If Greg Schulze had his way, the entire travel search process should have dog-friendly filters. The global executive of “anything that moves”, as he calls his portfolio at Expedia, moved to Singapore with his family in January and left their two dogs behind. Clearly missing his best friends, Schulze points out that while “air is tricky”, dog filters are available in Expedia’s hotel search. Of course, we talked about other things as well including his plans to grow the air, tours & activities and cruise business globally and particularly in Asia.
Consumer anxiety has not been solved but Expedia is doing its part to remove a big part of the anxiety, says Greg Schulze.
Q: You joined Expedia in 2005, and you were working for an airline. Why did you make this career change?
I started my career in manufacturing. I studied engineering and enjoyed the operations and numbers part but I didn’t like working in a factory. I went to business school and asked myself, what do I enjoy? Well, travel was top of the list and I joined American Airlines. I was in different jobs over the 10 years but mostly I was in revenue management. Revenue management is the core of airlines, was then and still is today and I thought with Expedia, I could still leverage my skills with analytics and numbers.
I worked in the Internet pricing group and saw what OTAs were doing. I was excited by how technology can change the customer experience of travel. Airlines are inherently operationally-focused – the best airlines are what they are, consistent in operations. Expedia is customer-facing – it begins with the customer experience. This was a good opportunity to stay within travel but switch perspectives.
Q: What’s the difference between how an airline thinks about distribution versus how an OTA like Expedia approaches its business?
Information is at the core. Airlines have an incredible amount of data and it’s about optimising revenues. Expedia leverages data as well but the key difference is Expedia is more focused on the customer and using the data to improve customer experience, to help them make more informed, better decisions, and understand the options and trade-offs. We are also focused on the entire trip, the holiday, not just the flight.
Airlines have gotten better at using data to improve customer experience. When I left the airline business, there was the beginning of discussion around added value products, ancillaries, but it didn’t really change until 2008 when in crisis, airlines added fees and charged premiums and it became an understood part of the purchase decision. Airlines and distribution channels had to change the way they presented the information.
Our job is to help customers make decisions between the different options. It is a huge challenge to present it in a way that is helpful, to help customers compare easily.
Data gives all of us an opportunity to be more targeted. But personalisation can be a distraction. You want to focus on scale, then personalisation solves itself. We look at data more holistically and we can improve your results if we ask you a few key questions.
Q: Do you think the whole ancillary drive is creating a degree of consumer anxiety? In fact, all the choices we are giving consumers online – between airlines, OTAs and the intermediaries that have come into the industry – isn’t that all creating more consumer anxiety, that I never know if I am making the best choice or getting the best deal or buying from the best person?
There’s definitely a limit to how much airlines can include in the purchase process – it is a high anxiety purchase from research to travel. We know that customers make 48 flight searches before they book.
It is true that consumer anxiety has increased. Airlines think of their product in isolation. The consumer is looking at 10 different airlines. It’s very challenging and an opportunity for us to present it in a way so consumers can compare the choices. Technology allows us to customise your purchase but paradoxically, customisation can decrease satisfaction if not done well.
Consumer anxiety has not been solved, and I am not sure if it will ever be solved. It’s a challenge for Expedia to stay with our travel partners as the product evolves. Product is more complicated, choices are more complicated – it is for this reason that Expedia and our competitors have become much more valuable partners, airlines understand that.
In Delta Airlines’ Q4 2015 earnings call, Ed Bastian, the president, called out its “first mover branded fares launch with Expedia” as a significant contributor. We have just launched Upgrade Options with Air Canada and you will see Asian launches coming up soon.
Simplifying the airline rules, or informing consumers of expectation of price changes – those are some of the things we are doing to remove a big part of the anxiety.
Flight over Penang island: “In an airline, it is about “swim lanes” and they allocate resources within those lanes. For Expedia, we invest in “the ocean”.”
Q: What do you think is the biggest lesson airlines can take from technology companies such as Expedia?
Technology is always a good investment. We invested $750m last year. Airlines spend a huge amount of money on the product, in my mind that’s the best use of money. Their focus is on delivering an amazing customer experience – it is puzzling that suppliers want to spend so much money on technology and on their direct websites when they know that customers almost always begin at OTA websites.
Expedia is focused on the experience of travellers. In an airline, it is about “swim lanes” and they allocate resources within those lanes. For Expedia, we invest in “the ocean”. We are very nimble, we have a test and learn culture, we have many failures but we learn and move quickly.
Q: What do you think then of companies like RyanAir wanting to be the “‘Amazon of travel” or Accor Hotels launching its own marketplaces?
I think it is a distraction. I am always puzzled by the Amazon of travel analogy. Amazon is an online retailer that connects customers with manufacturers and suppliers, that’s what Expedia is.
Q: Your role as senior vice president of global tour and transport – you describe it as “creating global, integrated strategies for Expedia’s air, car, package, rail, cruise, and insurance lines of business”. Why was it considered necessary to have this role based out of Asia at this time?
Firstly, I want to say I am excited to be in Asia. It is true I am going to enjoy living in Asia and is a great experience for me and my family. It is also true that having someone from HQ here is helpful at a senior level. I lead a global function and we want to shift focus on their business to Asia.
My other response is, why not?
We need to see Expedia into this new world of Asian travellers and we are under-represented here. My hope is that by being here, we will bring some attention to more local needs – engineering, marketing, HR. On the flip side, it will help HQ functions better understand the unique challenges and opportunities here. It is as simple as time zones – having reasonable time zones for meetings and recognise we are a global company.
It makes it natural that Asia becomes part of everything.
Q: With your role being based here, how is your team being restructured? More hires out here?
Some of the global team, who are now on five continents, may move here. We have a lot of people in markets but the strategy team should be in Asia.
Q: Air has obviously been the mainstay of Expedia’s business – the bread and butter as it were? How has that changed over the years?
Air is a big part of total gross bookings. Over time, it has declined as a percentage of total revenues. That’s because the hotel business has grown at a faster rate in the last 10 years while air margins have declined.
In 2014, 70% of our revenue came from transactions involving the booking of hotel reservations, with 8% of our revenue derived from the sale of airline tickets.
But air is a huge part of our business, strategically and for customers who are booking the whole trip. Air is such a huge asset – air search is the first part of the trip planning and the advance purchase is twice that for hotels. It’s its own marketing channel.
Q: Beyond air, which are the fastest growing parts of the business? Which has most potential and opportunities for growth?
Car rental is the big global opportunity, growing at 50%. It’s been under-invested in the industry. It’s growing in US and Europe, not a big story in Asia. In Asia, we are excited about the air launches in Taiwan and South Korea where we have full service sites and we are rolling out upgrade options.
Rail in Europe is twice the opportunity of low cost carriers. Rail in Asia – we’re looking at which country we should launch first. Our rail product (being developed with Silverrail Technologies) will be launched this year – we see rail as an entirely online, high transaction, low revenue, high attach opportunity.
The waters off Singapore offer cruising opportunities: “The question is how to adapt the cruise product to Asia.”
Q: There’s been a lot of investment in cruising in Asia lately.
Yes, we are taking our cruise business international and moving into Europe, Asia and Australia in late 2016, early 2017. We just finished the cruise platform migration end of last year and all of Expedia and Travelocity are on the new platform. There’s work to do with Orbitz. The question is how to adapt the cruise product to Asia – that’s the challenge, how to compete and win in a global market.
Cruise companies expanding big in Asia – they face those challenges. In China, cruise ships have added casino space. Disney has no casino space at all. Everyone has to figure out your audience.
We have Cruiseship Centres, an interesting part of the Expedia business, mostly offline and a franchise model. It has 200 locations in US and Canada and 5,000 travel consultants and the business is growing very well.
We think a good customer experience in cruise is a combined online and offline purchase – lots of information, rich content, reviews online and then purchase offline.
Q: Packages is a big space in Asia that’s still pretty much offline. What trends are you seeing in the package business?
We’ve seen fantastic growth in Asia with our dynamic packages – complete flexibility, flights and hotels and other products. It offers significant savings for customers. There’s increased adoption of that type of package once the customer knows it exists. We’ve been testing words like “Bundled”, “Packaged”, “Flight Plus”. On the Singapore site, it’s “flight + hotel”.
Q: For the first time, you’ve included tours and activities on your mobile app. What customer behaviour are you seeing here? Do people want to buy tours before they arrive?
Activities are the most suited for the mobile experience – and we see an opportunity to have more frequent and relevant engagement with customers on the app. Back end technology needs to be built between hotel partners and the activities side – that’s the next frontier and the question is, how do you fulfill that? We have completed platform migration for tours & activities and it’s a fast growing segment and well integrated into the Expedia experience.
Q: Insurance – a big growth area given the uncertainty in the world and the risks associated with travel these days? What trends are you seeing here?
People buy insurance for different reasons – and there are ways we can reduce that anxiety. We hold a price for a number of days or offer a full vacation waiver – this is hyper local because of regulations. Overall it is a hugely important business for Expedia.
Q: Where does the AirAsiaGo brand (part of the Expedia AirAsia joint venture) which sells flight + hotel fit in?
AirAsiaGo leverages the technology of the Expedia platform. It is doing very well since we made the migration. There’s the additional benefit of leveraging the AirAsia partnership – we watch market trends by seeing where they are expanding.
Q: You now have 75% ownership of the joint venture, any plans to fully own it?
The experience has been fantastic, I sit on the AirAsia board of directors and the expectation is this partnership will continue.