Expedia Group CEO Peter Kern sits down with Yahoo Finance’s Brian Sozzi to discuss summer travel demand, revenue and consumer resilience ahead of the integration of artificial intelligence services like ChatGPT.
video transcript
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Brian Sotzi: Welcome to Yahoo Finance Live. My name is Brian Sotzi. And it’s almost time to pull out your old swimming trunks and sun lotion and leave for summer vacation. The summer travel season is set against a backdrop of a slowing US economy and lingering inflation. Debt ceiling concerns and travel sentiment don’t help either.
Just ask Expedia Group CEO Peter Kern. Peter, it’s always a pleasure to spend time here with you. We are gearing up for the heart of the summer travel season. What are your thoughts on demand from your perspective?
Peter Kahn: Well, it’s already summer, so let’s take out our swimming trunks and go out. But we are seeing massive demand. Clearly, the international trend is back again, so it’s a big pick-me-up you’ve probably heard on your trips abroad this summer. There is a lot of demand in the domestic market, and there is also a lot of demand overseas. Not all airlift has returned to the world yet. So the air supply is still somewhat tight. And, unfortunately, that means prices stay high during the summer.
Brian Sotzi: Peter, how do business trends compare today to pre-pandemic levels?
Peter Kahn: yes. If you look at the difference between domestic and international, big cities versus beaches and mountains, many trends have actually returned to pre-pandemic levels. As you know, it was popular as a vacation during the coronavirus. place. Also, during COVID-19, the length of stay and length of stay are greatly exceeded, and people are basically completely hybrids or no longer going to the office, and where to go if they can afford it But I was able to go to work for a month.
And all of these trends have basically returned to pre-pandemic, with shorter stays. Big cities are back in a big way. And everything is normalized both internationally and nationally. There are still a few. China isn’t fully back, it’s part of Asia. But overall, we’re pretty much back to pre-pandemic normalcy.
Brian Sotzi: Why are prices soaring?
Peter Kahn: Why do you say that the price is high?
Brian Sotzi: yes.
Peter Kahn: Well, it’s a surprise. First of all, we had inflation for two, several years. There was more demand than supply. Demand is still outstripping supply, given the structural changes and more people who generally want to travel. It’s no longer a revenge trip. Just go travel instead of spending money on other things. And, as I said earlier, there are still areas where the supply has not fully returned.
So when there was mass revenge travel and mass inflation, prices went up. And they reached a point. And now it’s basically held because demand is sustained. And think about air travel. The supply is a little low in the world, so the price can be kept high. And in the hotel world, it’s hard to keep employees, so hotels are generally willing to sacrifice some volume for price. There are other issues as well.
I’ve seen hotels, airlines, etc. maintain their prices. Car rental is a little different. Car supplies are back. And their prices have come down significantly. But certainly, in hotels and on planes, it stays pretty high.
Brian Sotzi: How could this be—how long will this recovery and leisure travel last? So, Peter, I ask you that because today we got the earnings report from Walmart, Target yesterday. And they say consumers are so cautious, so cautious that they might not put another pair of socks or bathing suits in their shopping cart because inflation is so high.
Peter Kahn: yes. Look, I don’t think we’ll see any signs of that again so far. I think it’s clear that people prioritize travel over many other things. I don’t know about stocks. But you know, I think we’re going to — it seems to maintain itself. And again, I think people have a little more time, not as much as they did during the coronavirus. But a hybrid way of working leaves a little more time for leisure travel.
Many factors contribute to it. But so far, and this is true all over the world, we have not seen a full-blown recession due to what we call economic pressures. So will it last forever? who knows. However, depending on the depth of the economic pressures we face, it seems likely that travel will continue to be at the top of the list of things people want to spend money on. And that means travel and leisure travel should be maintained. Corporate travel is a little different. But it’s certainly doing incredibly well in the leisure sector.
Brian Sotzi: Last time we spoke, Peter, you seemed to be preparing to launch a new rewards program. And I know many of the analysts on the street are excited to think about what that means for your bottom line. where are you in it
Peter Kahn: yes. So even more than an analyst, I’m excited. So in the US he’s going to launch in July, which is basically what’s called the One Key. This includes his three big brands in our company: Expedia, hotels.com and Vrbo. And you will be able to earn cash and burn cash. We call this One Key Cache across all our products. So you can take a cruise and earn points which you can then use for vacation rentals or vice versa for hotels, flights etc.
So we are really excited. This is the first time. We obviously have a huge member base. And we are thinking of consolidating our member base. And vacation rentals didn’t even have a way to get paid. As such, this will be the first full-fledged rewards program for vacation rentals. This is very strong for Vrbo, and more importantly the fact that it is shared across all brands. And you’ll be able to capture that entire consumer base and offer more benefits and member discounts.
We offer people even higher level discounts. There are also package discounts available. So you get a lot of benefits. And we are really excited. So, on July 6th, we’re launching and throwing a big party in New York. you should come And it will be great.
Brian Sotzi: Well Peter, you know my email. Please send me an invitation. And maybe when I’m at the party, we can talk about your AI work. You are partnering with or considering ChatGPT, along with many other companies. what are you doing there? And how will AI change the travel experience?
Peter Kahn: yes. First of all, you need to tackle party games. Because if you want to talk about AI at a party, you have a problem. But that aside, we are really excited about AI. We have been working in this universe for a long time. And as I said on the earnings call and on many other calls, we’ve been working in this area over the years to strengthen our consumer proposition. And it’s about every big thing and little thing you see, like the images we show you, how we sort and filter for you, and so many other things. also applies.
But the large language model and especially the beginning of ChatGPT was exciting for us. As I said earlier, we have been at the forefront of AI for a long time. And when that happened, we seriously considered how we could use it to improve the consumer experience. So the first place we experimented with was a plugin to ChatGPT. Then people can visit ChatGPT, ask travel questions, get recommendations from ChatGPT, and click through to our environment.
This applies only to developer and page universes. Therefore, it is not yet available to everyone. But basically we got there first in our trip. And vice versa, perhaps more exciting, we’ve brought ChatGPT to the app (iOS app). And we’re basically allowing people to use ChatGPT to ask, “Where should I stay near the Empire State Building or near the Eiffel Tower?” Where is the best hotel there? Either way, they can ask a lot of questions.
And when they get recommendations, save those recommendations in your travel planning product. Then you can search, compare, and do it all. But there are many more possibilities. And we’re looking at interesting ways to help the service with ChatGPT. Perhaps help with searching and sorting if people want to ask long and big questions.
Therefore, there are really many areas where it can be applied. We are also working closely with ChatGPT to explore ways to leverage this technology.
Brian Sotzi: As a leader working closely with AI, Peter, I know there are some very interesting initiatives. In the bigger picture, are you concerned about how AI will affect the economy in the long term?
Peter Kahn: yes. We have seen many discussions. I think it’s really interesting. And obviously, there are implications for humanity as well. And I also know people like to look at the political environment and other places where it can be used and abused. I think a lot of people, including Sam Altman, have stated that regulation will probably be needed. And I think that’s healthy.
But I think people overcome their prejudice against all those dramatic stories when they think about it. There are lots of really, really good applications out there that don’t steal jobs or change the political climate. They really only improve people’s experience with the products we use or plan to use every day. If you think about all the ways to improve people’s experience, no matter how complex search is, you’ll find that there are all sorts of applications available for people with disabilities and other challenges.
So there are a lot of great uses and usefulness for actually enhancing what people are doing, rather than replacing it. So in our environment, I think we had to build a guardrail for ChatGPT so that it could only answer travel-related questions. We didn’t want it to affect other things with consumers. We are not interested in answering those questions.
So you have to, you know, you can’t just release it and see what happens. Must be used for specific applications. But when used properly, we believe it can be very valuable in improving consumer and employee experiences. One of our service representatives will get you up and running at some point. And we are constantly working to enhance those features. So if this helps us improve our performance, that’s great.
Brian Sotzi: If I see Peter at a party in New York City, I’d love to talk to him about artificial intelligence swimsuits. Expedia Group CEO Peter Kahn, it’s always nice to meet you. We will contact you shortly.
Peter Kahn: Thank you Brian. We are also waiting for suggestions for swimwear. thank you.
Brian Sotzi: Just wear it and show up. Thank you very much, Peter Kahn.
