Even before Covid-19 struck, it had been rocky seas for Expedia Group. The 3,000 layoffs and cost cuts it did, which was played out in full glare on social media, pre-empted the pandemic to come. Little did we know at the time that the same fate was to befall thousands upon thousands of more people working in travel.
So in a twisted way, you could say that this crisis has put everybody on the same sinking boat or to use the parlance of current times, “we’re all in this together”. Or to use another nautical term, we sink or swim together.
Booking Holdings, which had been the victory horse finishing off 2019 on a high, in its latest earnings call said bookings had decreased by more than 85% year-on-year, adding that it expects the impact on the current quarter, ending June 30, will be greater than the situation in the first quarter of 2020.
Phocuswire reports that it is taking steps “around supporting its financial position including an offering of senior notes, which is expected to raise $3.23 billion, as well as an offering of convertible senior notes to net an additional $735 million”.
And “the company says that even before the announced external financing, it believes if current business volumes stay the same, it can meet “operational and other needs… through at least the end of 2021”.
This week, Expedia made its moves, announcing a new CEO, Peter Kern (who had been in a stewardship role since Mark Okerstrom exited) and CFO, Eric Hart, as well as $3 billion plus of new financing.
Said Barry Diller, chairman, “We have one mandate – to conserve cash, survive, and use this time to reconstruct a stronger enterprise to serve the future of travel. We are unable to make any predictions as to when travel will rebound but we emphatically believe that it will, for….’if there’s life, there’s travel.’”’
Kern’s succession is seemingly as smooth as the previous handing of the baton from Dara Khosrowshahi to Mark Okerstrom – he’s been a board member since 2005 and became vice chairman in 2018, and since December, has been working alongside Diller to turn around Expedia.
“In these last five months, he has shown outstanding leadership in all aspects of the business, first in a wide reorganization and then dealing with the impact of the Corona crisis on our business,” said Diller.
Hart too is no stranger, having been with Expedia for 11 years. “He’s a strong executive who’s been truly tested these past five months as Acting CFO during both the reorganization and the Corona crisis. He has fully earned permanent status as CFO,” proclaimed Diller.
The $3.2b of new capital comes from an equity investment of $1.2b by Apollo and Silver Lake. “The equity will be non-voting and non-convertible preferred stock. It will also entail approximately $2B in new debt financing. We are also ceasing dividends until the business rebounds,” said Diller.
The actions of Apollo and Silver Lake are interesting to watch at this time, with pundits expecting some big-ticket mergers among travel companies in the next year or so. The two companies are also involved in the US$1b loan deal to Airbnb in the past couple of weeks, and Silver Lake led a $319m investment round in Vacasa, North America’s largest vacation rental management platform, last October.
It’ll be interesting to see how investors connect the dots during these opportunistic times when all travel companies are struggling to stay afloat.
Diller also announced that he, the CEO and board members will forgo cash compensation for the remainder of the year, while senior Executives – the Travel Leadership Team – will be taking a reduction in salary of 25% for the balance of the year.
Furloughs and reduced work week programmes for select volume-based teams are being implemented. “Our intention is that impacted employees would retain Expedia healthcare benefits coverage while on furlough or reduced hours, and we will cover the employee premiums in the case of furloughs.”
Speaking of the “extraordinary number of challenges”, Diller said, “just as governments around the world were unprepared, so too were we”.
“We had limited online tools to support widespread cancellations and our call volume spiked 500%. Under extraordinary pressure, our tech teams built new tools, and managed to bring our call center capacity to acceptable levels.”
Saying “there is nothing like a crisis to show the mettle of our executives, and I can say that without exception, none have been wanting”, he added, “We have the financing to carry us through, a superb newly named senior management team, and a very clear focus for whatever the future brings. So, we’ll seize the (next) day…”
And that is the common challenge facing all of us in the same boat – just seize the next day as it comes.
• Featured image credit: Ja_inter/Getty Images
