5 takeaways from Expedia's Partner Conference

LAS VEGAS – Mark Okerstrom is in an interesting position. Though he took over as president and CEO of Expedia in August, he joined the company in 2006 and has served as its CFO since September 2011. At the 2017 Expedia Partner Conference, however, his job has been to build confidence behind a brand that is a powerhouse in the hospitality space, but is facing growing competition from companies like Airbnb, mounting opposition from hotel companies pushing for direct booking and a third-quarter performance that was surprisingly underwhelming.

So how did he and his team do? Well, Expedia remains a monumental power in hospitality and travel, and no single deficient quarter or leadership change will be enough to slow this beast’s growth. Here are the five biggest takeaways from Expedia’s 2017 conference.

1. Q3 Was an Outlier, and A Learning Opportunity

When we last reviewed Expedia’s financial performance in 2017, things were surprisingly down. Due to hurricanes in the Caribbean, Texas and Florida, as well as an earthquake in Mexico, Expedia was forced to revise down its growth expectations for its basic operating profits in the third quarter to 10 percent from an earlier forecast of 15 percent. Okerstrom, however, said this is a minor stumble felt in tandem with the rest of the industry.

"This continues to be a massive industry,” Okerstrom said. "I'm very optimistic about the overall travel industry. We are the only truly global platform that can take any person from any place, and take them to any place by any means, and offer them an amazing set of activities all in one place. And if they've got problems along the way... we can solve them."

Rather than dwell on the fickle nature of the weather, Expedia leaned into these events to analyze the data behind them. Marco Tagliatti, VP of North America, market management at Expedia, said the company investigated a range of data analytics as hurricanes Irma and Harvey approached the U.S., and were able to watch in real time as demand across the Caribbean and southern U.S. dwindled and then shifted, providing Expedia with a means to learn how travelers book in the face of a disaster.

“During the storm, 75 percent of rebookings changed dates, 10 percent changed destinations and 15 percent changed properties,” Tagliatti said. “The more actionable data showed us where people were fleeing to. Then we watched as demand normalized after 29 days, and finally we began to observe recovery.”

As the storms approached, Expedia observed guests shifting their stays to New York, Hawaii, parts of Mexico and other locations throughout the Caribbean. Mario Ribera, VP of Latin America market management at Expedia, said the Dominican Republic took 26 days to recover from these storms, recording a strong decrease in demand during that period. Expedia’s data also showed that following the storms, hotels in the Dominican Republic recorded 11,000 new customer reviews. Surprisingly, these reviews were 8 percent higher on average than they were before the storms.

“We filtered for the word ‘hurricane,’ but the word that came up most in these reviews was ‘staff.’ Your staff,” Ribera said. “What we saw next to these reviews were great compliments. It was staff that made a great difference during this period.

Much of the hospitality industry is focused on mobile. Meanwhile, voice is poised to take over. Pictured: The Amazon Echo

2. Mobile is Old News – Voice is Now

Expedia spent roughly $1.6 billion on technology in 2017, so it shouldn’t come as a surprise that the company is always looking for the next tech opportunity. While most of the hospitality industry is improving its mobile offerings, Okerstrom said mobile is old hat.

“The initial idea behind mobile was to take your desktop and place it on your phone, but the use cases changed,” Okerstrom said. “Soon, 50 percent of mobile bookings began taking place the same day of the stay. That’s what makes voice so interesting. Think about the type of [free-flowing] queries made via voice… that’s where our multiproduct capability grows more interesting.”

The lingering question remains, why is the hotel industry so slow to adopt new technology? Jose Murta, global head of hospitality at Trivago, put it best when he said that technology is difficult to access, particularly for hardware-based solutions that require installation fees, maintenance fees, updates and ongoing attention. On top of this, Expedia has the resources to spill $1.6 billion in one year on technology spend, and has no real estate to spend on.

In a later discussion with Marina MacDonald, chief marketing officer at Red Roof Inns, hotel operations platform Alice came up. Expedia spent $26 million to acquire a majority stake in Alice, and MacDonald was asked why hotel companies aren’t going after deals like this. The simple answer is it isn’t their core competency, and many hotel companies just aren’t looking in that direction. “A lot of it is speed to market,” MacDonald said. “They were first.”

3. Airbnb is a Worthy Adversary

Expedia is deeply entrenched in the home-sharing market with HomeAway, but it remains very much a follower into the space. However, Okerstrom doesn’t see it that way—instead, he says Expedia’s infrastructure places it at an advantage compared to Airbnb despite its lead in the home-sharing space.

“A lot of our competitors are doing wonderful things [with home sharing], and we want to eliminate the advantage they have and take full advantage of the tools we have in our structure,” Okerstrom said.

During a panel focusing on alternative lodging, Bill Furlong, VP of Americas business at HomeAway, said hoteliers consider home sharing a new category of room, but this isn’t the case. Instead, he says travelers attracted to home sharing were underserved by the industry in the years before Airbnb.

“These were major segments of travelers with needs that weren’t being fulfilled,” Furlong said. “The drivers for this segment have been the same for years… so why are they growing now? The process is easier now, locations are getting broader and more efficient marketplaces have developed.”

Home sharing continues to gain momentum, but its growth didn't come out of nowhere

4. To Hotels Pushing for Direct: Go For It

When asked what he thinks about hotel companies pushing for direct bookings through marketing campaigns, Okerstrom said he doesn’t blame them. 

“We are trying to do the same thing,” he said. “We’re acquiring customers from Google. We give them amazing experiences and they come back to us. At the end of the day, we don’t force anyone to work with us, they come to us because they see increased value from our platform.”

MacDonald reiterated this point, and said that Red Roof’s partnership with Expedia through its Redicard loyalty program may seem counterintuitive, but it’s also effective.

“The reality is there are 16 million people coming to us through Expedia,” she said. “They are loyal to them and their platform, but maybe they aren’t loyal to a hotel yet. We want to talk with those guests about our value proposition and win them over with service. Loyalty is the holy grail, and you have to pick a partner in this space wisely.”

5. Hospitality Growth is Centered on Asia

Okerstrom still has his sights on making Expedia into a $100-billion company by 2020, a goal the online travel agency is inching toward, having reached $86 billion in gross travel bookings this year. The path to reaching that $100 billion, however, grows more difficult the closer Expedia comes to its goal, and Okerstrom says part of the strategy lies in activating the Asia hotel market.

“We are growing 13 percent year over year, and $100 billion is within striking distance,” Okerstrom said. “Asia is a big part of this, and soon it will be the largest travel market in the world.”

He pointed out that Japan’s travel industry is growing north of 40 percent year over year, and compared Asia’s travel growth to what was seen in Europe as international travel boomed. Partricularly, Okerstrom said much of Asia’s travel takes place within the market, and therefore Expedia’s goal of becoming more “locally relevant” applies here more than anywhere else.

“In Korea, we are very much a local OTA,” he said. “In Q2 we made an investment with Traveloca to get a hold on the Indonesia market, as well as Southeast Asia. When we talk about becoming locally relevant, this is what we mean."