It's never easy for a company to lose its leader, particularly when that person was on the throne for many years and enjoyed a reputation for level-headedness and calm. That's the situation at giant online travel agency (OTA) Expedia (EXPE -0.33%) these days, as longtime No. 1 Dara Khosrowshahi has taken the helm at Uber, to be replaced by Expedia CFO Mark Okerstrom.
Shareholders typically aren't fond of abrupt changes in long-term leadership, and Expedia's stock took a little hit after it was announced Uber's board had selected Khosrowshahi. I don't think, however, his departure will hurt the company in the long run. Here's why.
IMAGE SOURCE: GETTY IMAGES
The man who made Expedia big
That said, the market's reaction was certainly understandable. Khosrowshahi has been the one and only CEO of Expedia since its relaunch on the stock exchange in 2005. And he was involved in the company before that, as CFO of internet-properties conglomerate IAC -- the company that bought a majority stake in Expedia from its former corporate parent, Microsoft.
Expedia has gotten where it is today -- i.e., half of the big OTA duopoly along with Priceline Group (BKNG -0.40%) -- largely on its deal-making. Khosrowshahi wasn't the first Expedia CEO to snap up assets, but he was the leader overseeing its most significant acquisitions. During his tenure, Expedia bought such major players as Orbitz, Travelocity, and Trivago (TRVG 0.78%), among numerous others.
Over his tenure, the company's total assets, revenue, and market cap all rose precipitously. These days, thanks to Orbitz, Travelocity, and the many other and varied assets in its portfolio, Expedia is an almost unavoidable destination for travelers booking their trips online.
Dara Khosrowshahi. Image source: Expedia.
Buying your way into ubiquity is a strategy that clearly works. That also goes much of the way toward explaining the arguably greater success Priceline has enjoyed. Expedia's purchases really bring in the dough; recent buys Trivago and AirBnB-ish DIY accommodations service HomeAway are both posting impressive growth numbers, with Trivago increasing its revenue by 62% and HomeAway by 30% on a year-over-year basis in Expedia's Q2.
Continuing the journey
That's the main reason I don't believe a big strategy shift is in the cards for Expedia. If anything, we might see a stronger push toward international assets, as renting rooms in overseas markets in Asia and Europe is generally higher-margin and lower cost. Expedia's bread and butter is the American hotel market, which generally operates on the cost-intensive "merchant" model.
Also, potential growth in certain foreign lands is more promising in various categories of travel, which helps explain Expedia's most recent big asset buy: U.K.-based rail-services company SilverRail.
Lastly, we should keep in mind that the man who brought Khosrowshahi into Expedia, media magnate Barry Diller, is still its largest shareholder and the chairman of its board. We don't know how much of a voice he had in crafting its strategy, but he's benefited nicely from its implementation. Meanwhile, Khosrowshahi is staying on the board and Okerstrom is joining it -- two developments that also augur for a stay-the-course strategy.
Expedia is where it is today because of smart asset buys, and by adding new assets it'll at least stay there -- particularly considering it's in apparently eternal competition with the similarly acquisitive Priceline. Khosrowshahi might be on the way out, but I fervently believe the company's philosophy and approach to the market will remain for a long time to come.
