No alarm bells here, Huston wants to stay humble with more heart
No alarm bells here, Huston wants to stay humble with more heart 19/12/2014, by Yeoh Siew Hoon, in Distribution It’s hard to feel sorry for Darren Huston. After all, he runs the world’s biggest travel company which shows no signs of stopping and which has been gobbling up almost everything in its path.
Let’s do the numbers first before we get to the sorry part. Darren Huston: “Are we humble enough?”
According to its latest financial results, announced Nov 4, third quarter gross travel bookings reached $13.8 billion, an increase of 28% over a year ago. Gross profit was $2.6 billion, 32% up on the prior year. And evidence that its international expansion is working – its international operations contributed gross profit of $2.3 billion, a 33% increase versus a year ago. Hard to feel sorry, right? But during his session at Phocuswright in Los Angeles last month, one almost did. One, he spoke about the problems of size. Two, when asked about how he was managing Steve Hafner and the Kayak acquisition made two years ago, he said, “You don’t manage Steve.” And three, a fire alarm went off in the middle of his interview which left him, and everyone else, wondering what to do. Should we run or should we stay? But you don’t get to where Huston is by not staying cool and calm under fire, even if it was only a drill. The former Starbucks and Microsoft executive was all heart when he spoke about the challenges of size. “The business is super healthy, growing at double digit and we are taking market share everywhere. But as an organisation, I worry – are we humble enough? We are selling services that other people provide and it’s super competitive. We have to find a higher gear all the time.” Perhaps this explains why in early December, Booking.com flew about 50 hoteliers from Asia to attend a two-day event in Amsterdam. It was clearly an event aimed at putting more “heart” into its partner relationships and a hotelier who attended told WIT, “I came back enlightened, much more aware of what Booking.com is doing for us and planning and it does help to build relationships.” At the scale that it is at, it clearly has to find bigger things to sustain that level of growth. Huston said the acquisitions of companies like Kayak and Open Table was “to go to where the sun is shining to increase the addressable market”. “We have to work on big things to continue the path,” he said and as far as he is concerned, “we are just getting started” in terms of globalising and expanding into longtail accommodation, restaurants and cars. “We have to make sure we have accommodation everywhere you go.” He said the group was under-indexed in China, hence its partnership with Ctrip to grow that. “We are working wth Ctrip on getting enough inventory to servce inboud and domestic.” It is also under-indexed in India. “Everyone’s trying to figure out where Indians stay.” In contrast, it’s over-indexed in Latin America and Caribbean, where Americans go. “Someone told us in Miami, oh you’re the Brazilain OTA, which is quite cool, for a company that started in Netherlands and is now going global.”
Localisation will be a key focus. “In China, we never localised but now we have a team for local relevance. The good thing is we have global scalability – every experiment that we run can be run on every site.” He described mobile as a new platform to drive transactions but what was more important – “it offers us a computer in every pocket”. “It is transforming our ability to create end-to-end experiences for our customers.” He said he had high opens for both Open Table and Kayak which was when he made the comment about “you don’t manage Steve” (Hafner). In his session, when Hafner was asked what had changed two years after acquisition, he said, “Getting used to having a boss.”
Steve Hafner with Phocuswright’s Lorraine Sileo: Having to get used to having a boss is part of post-acquisition life. What it has given him is an appreciation of scale. “When you are a start-up, you aspire to build a great product or service, but you don’t appreciate the complexities of operating at scale. It’s been a big learning experience.” During the November earnings call, Huston spoke about Kayak. “I would say that Kayak, since the day we acquired it, has exceeded our expectations from a profit standpoint. “And I’m really proud of the work that Steve [Hafner] and his teams have done. I would say we are not as aggressively investing. We certainly don’t want to invest at a loss to build the Kayak business, so we have done a lot of experimentation and we feel pretty good about the results in particular in Europe.” And he added that the group would “look to see the effect of the various experiments that are going on and our ability to profitably roll this business out to more parts of the world.” At Phocuswright, Hafner said 35% of Kayak’s revenues were now from international sources, versus 14% previously, and he added, “We want Kayak to be a great product and service worldwide – the matrix is usage, not percentage of sales.”
Asked later a hypothetical question that if Priceline could acquire Uber or Airbnb, if the terms were the same, Huston picked Uber. “Both are great companies, truly disruptive but I’d pick public transportation which has tremendously underutilised assets.” All said, he noted the business was in a good place and for him, “it was a dream job”. Recalling his time at Starbucks, he said that culture was very much one of the heart, a consumeroriented company. Microsoft was very brain, data-oriented. Travel is a combination of data and facts but you also need to have a good feeling of the consumer, more heart. You can’t be just a technology or consumer company to be in travel, he said. “I can’t imagine doing any other job than what I am doing now.” I think it was at this point the alarm sounded. Now do you feel sorry for Huston?