Microsoft founded Expedia in 1996 as a division of the company. In fact, the website for the service was http://expedia.msn.com. Revenues increased by 31.5% in 2016 to $8.77 billion. While this is a healthy increase, net income did not fare as well, coming in at $282 million. This is a huge decrease from year-end 2015 of $764.5 million. The company claims to have $60 billion in bookings in 2016.
The company has acquired several assets in the online travel space over the years. Many people believe that Expedia competes with websites such as Travelocity, Hotels.com, etc. However, Expedia owns these entities along with others.
How the Company Started
The company was created as a division of Microsoft in 1996. Many companies diversified in the 1990’s to diversify their holdings.
It was a mistake for many of them to bring on businesses that were unfamiliar. Microsoft eventually divested in the department, and it was picked up by Barry Diller’s InterActive Corp (IAC). Microsoft provided the initial financing and the company went public in 1999, after spinning off from Microsoft.
The biggest challenges Expedia faced is the same that others in this industry face. The logistics of worldwide travel is a difficult field to master.
When you start to branch out into other networks and companies, you have to play by the rules of those countries and local communities. This means whatever business practices you set up domestically that work, may not be viable elsewhere.
Priceline and TripAdvisor are cutting into the company’s market share. Priceline specifically, has been aggressively advertising as can be seen from their television ads with William Shatner.
Expedia grew quicker than the technology they employed. During these times of rapid growth, they had to constantly upgrade their technology to keep up with the growing user base.
Some of the culture that was developed by Microsoft still hangs on with Expedia. This isn’t necessarily in line with the current management goals and adds to the challenge when trying to make changes.
The search engines have entered the fray of online travel. This is obviously a problem for travel services as Google can position its services ahead of others.
Why it Works
The company has developed into one of the biggest online travel entities in the world. Its network and companies make it difficult for competitors to penetrate. Due to the vast number of online assets, the company has a strong competitive position that is likely to continue for a while.
The company relies heavily on analytics of the data it collects, which is a huge amount of data. They gather preferences for travel as well as comments on how people like particular services. They can also specify what needs improvement, etc. Because their network is large, they have an advantage over competitors on the data they can capture.
Their acquisitions have made it possible to participate in just about every aspect of the travel industry. Whenever there is an area of travel the company is weak on, they will seek out companies that handle that and acquire them. This continues to be a successful strategy for the company.
Expedia lets the acquired companies run their respective businesses. They are better at it since that is the business they are in. Each of the businesses may compliment the Expedia service, and there are integration issues. But, for the most part, they let them do their jobs.
The company allows affiliate sales, which can help boost sales at a low cost. In fact, this type of promotion is almost no cost to the company.
Affiliate sales allow others to participate in the selling of the company’s service in exchange for a commission on each sale. Having a large army of affiliates is like having a sales force without the cost of salaries and benefits.
When the company observes competitors implementing successful campaigns, it makes an effort to buy those competitors, instead of trying to match what the competition is doing. This can often be a faster route to getting those services implemented.
Customer loyalty programs are huge with the company. They use customer data to determine which customers have been with them for a while and reward those customers with great deals.
The company has partnerships in China, which anyone who has tried to accomplish this will tell you is very difficult. This fact will make expansion in Asia easier for the company and positions them to stay ahead of the competition.
The company has been awarded both the Highest Rated CEO and Best Places to Work on Glassdoor.com. Employees maintain a 98% approval rating for the CEO, which is unheard of. The biggest complaint of the company is that they need to figure out a better work/life balance. People tend to work long hours at the company.
Some reviews will be based on regional differences. This is understandable for a company that has over 10,000 employees. Also, some managers will be better than others, and complaints may be based on that fact.
The company does allow reviews by its customers. This can help other travelers determine the best places to stay or which airlines to use, etc. This is part of their data analytics initiative to determine what they are doing right and where they can improve.
You will find rogue videos on YouTube from dissatisfied customers of Expedia. One suggested that Expedia does not back its customers when there are disputes between hotels and the customer.
Another stated that Expedia charged him double and would not reverse the charges. Keep in mind that anyone can post bad reviews, including competitors. They can even hire people on Fiverr.com to handle the review for them. This is not to say there aren’t people who have bad experiences. It’s just difficult to know what is true when viewing a video online.
There are some videos that suggest Expedia is price gouging. Again, anyone can post videos about any subject they want.
Lessons Learned By The Business
- The company knows that it has to establish relationships with airlines and other travel entities, even though these entities would receive higher margins without Expedia. They wouldn’t get the kind of exposure that Expedia offers, however.
- The company tries to avoid bureaucracy that comes with being a large company. They let their managers be autonomous.
- The company makes it a point to hire people who are passionate about both travel and technology. That is after all, what this company is all about.
- Expedia has learned they need to be omnichannel. Some companies claim they need to do this, whereas Expedia has no choice based on its business model. A customer may book something online, but if they are at their destination and run into trouble, they need to use their phone to speak directly to customer service to get it cleared up.
How Other Businesses Can Learn From This
Make sure your business can handle growth. Whether that be from technology or comes from hiring more people, growing without a plan, can leave your company vulnerable to slowdowns.
Give your management the freedom to make decisions. If you don’t, it will cripple the company as they have to wait for higher-ups to make those decisions. This becomes a huge bottleneck.