Priceline’s secret sauce: humility, synergy and people
CEO Glenn Fogel was in the keynote hot seat at EyeforTravel Europe last week talking about staying ahead of the curve. Pamela Whitby sums up his key points
Sitting “humbly” in the keynote hot seat at EyeforTravel Europe last week, dressed casually in jeans and an open-neck shirt, a first guess wouldn’t be that this was the CEO of a multi-billion dollar company.
But this is, after all the travel industry, and after spending 17 years building the biggest OTA in the business, with revenues of $10.7bn in 2016, you could argue that Glenn Fogel has every reason to look relaxed. But probably not for long, given the fierce competition and disruptive forces currently at play.
After all, on Friday last week he might have read a Bloomberg report on plans by The American Hotel & Lodging Association (AHLA) to lobby the Trump administration about the so-called "unfair practices" of the Expedia-Priceline duopoly. And then yesterday, he joined CFO Daniel Finnegan to face some testing analysts’ questions in a conference call; shares in Priceline were down 3.3% on news it had missed its first quarter targets.
Still, for the short time last Wednesday that Fogel faced questions on everything from Priceline’s M&A strategy to managing complexity and the next big thing in technology, it was clear that, in spite of the challenges, he remains excited about the future – and proud of what Priceline has achieved to date.
“We came so close to disappearing. Even my friends thought we’d go under,” Fogel said, reminding the audience that in 2000 it nearly did after the Internet bubble burst and wiped over 99% off Priceline’s then $30bn market cap. “But not only have we survived, we have also grown…we may not be curing cancer but I do believe travel brings happiness to people. We’ve helped make that easier, and that makes me feel good.”
Priceline has certainly grown through a series of “synergistic” mergers and acquisitions by targeting companies that it can learn from.“One of the dumbest ideas in the world would be to say let’s buy that company and tell them what do to. We buy them so that they can tell us what to do,” Fogel said.
One of the dumbest ideas in the world would be to say let’s buy that company and tell them what do to
Glen Fogel, CEO, Priceline
For this reason, most (though not all) of Priceline acquisitions have continued to operate as separate companies, while sharing information and best practice. Among the biggest names are Amsterdam headquartered booking.com, which in 2016 accounted for 80% of the group’s annual revenues, metasearch firms Kayak (in the US) and Agoda (in Singapore) and OpenTable, a booking engine for restaurants. Fogel couldn’t talk about Priceline’s most recent $550m acquisition of metasearch Momondo, which has not yet closed. But if dress code is considered in establishing ‘synergy’ then Hugo Burge, CEO of Momondo – who’d also opted for casual conference attire – apparently fits the bill.
“Synergistic is a terribly dangerous word but I use it,” Fogel said, because the benefits of having synergy are “endless”. Citing Priceline’s acquisition of booking.com in 2005 as the most obvious example, he said this “was whole lot better than Priceline.com going out and trying to find a whole bunch of hotels in Europe. Right away we saw benefit.”
In acquiring service companies, Fogel said the biggest asset is always people, who must be smart - as in astute - and must also fit with Priceline’s corporate culture. “One of things about our culture is that, yes, we have been successful, but people are humble about this success. People are working do what is right for the customer; there is a selflessness that I’ve seen over and over again,” he said.
No doubt, a statement that might stick in the throat of many an hotelier! As Rosanna Maietta, senior vice president of communications for the AHLA, was reported saying last week: “The Expedia and Priceline duopoly hurts consumer choice and the small businesses in our industry, which represent some 60% of all hotels in the US, who are struggling to compete as a result of the gouging commission rates.”
Although the story hadn't broken at the time Fogel was speaking, he did indicate that Priceline, like Expedia, seems to be going after the tech budgets of smaller fry. Unsuprisingly, given that the big chains like Marriott, Hyatt, Hilton and Accor are fighting back with investments in loyalty programmes and digital development – not to mention Google Hotels.
“If we look at our hotel supplier partners, the small boutique, even small chains, they just don’t have the budgets. We can bring technology to them at a lot lower cost,” Fogel said.
He might not, then, have been so happy to hear Brian Harniman, a former Priceline colleague, imply on Day 2 that products like Priceline’s Booking Suite is not some benign way to drive more direct business to hotels!
Arguably, however, by being, as Fogel put it, less “arrogant than some other companies” has paid off – in some cases at least. For example, the only OTA partner that UK Premier Inn works with is booking.com. And Lennert de Jong, CitizenM’s chief operating officer told EyeforTravel last year that it’s the only OTA, which “is playing – and has to play – the game fair and square because it only sells commissionable agent rates”.
Ahead of the curve
In the highly competitive travel space, Priceline has had to keep reinventing and improving on its offering. Having scale has helped it achieve that but, he admitted, “there is a flipside to this, in that it also brings complexity.”
However, as Fogel pointed out, “if scale was all that mattered then Microsoft would dominate the Internet, or if you go even further back IBM…”
On this point of scale, conference chairman Paul Richer threw in the Google question, which on Day 2 was referred to as the “biggest existential threat facing the travel industry,” by Rome2Rio executive chairman Rod Cuthbert.
By this Fogel seemed unperturbed. “Many times you think those leading today will lead forever, but when you look back that is not the case.”
So there are certainly no guarantees for Priceline’s place in the future of travel. But Fogel does know is that “we need to be out ahead of the curve. Because if you just keep doing what you’ve always been doing, you will be left behind.”
Right now, he is focused on those things that will deliver the greatest return. Even through growth may have slowed in this first quarter of this year, Priceline is still growing at a healthy clip so the big question now is: what to do next?
Nobody likes to be treated as part of a demographic slice.
Mobility will continue to be a big focus, as it will on technology developments in AI, machine learning, natural language processing and so on; these, he believes, will only continue to accelerate. With two teenagers, what he also knows for sure is that the ability to talk rather than type a travel request into a machine is coming soon. So, today’s problems will be solved with technology, but what he doesn’t know is how long that’s going to take.
The ability to personalise, however, will be where the industry battle lines will be drawn. “Nobody likes to be treated as part of a demographic slice. Everybody wants to be treated as an individual,” he said.
The companies that get this right, be it through data, technology or with the human touch, will see their customers returning year after year. And that, in this competitive market, is what it’s all about.