Expedia CEO Peter Kern has led the online travel agency for three years, from its pandemic nadir to the post-COVID surge in travel. With that experience, one trend he says he doesn’t see changing anytime soon is people traveling like there’s no tomorrow. What’s more, he says, people talk a good talk about climate change angst but are not modifying their behavior much.
Kern, a private equity executive and Expedia board director, took the helm of the company in April 2020 at the depths of the travel industry’s woes, filling a corner office that had sat empty for months. While the travel industry has largely worked through the pent-up demand sparked by two years of limited travel in 2020 and 2021, Kern says the sector is still booming. Indeed, in its most recent quarter, Expedia’s revenue rose 6%, helped in part by a 9% increase in hotel bookings. Last year, Expedia’s revenue at $11.7 billion was more than double 2020’s. Still, his prediction that this growth will last could be wishful thinking given that millions of Americans will have to resume paying down student loans this month, and inflation could curb their discretionary spending, including travel.
“Humans feel a great compulsion to travel and experience things they derive joy from and be together,” he tells Fortune. At the same time, they’re putting aside any worries about travel’s environmental impact, Kern notes, as evidenced by their choice when offered a chance to buy a plane ticket with a carbon offset at a higher price. “They’ll choose the cheaper [option] the overwhelming majority of the time.”
This interview was edited and condensed for clarity.
Fortune: With airfares and hotel rates now much higher, are we heading back to an era where leisure travel was mostly limited to the well-heeled?
I don’t think so. Post-COVID, there has been a general rise in inflation. But the nice thing about travel is that you usually can find something at every price point. If you’re used to a specific chain or hotel and don’t like their prices anymore, there is always another brand to fill in that void, or independents or rentals. But we are getting past those waves of Americans rushing to Europe and returning to something normal-ish.
What is the argument for booking an airfare on Expedia when someone can book one directly with the airlines, particularly if that person participates in a loyalty program?
You can shop everything in one place, compare prices, track prices. If you book with us, you get points with us and the airline, so you’re not giving anything up. It’s true that if you’re a super dedicated airline loyalty member, you can always get to the front of the line and that special phone number, but for everybody else, you can book your whole trip, with hotels and car with us. And if there are cancellations, we can do the rebooking for all parts of the trip, so it’s better to fix the itinerary in one place than in six.
What about hotels? Last year, I interviewed Hilton CEO Chris Nassetta, and he was a bit surprised when I told him I don’t book hotels directly with the chain and instead book on an aggregator site. He said I was missing out on a lot of benefits.
Most people don’t have absolute loyalty to one chain or one group of chains. Our view is that we reward whatever you want to do. I like boutique hotels and, no offense to Chris, but I don’t stay in his hotels very often, and I don’t stay at Marriotts very often. Unless you are really dedicated and travel a lot with one company, it’s hard to earn enough status to get a real reward. I’d tell Chris, “We bring you a sampling. People will choose one of his properties on our site, and you have one shot on goal to really impress them.”
You recently overhauled your loyalty program to create a dollar-value reward, which can be used on anything, rather than the free nights offered on hotels.com. Why? I liked getting free nights.
Many people could never earn a free night, so we wanted more benefits for more people and for it to be super flexible so that people could use it across any of our products. Our research shows that 80% of people never earn much in loyalty programs, so we wanted to give them something, whether they spend $50,000 a year traveling or $500.
There are new crackdowns on Airbnb listings. One in New York requires some hosts to register with the city. Does that help your business by sending more people to hotels, or does it mean they travel less? What’s the net-net for Expedia?
In the case of New York, it will probably mean somewhat more hotel bookings, but I think there is plenty of hotel supply in most major cities to accommodate whatever demand there is. I don’t think people say, “If I can’t get an Airbnb, I’m not going to New York.”
Any worries that people are starting to equate travel with climate change, leading them to curb travel?
I don’t. So far, consumers have not changed their habits materially in their shopping and travel. For instance, if you give a customer the option of a flight that is slightly greener than another one that costs $50 less, they’ll choose the cheaper one the overwhelming majority of the time. It’s not necessarily a great statement on society. We are seeing airlines test more efficient fuel and planes, and people are adopting electric cars. But I think it will take a general societal change. It’s not like travel is going away, [and that’s] because humans feel a great compulsion to travel and experience things they derive joy from and be together.
What about overtourism? What can companies like Expedia do to ease pressure on cities like Amsterdam, Venice, and Dubrovnik that get overrun by tourists?
I do think the market adjusts. Some people might go to Venice and are like, “This sucks, there are too many people.” But I think people will start to adjust where they go and are constantly searching for a new place. We haven’t done it yet, but there are opportunities to help people with a heat map of the world and say, “Here are places everybody’s going, and here are places where no one’s going for people who might want to go there.” We are also using AI to add more information to the chat, like “How long is the train ride from so and so?” and “Which hotels would you recommend so I can access mass transit from wherever?”
What is your happy-place destination?
Pick a spot, but Tuscany, Rome, Florence. Italy, for sure.
