Expedia, the online travel agency, plans to dismiss 3,000 staff and streamline its “sclerotic and bloated” organisation following the departure of its chief executive and chief financial officer in December.
The company said in an email to staff that it will “reduce and eliminate certain projects, activities, teams, and roles to streamline and focus our organisation”.
The cuts represent around 12 per cent of Expedia’s workforce, and 500 jobs will go in the company’s Seattle headquarters.
The restructuring comes after a boardroom battle between the former chief executive Mark Okerstrom and chief financial officer Alan Pickerill and its long time chairman and shareholder Barry Diller over the company’s strategy.
At the time, Mr Diller said that Mr Okerstrom had presided over a “material loss of focus”. During an earnings call this month, Mr Diller added that Expedia had become “sclerotic and bloated” and that it was “all life and no work”.
“We are stopping doing dumb things and starting doing what we think are good things,” he said.
James Cordwell, an analyst at the US brokerage Atlantic Equities, noted that Expedia’s fixed cost base was almost double that of its European rival Booking.com on a per night basis.
“Anyone who has looked at Expedia and Booking.com over the last four to five years has realised that the margin difference between the two of them is very different,” he said.
The email to staff from the “Travel Leadership Team” — a group of nine senior executives — acknowledged that the decisions were “difficult” but that “travel is intensely competitive and demands our very best leadership”.
Expedia and its rivals are already battling against a move by Google into the sector and the recent impact of the coronavirus outbreak. Expedia said that it expected the shutdown from the virus to cost it between $30m to $40m in lost earnings.
Mr Okerstrom, who took over from Dara Khosrowshahi in 2017 when he moved to Uber, had been attempting to reorganise Expedia’s multiple brands, which include hotels.com, Trivago and Vrbo, and focus on local markets. Mr Diller said that this meant that Mr Okerstrom had lost focus on the “day-to-day execution”.
During the fourth quarter of last year, Expedia increased revenues 8 per cent to $2.63bn but adjusted net income fell 4 per cent to $174m.
On his final earnings call, Mr Okerstrom blamed Google for the decline in revenue per visitor as the internet giant prioritised its own hotel and flight booking platform above organic search results.
Alex Brignall, an analyst at Redburn, said that Expedia had been hampered by the sheer number of brands that it was attempting to market.
“Expedia has fundamental shortcomings when compared to Booking, not least the multitude of brands that it is attempting to rationalise. This brand dis-synergy problem has led to difficulties with marketing which enabled Booking to dominate particularly in the Google channel,” he wrote.
In a statement, Expedia said it remained “committed to Seattle and greater King County” where it opened a new $900m headquarters in October.