Below is the transcript of an interview with Booking Holdings CEO Glenn Fogel. The interview will play out in CNBC's latest episode of Managing Asia on 14 September 2018, 5.30PM SG/HK (in APAC) and 11.00PM BST time (in EMEA). If you choose to use anything, please attribute to CNBC and Christine Tan.
Christine Tan: Booking Holdings has had a huge acquisition strategy over the years and has acquired so many companies over the years. Do you think that is a success factor for the company?
Glenn Fogel: Oh absolutely. Without the acquisitions that we've done we'd be nowhere where we are now. In fact, who knows where we'd be? We'd probably be owned by somebody else who would have acquired us. But it's worked out very well for us.
Christine Tan: You've been with the company for the past 18 and a half years. Do you remember the acquisition that you led, acquiring Active Hotels and Bookings B.V. in 2004 and 2005, a merger which led to the creation of Booking.com? Do you remember that historic merger?
Glenn Fogel: It was a transaction that we had absolutely just been so fortunate it worked out so well for everybody involved in it. But the truth of the matter is the transaction itself is not the critical issue. In fact, that's one of the easier parts. After you do the transaction, then you have to make them work together. Those deals 2004, 2005 as I mentioned, it was a long time…
Christine Tan: You led the acquisition!
Glenn Fogel: Yeah I did do that. That's right. And you know it's an issue I have about business journalism in general and the way people talk about it. People they assign value to one person. This person did that. But the truth is, it's never one person. It's always an incredibly large team of people who've done it.
Christine Tan: You were a banker and a trader before and I understand you tell me you were a coder as well in your early days. How did you end up in the online travel industry? You like the challenge?
Glenn Fogel: Our company which was one of those Internet darlings in the late 90s or 2000, we had a market cap of over 30 billion dollars shortly after the IPO in 1999, and that dropped down to just a couple hundred million dollars. Everybody thought we would go bankrupt. I left Morgan Stanley - this great place and I went to priceline.com. Even my mother thought like are you guys going to go out of business? Are you going to have a job or not? And it was hard. It was really hard. We were down to just a couple hundred people working every day, trying to figure out what can we do. And from that to this, it has just been incredible ride.
Christine Tan: Well Booking Holdings and its various different brands, operates in more than 220 countries. In terms of where you see the company here in Asia now, how bullish are you on this part of the region?
Glenn Fogel: Well everybody I think will say that Asia is the greatest growth area for almost all industries. Now travel, even more so and there are couple of factors that are driving this growth in travel. The first thing is you have a rising GDP per capita. People are getting wealthier. So, as people go from a lower income level to a higher level income, one of the first things they actually want to do is travel. So, we're getting that tailwind. Then on top of that, it's a great place to visit. So you have people outside Asia who say I want to go and look. I want to go to Asia because there are so many things to see here. So there are so many things that are driving this. We're very fortunate to have a lot of very qualified people here who are helping us become more and more successful.
Christine Tan: How fast is growth in Asia for you?
Glenn Fogel: It's quick. It's going faster than most of the areas in the world.
Christine Tan: Well given these investments you're making in China, is China the next phase of growth for you?
Glenn Fogel: It's a big thing right now, and it's not just China. Let's not restrict ourselves because there are a lot of other parts of this world besides China that are also growing very rapidly. When you look at all the different macroeconomic areas, you look at things in terms of the growth of the population, particularly the ages of the population. Age is much more demographically younger than other parts. So as these people age from teenagers, into young adults who earn money, they want to travel. We need to be there now to help develop these brand habits.
Christine Tan: Could it be your biggest travel market?
Glenn Fogel: Absolutely, it could be.
Christine Tan: You've invested in Chinese top online travel agency Ctrip and consumer platform Meituan Dianping. To what extent are these investments helping you capture more of the Chinese outbound market, something a non-Chinese travel company like Booking has found it very hard to crack?
Glenn Fogel: So one of the reasons we did those investments and one of the reasons both those companies were interested in having us invest and create our relationship was because of our outbound capabilities. Both companies are very interested in making their outbound services more powerful, and they recognize that we can bring things to them that will help them. So that's the reason to do that. We believe that there are really three things that are so important for our business being successful in China and one of them without doubt is that outbound business. We need to make sure that we are providing a great service to every single Chinese customer who wants to explore and experience the world.
Christine Tan: Have you seen an improvement in bookings as a result for the Chinese outbound market?
Glenn Fogel: Absolutely. You know, that is an area where we're growing nicely and we're growing both organically, people coming directly to our own site and using our own apps - that's one way that we're doing it. And the other way is through partnerships whether with Ctrip or Meituan, or other types of affiliate relationships we have with some of the Chinese banks. Our job is to make sure that that Chinese customers when they think they need a hotel somewhere around the world, or they need a non-hotel, a home, an apartment, we want to make sure the first thing they think about is using Booking or Agoda.
Christine Tan: In July this year, you made the decision to invest 500 million dollars in Chinese giant ride-hailing giant DiDi Chuxing. What exactly did you get out of the deal?
Glenn Fogel: So, there are a few things that we always look for when we're going to do any type of transactions, whether it be an acquisition or an Investment. The first thing is, how is that going to help our customers better off than it would be not buying or investing in that company. The one thing that is very, very well known is that when somebody who is not Chinese comes to China and they need to get around on the ground, they're not going to rent a vehicle and drive it themselves. They're not going to do that. So they need a way to get around. Now, DiDi is by far the biggest player for ground transportation in China. So, we want to come together with them to create a way for our customers to be able to go around seamlessly, frictionlessly. Most of our customers don't speak Chinese, don't read Chinese and if you recall when we first started talking to DiDi, they only had the Chinese App. Now they have Chinese and English but we have people who are operating in more than 40 languages. DiDi's not going to do 40 different apps or 40 different languages. We want people who have come to our apps, either the Booking.com app, or the Agoda app, to be able to get that car when they need it, where they need it, seamlessly. That's one. Second thing is, our brand is not as well known in China as some of our competitors who are local players. We want to help make it so people can understand, hey this is a good company to travel. I want to look into this. We got to get that brand up. One way to do it is working with DiDi to do some marketing. DiDi's got an incredibly large customer base. So being able to reach out to them and let those customers know about our services at Booking and Agoda, they'll help our business particularly, the outbound Chinese people who want to go travel outside China that we have this great service. That's another thing. The third thing we want is that, every single investment we make, we like to have a nice return on our financial investments. So three reasons and so far, I'm just I'm just thrilled with the relationship.
Christine Tan: To what extent, I know it's only been a couple of months, to what extent have you been able to push your hotel offerings to DiDi users?
Glenn Fogel: Well, you know we just started and we're still working that out- how we're going to do that. This is a long-term relationship. Well, it was a few months ago that we closed the deal. These things take time, and I don't want to start talking about exactly how we're going do it or when we're going to do it. But without a doubt, it's an incredible opportunity for us, for us to get our brand name out to those DiDi customers. The criteria is always going to be how are we going to help our customers, what value we get from making an investment or an acquisition, and is it the right price. And is the relationship right? Part of the thing is sometimes you'll see something that looks like a good price, and maybe you think it's going to add a lot of value, but you're concerned about the DNA of the company that you're working with. If you know this just won't work well in the long run, let's not do that. Sometimes the most important thing in acquisitions is not doing the acquisition.
Christine Tan: We could see you make a couple more investments in China by the end of the year?
Glenn Fogel: It could happen, it may not happen. We are always open. One of the most important things is not laying out what your plan is going to be, before you actually execute it.
Christine Tan: What advice would you give other companies on how to really crack the Chinese travel market? What's the secret?
Glenn Fogel: Well, I don't know if there's any secret and I'd say it's actually fairly well known some of these secrets. The first thing is, you have to recognize that China is different than other areas of the world. If you're going to just apply your playbook that you're using in other parts of the world, you'll probably not be successful. One. Two, you have to localize. Now we say that all the time about how you have to be local. But you really do have to be local. That means you need people to run your offices who are Chinese and understand the marketplace, understand the people, understand what they want and you have to be willing to adapt to that, you have to be flexible. There's too many people coming to China from outside China and we've seen a lot of people that came in and they left after a few years because it wasn't successful. So, you have to be willing to adapt.
Christine Tan: Well earlier this year, you and senior management decided to change the name of the parent company from Priceline Group to Booking Holdings. I know that you've been mulling over it for a long period of time, what finally made you do it?
Glenn Fogel: Well, it really doesn't matter much to our customers because they know those brands and those brands are continuing to grow, Booking.com, Priceline, Agoda. But for other areas in the world we want to make sure that the investment community is aware of who we are and what we are. We're in Singapore right now, if I went up to investors right now and I said what do you think about the Priceline group? They'd say "Priceline? I'm not that familiar with it." If I said Booking, they'd say "Yeah I know Booking." So we want to change that awareness for the financial community to know who we are. Now, there's also as you said that Booking is by far our biggest subsidiary in the group. It's important, I think, to align the parent name with the biggest subsidiary. I think that's helpful too.
Christine Tan: Well these days it seems that you're making a change in the way you carry out your marketing spend. Where exactly are you putting your marketing dollars?
Glenn Fogel: Well, you know people notice for a long time - you look at our income statement and you'll see we have two different ways to describe marketing. One of them is our performance marketing, then there's our brand marketing. We are one of the biggest players in the world in what's called the performance market. That means we spent a lot of money with players like Google, for example. Over time, we've been trying to increase the spend on brand marketing and not as much of an increase in performance marketing, to create a better balance.
Christine Tan: This is just to generate more direct bookings. Is that the end result?
Glenn Fogel: Absolutely. One of the strategies is really is to try and drive more and more people to come to us direct. When you're doing performance marketing, that means they're going first to somewhere else, they're going to Google first or Facebook first, they're looking off a YouTube ad and they're clicking off that. Or they're doing a metasearch for example, like Kayak is one of our metasearch site, that's not direct. We want our customers when they're thinking "I need to travel" first thing in their mind that I want them to think is Agoda, Booking, Booking, Agoda. That's what we want. Not Google. So through brand advertising, we're promoting that awareness by driving people to come to our site. At the same time we're paying for performance marketing which is also helpful.
Christine Tan: Some concerns lately about weak forecast on the third quarter earnings, leading some market commentators to question whether the company is actually sacrificing growth to focus more on margins and profitability. What is your position on this?
Glenn Fogel: Well, look, we always want to create a balance. We're always trying to create a balance, and I've said this to the investors all the time, you know, create the right balance for the return to the shareholders to the bottom line, at the same time, maintaining growth. Now there are a couple factors that we talked about in our earnings call that were happening regarding the beginning of the third quarter. In the long run, we're going to continue to grow faster than the general travel business as these people go from offline to online travel. You know the idea that 10 years from now somebody is going to book travel by walking down to a store and getting an extra person doing that. I just find it hard to believe that there are a lot people that are doing it. It's so much more convenient when you open up your phone, you see the Booking app, they just to have to tick, tick, tick and it's done and it's easier, frictionless. When you do that through all this incredible technology, well our systems don't forget about what you'd like. We know what you like because you told us what you like, and we can offer all the different ways you can do it. You can do it frictionlessly, seamlessly. So I see that there is still a lot opportunity for growth.
Christine Tan: Well in the earlier days Priceline together with Expedia was seen as the big disruptors. Now your hotel business is getting disrupted itself by these disruptors - tech startups Airbnb also in partnership with hotels, not to mention hotels themselves also wanting more direct bookings. Are you feeling the pressure? Are you feeling the squeeze?
Glenn Fogel: I have always felt the competitive pressure in every business I've been in, forever. You know the famous book by Andy Grove who ran Intel, he talked about how only the paranoid survive. You should always be concerned about your competition. That's a great thing because it really makes people work harder to create a better product, to create a better service, and we're always doing that. And I believe that some of things we're doing right now are addressing that. For example, the non-hotel accommodations, what we like to call homes...
Christine Tan: Alternative accommodations
Glenn Fogel: Alternative accommodations, exactly. It's a very big area growing very rapidly that didn't exist seven years ago. Now it's growing very rapidly.
Christine Tan: That's putting you head to head with Airbnb
Glenn Fogel: Exactly, we're going head to head with Airbnb and we are competing with them. We are doing everything that we think should be done to create a better solution for the customer and there are differences. For example, when you come to our site, a lot of times, people are not sure if they want a hotel or if they want an apartment. I know that personally. When I travel, sometimes with my family, we're not sure what we want. On our side, you see the incredible breadth of hotel accommodations, and you also see those alternative accommodations on the same page. I can compare and contrast them right there. Airbnb you can't do that. You only can look at the alternative accommodations. It's a big difference...
Christine Tan: But they're now also in partnership with hotels, so they are also giving you a run for your money.
Glenn Fogel: Have you looked at the number of hotels they have? Enough said. I don't like the end of the check out either. There's a service fee on top of the site. We don't do that. At other sites like Airbnb, you get this. To me, I want to know the price when I am looking at it. That's a big difference. And you'll see all those reviews etcetera. That's a wonderful thing to be able to do.
Christine Tan: So any plans, no plans to dial back on concessions?
Glenn Fogel: We always want to be price competitive. So if there's a competitive situation where somebody else is going out and offering a lower price, usually we'll look at the right way to make sure we match up with the other people and be competitive. The key thing is that balance, making sure that you're achieving the right results, the right way for the right price. You know, a lot of people are going out and they've built their business by giving away the product essentially they're selling it for less than it costs to produce, in the belief that they're going to bring in a lot of customers, and then at some point they'll turn it around and start charging more and making it profitable, that's sort of the games that's being played now...
Christine Tan: So no plans to dial back on your commissions?
Glenn Fogel: No, I'm not saying that all. What I'm saying is that we're always going to be competitive in the different situations and doing it the right way, in the right place and the right time.
Christine Tan: Well, for years Booking.com has been trying to build up its experiences business in areas like local attractions offering tours, you've recently acquired FareHarbor a U.S. booking software provider. What are you doing to build up your expertise in this area?
Glenn Fogel: This is an area that is important in the long run for us. When we started out, our main business has been hotels. We need to do more than that. We want our customers to really feel there's a reason to come to us. Besides giving them the best price, because many times there our competitor pricing is not that different, we need to offer more to them. I've talked about this idea, this whole holistic super system that enables people to be able to do all the things they want to do when they're traveling. I just used this recently. I was in Salzburg with my family and my Wife, she did the bookings for us and she used the Booking.com app. We got to Salzburg and she got an e-mail offering all these different things we can do and Salzburg, all these choices. All we had to do was show the QR codes when we went to the line and we went right in. I mean, that's just such an advantage for us, seeing people who were out there getting out their credit card or getting out their cash and it took them time. We' were just showing a QR code and up we went. That made me think why would I book with Booking.com? And the reason is because I'm getting all these other great things. These things are frictionless, seamless, and easier to do. That's one of the parts about our business. You asked at one point, about how we can handle this price competitiveness, and margins, and the commissions - we have the largest demand platform in the world by far. So if the supplier is someone who was offering a hotel, or they're offering a museum tour or bus tour, us being able to bring those people to those services, gives us an incredible benefit in working with those suppliers to make sure that we're able to do it in a way that's good for them and profitable for us. That's one of the advantages we have as a very very big player.
Christine Tan: So when could the experiences be a meaningful growth area for you?
Glenn Fogel: It's going to take time. It's going to take time. We've always wanted to make sure we're doing things the right way and we're experimenting. That's part for our DNA, to always experiment find the right way to do it. Now again, it's growing rapidly but it's going to be a long term project that will take time before anyone will see meaningful numbers for the income statement. The reason of course, you got to understand, we're a huge company, we earn many billions of revenue each year...
Christine Tan: But you've got to stay ahead of the curve.
Glenn Fogel: That's why we're doing this investment.
Christine Tan: You've had to make a write down of your acquisition OpenTable and other businesses in metasearch and ground transportation. Any lessons there learnt for the company as it continues its journey to become a full-fledged online travel agency?
Glenn Fogel: You know one of the things interesting about that is for several years we've been doing acquisitions and each one has had a really eye-popping return on the investments. And somebody said something to me that I thought was very good. He said "You know Glenn, what this really says is - it's not how great your ability to pick winners is, but it shows you're being too conservative, because if you don't have things that aren't working out, you're not taking enough risk." I thought about that and you know maybe they're right. I think that was a great question. Maybe we were being too conservative at the time. That being said, just to point out, OpenTable is doing wonderful now, that write down was a couple of years ago and we're very pleased with the progress of the company. They did a commercial relationship with Ctrip not long ago, so the Chinese traveler who's using Ctrip and going to a city where there's an OpenTable, they can easily go there and get that reservation. So I'm very pleased with what's going on and what they're doing there, again creating that holistic view. So when that customer comes to us, we're going to provide all the types of services for that trip make it easier for them.
Christine Tan: So you still think you're being too conservative?
Glenn Fogel: I think we have the right balance now.
Christine Tan: Booking Holdings is now the world leader when it comes to online travel. As CEO, are you confident it will continue to be number one in the future?
Glenn Fogel: I would like it to be. I'm doing everything I can. And the other almost 25 000 people who work for us are doing everything they can to try and make sure we maintain that number one position. It's interesting, I'm now 56 years old and I've seen a lot of companies that were very successful and then they weren't so successful and some of them even disappeared. Now, I know how every day you have to wake up and work really hard. And there is no rest. There is no ability for you just say l, "Well, we're number one and we can not work so hard anymore, all the business will just come to us." That's not what happens. It's actually the opposite that happens. Every day, there's somebody else. They're in a garage or a school or just a little office and they're thinking we're going to become the Booking Holdings company of tomorrow. We need to make sure that we're working so hard to prevent that from happening. Once upon a time, I was at a company and we were really small. And I went out to meet those guys at Booking.com, or I met the people at Active Hotels, or Kayak and all of these other companies when they were tiny little companies too and they became giants. And I know that small companies can become giants if you're not always doing the best you can for your customers, your suppliers and everybody.
Christine Tan: You sound paranoid.
Glenn Fogel: Only the paranoid survive.
Christine Tan: Well the company has come a long way and you've been with the company for the last 18 and a half years. What do you see as the next big thing in online travel?
Glenn Fogel: Well, I think the next big thing is creating that personalized holistic system that makes life so much easier for the traveler. You know I got asked a question not long ago. "Is travel broken?" Travel's not broken at all. You may think it's hard right now to travel. You don't know how travel was 40 years ago, 30 years ago, I know, but there's still a long way to go. So for example, I got off the plane last night in Singapore, and I want to get ground transportation. I could have used Grab and done that, but my assistant said it was going to be late, so she wanted to set up a car service for me and that was very nice. So, she did that, I got there, the car was not there, person not there. I had no notification at all. So, right away there should be a message telling me what had happened to that. Right? Or what if my flight had been delayed or something? There are all these different areas where travel can not work well. We want to create a system that starts from the time we start thinking if you're going to take a trip, to time you are back home...
Christine Tan: So you want it to be seamless?
Glenn Fogel: Seamless, frictionless, eEasy to do and able to correct the problems that will happen when you travel because things happen. There's weather, there's equipment failure, there's over bookings, there are all sorts of things. What we want to do is go back to those days when you had that travel agent human being who knew everything about you, knew what you like, knew what you wanted, knew what you could afford and would even come and tell you about good choices for you. You would pick one of these and then if anything went wrong, she would fix it for you as it happened. We want to take that, put that in a technological way so it happens instantly, seamlessly, frictionlessly. And then instead of worrying so much about the mechanics of the travel, you are enjoying the travel.
Christine Tan: You're 56 years old. You're in charge of over 22000 employees in more than 220 countries. How would you describe your leadership and your management style?
Glenn Fogel: So, it's hard. You know, we have a lot of different companies. We run them in a lot of different ways with a lot of different people, a lot of different cultures. Each of the brands has their own culture, and then at each different place you work there are different cultures all working in different ways. The question is how am I going to do it, what is the role of the leader of this group? And there's something a Harvard professor said and I don't know when he said this, we talk about how leadership is really making sure that people understand what reality is and then motivating people, mobilizing people to make whatever changes are necessary to adapt to this changing reality. The second thing is this making sure that I'm listening. It's so critical because I don't know everything. In fact I know just a sliver. I need to be able to take that information and all those issues that are being brought up from around the world and be able to listen to what people are suggesting. Eventually many times I'll have to make a decision that's correct, based on alternative ways to do things but a lot of times things for me to say you should make a decision and delegate downward as far as we can to the people who are in the field who know it better than I would know it.
Christine Tan: So you know your industry is full of disruption. This is also another way to keep the company nimble and responsive to change?
Glenn Fogel: It's so hard because as you get bigger and bigger more bureaucracy, more layers, systems, processes, all these things slow things down...
Christine Tan: You're feeling it?
Glenn Fogel: I do feel that. I do feel this. When you're just one little company and you have just five men and women in an office working together, everybody knows what each other is supposed to be doing. Now we're approaching 25000 people, picture everybody doing what they're supposed to be doing. It's harder. That's why you always want to guard against that, you're always trying to prune back. It's almost like a vine that can grow on its own and if you don't keep trimming it back, it'll go wild. So, it is important. There's another role as a leader is making sure that we are focused on the important things - the priorities. There are so many things you can do and when you're a big company, sometimes you get that idea, "well we have all this money and we're making all this money and we have all these great ideas, let's do this, let's do that." And that's when you say, "No, that's not what we do. We should focus on the most important things. Get that done. Don't worry about those, trivial things to the side."
Christine Tan: How do you go about motivating and inspiring your employees? How do you do that?
Glenn Fogel: Well I think a lot of times it's trying to make sure that people have the environment where they can become self-motivated because the first thing is to hire people who are self-motivated. What drives them? Now you're bringing the right people, so you've got the right people now. Now the thing is to make sure they understand what is the goal? What are we trying to accomplish? Make sure you are able to communicate the reason why that's the important thing to get done. If you put those things together, if you've done that correctly that will create the motivation. Here are some things I don't think worked so well, or they're very short term and they're dangerous, fear. Fear is not a way to motivate people. In the long run, it will actually create, one thing that I am certain happens, people leave. Nobody wants to work environment where they are afraid if they make mistakes or are afraid they don't do the right thing. People are going to go find the environment where they are feeling encouraged, where they are being supported and where they're being helped along the way. I've been to companies that have been more fear-backed and it's not very enjoyable.
Christine Tan: And finally what would you like to achieve for Booking Holdings under your tenure as CEO? What's your ultimate ambition for the company?
Glenn Fogel: At the end of the day, when I walk away, I want to feel that I helped. That I was part of an incredible organization that made travel better and helped people, more people to be able to experience the world. I really believe what I said earlier about this, I believe travel is one of the things that helps make this world a better place. So us being there to help make it easier, cheaper, seamless, frictionless, doing those things to make it a better experience right, We're doing our little part to make this a better place.
For more information contact Clarence Chen, Communications Manager APAC, CNBC International
D: +65 6326 1123
M: +65 9852 8630
CNBC is the leading global broadcaster of live business and financial news and information, reporting directly from the major financial markets around the globe with regional headquarters Singapore, Abu Dhabi, London and New York. The TV channel is available in more than 410 million homes worldwide.
CNBC.com is the preeminent financial news source on the web, featuring an unprecedented amount of video, real-time market analysis, web-exclusive live video and analytical financial tools.
CNBC is a division of NBCUniversal. For more information, visit www.cnbc.com.
About Managing Asia:
Managing Asia is the Asia Pacific region's ground-breaking interview programme featuring CEOs, entrepreneurs and other business leaders.
· Friday 17:30
· Saturday 10:00, 19:00
· Sunday 04:00, 06:00, 08:00, 18:00
· Saturday 19:00, 22:00
· Sunday 01:00, 03:00, 06:00, 09:00, 16:00, 18:00, 20:00
· Saturday 00:00, 03:00, 07:00, 16:00, 19:00
· Sunday 02:00, 04:00, 06:00, 10:00, 15:00, 18:00