Will new female CEO revolutionize Expedia's Asian business?

Kathleen Tan, CEO of AirAsia Expedia, talks to The Korea Times’ Business Focus during an interview in Seoul, May 21. / Korea Times photo by Yoon Sung-won

By Kim Da-ye

Expedia, a global online travel agent, launched its Korean operation in July 2011. Though industry watchers anticipated that the entry of the travel giant would shake up the outbound-tourist market, which is dominated by package tours and group travel, Expedia remains a minor player.

One of the major obstacles hampering the firm’s expansion in Korea is that it does not offer flights other than those operated by AirAsia, Asia’s largest low-cost airline based in Malaysia. AirAsia and Expedia set up a joint venture called AirAsia Expedia, which runs Expedia’s Asian business.

Expedia is yet to partner and coordinate with Korean Air, Asiana Airlines and other carriers that operate direct flights to and from Korea. Without flights to offer, the global travel agent is unable to provide more comprehensive packages and, for now, relies on the revenue from hotel bookings.

In an interview with The Korea Times’ Business Focus, Kathleen Tan, new CEO of AirAsia Expedia, said she wants to boost the travel agent’s limited presence here. While trying to work with carriers to offer flights, Expedia will become more aggressive in marketing to establish the brand here, Tan said.

“We are still trying to work with Korean Air and Asiana Airlines. They use a different system to sync booking data. We are trying to get the booking experience right,” said Tan.

“We are not going to be perfectly Korean, but we want to focus on what we are good at and what Expedia stands for.”

Although she does not reveal actual figures, Tan said that Expedia has recorded triple-digit growth every year since the Korean operation was launched.

Tan, a former senior executive at AirAsia, has high hopes for the joint venture and Expedia’s Asian operation. She calls AirAsia Expedia a start-up, and plans to list the firm on the Singaporean stock exchange.

Expedia is about technology

With hotel booking as its major business here, Expedia boasts a portfolio of 200,000 hotels in 30,000 cities. In Korea, the firm’s competitiveness comes from the real-time hotel-booking system. In addition, the information about overseas hotels is displayed in Korean, and the automatic translation reads quite smoothly.

Tan calls Expedia a “tech” firm rather than a travel agent. Expedia, in fact, started as a division of Microsoft that was spun off.

“We cater to a group that is very Internet-savvy. When you want to book a hotel online, you still have to call and check the availability. With our technology, if you log in and see a hotel in Osaka, the rate is alive,” she said.

“Doing a translation for every hotel, that’s a challenge. Expedia constantly improves on technology. We invest millions of dollars on technology.”

Most Korean online travel agents first take bookings for domestic and overseas hotels and, after checking their availability, confirm them in a few working hours. They increasingly try to have more domestic hotels available for real-time booking by securing exclusive deals.

Expedia operates differently. When it signs up a hotel in its portfolio, it asks the hotel to use Expedia’s system for recording vacancies. That way, users from any time zone can book Korean hotels in real time.

In fact, major Korean travel websites offer some of the cheapest rates that are available only when the booking cannot be confirmed immediately. An official from Expedia’s Korean office said that Expedia targets the specific segment of travelers who prefer to have a booking confirmed immediately and who do not want any surprises, such as when the room is no longer available or the rate has gone up.

Tan said that Expedia wants to break the perception that a Western brand does not offer the best value.

The travel agent offers a best-price guarantee: when a real-time price offered by Expedia is higher than that of another firm under the same conditions, the booking can be cancelled for free and the customer will get a 50,000-won voucher.

While Expedia is strongly committed to local consumers, customers should still research thoroughly rather than fully relying on the guarantee. Many of the lowest prices offered on other Korean websites aren’t real-time. And, though some websites do offer lower real-time prices, Expedia offers slightly more advantageous terms, such as free cancellation.

Korean low-cost carriers aren’t real

Tan stresses the importance of branding and marketing, and believes that a brand should excite consumers. Her marketing strategy at Expedia is in line with her experience at AirAsia, where she spent nine years helping establish the brand.

The latest example is a deal that sells a room at three- and four-star hotels in Osaka, Tokyo, Seoul, Hawaii and Guam for just 1,000 won ($0.9) between May 23 and June 30.

Attracting consumers’ attention with extremely low prices is a common marketing method used by low-cost airliners. Low-cost airliners in Europe often offer one-euro deals to fill vacant seats and attract first-time customers. Once they find the flight good for value, customers will return, even at higher prices.

Tan, who is deeply familiar with such strategies, said that Korean low-cost airliners are “not real low-cost carriers,” because they lack those aggressive deals. She did not mention any names.

“A real low-cost carrier offers a $1 fare,” said Tan. “Consumers get the hang of it and they come back for more.”

Social network

Tan, who started her career in luxury fashion, met Tan Sri Tony Fernandez, the founder of AirAsia, at Warner Music’s Asian headquarters in Singapore. Tan and Fernandez were close colleagues, and after Fernandez set up AirAsia in the early 2000s, he asked Tan, then managing director of Warner Music Singapore, to join the airline. Tan recalled the proposal was made in the middle of a concert of rock band Linkin Park.

“I was so bored at Warner. Kids kept stealing from the Internet. Back then — before Apple and iTunes — the record company was run by people who didn’t believe in Internet business,” Tan recalled.

When she moved to AirAsia in 2004, Fernandez gave her a three-word mission: “Go change China.” She said she did not know anything about the aviation industry at the time. She bought a book by Richard Branson, the British founder of Virgin Atlantic Airways, and a book on Michael O’Leary, the founder of Ryanair. “Those guys were my teachers,” Tan said.

Tan’s initial job was negotiating with airports to take AirAsia’s flights. She targeted “second-tier” cities, including Wuhan, Chongqing, Hangzhou and Shenzhen, while everybody wanted to fly into Shanghai and Beijing. AirAsia entered China in 2005, and was the first low-cost carrier to operate in that market.

Tan barely spoke Mandarin at the beginning, but became active in the social network media in China. The CEO said that she got to know China through the fans who followed her on her social network pages. She said she has about 200,000 fans who follow her online. On her Facebook page, she calls herself a “social media champion.”

Tan believes that the social media will remain an effective marketing method for her at Expedia.

For instance, she appeared on “The Apprentice Asia,” a reality TV program where contestants compete against each other to become an apprentice of Fernandez. It’s an Asian version of the famous U.S. TV show where real-estate mogul Donald Trump has the role of Fernandez.

By participating as one of the advisors, Tan had an opportunity to promote the Expedia brand. In one episode, Tan said, two teams of contestants had to make a viral video for Expedia.

“I need to build the brand and do shows — reality TV shows. I am always doing interviews in every city. I am basically selling myself,” said Tan.

Social media outlets are also her channels to communicate with customers. She said she once received a complaint from a customer through the social media. He contacted her directly, sent her many photographs and wrote her letters, saying that the hotel he booked through Expedia was infested with rats. Expedia investigated the hotel and, in addition to giving a refund to the customer, took the hotel out of the booking system.

“Since I became the CEO, I became more visible in the social media. We want to build a trusted brand. We want to be in the business for the long term,” said Tan.