Phocuswright 2015: Expedia to invest in air and rail as rivals’ focus is elsewhere

Expedia sees allocating investment in air and rail as a key differentiator that will drive up sales of related product and consumer purchase frequency.

Expedia sees allocating investment in air and rail as a key differentiator that will drive up sales of related product and consumer purchase frequency.

Dara Khosrowshahi, chief executive of Expedia Worldwide, told the Phocuswright conference this week that it liked these areas because no one else was prioritising them.

“We like to allocate capital where others do not,” he said.

“Based on the incredible success of Booking.com and TripAdvisor the vast majority of capital in the online travel space is going to hotels. Air, no one is investing in.”

Khosrowshahi said Expedia can take advantage of the fact that an air ticket has a high attachment rate to lots of other related products.

And he said there was more about air than price and schedule that customers are interested in, like if Wi-Fi is available or customer reviews and pictures.

“We think the flight product could be better and faster,” he said. “We do not see other big global players investing in flights so we think it’s an interesting area to go into.”

Khosrowshahi described rail as “an incredibly important transport medium”.

He admitted Expedia would not make much money out of it, but it has the advantage of being a frequent purchase.

“We will have the opportunity to upsell to consumers because we will have the context in terms of where the consumer is going.

“Travel is an infrequent purchase, therefore the more you can start to deliver to customers frequency the more sticky our apps are. I do not see anyone else doing it, so we will.”

During Phocuswright, Expedia announced a major deal with SilverRail to power its entry into the rail sector globally, with a platform due to be launched in 2016.

Another product area expanding for Expedia is vacation rentals following the $4 billion purchase of Homeaway, a partner the OTA was already working with.

Khosrowshahi said it was difficult to develop this area when it was “sharing the economics” with Homeaway but that now it was something it could throw volume at it.

“We are confident that this product is going to work for us. The most important aspect of us buying Homeaway was we believe in Homeaway product.

“We believe in home vacation rentals, we believe in taking that from a listings business to a transactional business. That’s what’s going to make that deal pay off for us.”

Expedia’s target is to ensure that the majority of properties are bookable online by the end of the year.

Airbnb had “built the playbook” for Expedia in the alternative accommodation sector, said Khosrowshahi, and it will look to develop accordingly.

He described Airbnb product as important but “not at the heart of the lodging eco-system”, the home share website being “additive” as well as “competitive” to established players.

“Any time you add supply it takes prices down and you boost demand. There is going to be a generation of travellers who travel more, so it’s going to be additive.

“The inventory is there anyway, it’s coming one way or another. You can spend your time resisting change or customer trends and people who do that typically lose share over time.

“Alternative accommodation is where independent hotels were 10 or 15 years ago. Players like ourselves brought that stuff online and that really spurred on independent hotels.”

One product area that Expedia is not interested in is restaurant reservations, unlike its big OTA rival Booking.com which plans to grow its Open Table brand.

Khosrowshahi said although there was the advantage of frequency of purchase, the “economics are not great”.

“We will leave that to competitors. We have zero interest in restaurants at the moment,” he said.