Expedia-business-model

Expedia Business Model: Getting Disintermediated By Google

Born in 1996 as a travel platform of Microsoft, it would be spun off later on. Expedia became among the largest online travel agencies (OTAs) which comprises a set of brands that go from Hotels.com, Vrbo, Orbits, CheapTickets, ebookers, Travelocity, Trivago and others. Expedia business model follows a multi-brand strategy.

Expedia multi-brand strategy

Over the years Expedia has become a portfolio of brands, which spans across several verticals:

  • Brand Expedia: a full-service online travel brand with localized websites in over 40 countries covering 27 languages offering a wide selection of travel products and services.
  • Hotels.com: marketing and distributing lodging accommodations.
  • Vrbo (previously HomeAway): an online marketplace for the alternative accommodations industry.
  • Expedia Partner Solutions: a white label or co-branded ecommerce template solutions (Hotels.com for partners; or Expedia.com for partners; or a agent booking tool, Expedia TAAP).
  • Egencia: a full-service travel management company offers travel products and services to businesses and their corporate travelers
  • Orbitz, CheapTickets, ebookers.
  • Travelocity.
  • Hotwire travel booking service that matches flexible, value-oriented travelers with suppliers who have excess seats, rooms and cars they offer at lower rates than retail.
  • Wotif Group: a leading Australian online travel company, comprised of the Wotif.com, lastminute.com.au and travel.com.au brands in Australia, and Wotif.co.nz and lastminute.co.nz in New Zealand.
  • trivago: majority-owned hotel metasearch company, based in Dusseldorf, Germany.
  • Expedia Local Expert: online and in-market concierge services, activities, experiences, attractions and ground transportation.
  • CarRentals.com: online car rental marketing and retail firm offering.
  • Classic Vacations: full line of accommodations, from mid-tier to luxury (including suites, villas and residences), competitive pricing
  • Expedia CruiseShipCenters: North America’s leading cruise specialist
  • SilverRail Technologies, Inc: ecosystem of rail carriers and travel distributors around the world’s most comprehensive rail search and booking platform

Expedia revenue models explained

Expedia (besides Vrbo who follows a mixed revenue model) follows three main kinds of revenue models:

The merchant model

Here some of the brands part fo Expedia facilitate the booking of hotel rooms, alternative accommodations, airline seats, car rentals and destination services. For those transactions Expedia acts the merchant of record (it processes the transactions making sure they are compliant to standards of privacy and security). Most of Expedia merchant transactions relate to lodging bookings.

The agency model

Here some the brands part of Expedia portfolio facilitate travel bookings and act as “the online agent” in the transaction. In turn Expedia receives commissions or ticketing fees from the travel supplier and/or traveler.

The advertising model

Here Expedia offers travel and non-travel advertisers through its various media and advertising offerings across its websites, as well as through metasearch site, trivago .

Marketing channels used by Expedia in the pre-COVID era

Over the years Expedia used primarily online advertising in the form of search engine marketing and optimization, metasearch, social media websites, brand advertising through online and offline channels, loyalty programs, mobile apps and direct and/or personalized traveler communications on its websites and direct e-mail communications.

Post-Google Travel era

first-google-era

In February 2018, Google launched Google Trips. As Google explained at the time:

Planning a trip involves lots of searching for flights, hotels, things to do, itineraries and more. The process is often cumbersome because we have to use multiple tools to gather everything we need—especially on a mobile phone.

So Google Trips was announced as a way to “help users explore options and make decisions on their smallest screens.”

In 2019, Google Trips got even better, much much better:

Your trips on desktop

In short, Google entered at full speed and force the travel industry by enabling end users to perform the whole travel navigation from searching to booking.

As reported on skift.com, Expedia’s CEO, while answering questions in a media briefing at the Expedia’s Explore ’18 conference in Las Vegas, Okerstrom announced, “The internet has been littered with the bodies of companies put out of business by Google.”

As Peter Maxwell Kern – Expedia Group, Inc. – CEO & Vice Chairman explained in the Q1 2020 press releases:

As far as the bigger cutting back marketing, OTA story. I recognize, as Google and others have pushed their way to disintermediate all of us, that has created challenges. I think there’s also been challenges as we’ve all tried to continue to drive growth and weren’t finding other ways to drive it as effectively.

How did Expedia react? And how is it reorganizing? Peter Maxwell Kern explained:

I would say the things that give me encouragement are, first of all, while we don’t have the volumes to test it right now, we do have an opportunity of an entire reset because we’ve essentially gone to virtually no marketing. And as we wade back in, we’re able to be more precise, be more constrained, watch and learn and grow into it and not just dive back in head first and spend back to the levels we were at.

As Expedia had to cut back on marketing activities due to the fall of bookings in the travel sector, during the COVID, Expedia is now rethinking its whole marketing (and business) strategy. Peter Maxwell Kern further explained:

We’ve chased unhealthy growth over the years. And Google and other performance marketing channels have tried to disintermediate us and we’ve made some not terribly smart choices along the way. We believe that this reset of the virus will give us an opportunity.

While Expedia has always been pushing on online marketing, it also invested substantially in paid performance marketing, which over the years proved inefficient. And this came out as the crisis hit, and Google itself entered the travel space with an enhanced Google Travel.

As Peter Maxwell Kern highlighted:

I mean, we’ve been talking about this for a while that as we wade back into the marketplace, to be much more disciplined to only chase real growth, real valuable growth, healthy growth and not be stuck chasing performance marketing and entering into dis-economic auctions. So we intend to be much better about that. We intend to keep those customers longer. We intend to serve them better and keep those direct relationships going strong.

reindermdiation-second-google-era

How do you defend from the giant turned into the everything search engine?

A few things that Expedia is doing, both as a result of the COVID and Google entering aggressively the travel space are:

Cut back last-mile marketing

As Expedia has been inesting widely in performance marketing. This is also what we can call a sort of last-mile marketing. Easy to track, simple to explain in terms of ROI, and yet expensive, if not balanced by a strong brand.

Invest massively on the product

Expedia business strategy will focus more on strengthening its brands’ portfolio, cutting back on expensive marketing activities with low ROI, and invest back on the platform and engineering needed to improve the product.

Work on integrations and parterships

As part of hits multi-brand strategy, Expedia will also keep investing in integrations across its brands, and partnerships with other brands.

Strengthen the brand, bottom-up

Another way to make sure to prevent disintermediation is to get as close as possible to customers. This means investing in both directions:

  • Product and engineering to have a great product/platform.
  • Brand advertising to reach potential customers directly and cut out Google from the experience.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here