As CEO of Expedia, Dara
Khosrowshahi presides over the world’s largest online travel business with $3
billion in revenues in 2009 and a growing treasure trove of popular travel
sites including TripAdvisor, Hotwire and Hotels.com.
Coming to America: I came to the
States with my family in 1978 during the Iranian Revolution when I was 9. I
thought all those channels on cable TV were really cool. I didn’t notice that
we moved from a mansion to a little condo. We had the comfort of family and
food on the table. The U.S. is a welcoming place for people who didn’t grow up
here.
Maintaining an Iranian identity:
It was an ironic reversal. When we were in Iran, my parents wanted us to go to
college in the States. So, at the dinner table, they insisted we speak English.
We hated it. Then, in the States, our parents insisted we speak Farsi. We would
say, “Do we have to speak Farsi? Nobody speaks Farsi here.”
Switching careers from engineering
to investment banking: I had a great [engineering] training program in Kentucky
lined up, but my girlfriend lived in New York. Love won the day. I joined Allen
and Co. [an investment bank focused on media] as head of strategy and planning.
It set me off on my career.
Acquisitions: I’ve done 20
transactions in the five years I’ve been running [Expedia]. I’ve learned three
lessons: First, keep it simple. When you need to put together a long argument
to justify it, then too many things have to go right to make it work and you will
probably have a failure. In real life, things always go wrong. Second,
management has to be great. Our most spectacular home run deal was TripAdvisor.
When we bought it [2004], it was going to do $10 million in cash flow and last
year, it did close to $200 million. Steve Kaufer, the founder, took it all the
way to where it is now. Third, go with your gut. There have been a couple of
deals where it seemed right intellectually but it didn’t feel right in my gut,
and I went forward with the deal and it was a disaster.
The financial crisis: All of us
were pretty panicked. The first thing the board asked us when the crisis hit
was, “Is the company safe?”
[Fortunately] we’ve always been really conservative in terms of having enough
cash to run the company. Once we could say the company was safe, we had the
luxury to act in a rational manner.
Emerging from recession: Last
year, when business demand cratered, hoteliers looked to leisure demand to take
up the slack. They put a lot of great deals out there. Last year was the best
time for a leisure traveler to buy in probably the last 20 years. [Consumers]
came to a lot of our sites and bought pretty aggressively. People put off
buying their cars but they didn’t put off going on vacation. That allowed us to
gain a lot of share.
On competition from Google and
Microsoft: Last year, we launched the “traveler first” initiative. It is pretty
simple. If we are making a decision about a new product or a new acquisition,
always think about what it means to the traveler first. Then think about the
profit and loss. Last year, for example, we cut booking fees to zero amid the
worst recession. We also got rid of change/cancellation fees. If we think about
the traveler first, if we up our game, we can avoid any potential disintermediation.
Travel is our lifeblood; we should do it better than anyone else. We have
plenty of capital. Frankly, we have no excuses.
Social networking: Our social
strategy is led by TripAdvisor. The site was founded on the basis of travelers
telling each other unvarnished, unedited opinions. Now we have
CruiseCritic.com, where people discuss the food and entertainment on cruises.
The amount of information is incredible. Users tend to put out a review and you
get viral adoption of products.
Growth: Advertising is an
exploding revenue stream. It’s 12 percent of revenue and double that in
profits. We are by far the largest travel media company in the world. We see
incredible opportunities in the Asia-Pacific [region] and Latin America. They
are just getting started in internet commerce and travel is always a leading
category. Eighty percent of leisure travel [in Asia] used to happen over the
holidays. Now people are beginning to take vacations on other days.
Expedia’s $320 million R&D
budgeT: We are a travel technology company. It’s really about bringing together
the travel skills and technology to make special things happen. It’s the value
we add to our consumers and it’s the value we add to our supply partners. It
will always be core to what we do.
Challenges: The unknown is in
mobile with devices like the iPhone and iPad. People have been talking about
the mobile revolution for 10 years and now it’s happening. The danger is that
whenever you have a new platform, you have new businesses sprout up. Will there
be another Expedia that comes out of the mobile platform? We would like that
new company to be us, but frankly, it’s something I worry about. There are
people in the garage that have nothing to lose and everything to gain. You have
to watch very closely. And if we don’t build it, it’s something that we will
have to buy.
Recruitment: It’s nice to be
hiring again. I recently had a conversation with an HR group about how many
recruiters we should be bringing in. Seattle is a good area to be hiring in.
The only problem is transportation. Our bus system is pretty good, but when you
have a city this size, you typically expect to have a better rail
infrastructure.