Former Expedia boss Dara Khosrowshahi surprised much of the business world with his decision to move over to the top job at beleaguered rideshare behemoth Uber.
After the initial shock of the decision rippled through the industry, the obvious next question was: who’s the next CEO?
The team had clearly been working on a transition plan, as the decision was delivered swiftly and confidently.
CFO Mark Okerstrom would step up into the CEO role.
As he’s had two weeks to settled into the gig, the press hounds were let loose in a series of one-to-one interviews with the new boss.
Tnooz had its turn to interview the affable Okerstrom, and here’s the conversation, edited for brevity and clarity.
Let’s start with the Big One. Is it difficult to step into the shoes of a Dara? That’s what everybody wants to know. Big shoes to fill, or you do you just try to fill different shoes?
It’s easy to step in the shoes because they’re so big!
I think, it’s one of these things that, even though the timing couldn’t have been predicted, the outcome was a very well thought out plan. Dara and I have been working very closely together, sitting six feet apart from each other for many, many, many years.
And, eventhough I absolutely miss having him around, and I think the people at Expedia miss having Dara around, he has been around for 12 years.
After the initial shock, I think people are pretty excited. And I’m super energized at the opportunity.
We’ve got just an amazing portfolio of businesses here that have just a huge amount of potential ahead of them. We got a leadership team that is fired up to take things to the next level.
And I am absolutely honored and excited to be at the helm.
As a CFO coming into the CEO role, what is different for you when you approach that job? Is there anything different, or do you maintain your same perspective?
I’ve been around this business in strategy, operations, and CFO roles for many years.
I wasn’t in a pure finance capacity for any of that. It was always taking on a project, whether it’s working closely with restructuring our search engine marketing operations or global call center operations, or our launch of Expedia Traveler Preference program.
I’ve always had much more of an operational bend to what I do.
Even over the course of the past five years I would absolutely be highly involved in all of our mergers and acquisitions and our tax structuring work, and foreign exchange hedging operations.
But I would also be traveling around with Dara to China or to Austin to visit Homeaway or, London to visit Hotels.com and really run through their businesses and do deep operational reviews.
So I think the real change for me, honestly, is that now I have the bandwidth to focus my energy on where the business needs me most.
Absolutely sometimes that’s finance. But I’m not locked into that side of it now. I can work much more closely with the rest of our businesses to help them reach their full potential.
There has been a lot of growth through M&A over the years. Do you see the growth, as you talk about taking it to the next level, focusing on the assets you have, and growing organically, or do you see a lot of M&A in the future?
I think we’ll always be opportunistic in M&A. It’s hard for us to stop doing it. We can’t stop ourselves.
We’ve always been very strategically oriented and financially disciplined in the acquisitions that we’ve done. And to the extent that we see something that is strategically and financially attractive, we’ll absolutely do it.
The last five years have been incredibly active on the deal front.
I think the next five years if I was a betting man, I would say probably less active.
Then the great thing is, to create a whole lot of value on a go forward basis for our supply partners and consumers and for our shareholders and employees.
We don’t need to buy anything else. We’ve got a stable of the world’s best travel businesses, and we can do a whole bunch to make these businesses we’ve got a lot better. A real focus on operations.
How does that tie into Expedia as a tech company and the A/B “test and learn” culture. How is that strategy panning out, as you continue to focus on these technologies?
Technology is at the core of it. We are a technology company that happens to apply its craft to the industry of travel.
When I use the word operational, what I really mean is better automation and better use of machine learning. And more analytical techniques to actually drive the right behaviors across the organization.
Test and learn, A/B testing, is absolutely fundamental to what we do on the consumer side of things.
But technology is everywhere. Technology is in finance, technology is in marketing, technology is what we are.
Looking to metasearch, do you think technology will help you find newer business models – the next metasearch if you will? Or will metasearch will continue to grow and also put some pressure on Expedia core business?
When we talk about the success of metasearch, what we’re really talking about is the success of Trivago.
We’re absolutely thrilled with their success and we think that that business model and that business has a very bright future ahead of it.
But, I also think that, as Hotels.com and brand Expedia push out their global boundaries and become much more locally relevant on a global basis, they’re going to reach a huge amount of success as well.
In the early stages of market entry for an OTA, when you’re just signing up new hotels and the consumers don’t know you very well, I think metasearch is a very valuable tool.
Ultimately though, once you get into a position where you are a mature player that has all of the hotels, good brand recognition – you can really stand on your own with these markets. Certainly, that’s where we are in a place like the United States.
Even when you’re at the top, even in the United States, you still think metasearch is a great channel for acquiring new customers. I think the two are definitely able to coexist.
Both models will continue to be great long into the future.
So you would say that metasearch still has room to run. That it hasn’t peaked or anything like that?
I think so.
As you’re probably aware, Trivago has had a few stumbles over the course of the last quarter or two. But I don’t think that undermines the overall value that they deliver.
I think these are adjustments to their marketplace model that I think will work themselves out over time.
Let’s talk about the regional, about competing locally on a global basis like you mentioned. Specifically related to China, with a regulatory environment that’s shifting quite a bit more rapidly than normal, as well as the competitive environment there. Do you feel like, with metasearch or other brands, that makes you want to explore markets outside of China — like Indonesia?
I think that China is a difficult market to compete in, particularly on the domestic basis. Like being truly locally relevant in China, given the strength of the regional powerhouse there, is difficult.
That said, we were very excited about the inbound opportunity into China and we are actively acquiring hotel inventory there. We’re very excited about the outbound hotel opportunity.
Hotels.com and brand Expedia are both big players there, as well as our Expedia Affiliate Network business which is powering a lot of the big online players, as well as airlines and online travel agents.
We are making the most of what we can in China. I think that the story in China is one of the things that’s going to evolve over a 10 year period. I don’t think China is going to change dramatically for us in the next two years.
But we’re highly excited about Indonesia. We just made a minority investment in traveloka, which is you know the largest online travel agency there.
They’re expanding nicely into the rest of Southeast Asia. Hotels.com and brand Expedia are doing very well there.
They’re truly becoming locally relevant in places like Malaysia, Indonesia, certainly Singapore. North Asia has been great for them as well: Korea, Taiwan, Hong Kong have been excellent.
We’re starting to ramp up our efforts in India, after a pretty difficult regulatory environment there. I think we’re nearly back to full steam and are excited about the prospects there.
As always, we’ve got tons going on and certainly, Asia is a big part of the story.
I was in China last week for TravelDaily conference, and Glenn Fogel from Priceline Group talked a lot about localization in China. Specifically about it being a core competitive advantage when you can be of the community and understand the differences. What is your localization strategy?
Generally, our localization strategy is a number-fold.
First of all, to be truly competitive in the sense that a local would view you as being competitive.
You’ve got to have all the relevant destinations and all the relative properties and inventory in those destinations. I think that’s table stakes. To the extent that you don’t have property coverage in the destination where the local businessman goes but no leisure traveler goes. It hurts your ability to compete.
Secondly, you’ve got to have local payment types. We’re a merchant and an agency player. So we have the ability to process payments from all around the world.
We’ve been very active in adding new forms of payment types, including relevant payment types in most of the Asian countries.
Thirdly, you got to also make sure that you’ve got proper translation and localization — and you’re doing it in the sense of how locals actually speak.
I think that’s where we’re getting better. We’re using a lot of automation in this which is great and scalable. And we’re working on actually making it better and giving it a little bit more of a human touch.
But I think that that is the key. I don’t disagree [with Glenn], being locally relevant is the recipe for success and global expansion.
Let’s talk a little bit about personalization and technology. This fits in with the way that different cultures like to be targeted their different travel conferences. What are your personal and professional thoughts on personalization and the road ahead to get better at matching offers to people and provide more targeted services to customers across all your brands?
Honestly, I think it’s a huge opportunity. It’s the next big thing potentially.
If you think about the first wave of online travel evolution or revolution, it it was really about taking the green screen that the travel agent used to look at, making it beautiful and putting them in the hands of consumers in the form of their smartphones now and their desktops originally – and helping them see all the choices and book themselves.
But where we still aren’t yet is to that spot where we were back in the 70s and 80s, where you would have had a travel agent that you always used, and they knew where you stayed.
And they knew what type of hotels you liked and they knew where you like to go in the summer and where you like to go in the winter. And they could already tailor their offering to you.
We’re not quite there yet. In the race between man and machine, in that respect, man is still winning.
This area of personalization and befitting to the title that OTAs got, which is online travel agent, is really yet to come.
It’s another one of these areas that a large scale player like ourselves – multi-brand, great capabilities and vast amounts of data – will put us in a position to do that potentially better than anyone else in the industry.
How do you navigate all of the data, both from a privacy standpoint and what’s going on in Europe, but also the sheer volume that you guys must create? What are your thoughts on privacy and managing the data flow so that it can be effectively used by the businesses?
First of all we take privacy incredibly seriously.
We have a capable legal team which works closely with the business. We take privacy, security, regulatory compliance of all types – that’s like table stakes for a mature global player like ourselves. We’re on it.
As it relates to handling the vast amounts of data that we’ve got, there’s just been such innovation in this in this space. Particularly cloud computing, whether it’s Google or AWS has really opened up our capability to process vast amounts of data in just a fraction of the time that we were able in the past. And do it on a real time basis.
We’re not spending as much of overnight time running these massive SQL queries. We’re actually spooling up resources and doing it on demand when we need it.
The capacity of large players like ourselves to actually just get better and faster at processing large amounts of data much more quickly and ultimately feeding that back into things like personalization or real-time data back to our hotel partners around search activity around their hotel. Right now.
I think we are still in the early stages but the curve of innovation is steep right now.
Augmented reality and Apple. Today iOS 11 came out, and I’ve been thinking about how AR will change the mobile experience in travel and hospitality. Do you think about augmented reality in a booking process? I’m curious for you to riff on that and the first augmented reality devices that are mainstream.
I think it’s really interesting. And virtual reality, which we’ve been experimenting with.
We’ve done various partnerships with various folks doing things like creating virtual hotel room environments, where you can actually throw on your Samsung device and walk around the room, and pick up coffee cups and throw pillows around and actually immerse yourself in the overall experience.
We’re in the early innings here, but I think the most obvious application for this at the moment is around providing better content around hotels. And allowing travelers to make more intelligent choices about the place that might be best for them – in advance and are in a very immersive way.
You mentioned trivago and the brand has had a great advertising campaign that worked well in the states. Another brand focused on advertising is Expedia Media Solutions. Is the brand still a bright spot for the company?
We’re actually really happy with the progress there. It’s actually been a nice revenue driver for us as we have gained more scale and as we have gained more capabilities around the around really targeting the right ad to the right customer at the right time.
It’s really resonated with our advertisers. We’re also working on just much easier tools for advertisers to use. Whether it’s in display advertising or whether it’s in our travel ads product, which is more of a bidded product that can allow hotels to pin themselves to certain spots in the search results.
We think there are huge advancements coming there on that front. It is a wonderful part of our business and it just continues to gather more and more steam.
Do you think you guys benefit a little bit from the overwhelming amount of technology and advertising options that any given hotel operator, basically any hospitality entity, has to deal with? And managing all that.
I think we benefit from it to the extent that our advertising placements are just so profoundly targeted.
The audience that we have on Expedia.com or Hotels.com has already designated themselves as wanting to travel.
And, you know, that’s not true with the New York Times, that’s not true with all of these other publishing formats.
Because we have travelers, in real-time, expressing travel intent – I want to go to New York or I want to stay in a five star hotel in New York or want to stay in a five-star hotel in Chelsea, New York.
It just gives our advertisers the ability to really target an audience that very few other travel platforms enable them to do. Or advertising platforms enable them to do.
Final question. It’s always a good one. You know it can be positive or negative. Opportunities or threats. What keeps you up at night? What are the things that excite you, when you wake up and you’re really excited? And some of the things that you want to make sure you guys are getting right in the coming year.
I’m highly excited about the opportunity for just organic growth ahead.
The fact that we’re really the largest travel company in the world, and yet have under 5 percent of this market, just absolutely blows my mind.
The fact that there are probably over 1.5 million hotel properties in the world, and that we only got 445,000. It just blows my mind.
The bigger we get, the more data that we have, the better advertising platform that we can create, the better demand targeting that we can create for supply partners, the more assortments and payment types and all the other things that consumers care about, we have on the platform.
The bigger we get, the better value we’re able to provide for everyone on the platform and I think that’s highly exciting.
Now what keeps me up at night? Well, first of all I’m a new CEO!
I’ve only been at it for two weeks, so if I don’t realize the full potential ahead of us, I’ll be really disappointed. So I spend a lot of time up at night just thinking about how we can go faster. And right now, that is priority number one for me.
Are you are a 90-days person on your leadership style? Do you believe the view that 90 days is the most important?
I take a pretty broad view. The first 90 days is a lot less important than someone who just took his role fresh. I’ve had 11 years to actually figure out what it’s going to take to bring this business to the next level.
Now that I have more time and I’m not worried about tax structuring as much as I was in the past. I’m spending a lot of time listening and I’ll do that for 90 days. Maybe it’ll change my mind on a few things. But but I got some pretty good ideas already.
Leadership requires proper goals and you know proper targeting of execution across a broad horizon. I hope we achieve a lot of great things in the next 90 days.
But I’m also looking five years out and thinking about where will the world be and how do we position ourselves best to be on the top, five years from now.
It might be a challenging question. What are one or two things that you learned from Dara that you remember greatly and that you will continue to consider?
Listen. Listen, listen, listen.
The higher up you get, the harder it is to get the truth. And so it’s really important that you listen, not only to your direct reports in the organization but to everyone in the organization. You have to be able to understand truly what’s happening.
And unless you listen, you will never never know.