Former Chief Executive Officer, Expedia Group Inc
Expedia CEO Talks “Slightly Decelerating” Travel Demand | Bloomberg Talks
Outgoing CEO of Expedia Peter Kern discusses the declining tailwind of post-pandemic travel spending and how the company has set itself up to power through, as well as tech developments in the business. He speaks with Bloomberg’s Sonali Basak.
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About Peter Kern
Peter Kern, who stepped down as Expedia Group CEO in May 2024 after four years, has described the company as "reset for the future" and "in a really strong place." He stated that his departure was planned, noting his contract was up and that the company had completed a major technological transformation, including consolidating multiple technology stacks into one and unifying its loyalty programs under "One Key." Kern said the company was focused on investing in long-term customer value through its app and loyalty program, and that it was using artificial intelligence throughout the consumer experience and for operational efficiency menus. He also said Expedia was moving away from being a "competitive house of brands" toward a more unified approach. Kern has commented on broader travel industry trends, stating that the macro environment was "softening around the world" and that travel growth was decelerating from the post-pandemic surge. He said Expedia expected to outperform the market, but acknowledged that the market was slowing. Kern also noted that the company had not seen evidence of consumers reducing travel spending due to inflationholidays, but that travelers might trade down to cheaper alternatives. He described the company's B2B business as a significant growth driver and said Expedia was well-positioned competitively, particularly against Airbnb, by offering a rewards program and a broader range of travel products.
Transcript (16 segments)
✨ AI-enhanced transcript with speaker attribution
S
Shanali Bassic0:00
This is Bloomberg Markets and I'm Shanali Bassic. It's time now for Stock of the Hour. This week shares of Expedia Group jumped the most intraday in about three months after Susquehanna raised its target on the travel booking company to $145 from $120. The analyst expects 2024 revenue to grow at least 10% and to show margin expansion. We're going to discuss it with the most relevant man to talk about it, the CEO of Expedia Group, Peter Kern, who announced last week that he will step down as early as May. Peter, thank you for joining us.
When you think about how the stock initially reacted from the last set of earnings to the transition plan, how do you now resell the story to investors in the wake of a management transition?
P
Peter Kern0:41
Yeah, I think it's the same story. I mean, we've been working for four years on a transformation of the company technologically, our brands, everything to reset the company for the future. That was the work I was focused on. My contract's up, you know, in April, and we felt like it was a really good time for a transition. We've rebuilt the teams. We're in a really strong place. So I don't think I have to resell the story. If they want to sell us their stock back cheap, we'll buy it, and we feel really good about how we're set up for the new year.
S
Shanali Bassic1:08
When people think about Expedia, one thing that investors are very concerned about is that move from post-pandemic travel spending to now a more strapped consumer perhaps dealing with inflation again. How much do you believe that revenge spending may start to subside?
P
Peter Kern1:25
Yeah, I mean, look, I think we had really robust growth out of the pandemic, and it was growth on growth on growth. We had years of double-digit strong growth, and a new part of the world would open. Asia was rebounding last year after the West kind of slowed down, and now Asia will slow down too. So we expect travel growth to be solid, just decelerating as compared to some of the opening trades that were happening. The good thing is we were doing all the hard work on ourselves during that period, and we are in a different position internally to grow out of this. So we feel really good about where we are in terms of the business, the technology, the consumer experience, and even if the market tailwind is not as strong, we feel like we're in a really nice place to keep growing.
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Shanali Bassic2:08
How do you respond also to any threat of more competition? You know, another company reporting today is Airbnb, and a lot of questions about whether they will expand in the booking space. How would Expedia respond?
P
Peter Kern2:18
Yeah, again, there has been plenty of competition in travel for a long time. Obviously, we have big competitors who are very good at what they do, but the nice thing for us is we spent the last three years rebuilding ourselves, and those companies have pretty much been going steady state, which has set us up in a new place in terms of AI and machine learning, our service experience, all the things that really impact the consumer, our rewards program. We have a big new rewards program. Airbnb doesn't have a rewards program. Vrbo customers can get rewards. So we think we're set up competitively very well. Obviously, those are big companies; they're going to do fine too, but we felt like we made more improvements on ourselves and what we're capable of giving the consumer than our competition has.
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Shanali Bassic2:58
We're talking so much about the consumer today and the pain they may or may not feel over the next six to twelve months. Things like rewards, how much do they matter in an environment like this?
P
Peter Kern3:07
Well, we think rewards matter to our customers. And it's not just rewards; it's that the benefits of being a member include member discounts and other kinds of service benefits. So we're really focused on getting members into our universe because they get a lot of benefit. They can find the best prices. They can make their money go farther. We have package deals that make the money go farther. So I think travel, we're pretty confident travel is going to remain strong. There may be some trades as consumers trade out certain things, but there are lots of ways to make their dollars go farther if they come to the right place. We feel really good about that positioning, and we're not feeling a lot of consumer pullback. You know, I think our forecast is travel will be solid, as I said, just a slightly decelerating environment.
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Shanali Bassic3:52
Something that's really ailing a lot of consumers as well, I'm sure we've all felt it, is the sky-high cost of traveling right now. How much do things really have to start to give to get people back on the road again?
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Peter Kern4:02
Well, again, if you look in pockets, it's different. For example, car rentals got super crazy during COVID; now the prices have come down considerably, and that's been a headwind to our business, but prices are getting more reasonable for travelers. We're seeing units go way up but the price come down. Air is starting to get cheaper, finally domestically first, in the US, but now it's starting to spread generally over the world. Again, there may be growth in price but it's slower. And lodging seems to want to hold pretty well. There will definitely be pockets, I think at the lower end of vacation rentals, at the lower end of hotels, you'll see pockets of price pressure, but the middle and top seem to be holding. So you may not get many breaks anytime soon.
S
Shanali Bassic4:42
You were talking about AI. A lot of companies are thinking about AI right now. What does it really do for you to set you up for competition or reduce costs?
P
Peter Kern4:51
Yeah, so it does both of those things. First of all, on the consumer experience, what we've been focused on is putting AI throughout the front-end experience. Also, as we put all our technology onto one stack, we can now deploy it across any of our brands super simply. So what it does is from discovery, you search on ChatGPT all the way through to how you search, how we serve up the right pictures to you, how we service you if you have a service problem. All of that is enabled by various kinds of AI or machine learning. Then on the efficiency side, we're experimenting with all kinds of things: how we work in the call centers to answer questions, to help our representatives do things, all kinds of repetitive tasks through the process. And even when hotels or a Vrbo host needs to describe themselves, maybe they're not the greatest writers, we can use AI to help enhance what they write, to help them down that path. So there are a lot of really cool things we're experimenting with.
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Shanali Bassic5:46
You were saying as you stepped down that you're ready for your own vacation. Where does the CEO of Expedia head out?
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Peter Kern5:53
I'll take just about anything at this point. I've traveled a lot, so I'll probably go to Italy. That's my favorite spot. But I'll take anything right now.
S
Shanali Bassic6:03
Peter, thank you so much for your time. That is outgoing CEO of Expedia, Peter Kern.