On Halloween 2020, Expedia Chief Executive Peter Kern wore moose antlers and read bedtime stories on Zoom to his employees’ children.
“I’m famous for putting babies to sleep because of my grumpy voice,” the Seattle-based travel manager says as we embark on a Zoom call to discuss his leadership strategies some 18 months later. “I was very good at putting my own sons to sleep that way.”
Kern needed calm throughout his two years as chief executive of Expedia. He has served on Expedia’s board of directors since 2005, when he spun off from media conglomerate IAC. But he was suddenly thrust into the helm of the company after his predecessor Mark Okerstrom and Expedia’s chief financial officer left in December 2019 following a board dispute.
In a quarterly business update in November, the travel group’s net profit fell 22% from a year earlier, missing Wall Street forecasts despite increased marketing spending. Its shares fell more than 27% as a result. Expedia rival Booking.com posted higher profits and half the fixed cost base.
Expedia management at the time blamed Google’s encroachment on travel booking, but its chairman, media mogul Barry Diller, said the business had become “a game and not a job”. Kern, who had known Diller for about 20 years, was tasked with healing a business that Diller described as “bloated and ossified.” Kern’s strategy: fewer people organized around clearer goals.
“I think sometimes it’s possible that leadership hasn’t properly defined what success looks like and how a group needs to be organized to be successful. . . Most people don’t want to just go to work, spin the gerbil wheel, and go home and get paid. They want . . . feel that they are making a difference,” he explains.
“Organizing for success” has a cost. In February 2020, Kern oversaw 3,000 layoffs — about 12% of Expedia’s workforce — and streamlined the sprawling group, which had amassed an array of brands including Trivago and Hotels.com. Most had their own marketing teams, for example, which meant replicating work across the company. Now there is a centralized marketing center working across all Expedia brands.
Kern says it wasn’t about “[taking] costs because the costs are bad and we want to make more money” but organizing the group to be more efficient, adding “if we do this the business will take care of itself”.
In February this year, Expedia said it achieved record fourth-quarter adjusted profit despite continued uncertainty in the travel industry. The group is also taking a new direction. Kern is in Las Vegas this week to publicly launch a new strategy: to focus more on offering its technology and marketing to other travel companies than being an online travel booking site with multiple brands. .
But February 2020 was not a good time to start a major overhaul of a global travel company. A month later, Covid hit the US and Europe and the travel industry came to a halt. Failing to find someone else for the top job, Kern was persuaded to take over full-time.
“It was definitely not my idea or [Diller’s] that it would be me,” he notes.
As Covid spread and travel restrictions increased, Kern needed to motivate employees who, already reeling from layoffs, were threatened by what looked to some like an existential threat to the travel industry. Some questioned not just whether Expedia would survive, but whether it was worth staying in the industry for the long term. Staff were dealing with a torrent of anguished phone calls from customers as they tried to cancel and get refunds for trips.
In the 10 weeks since it halted travel to Europe and the United States in March 2020, Expedia handled 22 million calls and messages, more than double its usual rate. Kern says his staff needed “continuous love.” One of his methods was sending semi-regular videos from his wood-clad Seattle home. In some, he read bedtime stories to the children of exhausted staff. In another, he referred to a mountain hike on the anniversary of the 9/11 terrorist attacks. The bedtime stories were his wife’s idea, he admits on our call.
He says he’s “not big in the advice category”, but he’s found the best way to keep staff on his side is “to be upfront with your people about how you feel” and to not giving a picture of what you think a CEO should look like speaking or writing.
Part of its effort to make Expedia more competitive has been to push decision-making back and allow people to make their own choices. One of the company’s new values is “Choose Without Fear”. Kern translates this into the words of Lionel Richie, his favorite TV show judge. american idol“There is no loss. There is only winning or learning”.
Kern never saw himself in the travel industry although he enjoyed it as a personal hobby and invested in several small travel technology groups in the past. He started out in finance, first meeting Diller when he ran the finance department of the Home Shopping Network television station. He then moved into private equity for more than 20 years, where he says he learned the importance of recruiting good people and giving them space.
“No matter how smart you are, you can’t increase IQ points. You have to create an environment where the team can deliver,” he says.
Prior to Expedia, he ran Tribune Media, one of the largest broadcasters in the United States until its merger with Nexstar Media Group in 2018, and while his prior knowledge of consumer and tech brands undoubtedly helped, Kern says his biggest asset is that he hires people. “who are much better than me in everything”.
Where previous experience paid off was in the emergency fundraising Expedia needed to survive the pandemic. As of May 2020, the travel company had raised more than $3.2 billion in funding, including $1.2 billion from private equity groups Apollo Global Management and Silver Lake, which temporarily secured seats on the board of directors.
“I knew how to deal with all investors. I knew what we had to deliver and I had negotiated more than my share of those deals,” Kern says.
Three questions to Peter Kern
Who is your leadership hero?
Picking a leadership hero is tough. I like to take elements and traits that correspond to me among the different leaders that I respect. Right now, I admire Microsoft CEO Satya Nadella and his work in taking Microsoft from sleeping giant to moving into the cloud and reinventing the business. This most closely resembles how I see my challenge at Expedia.
What was the first leadership lesson you learned?
It’s normal to make mistakes. You walk into a job, you assume you have to be perfect, and then you miss something or something doesn’t go your way, but you survive and get past it and learn from it. This ability to fail and realize that one’s life is not in danger is an important life lesson.
What would you do if you weren’t CEO?
It used to be like a college basketball coach or a football coach, but now a sommelier would be better. I am a big fan of old world Italian and French wines.
Today, business is emerging from the pandemic into an equally uncertain world. Inflation is on the rise, the war in Ukraine has caused large fuel price spikes and consumers are showing signs of reduced spending. Expensive items such as vacations seem like a risky bet. Additionally, environmental concerns and remote working have caused companies to reduce their travel budgets.
But Kern is optimistic about people’s propensity to travel. He argues that in Western countries, Covid has caused both a “savings boom” and a wave of spending on material goods while restaurants, hotels and airlines have been shut down. “There’s been a big underspend in travel spending and we and a lot of people think that’s going to reverse… Everyone has bought enough stuff,” he says.
Evidence from airlines such as United, which said in April that they expected record quarterly revenue in the three months to the end of June, suggests so.
After all, says Kern, “people don’t put pictures of their vacuum cleaner on their fridge but of their favorite trip to Italy, Singapore or Thailand.”