Why Expedia is kicking your butt
 
Why Expedia is kicking your butt
12 DECEMBER 2014 8:32 AM
The online travel agency is pulling all the right levers to grow its share of gross hotel bookings.
By  
Here’s one from the news-you-already-know file: Online travel agencies aren’t going away. 
 
After rising to prominence in the early 2000s, they now represent 13% of global travel gross bookings ($150 billion in 2013) and 38% of the online travel market, according to research from Cornell University’s Bill Carroll and Phocuswright’s Lorraine Sileo. Gross global bookings are growing at 12% annually, while in the United States OTAs have a 15% share of the market and are expected to jump 5% to 6% annually in 2015 and 2016.
 
I can share more data, but most hoteliers already get the big picture: OTAs are a force to be reckoned with. Less clear to them is why exactly that’s the case. 
 
The answers were readily available—and delivered with all the rah-rah raucousness one might expect at a Las Vegas-hosted brand event—during the Expedia Partner Conference earlier this week. 
 
The OTA is one of the heaviest hitters in the space, boasting a portfolio of brands that generated more than $48 billion worth of business during 2013.
 
Here are four reasons why Expedia is growing its bookings revenues (and why you might be not): 
 
1. Marketing clout. This is the obvious one. The OTA spent $2.6 billion in sales and marketing during 2013, according to CFO Mark Okerstrom. Most hotels, let alone hotel conglomerates, can compete with that kind of dough. 
 
2. Tech savvy. Although it makes the hair on the back of Okerstrom’s neck stand on end (as might it would any scrupulous CFO), Expedia spent $650 million on technology last year. That affords Expedia a competitive online edge that’s virtually unrivaled in the online travel space. 
 
Expedia CEO Dara Khosrowshahi said a chunk of that goes toward continuous testing of its platforms. Expedia runs 1,500 A/B tests each year, for instance, whereby it shows two versions of its website to different consumer sets in real time and measures which version fosters a higher rate of conversion. 
 
“Based on all these A/B tests, every single day, every single week, every single month, our site is getting a little bit better,” he said. 
 
Many hoteliers are lucky to update their site every 15 months let alone 1,500 times in a single year. 
 
3. Mobile obsessive. “Mobile” was the word used more than any other during the conference—and with good reason. It represents the single greatest potential source of revenue for the global OTA. 
 
“Everything that we build … we’ve got to build for the mobile phone,” Khosrowshahi said. 
 
4. A footprint in China. Expedia executives bought big into China with their November 2011 acquisition of a majority stake in eLong, the second largest OTA in the country after Ctrip. 
 
“Our goal is to become the largest hotel booking company in China,” said eLong CEO (and crowd favorite) Guangfu Cui.
 
Not only is China one of the largest domestic travel markets in the world, it is also the largest outbound market. Each point of share gained in the country translates into exponential exposure in bookings made elsewhere around the world. 
 
When stacked together, the above four reasons might seem an unsurmountable hurdle standing between hoteliers and direct bookings with their customers. While I’ll never dissuade hoteliers from trying to connect direct with their guests in the booking phase, there might be a more optimistic way to view it: Expedia and its OTA ilk allow hoteliers to reach new heights. You don’t have to go through them. You can work with them to reach previously untapped sources of demand.
 
There’s a reason Expedia’s event was called the Expedia Partner Conference, after all. The company recognizes it is only as good as the partners supplying the end travel accommodation and experience. It might also explain why hundreds of hoteliers were willingly and very happily in attendance. 
 
And besides, Expedia brings benefits beyond intermediated bookings. Global reach and a presence on mobile are two of the biggies. Those and several others are laid out in Carroll’s and Sileo’s aforementioned research. 
 
I spoke with Sileo during a break at the conference, and she summed up this sentiment best when she said: “OTAs are inevitable. They’re a reality. You need to strategize with them, not against them. 
 
“They’re here to stay,” she added. “Now it’s about how you work with them.”
 
Now on to the usual goodies …
 
What’s making me happy this week?
The passage of an omnibus government funding bill. The bill, which passed the House on Thursday and is headed to the Senate, would avoid another government shutdown. More relevant to the travel industry, it includes a five-year reauthorization of Brand USA, which has proved a crucial spark for inbound international travel into the country.  
 
Stat of the week
$1.3 trillion: Size, in dollar terms, of the global travel industry. The stat was shared by Okerstrom to underscore the importance of travel in the global economy. 
 
Quote of the week
“A great brand is a story that never stops unfolding.” 
Tony Hsieh, founder and CEO of Zappos.com, during a keynote address at the Expedia Partner Conference.
 
Hsieh, poster child for a new breed conscientious dot.com CEO, gave an inspirational keynote during the event that touched upon everything from successful company cultures to thoughtful urban development. He shared a lot of interesting nuggets of wisdom during his time on stage, but the above quote is the one thing he wanted attendees to remember. The work of a company is never finished, he explained. The best brands strive to improve every single day.  
 
Reader comment of the week
“My favourite (and the one that I am banking on the most) Tom Corcoran will wear a tie!”
Reader “araj” naming his favorite of Finance Editor Shawn A. Turner’s 15 insane predictions for 2015.
 
My favorite? No. 8. “Joel Ross sheds his Dr. Doom moniker and writes for HNN that he takes back all of his bearish columns and that revenue per available room will continue to grow unchecked through 2023. Instead of Dr. Doom, we all start calling him Captain Sunshine Puppies.”
 
Email Patrick Mayock or find him on Twitter.

Editor’s note: Expedia provided airfare and hotel accommodations. Complete editorial control was at the discretion of the Hotel News Now editorial staff; Expedia had no influence on the coverage provided.
 
The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.
 

3 Comments

  • rhcaldwell December 12, 2014 5:00 AM

    Expedia are also one of the most bureaucratic, disorganized, and difficult-to-deal with companies I've come across – in any industry. I'd bet on booking.com as the long-distance runner that will win in this space. That said, your broader argument about the internet marketing savvy and budget asymmetry between OTAs and lodging properties is correct. It's not an evenly-matched fight. Lodging businesses need to take marketing much more seriously to not continue losing revenue % to the OTAs.

  • Versoisien December 12, 2014 5:18 AM

    Well I can tell you one thing: Expedia has had its butt kicked but good in Europe where Booking is way ahead, as they are in holiday rentals, where Expedia is just getting a start with HomeAway. Oh and Priceline/Booking's partner in China is Ctrip , the market leader; so much for Elong which is an 'also ran'.

  • hotelobs December 15, 2014 1:15 AM

    Go Expedia!!

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