71: Travel in the Age of AI: Booking Holdings CEO Glenn Fogel on the Connected Trip

Well, thanks for having me and thanks everybody for coming.

So it is interesting because I got asked a similar question earlier today in an interview we're doing and there were people there and I was trying to describe to them about well you had to buy a thing called a ticket, had this thing called paper and there's this red carbon behind. They had no clue what I was talking about. Just literally really see the change. Back then you had to go see somebody or you maybe you made a phone call but then like are you going to mail me the ticket? In fact, when we first started our company, we actually printed the tickets in our building and then we'd send them out by FedEx to people. It was that crazy back then. And it really became a thing when they actually in certain places where they became in a rule, you had to go ticketless and you weren't allowed to do tickets. There are certain countries that said you're going to all ticketless. I think China may have been one of the first ones that did that. And everything about it has made it so much easier, better except one thing though. People still find it incredibly frustrating because it is. And the fact is, is there a single person here raise your hand if you can say I've never had a frustrating moment in planning, organizing, executing or you know going through my travel via anybody?

If I were to say if I said you know travel I love doing it but the planning and it sucks. Would anybody disagree with that? Right. It does. And back in the day that early part you had a thing where you go to a person and a travel agent a human travel agent and that person she knew a bit about you and she kind of knew what you could afford and what you'd like and you talk back and forth and she knew your family and she'd say okay you can do this and here's some hotels and all planned out based on what you knew. Personalized it. And then you gave her one thing. You gave her a check, which you all know, they didn't know what a check was either. I explained that. And then if anything went wrong, you just called her on the phone or somebody, one of the older people said, 'Yeah, you go to a pay phone.' They didn't know that one, of course, but you call and they fix everything for you. Nowadays, if you think about it, it seems worse, doesn't it? But that's what we need to recreate using technology. And that's what we call our connected trip is using technology. All the things we can do through digital process. The database knows so much more that anybody human being with brochures and books knew. And it reminds everything about your history of what you like, what you don't like. And it has the ability to know all the things that you may want, what price level, etc. You can interact. And now with GenAI, you can actually have that conversation with that agent.

So, I happen to have my phone with me right now. This is like a travel agent in my pocket. And I can go and I'll just say Priceline. I'll go because I like Priceline. And I just go to Priceline. It's called Penny. It says, 'Hello, I'm Penny. How can I help you?' I can just start the conversation with, 'Hi, I want to go to London.' Well, that's very interesting. When would you like to go? What would you like to do? And you'll have that conversation. Now, if I have been using Penny for some time, it knows my history. It knows all the things I like. And by the way, one of the most frustrating for me before we came with GenAI is for years I do a hotel search on our own sites and it would throw up some nice hotels and throw up like one two stars. I am now in my 60s. I am not going to one or two star hotels.

I like this example because I spent a lot of time in Amsterdam. How many of you been to Amsterdam? Great. Okay. How many of you keep your hands up? Keep your hands up if you took a boat tour, a canal trip. Did you go to the Rijksmuseum? You're going to go to Amsterdam. You're going to arrive Tuesday. You set this all up. We have it all done because we suggest these and you like it and you got your tickets for Wednesday to go do the canal boat. Good. You got Thursday for the Rijksmuseum, right? You arrive Tuesday. We know looks like it's going to rain on your boat day and it's going to be sunny on your museum day. We send you that message. Hi, weather doesn't look good for this. Let's switch it around. What do you say? We can do it all for you. Just one thing done and we'll do it all for you. That's what you want. That's what we are building for you and then you will be happy and then you will come back to us and we'll do well.

It is an incredible thing not just for the travel industry but as we all know for everything. The world is changing very very fast.

Well, one of the things it already is doing really well and that's improving customer service because as we know things go wrong in travel. It's not our fault. I just want to make that right. We have nothing to do but just let you know but we know bad things happen and being able to get a solution to that. First of all, connected trip having everything together makes a big difference. So you got the plane ticket and you got all done fine. You're all excited. You left the house and you're going to the airport and the supposed to take off in 2 hours. Time is fine. And you get a text message. Today you get the text message that says, 'Oh, your flight looks like it's going to be delayed. It's not going to be 2 hours from now. It's going to actually be six hours from now.' And you're like, and that's all you get. That's it. Nothing more. What we want to be able to give you in customer service is we have another flight that you can take that'll only be four hours. So you'll not have to wait six, you four, and be great. And then because it's connected trip, we know then you obviously had a car to pick you up. We're going to change that for you automatically. We know that your dinner reservations that you set with OpenTable, well, that ain't going to work now. So, we have already looked to change that for you for the later reservation. Unfortunately, there are no seats available at that time. But there's another restaurant just down the street, same type of food. We'd be happy to make that reservation available. And by the way, because been such a lousy time, we're going to give you that free bottle of wine and notify your other party that was going to meet you and all that's going to be wonderful. That's what we're building right now. Now, are we there yet? No. But we do have is better customer service than it used to be because using GenAI enables so many things to be better. First of all, you don't have to talk to a human being to get a lot of things done. GenAI handles it all. You're talking to somebody, you think it's a human, it's not. It's GenAI talking to you back. I'm telling you.

In our thing when we're doing travel customer service in the past the agent would have to summarize all the things happening in the problem so that if it doesn't get solved right there that the next agent that you call when you're even angrier will actually know all the notes to be thought well GenAI is recording it and changing it all right there and writing it down summarizing it but even more so has anybody here ever worked in a customer service shop ever so you know scripts right so scripts are all pre-done all written out all that but with generative AI interpreting what you're saying as a customer being able to understand that and be able to figure out what's the best solution and coming back the customer service agent can read that say hi this is the thing to do makes it faster simpler easier how many people waited an hour for customer service on a travel thing right yeah design the great thing when you have GenAI you don't need a lot more people you don't have to wait it should pick up immediately if you have the right amount of compute this should not be an issue at all.

That's why I'm so optimistic about it's going to be so much better than it's been in the past in all of these areas. So, it's wonderful. We just have to get from where we are today to where we want to be going as fast as we can.

Well, I think it's helping. I think it's definitely helping because we're able using AI, we're able to make a better suggestion in terms of we know what you just bought and what you may want. Also being able to cross-sell and come up with things and giving you discounts because you bought this, we can give you a discount here. Those type of things are really helpful, but I want it to be more. It's funny people say that that's incredible up 20%. So just for scale, so last year we did $186 billion of total transaction. Just to give you a side note, what does that really mean in terms of market capitalization? We're a public company. So our market cap is approximately twice what number two is. That's the amount of the scale we have. And we're still rather small part of the overall travel industry. Total travel industry probably north of three trillion. It's hard to know exactly where the money is. So as a percent of the total amount, you know, more than 5% but not much. But the fact is really big. It's a huge amount that we have to work with. But I don't think 20% that's lovely. But I'm like, well, I know they didn't just buy one thing. They bought other stuff from somebody else. Why? It's always interesting though. People ask that do ask that question, too. They say, well, they bought a hotel. Did they buy any attraction, something to do there or not? And I say, 'Well, I know they did because they didn't go on a trip just to stay in the hotel room the whole time. I know that, but they didn't buy it from us.' And my question to my team is, 'Well, why not? Why did they buy it some other way? What should we do more? What signals did we not get that we need to put in so they'll buy it from us?'

Booking.com is by far the largest, which again, it's interesting. Again, size matters in so many things. Priceline's a huge company. OpenTable are huge. These are billion-dollar companies. These are enormous companies worth of lives to scale. Booking is just so much bigger. So if you round off and you look at our 10K just round it off call 90% of the business is Booking.com and rounding but that's you know that means that wait so only 10% of your business is Priceline or Kayak or Agoda and I'm like yeah but that's still 10% you know we're 150 billion that's a lot of money.

So, that's one of those great questions asked me and I understand this is on the record. It is. So, you're in a very good level. If you buy more, you may get better. Okay, maybe you're the top.

That's a big issue for everybody is do the horizontal large language models dominate everything, take over everything? And we are all, look, we're all aware of what just happened the last couple weeks. We know that some new models dropped. Get a couple people saying everything a genius is going to solve. Everything and every company that is based on old software companies will disappear. And we all watched a trillion approximately a trillion dollars of market cap getting vaporized in a couple of weeks based on that. It's come back a little bit and stuff because well wait maybe not. So there was that belief there was that thing going around. People say well people won't need a Booking.com or any of those competitors because they'll just go to ChatGPT and then they'll go straight and buy it from the supplier. So, a couple things to understand about this. One, certainly the large international chains are doing what they can and working to make sure that they can try and get somebody off of a large language model to go directly to that international chain. They're big. They have big IT departments. They can work and put together an MCP server and connect and put all the information through and all that. But approximately a little bit under 90% of our hotel business is not with the top 10 international chains. So the idea that this little 20 room chateau thing in France is going to be connecting somehow to ChatGPT and getting streamed and then the person goes straight there. That is not happening. The complexity of how you get all that information and be able to display in the right way and get the right availability, the right pricing and then throw on top of that the payments. We do payments approximately 100 different ways payments. Now I don't know how you would even understand that question because we're in America in the US and what are you talking people say what are you talking about? I take my Visa take on my Mastercard. You know the rich people pull out the American Express black card. Other people don't do that that way. They want to pay in the way they like to pay. I don't read this. Oh, yeah. Like China, Alipay, WeChat pay. Well, we have someone from the Netherlands where Yes.

Exactly. So that's a really important thing because if you are that small hotel in the Netherlands and you have a visitor coming from oh I don't know let's say coming from Africa and the person from Africa wants to use M-Pesa right the small hotelier in the Netherlands does not want to take M-Pesa at all they would like to have euros deposit in their bank we will take the money in M-Pesa that's good for the customer who's traveling to the Netherlands we will put euros into the bank account of the hotel in the Netherlands and we will do it cheaper than it would have been if they try to do it some other way because it's easier for us to do that type of transaction than for the customer has to do what go to an FX store and actually change money god does anybody do that anymore I don't think so and it'd be horrible so that's another way then the regulations a lot of people don't understand if you're a merchant of record in the travel industry there are a lot of rules that apply particularly not just the monetary stuff if you're transferring money around now you got a whole bunch of stuff there tax stuff you have to deal with but just in general merchant of record in Europe I got to deal with DMA digital market I deal with DSA digital services act I got to deal with EU AI Act I got to deal with PSP I got P2B platform to business I got to deal with DAC 7 I got the list is endless. And there was just an announcement a couple days ago where OpenAI came out and said we have no intention of doing travel as an agent and Google some time ago and said we're not doing merchant of record and Google thought about doing this a long time ago done a couple and they pulled back and there's a reason they can make a lot more money just making us buy ads on their service and then they don't have to touch any of the complexity of it. So it's good for everybody and I think that's what people realize this idea you're going to vibe code companies like ours or Salesforce or ServiceNow that's a little fantasy.

It's a dawn of a new age and the problem is nobody has a good sense of what the future's going to be. I mean, think about how fast things have changed. When ChatGPT first came out, 22 and you first tried it and you're kind of it's nice little party trick, you know, can make a limerick. Great. And from that to where we are now and then think where it's going to be from now to next year. If everybody's been out in the valley recently listening, they're all the rumor of what is the new models coming down and how much more powerful it's going to be. How many of us here have vibe coded something for own personal use? Anything? Anybody? Somebody did. Yes. Okay. Right. So, you know, you see what's happening and that's the personal stuff, but it's coming down so fast. So, we're going to ask regulators. We're going to ask our lawmakers, our pol we're say, 'Hi, could you please regulate this?' Well, it's hard because nobody has a good understanding and they have to get the information first. But the problem is as soon as you do it changes and it changes again and again. DMA is a good example of this because all these things were put together a few years ago and now with the changes and how things are trying to fit these things in or not take something as simple as OpenAI. Now OpenAI almost a billion approximately a billion monthly users, right? It's got a market cap of I'm wrong about somewhere probably half a trillion I think last round something like that very big right it's not currently regulated under the DMA so well why not well because it doesn't fit the category is one reason I mean there's also how long you got three year thing but the fact is what is it is it a search engine because there are certain categories to find what actually is it how does it fit do we need new rules basic point being that this is a really complicated and somewhat concerning time because if you don't set up the rules now, it's going to be really hard down the road to create them, to bring it back if you don't like what it's created. There's a very famous Princeton professor who I can't pronounce her names exactly right, but she talks about how the values of new technologies that come in, you see the shiny new object that's so good and you love it and it's all good. The problem is society doesn't recognize, we don't realize what the problems from that technology is until far down the road and now it's really late because the new technology has been embedded into your society and now it's really hard to pull it out and you can think of a lot of examples of that when we're made. Now one I thought of and I checked it with ChatGPT so it must be right. I said would plastics work as an example of that and ChatGPT said yes it would. That is true because don't do that don't never trust you got to verify but when you think about it it does because plastics at the beginning a wonderful thing is light you can form it anywhere you want there are lots of good uses for it now we read all about microplastics and the potential health dangers of that and then you know the next problem is we can set up the rules rules in Europe may be different rules in China may be different rules in India may be different even bigger issue. Just here alone, think about it. Right now, we have 50 states and we don't have a federal rule.