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Latest News

Expedia shifts focus to direct consumer relationships: “SEO is not the future of our business”

Expedia shifts focus to direct consumer relationships: “SEO is not the future of our business”
mm
Amy Hinote
February 13, 2020

In a refreshingly clear-eyed and candid earnings call on Thursday, Expedia Group Chairman and senior executive Barry Diller and vice-chairman Peter Kern (who are running Expedia following the exits of Mark Okerstrom and Alan Pickerill) discussed Expedia’s adjusted trajectory, Google’s effect on the business, Vrbo, and its new focus on developing direct relationships with consumers.

 

The Google Effect

Expedia is not happy about changes at Google.

According to Barry Diller, Google should have oversight, but Expedia isn’t waiting for the government to step in: “When businesses get to this size they absolutely have to have regulation—sensible regulation . . . I do believe that will happen, but we are making our own efforts. We are driving direct relationships with consumers.”

Diller said Expedia’s app download growth is up 40 percent this year and added, “We are going to do everything we can to diversify our traffic to more direct arenas.”

Related: OTAs ask EU Commissioner to investigate Google Vacation Rentals

SEO Challenges

According to Peter Kern, “[SEO] is still a significant part of the business and a good part of the business. We’ve been belaboring this, but clearly as we move to direct relationships and direct traffic, with our customers. That is the single best way we can offset any declines that come from SEO.”

Reflecting on the previous quarter’s results, Kern said, “In terms of what happened in the third quarter, I think it was a compounding of a number of tactical things that Google did, and we did not respond well to. Again, Barry mentioned in the very beginning, we were caught up in a rather large undertaking in terms of reorganization, and that took people’s eyes off the ball, in our view. We could have done better; we should have done better; we will do better. There were also some changes in some auction dynamics in meta that we did not respond particularly well to. So there are a number of things that were going on that we were not really on top of. SEO was one of them. We expect SEO to be a continued headwinds.”

“Google—until someone stops them—is not going to stop doing what they’ve been doing,” Kern added. “We’ve seen signs as recently as last week of some changes that may have impact and hopefully they will think better of it and create a fairer marketplace. But we can only control what we can. We are working really hard to offset those headwinds in pure SEO activity, as well as do everything we can around the rest of the business to make up for whatever we give up in SEO.”

“SEO is not going to kill us,” Diller said. “And SEO is not the future of our business. These trends began seven or eight years ago. We should have been more alert obviously to the continuing consequences of this. I don’t think we are going to be saved by some bell—by a government bell. I absolutely believe there will regulation, but we are doing all the things that we intend to do to de-emphasize it. It is a part—not a huge part—but a part of our business, but it ain’t the future.”

Will Google also create competition on the supply side?

However, many are unsympathetic to Expedia’s challenges with Google, as Google is now doing to OTAs what OTAs did to its lodging suppliers: bait with traffic, create dependency, and then switch business models.

A expected problem for OTAs is that its vacation rental providers are now accustomed to paying for booking performance (thanks to these same OTAs), and are agnostic on whether they pay Google, Expedia, Booking, or Airbnb.

As more vacation rental channel managers are able to connect directly with Google’s new vacation rental OneBox search functionality. vacation rental managers and homeowners are not going to need to use an OTA to connect with consumers. Since Google is at the top of the funnel for vacation rentals, managers are likely to shift budgets from OTAs to Google. As a result, brands like Vrbo may have a supply problem resulting from Google’s new format in addition to the decline in consumer traffic. 

 

Views on Vrbo’s Rebrand and Performance

Expedia executives were asked, “Is Vrbo where you need it to be, in terms of operations, marketing, etc., in order to attack the alternative accommodations market?”

According to Diller, “No. Vrbo is not where it needs to be, but it is a lot different than it was a few months ago. It has a new leader whom we have confidence in, and he is also on the ground. And—look—what happened to Vrbo is it was—as I think all of you know—a collection of a bunch of disparate businesses/brands all over the world, basically, that were bought together and put under the name of—a dumb name—called HomeAway, which meant nothing to no one. We did have one business which did mean something to people called VRBO which we tried and I think are at the very beginning of branding Vrbo. And, I don’t know if we went too fast or too slow on this, but we did this absolute change—day one to day two—from everything to then one thing Vrbo. That caused it to lose a ton of SEO traffic. Given the trends in SEO anyway, it was not well executed.”

Diller continued with what we believe to be a little dig at Airbnb: “Vrbo is in a great—somewhat standalone—category. It’s not rooms in the attic that people rent you and stand next to you while you go to the bathroom. It is basically accommodations for families, whole homes, and large apartments in resort areas and other places. It’s got great product. We just need to market it better than we have, but certainly it’s got large opportunity for us.”

He added, “As far as the category, I’m very impressed with what Airbnb has done over time. I wouldn’t call it a revolution, but not only has it opened up inventory that didn’t exist, but it has also brought people into traveling that couldn’t afford it before, or didn’t want to mess with big stiff hotels, and also people who wanted a different experience, older people who were lonely and didn’t want to go to some cold place. It’s done a great job. But you put its inventory against hotel inventory, they have kind of a different audience. I’m not a big believer that they’re going to merge. I think there is a healthy standard hotel business and there’s going to be this business. We are participants in it.”

Diller also announced that almost all of Vrbo’s inventory is now on Expedia.com. 

 

What we can expect from Expedia

Unlike previous earnings calls, Diller and Kern were open about the direction they taking Expedia. On the consumer side, the company is looking to “ease their path to travel” and “add value” for its consumers. Internally, the company is looking to streamline and simplify the business and decrease costs that resulted from unnecessary complexity. 

“We were a bloated organization . . . over the years, chasing the tail of growth, adding people and people and complexity and all this stuff until very few people could figure out what they were supposed to do during the day,” said Diller. “Simplifying that has a great by product of cutting our costs.”

Kern added, “The industry suffered –or benefited — from a high degree of commercialization around everything they did. It was an aggressive ‘how can we turn a customer into a consumer into buying a hotel room?’ That goes for all OTAs. And I think, ironically, to tie a few of these questions together, that Google’s pressure and the pressure on performance marketing puts the pressure back on all of us to make it about the consumer experience.”

Throughout the call, Diller and Kern mentioned several initiatives they’ve added to the playbook for 2020:

  • Progressive web app (PWA) growth
  • Focus on user experience
  • Packaging: Adding value to consumer by packaging to provide lower price and better experience
  • Content: Customizing content that is served and matched to the customer
  • Call center improvement
  • Brand differentiation
  • Driving “biggest pools” of direct demand
  • Customer retention and loyalty
  • Streamlining and simplifying businesses and identifying areas for cost-savings
  • Experiences
Related Items#bookdirectairbnbbarry dillerbookingearnings callexpediaFeaturedgoogleloyaltyOTAsPeter Kernseo
View Comments (3)

3 Comments

  1. HomeAway says:
    March 6, 2020 at 8:55 am

    That dumb name didn’t have that terrible quarter you just had did it?

    Reply
  2. HomeAway says:
    March 6, 2020 at 8:55 am

    That dumb name didn’t have that terrible quarter you just had.

    Reply
  3. Donna Brucato says:
    March 5, 2020 at 5:51 pm

    I have been with VRBO since 2007. Fast forward to 2020 now under Expedia. It is has a bull in a China cabinet of changes. Just as I’m about to bail after each devastating change, it settles down and I let my guard down and think…okay, I don’t have to rush into launching my own web site. Then, yep, the bull is let loose in the cabinet again. Their first line of support deserve metals……

    After freezing funds from all owners/managers with one day notice in the middle of the night, being held hostage to pay 3% to release the money, it took Expedia weeks before they could take over credit card process only for new bookings. All past bookings were frozen or released at 3% pay up option. Expedia knew this was going to happen but gave no notice…. I called both the company VRBO used to process our credit cards payments VRPS and VRBO. There was a little feud between the two companies. Or so they spun it that way. They both quoted their standard user policies – they can change anything they want, when they want, because using their services, gives them that right. There is absolutely no recourse.

    The latest change?. Expedia will no longer give an owner nor manager the address of the person who is going to stay in the unit/home at the time of booking. It is obvious that Expedia works for the traveler using the real estate of others to fund their institution. The owner/manager is not ignorant about this concept, but often finds themself shrinking more and more in the equation with less and less of a voice. The only voice they want to hear from are those who are paying the booking fee. I contacted the BBB on this change and what was the response to the BBB? A policy quote they can change anything they want, because using their services, allows them too.

    Reply

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Latest News
February 13, 2020
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Amy Hinote @vrmintel

Amy Hinote is the founder and editor-in-chief of VRM Intel Magazine, which provides news, information and resources for the professionally managed vacation rental industry. With a background in finance and over 15 years in the vacation rental industry, Hinote has worked with property management companies, technology companies, intermediaries and investors, and provides insider information about the growing vacation rental industry. She also founded the data company, now known as Key Data Dashboard, which provides aggregated market intelligence and reporting for vacation rental managers. Hinote resides between Alabama's Gulf Coast and Evanston, Illinois.

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