LAS VEGAS – When Mark Okerstrom took the lead as president and CEO of Expedia in August, following the resignation of previous company head Dara Khosrowshahi, he admittedly had few plans to divert from the online travel agency’s set course. He reiterated that at the Expedia Partner Conference, taking place this week at the Aria Resort & Casino, where he stressed Expedia’s ongoing and future goals of partnership, local activity and innovation acceleration.
“The day Dara left I wasn’t cheering saying ‘now I can do what I want!’ The truth is, we were lock step in running the business,” Okerstrom said. “What you will see from us going forward will be an extension of what we’ve been doing all along, but we want to do it faster. We want to accelerate our global push, be more customer centric and accelerate the pace of innovation internally.”
Looking back at Expedia’s performance in 2017, more of the same—but faster—isn’t looking like a bad approach for the coming year. However, the company did see a bit of a stumble toward the end of Q3, where its basic operating profit grew 10 percent, missing its forecast increase of 15 percent. That's still an increase, however, and Expedia is no worse for wear today than it was last year, with Okerstrom stating Expedia continues to grow at a pace two-times that of the rest of the travel industry. The company also launched a new web app and partnered with Amazon to improve interactions with its voice-centric Alexa product. In fact, Okerstrom said mobile, an area where most hotel companies are just now beginning to see growth, is almost old news. Voice, he said, is the new frontier.
“We are at the early stages of innovation in travel, and we want to be in front of it,” Okerstrom said. “The land grab, the race to be present across the world, we have largely completed that. Now our goal is to be locally relevant in every market we choose to be.”
Tools of the Trade
It’s no secret that Expedia and the hotel industry have something of a love-hate relationship, though Okerstrom was coy enough to avoid broaching the subject. However, it is clear that in order for Expedia to succeed, hotels must succeed. It’s good news then that despite natural disasters, travel bans and more casting a shadow of doubt over the industry, Expedia recorded 1.6 trillion roomnights in 2017. This number can be seen as a glimmer of positivity in an arena so often characterized by uncertainty, but the hotel industry certainly has other challenges to worry about aside from hurricanes and politics. Luckily, these other challenges actually have solutions.
Recently, Choice Hotels International’s VP of franchise development, Brian Quinn, went on record urging the company’s franchisees to better leverage its tools to succeed. In much the same manner, Expedia is calling out the hotel industry to leverage its data wherever possible because the success of the company is directly tied to the success of the hotel industry.
In this vein, Benoit Joil, VP of lodging product at Expedia, pointed out that 85 percent of hotels still do not take advantage of revenue-management tools, placing them at a major disadvantage when it comes time to push rate and maximize profit. The company’s Rev+ tool, which can be accessed through the Expedia Partner Portal, launched earlier this year as part of a bid to improve the industry’s revenue-management landscape, with Vivek Bhogaraju, director of revenue management solutions at Expedia, referring to revenue management as a team sport.
“Revenue management has been around for more than 30 years, but adoption of it is poor,” Bhogaraju said. “We looked at the reasons and want to know why, but our focus in on accessibility. Cost of ownership is high, not just for what you pay for a solution but what it costs to adopt it, and we want it to be available to all hotel partners free of cost. Also, people are making decisions based on stale data, and real-time data is the foundation of revenue management.”
The Great Disruption
Midway through the conference, Cyril Ranque, president of Expedia’s lodging partner services, took to the stage to discuss challenges, including labor costs, which are expected to rise 4 percent next year and contribute to an expected 4.1-percent increase in hotel operating costs. On top of this, hotel room supply is forecast to increase 2 percent in 2018, while demand is expected to rise only 1.9 percent.
According to Ranque, no trend is more worrying for hospitality than the growing foothold home-sharing has over the traveling public. To date, one-third of American travelers have experienced private accommodation rentals for vacations, but the more worrying number was to come after this: Ranque reported that 90 percent of these guests considered themselves highly satisfied with their stay. Compared to the industry’s American hotel guest satisfaction score of 75 percent—up 3 percent over 2016—this is a massive deficit that cannot be ignored.
“This is a wake-up call for hotels,” Ranque said. “We need to create better value and look at antiquated check-in procedures. We have to understand what customers want.”
Understanding what consumers want is Expedia’s business, and Ranque said studies of millennial travelers have yielded valuable information about what they find most important to their stay. Access to unique local culture ranked high at 63 percent importance for driving guest bookings, while 73 percent of travelers value a social atmosphere and 43 percent of business travelers want a better combination of work and play while on the road.
Later in the conference, entrepreneur and founder of Morgans Hotel Group Ian Schrager said hotels “should be in a panic” over home sharing, and that their energies have been misplaced in countering the effectiveness of these disruptors. Schrager pointed out that the industry has been preoccupied with relying on legislation to curb the effectiveness of home-sharing companies, but such legislation will serve only to slow them down, not stop them. He said the answer depends on true differentiation and providing that which home-sharing companies are unable to provide: the communal experience.
“We have to focus on the hotel product and communal spaces. We have to do what they cannot do,” Schrager said. “Disruptive things come along every few years or so and you have to adjust your model or you become yesterday’s news.”
Schrager also lamented the fact that technology companies refuse to cooperate with each other, creating a web of confusion for all industries, particularly hospitality. This disconnect has muddied the check-in and check-out process, something that continues to cause friction between hotels and guests.
“If you had one area to focus your technology budget, I would say the check-in process and finding a way to not have guests check out at all,” Schrager said. “We want to get guests up to the room as fast as possible, and when they leave they don’t want to stand in line unless they have a question about their bill. Don’t make guests check out; find another way.”