Scott joined Hotels.com in 2003 when the company was a Dallas-based startup. He spent 5 years in product and customer marketing before moving to SVP where he was responsible for the global website and product development. In 2012, Scott was then promoted to President of Hotels.com with full P&L responsibility. Scott previously spent 3 years at Blockbuster as Senior Director of Strategic Marketing for Blockbuster Online, the incumbent competitor to Netflix, where he was competing directly with the now video streaming giant. Read moreView Profile Page
That changed a lot in two, three years. When I started, we were pretty much still a start-up in Dallas. Honestly, Hotels.com, it started off as a call center business. It was originally called Hotel Reservation Network. The reason why it worked is because the original founders were able to go to the hotel groups, primarily the big chains and say, hey, I’ve got this small, opaque channel, phone, and I’m going to be able to sell a lot of rooms for you, if you’ll give us a discount. Give us a 10% or 15% discount and it won’t be visible. It won’t be widely shared; it’s only through this 1-800 number. We’re going to advertise it, but you have to call, to get it.
That’s how they started. Round the 2002, 2003 time period, they created their first website. At that point, consumers were starting to adopt internet technologies and come onto websites to do business. When I walked in the door, in 2004, we had a pretty rudimentary website. Maybe in the first three months I was there, most of the chains came back to us and said, now that you’re visible with these discounted prices, that’s not good for us. It used to be okay through the phone; now it’s visible. You’re hurting our business, our brand. They pretty much enforced a rate parity clause for us. They said that you can’t have a lower price than we do, on our own site.
Our strategy legs were cut right out from underneath us. We pivoted. It’s not too dissimilar to the positioning that it is today but, at that point in time, we had a small group of people that would go to each of the hotels we signed up, and they would inspect, if you will. They had a questionnaire that they would go and complete. It included food quality, cleanliness, level of luxury and all that kind of stuff. We pivoted and we went to a brand strategy of, we’re the hotel experts. We had a whole brand campaign that focused on being the hotel experts.
Over time, that continued to evolve. In the recent incarnation, it’s been up for eight years or so, which I’m sure you’ve seen Captain Obvious. Captain Obvious came about by saying, look, if you’re going to go book a hotel, why go anywhere else besides Hotels.com. It’s the obvious choice. That’s where it started from. Our positioning and strategy was really about, we have more inventory than anybody else; it’s in our name, Hotels.com, which was a brilliant stroke by the original founders, to go and get that URL really early. We have all the information and content you need to make a decision. So why go anywhere else; it’s the obvious choice. That’s where the business evolved, from strategy perspective. It’s been very successful for them.
I’m sure there’s a Harvard business strategy case on this, somewhere. I actually look at how Booking operated against us, as a classic strategy example, of how you compete against your biggest rival. I feel like Booking, basically, took at a look at what we were doing in the US and said, these are the gaps I see, from a consumer standpoint and here’s how I am going to fix it.
It starts with, they had a different approach in Europe. Having grown up in Europe, they understood the different cultural aspects, the currency, the language; that was key to them. They were able to create a website that was specific to that country, with that language and having an individual one for each of those countries. Bang on; spot on. They should have done that right off the bat. Then they look at us. At the time, we were a merchant model where, again, you pay up front, as a consumer. They knew that that wasn’t going to work in Europe because that’s not how consumers work in Europe. So they said, we’re going to change that and only have consumers pay after the stay. So that gave them a competitive advantage, from that standpoint.
Then they look at our margins and they say, okay, well Expedia is charging most of the world 25% to 30%. Let’s just start off at 15% and make a simple, really one or two page contract, that we can go into thousands of these independent hotels in Southern Europe, where lots of Northern Europeans like to go, for vacation. Make it super simple for them to sign up and we’ll be their marketing arm. They don’t have the technology skill set; it’s not a big chain-driven market, like it is in the US. We’ll be their marketing arm.
They undercut us on price, they had a better product, pay after stay. They made it super easy, from a customer experience perspective, by having a website, per country and language and they moved very, very quickly. I’ve often used the analogy of, when Henry Ford created the production line, to create a car, that’s exactly what Booking did, in terms of getting it right, all the way through the market. They sent skilled people to each hotel, they knocked on the door and said, here, we can bring you more room nights a year, super easy, it’s only 15%; we’ll be your marketing arm. Then they translated into every language that was important, they put it on every website. Then they turned on the spicket of SEM and it was just like a machine. It’s a production line. When they did that, they just turned on tons and tons of demand for these independents and it worked, like a charm.
For us, at Expedia, that’s one of the reasons why Hotels.com moved its world headquarters to London, in 2009, because we were behind in Europe. Very strong in the US, but behind in Europe and going East, and we really needed to have a presence there, to better understand the market dynamics, so that we could compete better. Eventually, we created an agency model and reduced our fees, to try to compete better. We got better and better at it. But yes, it is a classic strategy example, of competing rivals.