Here’s the discussion with the Expedia CEO, edited for clarity and brevity.
Let’s talk China, let’s talk the eLong exit. You were in the business for 11 years ad I’m curious what you’ve learned in that time and what’s next in that market.
We’ve known for a while that China is a giant market but also a very competitive market.
For 11 years, we did very well manuevering through that combination and growing that business organically with a terrific management team.
Over the most recent period, when we looked at the combination of the strategic value that we could get for eLong in a sale versus the competitive environment for the local traveler getting much tougher, we came to a conclusion that it made sense for eLong to be majority owned by Ctrip.
It was an opportunity that came up and when we balanced the view of “should we continue” or to realize value for shareholders, we decided that it was time to realize some value.
The good aspect of that transaction is that we are still very much partners with both eLong and Ctrip on the outbound Chinese traveler, which has always been the most important strategic element of our operations in China.
You never can predict the future, you can never predict it in a market like China. While the outcome wasn’t ideal, the outcome was actually pretty darn good.
So is China an impossible market given the competition or are there just a lot of growing pains as companies figure out how to keep the margins healthy?
Everything goes through cycles. I’ve been in this business for 10 years and some would say that I am getting a little long in the tooth.
You realize that some people take cyclical trends and they assume that the trends are going to go on forever. I think this is a really tough cycle for China in a number of ecommerce categories where you have strategic players trying to gain the upper hand — and especially to be the number one.
This will continue for some period of time — it’s difficult to predict for how long — but at some point the economics always come back to real unit world economics. But it will take a while for China to get there.
We think that when it gets there, it will be healthy. And we are still operating in China both through the outbound business, with Hotels.com, and we’re introducing the Trivago metasearch brand into China.
We’re still going to be playing, it’s just going to be in a different format on a go-forward basis.
As far as the outbound traveler from China, that business is good and healthy? Will that demographic offer inroads to get back into China itself?
[This market] is growing in triple digits. [China] is one of the fastest growing outbound markets for us, so we are quite optimistic as far as the result today.
And even more optimistic about the results on a go-forward basis. I think that the majority of our focus will be the China outbound market at this point.
We’ll be opportunistic as far as within the China market as it relates to the domestic traveler, just like we are in any other market.