Expedia Group Vice Chairman and CEO Peter Kern spoke with Skift Executive Editor Dennis Schaal at Skift Global Forum 2021. The two discussed the theme “Powering Travel Beyond the Booking to Boost Recovery.”
You can watch a full video of their discussion as well as read a transcript of it, below.
Dennis Schaal: Hey everybody. Don’t forget if you have questions for Peter ask them through the Skift live app and I will try to get to them. As Sean said earlier, they’ll probably be better than my questions, that was a great line. So Peter, your first Skift Global Forum as CEO.
Peter Kern: So exciting. Everything I dreamed of.
Schaal: Well, it hasn’t started yet, so we’ll see.
Kern: Okay. Sorry.
Schaal: I’m used to seeing you on Zoom calls with a moose in the background in the backyard and this is definitely a change. So over the last year and a half, basically you’ve been busy remaking the company trying to simplify the operations. And the news this week was that you’re taking three Expedia loyalty programs: Expedia.com, Hotels.com and Orbitz, and consolidating them into one. So why are you do doing that?
Kern: Let me first say this is a great week for travel, right? We just heard that we’re going to be able to get travelers from Europe to America, the theater is open on Broadway. I went to a college football game last weekend, people are moving again.
Schaal: With 100,000 people in Texas.
Kern: With 100,000 people in Texas. (It) did not feel very Covid compliant but I went, and yeah. So the loyalty program for us, it’s really, yes, we are taking three and making one. But we are really making one global overarching loyalty program for all our brands, for all our products, for everything. And the goal was really make it simple for the customer, help them understand the way to get the most value out of our brands and our products and make it one simple thing that cut across the company so that people could move around, earn and burn their loyalty rewards —however they wanted and really make it a bigger opportunity for the customer. And of course, it creates a simplifying universe of our brands because we’re moving from competitive brands to a house of brands where they all work together for a common goal for the customer as opposed to working against one another.
Schaal: So if people don’t know what you meant by that, Hotels.com used to compete against Expedia.com, they had different marketing teams and tech teams and everything, so do you think that model is dead?
Kern: Yeah. I think it worked for a while, we were sort of a holding company of a bunch of great travel brands that had built audiences and followings. But I think as we migrate to really using all of our power which is our huge reach, we already have 145 million loyalty members in those three programs and that’s only on three of our brands and we have many more brands. So the potential reach of something like that and the power to drive better outcomes for customers, better outcomes for suppliers is just much more vast. So I think the days of trying to let us compete against ourselves and paying Google too much to compete with ourselves are over I hope and yeah, the brands are going to work together for a common goal.
Schaal: You mean you prefer to spend money on a loyalty program than spend it with Google?
Kern: I prefer to spend money on almost anything than spend it with Google. But yes, I’d rather give the money to the customer than to Google for sure.
Schaal: Yeah. I mean, I would say six to nine months ago you were talking about how reducing Expedia’s reliance on Google marketing was a big priority but early in the pandemic, it seemed like you were spending money for Vrbo like way more than a lot of the other brands combined. And a lot of that was video, I imagine, YouTube and stuff like that. So has that priority been downsized?
Kern: No. Vrbo is still a key priority for ours. Again,
Schaal: No, I mean, reducing spending on Google.
Kern: Oh sorry. Yes. Yeah, in a sort of global sense, reducing it. Which is to say Google is great, it reaches a lot of people and for us to use it to bring customers in makes total sense. And as long as it does and it economically makes sense, we’ll keep doing it. But ultimately it’s on us as an enterprise to create the sticky relationship with the customer with a great product and great loyalty and great travel outcomes and service and everything else that makes that experience great so that the customer wants to have a direct relationship with us and we don’t have to keep fishing for the same customer over and over again and paying Google every time. So that’s on us to do, but yeah, we believe in having those direct relationships and that’s what we want to drive.
Schaal: And for the first time, Expedia customers will be able to earn points on vacation rentals, right?
Kern: Yeah. I mean, when we get this all launched, you’ll be able to earn it on anything, cruises, vacation, rentals, activities. And equally, if you rent homes all the time on Vrbo and you want to use what you’ve earned to make a flight more affordable for you, you’ll be able to do that and vice versa. Or you use it for business and you want to take a vacation on Vrbo, you can go do that.
Schaal: So let’s talk about Vrbo. Is that the best thing you have going on right now within the Expedia portfolio?
Kern: I think it’s a really good thing we have going on. I mean, again, I’ve said to you Dennis in other interviews, I don’t think we can all take too much credit for the ebbs and flows of Covid and who were the beneficiaries and who got hit in the face. We’ve had some tough outcomes. Expedia is broad enough that we have some businesses that have been hurt mightily and we have some like Vrbo that have been very successful. I tend to think it all balances out over time. I know there some in my industry who think it may changed forever but Vrbo is a great business.
Schaal: Who would that be?
Kern: I don’t know. You’d have to tell me.
Schaal: I think we had a speaker last night that
Kern: Brian and I disagree on this point, but that’s what makes it fun. But Vrbo has had a great run. It’s been a great moment for Vrbo. I think tons of customers — hopefully, many of you — have had a chance to experience them and had great trips and I think that’s great for Vrbo long term. Do I think that vacation rentals have supplanted hotels in the world of what people want to do with their lives? No, I think more people have now figured out that that’s a good solution for certain kinds of trips and certain kind of family events and certain kind of group events and that’s great. And we want those people certainly to do it with us and we think Vrbo is a great way to do that.
Schaal: So Vrbo is still a small brand compared to Airbnb, right? It’s not a winner-take-all market but how do you view its chances of making additional substantial gains against Airbnb?
Kern: Yeah. I think we proved in the U.S. during this period where we gained share and is our biggest market, we proved that we could deliver a differentiated product. I mean, Airbnb covers a lot of things we don’t and kudos to them. They’re a great brand and they reach into places that are not necessarily focus areas for us. But we’re going to be good at what we’re good at and we’re good at the whole home solution, we’re good at vacation properties. We’ll grow that, we’ll grow that to more places, we’ll be more competitive in far more places and we’ll be the solution again that is tied into a much bigger broader travel ecosystem as opposed to Airbnb, which is great but just Airbnb.
Schaal: So I interviewed you before this event and I was very happy to see you doing some trash talking about Airbnb and Booking.com. Journalists love trash talking. So you just said about Airbnb that they cover a lot of things that you don’t. But in this interview, you said you feel that Airbnb is a one-dimensional company.
Kern: No. I said, they’re good at one thing.
Schaal: Do you see the contradiction? Do you see what I’m getting at?
Kern: They’re extremely good at what they’re good at as our other competitors. Listen, we all lean into our strength, right? They lean into that strength, they lean into the culture of Airbnb and the brand recognition and what young people associate with and it’s a great advantage for them. Booking is really good at certain other things, great at performance marketing, great at driving discounts, (and) a number of things. We have a great breadth of product that nobody else has. We have an opportunity to bring that all together under one loyalty. We have the opportunity to let all our brands work together and drive business. And we’re in the business, ultimately … Yes, we want to be successful but we’re trying to drive our suppliers success and the breadth of all of that and the reach across all those things will inure to the benefit of the suppliers. So I think, look, we all lean into our strengths. They are bigger companies than us by value and they’re very good at what they do so (I) wouldn’t take anything away from that. But we have our advantages, too.
Schaal: So Booking.com, Booking Holdings has been pushing its connected trip strategy for a while and what you just described sort of sounded like a connected trip to me. You’re bringing all your brands together (and) all the different products. But you said when your staffers ask you about Booking.com’s connected trip you say, “What the hell is a connected trip? It’s a trip.”
Kern: Yes. What I say is, so you mean a trip? Because I don’t know the difference between a connected trip and a trip. And I’m pretty sure we’ve been selling whatever a connected trip is for 20 years. So it’s a cool sounding thing and great. Anyone can brand anything and it’s a good set of words. But we’ve been in the trip business a long time. I’m pretty sure we sell more multi-product trips than any other OTA in the world and we’re going to keep doing that. So I feel good about our journey.
Schaal: You also said that you didn’t feel that Booking.com or Booking Holdings has much upside. So I went into the videotape and I looked at 2019. Older people will know about going to the videotape. I looked at your 2019 financial results. Booking Holdings made $4.8 billion in profit and had a margin of 32 percent. Expedia made 565 million in profits and had a margin of 4.7 percent. So it looks like you have a few things to prove.
Kern: Well, first of all I think, there’s a lot in that math that is not pure accounting. So our earnings had a lot of noise in it. But they have higher margins than us, there’s no question (about that). And in some ways, that’s the point of what I said, which was basically that I was really referring to us — I think we have more upside. We’re like a great athlete who hasn’t maybe gotten all the best coaching, we got to get everything right, we have more upside and you’ve made the point. We’re in this similar business, we’re in other lines of business, we’re heavier in air and other things, but our margin opportunity has tons of upside.
They are a nearly perfect machine at driving discounts through performance marketing to us. Nobody is better than them — I admire them greatly. But that does not lead to as much potential. We have more potential because when we get it right, our machine will accelerate and we have great opportunities, as I said, leaning into all our advantages and we think that’s going to be powerful. I mean, their rewards program has no rewards. It’s just discounts so that’s a different approach.
Schaal: Wow. So when you changed your rewards program — I mean, you’re in the process of doing it. There’s a lot going on in loyalty today: the genius program Booking.com (and) Marriott has Bonvoy, their loyalty program. Now we’re seeing subscriptions take off — Tripadvisor has their subscription program and eDreams. So you’re not making these changes in a vacuum, right?
Kern: No. I mean, we look at all of those. But, I mean, ultimately we’re making the changes that we think are valuable to the customer, sticky, build those relationships we want. I think, look, anything can be marketed to consumers and many consumers will do things for sure. I mean, in the travel industry, this is my first (Skift Global Forum) but I’m sure you’ve had people up here in the past who had cool things they were doing that are no longer coming here because that cool thing did not quite work out the way they planned. So we’re going to see it ebb and flow and change and I’m sure those companies can get some subscribers to pay for the benefits. We think basically all those subscription products we have the benefits already baked into what our loyalty is.
Schaal: So that’s not on the table, subscription?
Kern: No, we’re not talking about that now. But we have to do a better job of helping consumers understand the value we present and again, that’s on us to do but it’s a tremendous opportunity for consumers and we think it will be powerful. So sure, we’re against other loyalty program. We all want loyal customers as we should and we respect that our suppliers want to have direct loyal customers and that’s great and they should. And then there’s a ton of millions and millions of customers who are never going to of the same hotel all the time. And those people are out in the wild and they should come to us because we’re going to give them the best experience and the best value.
Schaal: Right. So it’s funny that you mentioned things that don’t work out. So I went to the videotape again, (and) I dug up this 2017 tweet from Dara when he was still CEO. (It) must have been shortly before he left for Uber, and he said, the next five years at Egencia — Expedia’s corporate travel business — will be its biggest. Teams in technology are just ready and armed. Get ready, corporate travel. So of course you’ve made
Kern: That’s all? I like it.
Schaal: You’ve just made a deal to sell Egencia to American Express Global Business Travel. And I remember Egencia was sort of a rising star for a while within the Expedia portfolio. Why couldn’t you make that work? Not you, well, you were on the board. But why couldn’t Expedia Group make that work?
Kern: I don’t think it’s a question. First of all, we’re merging it into American Express GBT and we will retain an ownership and an important commercial agreement to help power that business with our supply. So it’s not like we’re saying goodbye to corporate travel or we don’t believe in corporate travel. And I will add that we’ve had one of our best years this year in signing a new business. So we continue to do great at Egencia. Corporate travel is challenged and we can talk about that.
Schaal: Really? This year, you had one of your best years in signing a corporate?
Kern: Signing a new business, yeah. So the solution is really good, I’m sure Dara was right that we were locked and loaded to take over the world. But we’re trying to make a simpler business to operate for our company. We were a big complicated company. It created challenges for us delivering — look, we have to deliver great products to the consumers every day, right? That’s what we’re in the business of doing, and the more things we have the harder it is to concentrate on the most important things. And we felt that Egencia could be more successful as part of a business that was wholly focused on the corporate solution, bringing all that technology we developed and all the business we developed to that combined group to power a bigger better corporate solution. And so we felt like that was the right economic solution for us and the best way for us to concentrate the business and the best way for Egencia to succeed long term in corporate.
Schaal: So even though you’ve been selling brands, trimming the business, consolidating teams, it struck me that Expedia is still a very unwieldy complicated business. So I thought of that when you were talking I think it was in earnings call and you were talking about how one of the ideas is to integrate Vrbo’s inventory into Expedia.com. And you said you just haven’t been able to get the customer experience right at this point. But it also sounded like with all the things you’re doing it’s really not that big a priority because you have so many bigger priorities. So how do you view that?
Kern: Yeah, well, I think we had a history sometimes of saying, this is our next thing, this is the thing we’re all going to focus on and do this thing. And sometimes we delivered and sometimes we didn’t, whatever. But I think now we’re really remaking the guts of the business, the technology at its core, and that is going to make us really powerful and fast and innovative for the consumer. And so when you say, well, is that thing going well? It’s not the one thing, we have 20 things, 100 things going on as we move to a more platformized technology structure that powers all the brands that powers everything and our (business-to-business) business, which is a huge business.
So Vrbo on the (online travel agencies) or vacation rentals on our OTA brands we want that to be successful, we think that’ll be a good product. Again, we’ll give exposure to more customers to the product, all good things it’ll be able to push Vrbo through to our B2B partners, which is really valuable and important and again, really valuable for our supply partners in Vrbo. So all of that’s important. But we have a lot of important work going on. So I was trying to de-emphasize it as the one thing that’s going to set us free. We have many things that are going to set us free. And that is one of them, but we have a lot.
Schaal: Right. Let’s talk about tourism activities. So it hasn’t always been, again, the biggest priority for Expedia. You’ve always had a tourism activities business. This year, you shut down, I believe, Expedia Local Expert, right? Which had tour operators in airports and stuff like that in Las Vegas. But you just made this partnership with GetYourGuide based in Europe. What is the significance of that partnership? And what does it mean to your longtime partnership with Tripadvisor’s Viator?
Kern: Yeah. So on the first part, we want to do better in activities. We had some activity businesses but we were trying to self source everything, and we felt like the breadth of our offering was not as good as it should be. Again, we reached hundreds of millions of travelers, and we should have a much more robust activities business. Part of the reason we didn’t was supply. And we decided that we’re being much less religious about owning everything we have to own. And there are some great companies — including Tripadvisor, including GetYourGuide — (which) have great supply. And we’re willing to work with them to power our activities business to move that inventory and give our customer a great outcome. So the significance is we want lots of valuable activities inventory for our customers and we will take that inventory. We’ll self-source it. We’ll find it from third parties and we’re open to whatever is the right answer to expand the offerings to our customers.
Schaal: What’s your view of Google’s pushing to activities at this point? They’re doing things to do.
Kern: Hopefully, it means they’re running out of stuff to do in other categories.
Schaal: I mean, yeah, no, I was looking at vacation rentals, I don’t think you’re participating in that, are you?
Kern: We pulled out of that. Look, I think, as I said, when Google provides a good customer experience and it’s useful to the supply community like us, we’ll participate. We’ll see what they do. Like many of these things, they’re trying to intermediate a space that they weren’t in before. It’s not the biggest category for us, so I guess that’s good news. It’s not the most dangerous thing in the world. But again, since you like connected trips so much, I think if people come to our sites and they want to actually book more than one thing, we will be the place to do it for sure. And so the benefit of going to Google and searching a zillion activities somewhere, I don’t know. I’m sure they’ll do a good job but we’re not spending a lot of time worrying about that right now.
Schaal: To me a connected trip is if I know the general manager at a hotel.
Kern: There you go. Some hotel owners are here, man, you can talk to Tyler (Morse, CEO of MCR Hotels).
Schaal: So you’ve been a big advocate for vaccine equity. Could you talk a little about that and why it’s so important?
Kern: Sure. I mean, listen, I’m not a scientist and I’m not a politician. I just think we are all facing in the travel industry the effects of unvaccinated people in the world. And I don’t just mean the fight in America about the choice of vaccinated or mandated or whatever, which is its own thing and I think people should follow the science. But we’re also fooling ourselves if we think we can fix it and then put up a wall around the country or around each country or whatever, or around the west. So variants will come, nobody should have been surprised by Delta, nobody should be surprised by Mu or new or whatever comes next. And the more people we can help get vaccinated, it’s good for the people, it’s good for their economies, it’s good for the global economy and it’s going to help us work this thing faster.
And look, the world is going to have to learn to live with COVID clearly. We’re not going to flip a switch and make it go away. And the notion that the U.S. or anybody is going to vaccinate everybody and close the place down. I mean, we’re all begging our industry to let travelers come from Europe who are vaccinated. We need the rest of the world to get vaccinated and personally, I think the private sector should help. So we did our part. We did our Give the World a Shot campaign. We gave $10 million to UNICEF after about a month of the campaign. Sadly in the travel industry, we don’t have bottomless pockets but maybe Google wants to throw in.
Schaal: Because they have bottomless pockets.
Kern: They do have bottomless pockets. Exactly.
Schaal: Just along the same lines, do you think online travel agencies have any responsibility towards communities? I mean, you’re trying to just drive bookings. Should you be just driving as many bookings as possible to places like Amsterdam or Venice? What do you see as your responsibility?
Kern: Yeah, I think, the last panel did a good job of talking about and thinking about responsible tourism. And I think it takes many forms. It’s obviously many of the things they were talking about — community, it’s environmental. We can all talk about the cruise ships in Venice or the various things. Sure, there are a few places that have been overtraveled. And it may well be that my friend Brian is right that the pandemic has opened people’s eyes to more places to go to. But I think our responsibility is helping consumers understand their choices, helping them understand how they can make sustainable choices, how they can find the right hotels or the right places to go that represent things and helping them with discovery so they can find out that they should go to Africa and visit a place they hadn’t thought of. And that’s part of our role as an OTA is we can give information and help people make good choices.
Schaal: We’re out of time. But I just had this idea: Maybe we should get you and Brian on stage together next year.
Kern: I’d love to. Listen, Brian is amazing, I just disagree with him on this point.
Schaal: Okay. Anyway, thanks, I appreciate it.
Kern: Yeah. Thanks.