Expedia moves closer to consumers

Expedia Group has shifted its strategy from being about transactions to being more customer-centric, attendees at the group’s Explore ’18 event in Las Vegas were told.

The company was eager to illustrate the ways in which it worked with its hotel partners, but the strategy was likely to clash with the operators’ direct booking strategies.

CEO Mark Okerstrom said: “We have become the largest travel platform that exists in the world. We are sitting in the centre empowering all of it. It’s not about traffic and transactions any more, it’s about customer behaviour. They’re trying to tell you something, listen to them. You will see our brands tailor experiences for our customers.

“If Amazon is the global platform for thee ordering of consumer goods, then Expedia is the global platform for the physical movement of people.”

Okerstrom acknowledged that the group needed more hotel properties, but reiterated past statements that he was not planning to undertake significant M&A activity to achieve it.

Commenting on the role the company played with the global operators, the CEO said: “For the last five years we have been on a journey to change our relationship with the chains. If you think of all the ways that we can work together with data and revenue management, what we have done with Red Lion, I am confident that we can work together – not partnering can be an existential threat.”

Asked about the push by chains towards rate parity in some locations, Okerstrom said: “What’s very interesting is that hotels have pushed their book direct strategies with discounts on their own sites. What we have noticed is that independent hotels have come to us with offers and we are seeing customers choose them and the chain hotels drift to the bottom.”

The company told delegates about the data it had access to, which was used to drive its portfolio of partner tools.

Expedia CMO Aaron Price said: “It’s not enough to just be a billboard and have a brand out there. There are billions of paths out there and it’s not a job you can do manually, you need machines and machine learning.”

Okerstrom said: “AI changes the game. We used to take huge data sets and run algorithms on them to tell us what to do next, it would take us days in many cases. We’re now doing that in hours, soon it will take minutes and then seconds. With that type of power, you can start to treat every individual as an individual in real time. A subset of that is what happens with personalisation, what happens with voice.

“We’re now using AI to suggest to our hotel partners what to change, what to improve and it is getting more and more like real time.”

Commenting earlier in the event, Benoit Jolin, SVP, global product & design, Expedia Group, said: “The biggest gift an OTA can give to the hospitality industry is data.”

Jolin also looked at the increased interested in voice technology, telling delegates: “Voice search is an interesting space to be, if it helps customers refine their search in advance. It may ease some anxiety about where the customer wants to go.”

When asked how the platform planned to work with hotel brands to ensure that they were able to use voice to sell rooms. Okerstrom told Hotel Analyst: “Last year we would have said that voice is the next big thing, but increasingly we are seeing voice as a subset of AI. We now have the ability to process vast amounts of data in real time and one of the applications of that is taking voice, translating that into data that we can understand. We are training algorithms to respond to questions and we’re starting to put the answers on the website.

“What will happen from a consumer perspective with voice is hard for us to imagine. So far voice is used for music and for kids to tell jokes, but people still want to see stuff – ultimately it will be a hybrid experience, there will still be photos when you use it to find hotels.”

The data breach suffered by Marriott International was on the mind of many at the gathering. Okerstrom said: “This is a reminder for the world that there is no distinction any more between offline and old economy and technology companies. They are the same. This is a wake-up call for everyone, cyber attacks are very sophisticated, they are being carried out by nation stakes. There are pots of money to be made.

“We have a security operations centre, we have AI looking for things, we are segmenting all of our data to make sure that the important stuff is sitting in a virtual vault with 12 feet of virtual concrete around it. I think Marriott took this very seriously, but you have to be able to detect when people got in and how they got in and you have to set traps to catch them.

“The problem is that humans are still involved in this and it only takes one email to someone that looks like it’s from their boss, asking for their password and they have you. The weak link is humans. You know someone is going to get in. We hope like hell that Expedia Group never gets hit but it’s a case of man vs machine and we have some of our smartest machines and our smartest men on it.”

HA Perspective [by Katherine Doggrell]: The relationship between the OTAs and the hotel sector – in particular with the big chains – has been through many a flux over the years and is currently in ‘frenemy’ status. After all, they both want the same thing: heads in beds. Cyril Ranque, president of lodging partner services, Expedia Group said that the group saw its new role as that of “a multi-channel advisor to hotels”.

Unfortunately, Expedia Group wants that other thing which hotels (mostly) want: a relationship with the guest. It’s not just transactions any more. They want to know all about you and be the best travel agent they can be. Meanwhile, the chains want you to shun the OTAs, join their loyalty scheme and book direct saving –  they tell their owners – many doubloons.

Of course Okerstrom has his bogeymen. He said: “The internet is littered with the bodies of companies that have been put out of businesses by Google. We spend lots of money with Google but we have more engineers working on travel than they do. They are a great partner, but one which has some advantages over us, so we have to be mindful. We’re creating amazing products, we’re doing things which Google can’t do, which Google might never do. Yes we have a strategy, it’s a strategy to treat customers better than they’ve ever been treated.”

There was some hope for hotels and their customer relationships to be gleaned from this comment. Explore ’18 was three times the size of the IHIF in Berlin, because it wasn’t just filled with hotel folks, it was filled with car rental people, cruise people, airline people, all the different products that Expedia Group offers. Hotel groups do, in the main, just offer hotels and, it should be noted, operate them too. Surely, you would think, there must be something in that expertise.

The company also seemed to realise the threat posed by its size, if only obliquely. Ben Blake, VP, global customer & business development, Expedia Group, said: “Over time, what we have seen is not that platforms will take over the world, but the rise of niche players. The largest websites in the world are platforms like Amazon, but the most loved are all niche players.”

Good news for those niche players, but whether this means that hotels should give up on selling rooms and stick to their knitting is something which is frequently discussed in these pages. The answer is, rather boringly, rather nuanced. The OTAs remain great at customer acquisition and what hotels do with that customer is up to them. Where hotels are running a growing risk is letting the likes of Expedia Group know more about their guests than the people tucking them in at night.

 

Additional comment [by Andrew Sangster]: At Hotel Analyst we make this same point repeatedly, but it is so important it bears repeating: hotel brand companies are about the product, OTAs and the like are all about retail.

This does not mean that hoteliers should not have a retail channel of their own – again something we keep emphasising – but that hoteliers should recognise that others have superior retail skills and should be partnered with on this basis.

Right now Expedia appears to be in a weaker position than it has for some time. In particular, Google is seen as a major competitive threat. This offers a chance for hoteliers to rebalance their relationship with the retailer Expedia.

As always, commission levels are seen as a key problem. But it is more than this. Hoteliers should be deepening their relationship with customers and by working more closely with Expedia it ought to be possible to do this by getting email addresses and the like directly from Expedia. It is in both parties interests to ensure guests have a great stay. Expedia needs to amend its practices here to demonstrate it wants to be a true partner.

Also, Expedia’s breadth and reach ought to enable hoteliers to hold their prices in a market that is coming under huge pressure thanks to the entry of alternative hotel accommodation. While Expedia itself is assisting the onslaught of alternatives, its global reach should help hoteliers maximise prices better.

Expedia ought to be promoting its ability to do this too. It’s a nuanced message, with one story for consumers (we’re the cheapest) and one for hoteliers (we’ll get you the highest price) but Expedia ought to be able to communicate this to stakeholders in the right way.

Posted on behalf of Hotel Analyst

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