Expedia: The Action's In Corporate

Expedia has invested more than $10 million in its corporate travel products, not including what it spent last year for Metropolitan Travel, according to president and CEO Erik Blachford. "There's nothing more exciting going on in travel right now than what you see in corporate travel," he told the crowd at the National Business Travel Association convention in Dallas this month. "And it's a completely different animal from leisure travel." BTN executive editor Jay Campbell met with Blachford and vice president of corporate travel Matt Hulett at the convention for an update on Expedia Corporate Travel.

BTN: Some booking providers are offering a single solution that makes them essentially an online agency. Why did Expedia decide it had to own the service by buying Met?

Erik Blachford: We thought about outsourcing. It's funny you would say that what GetThere is doing is an online agency. We feel that's a software vendor that has outsourced part of the solution, or maybe you have an agency that has licensed the software, but what it isn't is a single agency. We say that the intuitive thing people want is one point of contact on everything—a seamless experience where the software, agency, support, data, reporting all lives under one roof and ultimately that's how it's going to have to work. The current methodology of cobbling together software and some other company to do the service means you kind of do some telephone roulette to know what number to call. I think everyone agrees that, long term, that's not going to last. We said, "Why do it at all? Let's start where everyone is going to end up."

BTN: The acquisition of Met was a statement of Expedia's commitment to corporate travel, but some have asked whether it's too small. People hear and spread rumors that have Expedia buying Rosenbluth or WorldTravel or Navigant.

Blachford: It's the three bears thing. Having no porridge at all was too small, going out and buying one of the megas is too big—that's the papa bear porridge we won't be able to digest. Doing the Met acquisition has allowed us to take on responsibility for servicing a bunch of pretty big clients. We've got Amazon, Washington Mutual, Nordstrom—these are not small companies, they are companies with real travel needs.

BTN: Many of them have the Highwire booking tool, right?

Matt Hulett: There's a bunch of stuff going on. We just launched 2.0 for heavily managed travel in June, and we haven't talked about who has or hasn't migrated. The day after we shipped 2.0, we had a customer who was at 10 percent usage on a competing product. Three weeks later, they were at 70 percent online adoption.

BTN: If a corporate client wants to collect commissions, are your fees different?

Hulett: Typically in corporate travel, the price you're quoted at the point of sale is different from what you're billed in the end. We have a closed-book model, and that's the price. When the traveler sees it is $5, it's really $5. You don't get a rebate at the end of the month. There is variance in our fees based on the types of agreements; for example if offline you want more dedicated agents than others. But no, we're not sharing commissions.

BTN: Does ECT offer service-level agreements?

Hulett: Absolutely. It depends on the type of customer. Larger customers have different types of agreements, but we have many in place today.

BTN: How many agents are servicing corporate business within ECT?

Blachford: I don't think we're breaking that out now.

BTN: Can you detail the "$10 million" investment?

Blachford: That's a round number to use when we think about all the people hours and the development of everything around ECT.

BTN: You dyed your hair blue when Expedia turned profitable. What color can we expect for the same on Expedia Corporate Travel?

Blachford: (Laughter) No, we actually don't have a stupid executive trick lined up. Maybe we'll have to have Matt do something.

BTN: Kidding aside, there is not a lot of detail available on the performance on Expedia Corporate Travel just yet.

Blachford: In 2002, Met's sales were $150 million. We have said that in 2004 we should be able to do over $750 million in gross bookings.

BTN: You said that when Expedia stocks its "shelves on the corporate side, it's not the same thing as on the leisure side." Please explain that.

Blachford: The leisure relationships are linear, but in corporate you have more of a triangle because the corporation is really the customer, so they have relationships with the agency and the suppliers. To get the most value, the corporation has to see the fruits of both the corporate-supplier negotiation and the agency-supplier negotiation. We've got a leisure site for pushing our inventory, but this over here is truly the corporation's domain. It's about their priorities, and the smaller companies are delighted to take advantage of our rates. On the larger side, we can add a ton of value on their less-traveled markets and routes. If any traveler, whether for leisure or business, is not well served by the way we show our inventory, we're going to lose their business.

BTN: What will happen to the merchant model if hotels begin filling up again?

Blachford: The only thing I can predict is that it will evolve, and it will be an interesting dynamic as some hotels fill again. The merchant model is still relatively new, and a lot of the agreements are in flux. We'll be well served by trying to be flexible.