John Kim's colleagues pause a minute when they walk by his office and hear him talking aloud. No one's in there with him.
Kim's talking to his watch. Or his glasses. Both send Bluetooth signals to his phone, and he's either checking email or accepting calendar alerts for his next appointment.
Hotel News Now sat down with Kim, senior VP of global products, last week at Expedia's headquarters in Bellevue, Washington, as part of an invitation that included some backstage access to the online travel agency's innovation processes.
Kim and CEO Dara Khosrowshahi are placing their bets on innovative technology. Staying on the cutting edge, remaining agile and adjusting on the fly are necessities as the way consumers book travel continues to shift and brands grapple for more control of the distribution.
The executives fully acknowledge the future challenges facing Expedia and its family of brands, each responsible for a different kind of consumer interested in researching and booking travel. The brands—Expedia, Hotels.com, Hotwire, Egencia, Venere, eLong and Trivago, among others—operate in virtual silos and often compete with each other. Khosrowshahi likes it this way, saying "competition spurs innovation."
Aside from internal competition, other challenges are coming to light:
- Expedia’s stock price has fallen 24% since the beginning of 2013, closing September at $51.81 per share, compared to rival Priceline, which topped $1,000 per share in September.
- Margins negotiated regularly with hotel inventory suppliers are shrinking.
- More necessary search-engine-optimization and search-engine-marketing partnerships mean higher costs.
- There is increased competition and innovation in the opaque and mobile spaces, essentially forcing Hotwire to adjust its overall strategy.
- There is increased competition in the metasearch space, including an online review giant, formerly in the Expedia brand family, quickly outgrowing its former parent company in many metrics.
But in blue jeans, sneakers and his trademark loud socks—with office views of Mt. Rainer on one side and the Seattle skyline on the other—the CEO is comfortable.
Khosrowshahi also is approachable. He responds to emails within minutes. He posts blogs to LinkedIn offering career advice. He occasionally pops in the innovation lab on the 11th floor, which he refers to as the "coolest space in the building."
“When I look at the business going forward, we see enormous opportunity,” Khosrowshahi said. “We’ve invested very aggressively in technology, so I think the product is going to get better and better.”
Walking the walk
Inside the innovation lab on the 11th floor there are a dozen lounge chairs facing a large projected display. It's standing-room only and everyone—product designers, web developers, researchers—are watching a red dot bounce around the screen.
On the other side of the glass is a Seattle resident in her 20s who responded to a Craigslist ad offering a $75 Visa gift card to participate in an online travel booking study. As she surfs Expedia's new responsive-design site, the red dot is tracking her eye movement. Other study participants are patched to machines that read their nervousness and facial expressions to determine instances of frustration and happiness.
Instructed to book a trip to New York City in January for her and her spouse, the millennial checks star-ratings, skims user reviews and flips through a slideshow of hotel property photos. But her eyes are consistently drawn to the top listing—the only one with a yellow-shaded backdrop—and she ultimately chooses the W New York, a hotel with a lower guest-rating score but atop the list because it's paid content, and labeled as such.
So, while Starwood Hotels & Resorts Worldwide and all the other hotel management companies and franchisors, drag Expedia into lengthy negotiations over commissions on guests sent to their hotels, it appears in the innovation lab that working with Expedia and paying for placement is delivering exactly what the hoteliers are paying for.
“We’re constantly testing new features, new designs,” said Scott Jones, senior VP of design and user experience. “Then the developers will go back and make some tweaks to the site and we’ll spend a few days testing again.”
Along the wall in Jones’ lab, screenshot print-outs of heat maps show where an aggregate sample of 10 to 12 average travel consumers focused most of their attention while surfing Expedia's site. Polygraph-looking line graphs show when the users had fluctuations of emotion.
Once new site features are tested in the lab, they’ll be implemented on the site through a process called A-B testing. A portion of Expedia users will be shown the new feature and others, called the control, will not. Tests determine the popularity and usability of the new feature before it is implemented.
Expedia is running an A-B test on a feature called Scratchpad, which saves past searches atop Expedia’s homepage so users can pause their research and easily go back and review everything they’ve browsed before making the most informed choice.
“Expedia is not one stagnant site,” Khosrowshahi said. “Right now there are probably 140 versions of Expedia.com out there across the world.”
Prepping for the future
While the future of travel research and booking on the web is murky and unpredictable, Expedia can afford to spread its wagers across the table.
One area of focus is packaged travel—travelers who book a combination of hotel, airfare and car rental together—and Expedia is reinventing the way it targets those travelers. New features are designed to promote a destination and then walk the user through his or her flight and hotel options seamlessly rather than push individual travel components.
The new Expedia iPad app, due out early next year, is at the same time heavy on imagery, complex on the back-end and yet simple to navigate. Users will swipe and zoom across a globe and land on a destination; then, flight search results and hotel options will appear side-by-side, each scrollable and sortable independently.
Kim said he is confident Expedia’s iPad app will be one of the top three to five apps in the world.
“You can start to see the whole trip coming alive before your eyes,” Kim said. “You get your reviews all in one place and we make it super easy to shop. You slide to check out, and we’ve got your credit-card number stored and you can add the trip to your calendar or share it and you’re done shopping.”
Payment options are another emerging area gathering much of Expedia’s attention. David Doctorow, senior VP of global marketing for Expedia.com, said there are “a bunch of future growth opportunities” around the way users pay for travel. Expedia Traveler Preference, which gives travelers the option of paying on Expedia or paying at the hotel, just scratches the surface, he said.
Of all the executives at Expedia, Doctorow’s job might require the most agility. He is responsible for overseeing the company’s efforts in SEO, SEM and metasearch placement. It’s in these three areas where hoteliers can benefit the most from Expedia’s experience and spending power, he said.
For example, keyword bidding is both an art and a science, and Doctorow is confident Expedia has an upper hand. Because the company markets for hundreds of hotels in any given city, the cost of specific keywords can be defrayed among more entities. And because of Expedia’s track record working with companies, such as TripAdvisor, Kayak and Google, its “quality score” translates to less expensive cost-per-click prices.
“From the perspective of a hotelier, if they can leverage our good quality scores that we work really, really hard to improve every single day, that’s an efficient way to tap into traffic versus having to build their own,” Doctorow said.
“We see a lot of potential ahead of us,” Khosrowshahi added. “It’s a very competitive field. It’s a big field. But I think that if we put our heads down and execute we’ll see lots of success.”