In a bid to stay relevant to customers, Expedia is investing in emerging technologies like cloud and voice

Never shy about saying that with Google as its greatest competitor it needs to stay vigilant, Expedia is also on the ball about achieving optimum efficiency in technology. What other way to stay ahead? As its latest announcement shows in its figures for 2018, the solution is to throw money! In 2019, Expedia says it expects to up its spend on cloud alone to $250 million!

Expedia has been investing aggressively for some years now to cut its costs and improve marketing by migrating to cloud computing and data systems. It announced plans to hike booking in 2018 by leveraging its data-driven approach to marketing optimisation, while continuing to aggressively drive its global expansion plans. However, with so much else going on, it had in the end to trim its budget for cloud spending and the bill undershoots original projections by tens of millions of dollars.

As companies expand into the travel space, we believe there’s room for all platforms that behave in a responsible manner

Brandon Ehrhardt, Director for Platform Services, Loyalty, Expedia Group

So, although cloud is a top technology priority for Expedia, it’s not the only one. Expedia Group’s Brandon Ehrhardt, Director for Platform Services, Loyalty, who will be speaking in San Francisco next month about the opportunities for voice says there is a strong commitment to“helping consumers tap into emerging technology to enhance their travel experience”. Aside from investments in cloud, this is also “visible in our investment in voice and in our choice to work with Google in this space”.

In 2018, the group introduced Expedia Action for Google Assistant for its flagship consumer brand, Expedia. “This was the first Google Assistant travel action of its kind, giving travellers the ability to book and manage upcoming travel plans,” explains Ehrhardt, who believes that “as companies expand into the travel space, we believe there’s room for all platforms that behave in a responsible manner”.

Acquisition trail

Last year, money also went on acquisitions, such as on meeting the demand for short-term rentals in the US and competing with another major competitor, Airbnb. The group bought a pair of venture-backed hospitality start-ups, Pillow and ApartmentJet, for an undisclosed sum. On these deals Forbes magazine commented that: “This is expected to add a unique software platform which will lay the foundation for HomeAway and Expedia Group’s urban expansion efforts in the coming years.”

All in all, last year total technology and content costs totted up to $1.7bn, a rise of 17%. Cloud expenses alone came to $141 million against $57 million the previous year. Those figures are, of course, dwarfed by the selling and marketing bill – up 12% at $2 billion, but they are still hefty. In financial parlance, as analyst Justin Patterson at brokers Raymond James commented, they did indeed form a strong “headwind” last year. 

Fundamentally, it is less about our brands competing with each other, and rather squeezing out best practices and best win-wins for all

However, Expedia has a long-term goal. Ehrhardt puts it like this: “As the world’s travel platform, we take pride in our roots as a technology company created to meet the changing needs of consumers who were just discovering the web.”

In other words, as oft quoted, Expedia has its eyes on the future and its quest to move from being a web company to a technology platform. As Abhijit Pal, Expedia’s head of research told EyeforTravel in an interview late last year: “There is lot more scale that you can achieve both on the consumer side and from an industry point of view when you think of it as a ‘platform’ business. Fundamentally, it is less about our brands competing with each other, and rather squeezing out best practices and best win-wins for all.”

Building on cloud

In terms of progress with cloud so far, chief financial officer Alan Pickerill had this to say to analysts. “We've got additional components across air and the other lines of business to put into the cloud. It will just kind of continue to grow as we move through the year. If we go according to plan, then we'll have a good share of the compute in the cloud as of the end of 2019, but there will be more to move in 2020,” finance officer Alan Pickerill told analysts in a briefing. 

…we're trying to be very prudent and disciplined about the rollout to cloud

Alan Pickerill, Chief Financial Officer, Expedia

And, given Expedia’s commitment to keeping partners and customers abreast of moves, he added: “I should say, too, though, that we are being - we're trying to be very prudent and disciplined about the rollout to cloud. We test things very carefully, will roll things out and scale them back just to make sure that the customer experience is seamless and not disrupted!”

All in all 2018 was a pretty good year for Expedia, as even the analysts acknowledged they remain concerned about the impact of an inventory price war with Booking Holdings (which they see hovering in the wings). Gross bookings were up 13% to $99.7 billion, on which Expedia’s revenue gained 12% to $11.2 billion. It now has over a million properties on its core lodging platform, including 370,000 listed on HomeAway.

About two-thirds of Expedia sales came from booking lodging on sites including Hotels.com, and that revenue grew 10%. Growth in the vacation-rental segment HomeAway slowed to 20% in the fourth quarter but grew 29% for the full year. Airline revenue rose 18%, as Expedia sold not just more tickets but more expensive ones.

Less pleasing for investors, though, was that, when all the accounts were done, fourth quarter 2018 profits were down 69% at just $17 million. And Reuters expects the number for the whole of 2019 to be even lower!  Expensive business travel!

Brandon Ehrhardt, Director for Platform Services, Loyalty, Expedia Group will be speaking at Analytics & AI in Travel, North America next month on a panel that will address the opportunities for voice-enabled personalisation