finally starting to deliver results, and we are in the best place we’ve ever been technologically.”

That was three months before Expedia group lowered its guidance.

Kern Revamped Expedia Group

Kern has to be credited with guiding Expedia Group through the pandemic, and undertaking a massive transformation of the company.

He got rid of outdated brands and restructured the way employees work, consolidating a variety of teams, such as marketing and tech, that previously had worked at cross-purposes – the Hotels.com brand competing against Expedia.com, for example.

Consider what it took to accomplish that. The loyalty system had seven tech stacks before the rollout of the new multi brand loyalty program, One Key. There were 17 customer relationship management systems that have been consolidated into one messaging system for all the brands, the company said. And 13 machine learning platforms have been replaced by one.

Playing the Long Game

Expedia officials are optimistic about the future despite the choppy path over the last year.

Gorin told analysts last week that membership in the Expedia Group loyalty program is up 40% year-over-year.

“And when it comes to cross-shopping, what we’ve actually seen is that 25% of people who have redeemed their One Key cash on Vrbo, who had earned that cash on either Hotels.com or Expedia, are completely new to Vrbo,” Gorin said. “So I think that really sort of reassures us in this idea of being able to capture more trips from travelers because of the One Key program. And we will be — we are looking to roll it out internationally later this year.”

Expedia launched a website in the United Arab Emirates this month and Kern sees upside internationally, where progress has lagged.

“On the international side, we’ve seen quite good returns in all the places we’ve pushed into,” Kern told analysts last week. “We’ve tried a number of different ways in, now that we have the product improved, leaning more into performance marketing in some places, leaning more into brand in other places. But we’re seeing broadly good response. We think it’s contributing. It’s just that North America is so large that it’s hard to see in the numbers.”