Expedia CEO and CFO resign after clashing with board on strategy
Expedia Group announced its chief executive and chief financial officer have resigned after clashing with the board over an “ambitious” reorganisation plan that weighed heavily on the travel booking group’s recent results and outlook.
Barry Diller, chairman, and Peter Kern, vice-chairman, will now oversee the company’s leadership team, following the immediate departure of Mark Okerstrom, a 13-year veteran of the company who became chief executive in August 2017.
The company’s preoccupation with a process to simplify its portfolio, which includes Hotels.com and Trivago, and attract new customers has compounded broader challenges for the industry as it grapples with competition from the likes of Airbnb and Google muscling in on the travel sector.
“This reorganisation, while sound in concept, resulted in a material loss of focus on our current operations, leading to disappointing third-quarter results and a lacklustre near-term outlook,” Mr Diller said in a statement on Wednesday.
“The Board disagreed with that outlook, as well as the departing leadership’s vision for growth, strongly believing the Company can accelerate growth in 2020” and that divergence “necessitated a change in management”, he continued.
Expedia shares lost more than 27 per cent on November 7 after net profit fell 22 per cent from a year ago — even as revenue rose — missing Wall Street forecasts, and it revealed an 11 per cent year-on-year increase in selling and marketing expenses.
Rival TripAdvisor also took a hit that day after also citing weak online search and advertising trends, sparking a broader sell-off for the sector. Analysts point out search engines like Google are dedicating more and prominent space to their own paid travel products. That is forcing companies like Expedia to rely more on higher-cost ad clicks and eating into their profits.
Expedia also said it saw a larger than anticipated decline in average daily rates for hotels in North America during its third quarter, while geopolitical and weak economic factors weighed on rates in Asia. Consumers shifting away from hotel rooms towards Airbnb and short-term holiday rentals is also putting downward pressure on hotel prices.
Expedia on Wednesday also announced a new share repurchase plan, adding to an existing programme of 9m shares, that takes the total number of shares available for repurchase to about 29m.
Mr Diller, who became chairman in 2002 when his InterActiveCorp (then known as USA Networks) acquired a controlling interest in Expedia, said he would purchase additional shares in the group “as a tangible sign of my faith in and commitment to Expedia’s long-term future.”
Naved Khan, analyst at SunTrust, said the management change was positive for stock sentiment, given growing investor impatience over execution and share price underperformance. “We expect the company to refocus on accelerating growth in 2020 across the business as it looks for new leadership. The significantly boosted repurchase program . . . mitigates downside risk, in our view.”
Shares were up 6.2 per cent in morning trade on Wednesday, but sit 6.2 per cent lower for 2019. The company has a market capitalisation of $14.4bn.
Alan Pickerill, who has been at the company since 2008 and became CFO in September 2017, will have his duties picked up in the interim by Eric Hart, Expedia’s chief strategy officer.