5 questions: Expedia CEO Dara Khosrowshahi

LAS VEGAS—When Dara Khosrowshahi speaks, the buzzword is “billions.” At last week’s Expedia Partners Conference, here at the Bellagio, he announced the company’s ambitions to achieve $100 billion in gross bookings by 2020, having already realized $71 billion in gross bookings in 2016. Khosrowshahi also shared with the event’s 4,000 attendees that Expedia invested $1 billion in data and technology in 2016 and more than $17 billion in technology and marketing over the last five years.

Yet, compounding bookings at a rate of less than 10 percent annually for the next three years hardly seems tantamount to a Herculean feat for a company that 20 years ago got its start with a staff of five. Today, it ranks on the S&P 500 and represents almost exactly 5 percent of global travel industry bookings.

So, when HOTEL MANAGEMENT met with Khosrowshahi, who has now been at the helm of the travel technology company for over a decade and who was elected to the New York Times board of directors last year, we asked him to share his insights on a host of issues currently germane to the hotel industry and its future.

1) HM: Expedia got its start 20 years ago when founder Rich Barton—now co-founder and executive chairman of Zillow.com—took a risk as a young product manager at Microsoft and pitched the idea to Bill Gates. Today, the company continues to take calculated risks such as increasing year-over-year adjusted technology and content expense by 57 percent just in Q3 2016—a rather different approach from many publicly owned hotel brands that mitigate risk through asset-light portfolios. What advice could you offer to the CEOs of publicly traded hotel companies to drive better earnings for their shareholders?

Khosrowshahi: It would be somewhat presumptuous of me to give advice with very little experience in the business of really running a hotel. Expedia is really in a different situation in that we don’t have physical product. Our product is virtual and that allows us to take smaller bets and many smaller bets that result in an amalgamation of big risk and, often, large innovation. The advice I would give to the CEOs of hotel companies is to ask themselves if there’s a way to make smaller bets and take more risks more aggressively, which will allow for more growth in the end. But I don’t know if that’s easy as it’s a different industry than we’re in, but we certainly meet in the middle.

2) HM: What’s your take on cyber security and cyber insurance?

DK: I don’t think there’s such a thing as cyber security anymore. The amount of cyber fraud activity and attacks is extraordinary and, sometimes, it’s the best and brightest who are comfortable in the dark spaces of the web. For us, it’s not necessarily about prevention, but detection and counteractions. All I can say is that you have to make the investment and it has to be the core of what you do as a company, otherwise you will get caught and you will get hurt. But we have been lucky and this is something that goes right up to the Board level and will continue to.

By nature, you’re playing defense. It’s difficult to be proactive, but you can be proactive in designing your systems so you’re protecting your company’s key data with the best technology and the best design. My personal experience has been that companies try to overprotect their assets and we have so many external touch points—be it to an external device or wearables or your PC—that it’s difficult to protect a broad perimeter. But if you protect where your key customer data is and you’re very offensive on protecting that data, you have a good chance of succeeding. Customer data is one thing that we hold here because that’s customer credit card data.

3) HM: Now that Expedia has added alternative lodging product to its business mix with the recent acquisition of HomeAway, could you share your views on how you see this type of accommodation affecting the hotel industry?

DK: Alternative lodging is both a disruptor and complementary to the industry. Fundamentally, it represents new supply coming into the marketplace and it’s going to put downward pressure on pricing where pricing has been a positive factor for the hotel industry for the last seven or eight years. I believe it will be pressured going forward, on a per-square-foot or a per-room basis. With alternative lodging, new demand is also being introduced to the marketplace and we believe that alternative lodging is introducing a new generation of travelers to the marketplace: the millennial. We’ve seen that travelers display different behaviors based on occasion, so we think alternative lodging is introducing this new generation of travelers to travel, and they will then try more traditional products like hotels, car rentals, etc. We think this is an opportunity.

4) HM: Do you have any experience staying in alternative lodging?

DK: I have a family of four kids. We go on summer vacation, usually to Europe, and during the past four or five years we’ve rented a home. We can get a pool, the family can hang out in the living room, and we love cooking together as a family in the kitchen. But I see my family using alternative lodging and hotels at the same time; if we stay two or three nights in a city, we’re staying in a hotel. But if we’re staying a week, we’ll do alternative lodging. Last summer we went to Spain for a week and we stayed in a home, but while we were there we went to Barcelona for two nights and then we stayed in a hotel. But it really depends on the occasion.

We’re still in the early development of this industry and there are two areas where we see alternative lodging working; one is the family segment at beach and ski destinations. We are also seeing it becoming more of a factor during peak periods and certain events like Oracle’s annual OpenWorld tech conference and Salesforce’s annual Dreamforce convention, both in San Francisco where alternative lodging proved cheaper than traditional hotels and so the alternative lodging market played a big role in the city at that time.

I also think that was a particular audience—a particular segment—where you saw the penetration of alternative lodging was particularly high. The penetration of alternative lodging into more traditional segments of the market will be more gradual and there are certain markets, such as like Las Vegas, where pricing for events is terrific and so you won’t see alternative lodging playing as much of a role. The effects, then, of this segment of the industry will be market-by-market, but alternative lodging will play a bigger role in our industry over the next five years than it has over the last five years.

5) HM: Expedia issued a release in June announcing that the company has achieved pay parity between men and women working for the company. How will the company now establish parity in gender representation?

DK: For us, the important issue is working on gender balance at all levels of the company, but especially at senior levels. Approximately 51 percent of our overall population is female and approximately 30 percent of our leadership is female, so there’s a drop-off between the general populous and the leadership ranks. We’re very open as a company about these statistics and what the reality is and we are now quite united in recognizing that a diverse workforce is a better workforce. It’s more innovative and more open to new ideas and also more attune to the dangers around the corner.

We also want to be able to attract the very best talent around the world and 60 percent of college graduates are women, who also make up a large part of our customer base; 80 percent of the purchases made [on an Expedia channel] are affected by women, whether they’re the decision-maker or advising on the purchase or have an opinion that influences the purchase. For us, it’s a real business imperative. So we test and learn, and over time, we expect to improve.

This initiative began about three years ago. We have a tradition of setting what we call huge, audacious five-year goals and these are big goals for the company and dreams that we want to accomplish. Getting to $100 billion in gross bookings by 2020 is one as is increasing the percentage of women vice presidents in our company from 15 percent to 30 percent. Women as leaders in the field of technology began with [Facebook COO] Sheryl Sandberg and also our talent base. We have the talent at the company, we just need to develop it a little more effectively over a period of time.