Expedia Group, Inc.

In the not-too-distant past, planning a trip was a fragmented, friction-filled, and often-frustrating endeavor. It involved poring over glossy brochures, making countless phone calls to airlines and hotels, and placing immense trust in a local travel agent. The power was held by the suppliers—the airlines with their opaque fare structures and the hotel chains with their rigid booking systems. The consumer was a price-taker, armed with limited information and even fewer choices.

Then came the internet, and with it, a revolution that would forever democratize travel. At the vanguard of this revolution was a small, experimental division incubated within the walls of the world’s most powerful software company. That division, which would soon be spun out to become Expedia, was built on a radical premise: to use the power of technology to pull back the curtain on the travel industry, to aggregate the world’s travel options in one place, and to put the power of choice, transparency, and booking directly into the hands of the traveler.

This is the definitive story of Expedia Group, Inc. (NASDAQ: EXPE). This company has been a central architect of the online travel age for over a quarter of a century. It is a tale of technological pioneering, audacious industry-shaping acquisitions, and a relentless battle for market share in one of the most competitive corners of the digital economy. We will trace its journey from a Microsoft “skunkworks” project to a sprawling, multi-brand global empire that includes household names like Hotels.com, Vrbo, Travelocity, and Orbitz. We will deconstruct its complex “two-sided marketplace” business model, explore its epic rivalry with Booking Holdings, and analyze its ongoing transformation from a collection of disparate brands into a unified, technology-driven platform that powers the entire travel ecosystem. This is the story of how a simple idea—booking a trip online—grew into a global force that moves millions of people every single day.

The Genesis of an Idea: A Skunkworks Project Inside Microsoft

To understand Expedia, one must travel back to the mid-1990s, the dawn of the commercial internet. The world was just beginning to grasp the transformative power of this new medium. At the epicenter of the tech universe was Microsoft, the undisputed king of the PC software era, which was grappling with how to extend its dominance from the desktop to the new frontier of the World Wide Web.

Rich Barton and the Vision of “Travel as a PC Peripheral”

In 1994, a young, ambitious product manager at Microsoft, Rich Barton, was tasked with exploring new consumer applications for the company’s software. He was working on a CD-ROM travel guide product. Still, he quickly realized that the real opportunity was not in static, pre-packaged content, but in the internet’s dynamic, interactive potential.

Barton had a powerful and prescient vision. He saw that the travel industry was a perfect candidate for digital disruption. It was a massive, information-intensive market that was plagued by inefficiencies and a lack of transparency. He pitched an idea to his boss, and eventually to Bill Gates himself: to create a new, online service that would allow consumers to research and book their own travel—flights, hotels, and rental cars—directly from their personal computers. He argued that technology could aggregate all the fragmented travel inventory, empowering consumers with unprecedented choice and control. The project was codenamed “CarPoint” for cars and “Travel” for the broader idea.

Bill Gates, famously forward-thinking, saw the potential and gave Barton the green light and a small team to build a prototype. Expedia was born as an experimental “skunkworks” project within Microsoft.

Launching Expedia.com (1996): A New Way to Travel

On October 22, 1996, Expedia.com was officially launched as a division of Microsoft. It was one of the very first online travel agencies (OTAs) of its kind. The initial website was rudimentary by today’s standards, but the core value proposition was revolutionary. For the first time, ordinary consumers could go to a single website, compare flight options from multiple airlines, check hotel availability, and book their entire trip without ever speaking to a human.

The early Expedia team faced immense challenges. They had to painstakingly build connections to the archaic, mainframe-based Global Distribution Systems (GDS) like Sabre and Worldspan that airlines used to manage their inventory. They had to convince skeptical airlines and hotel chains to participate on their platform. But the consumer response was immediate and enthusiastic. People loved the convenience and the feeling of empowerment. Expedia was not just a website; it was a new way of thinking about travel.

The Spin-Off and the Dawn of a Travel Empire

By the late 1990s, Expedia was one of Microsoft’s most successful internet ventures. However, being part of a giant software company had its limitations. To be truly nimble and to have the freedom to grow, Expedia needed to be its own entity.

The 1999 IPO and the Rich Barton Era

In 1999, at the height of the dot-com bubble, Microsoft spun off Expedia as a separate, publicly traded company in a successful Initial Public Offering (IPO). Rich Barton became the company’s first CEO. This marked the beginning of Expedia’s life as an independent force in the travel industry.

Surviving the Dot-Com Bust and 9/11

The years immediately following the IPO were a trial by fire. The dot-com bubble burst in 2000, wiping out hundreds of internet startups. Then, the terrorist attacks of September 11, 2001, brought the global travel industry to a grinding halt. It was an existential crisis for a young company whose entire business depended on people traveling.

It was during this period that Expedia’s resilience and the strength of its business model were proven. As the travel industry slowly recovered, consumers, now more price-conscious than ever, flocked to online platforms like Expedia to find the best deals. The company not only survived these twin crises but emerged from them stronger and with less competition.

The Acquisition by IAC and the Barry Diller Era

In 2001, the media and internet conglomerate IAC (InterActiveCorp), led by the legendary and aggressive dealmaker Barry Diller, began acquiring a controlling stake in Expedia, eventually taking the company private in 2003. This marked the beginning of a new, transformative era for the company.

Barry Diller was a shrewd and visionary leader who saw the immense potential of the online travel market. He believed in an aggressive growth strategy, fueled by a relentless acquisition campaign. Under Diller’s leadership, Expedia would go on a multi-year buying spree, swallowing up a host of competitors and complementary businesses to build a sprawling, multi-brand travel empire.

The “House of Brands” Strategy: Building an Empire Through Acquisition

The core of Expedia’s growth strategy for nearly two decades was to operate as a “house of brands.” The idea was to acquire different online travel brands, each with its own distinct identity and target audience, and to operate them as largely independent businesses, all while benefiting from the scale and shared technology of the parent company.

The Age of Acquisition: A Deal-Making Machine

Under the leadership of Barry Diller and later, Dara Khosrowshahi (who served as CEO from 2005 to 2017), Expedia became a deal-making machine. The company spent billions of dollars to acquire a portfolio of some of the biggest names in online travel.

This list highlights the most significant acquisitions that transformed Expedia from a single website into a global travel conglomerate. Each deal brought a new brand, a new customer segment, or a new geographic stronghold into the Expedia family.

• Hotels.com (Acquired as part of the IAC deal in 2001): Originally known as the Hotel Reservations Network, this was a key acquisition that gave Expedia a powerful, hotel-focused brand and a pioneering “merchant model” for hotel bookings.
• Hotwire.com (2003): An “opaque” travel site that allows consumers to book discounted hotel rooms and rental cars without knowing the exact brand until after the purchase. This was a great way for suppliers to sell distressed inventory without publicly discounting their brand.
• TripAdvisor (2004): In a move that would later be viewed as both brilliant and a missed opportunity, Expedia acquired TripAdvisor, the pioneering travel review and user-generated content site. (TripAdvisor would later be spun off as a separate company in 2011).
• eLong (2004): A major Chinese online travel agency, this was Expedia’s first major foray into the massive and fast-growing Chinese market. (Expedia would later sell its stake in eLong).
• Trivago (2012): A leading German travel “metasearch” engine that allows users to compare hotel prices from hundreds of different booking sites. Expedia acquired a majority stake in Trivago, giving it a powerful presence in the metasearch space.
• Travelocity (2015): In a blockbuster deal, Expedia acquired one of its oldest and largest rivals, Travelocity, famous for its “Roaming Gnome” mascot.
• Orbitz Worldwide (2015): Just weeks after the Travelocity deal, Expedia announced an even bigger acquisition: the $1.6 billion purchase of Orbitz, another major U.S. OTA that a consortium of major airlines had originally founded.
• HomeAway/Vrbo (2015): This was arguably the most important and strategic acquisition in the company’s history. For $3.9 billion, Expedia acquired HomeAway, a global leader in the vacation rental market and the parent company of Vrbo (Vacation Rentals by Owner). This deal gave Expedia a powerful foothold in the rapidly growing alternative accommodations market, putting it in direct competition with Airbnb.

The 2005 Spin-Off: Expedia, Inc. is Reborn

In 2005, Barry Diller’s IAC decided to spin off its collection of travel brands into a new, independent, publicly traded company. This new entity was named Expedia, Inc., and it brought together the powerful portfolio of brands assembled over the previous years. This marked the birth of the modern Expedia Group as we know it today.

The Expedia Business Model: Deconstructing the Two-Sided Marketplace

Expedia Group operates a classic “two-sided marketplace.” On one side, it has a massive global audience of travelers looking for places to go. On the other side, it has a vast inventory of travel products from hundreds of thousands of suppliers (airlines, hotels, car rental companies, cruise lines, etc.). Expedia’s business is to connect these two sides and to take a fee for facilitating the transaction.

The company makes money in three primary ways. Understanding these models is key to understanding the company’s financial engine and its relationship with its partners.

The Agency Model

In the agency model, Expedia acts as a traditional travel agent. It facilitates the booking on behalf of the traveler, and the traveler pays the supplier (e.g., the hotel or airline) directly at the time of their trip. Expedia then earns a commission from the supplier based on the booking’s value. This model is most common for flight and car rental bookings.

The Merchant Model

The merchant model is more complex and has historically been more profitable for Expedia, particularly in the hotel business. In this model, Expedia contracts with hotels to buy rooms at a wholesale, discounted rate. Expedia then acts as the “merchant of record,” selling the room to the traveler on its own website and collecting the payment at the time of booking. The traveler pays Expedia, and Expedia pays the hotel. Expedia’s revenue is the “merchant margin”—the difference between the retail price the traveler paid and the wholesale rate it paid to the hotel.

The Advertising and Media Model

The third revenue stream comes from selling advertising. The most prominent example is Trivago, which operates on a cost-per-click (CPC) advertising model. Hotels and other OTAs pay Trivago a fee every time a user clicks on one of their listings. Expedia also sells advertising placements and sponsored listings across its other brand websites, allowing travel partners to pay for more prominent visibility.

The Brands of the Empire: A Closer Look at the Expedia Portfolio

While the company is now moving towards a more unified strategy, for years its strength lay in its diverse portfolio of brands, each targeting a different segment of the travel market.

Expedia.com: The Flagship Full-Service OTA

Expedia.com remains the group’s flagship brand. It is a full-service Online Travel Agency offering flights, hotels, car rentals, cruise packages, and activities. It is a globally recognized brand that is often the first stop for travelers looking to book a complex, multi-product trip.

Hotels.com: The Accommodation Specialist

As its name suggests, Hotels.com is laser-focused on accommodations. Its brand is built around a simple, powerful loyalty program: Hotels.com Rewards, which offers customers one free night for every ten nights they book. This simple and easy-to-understand value proposition has made it a favorite among frequent travelers.

Vrbo: The Champion of the Vacation Rental

Vrbo (originally an acronym for Vacation Rentals by Owner) is Expedia’s answer to Airbnb. It is a marketplace for “alternative accommodations,” connecting homeowners who want to rent out their properties—be it a beach house, a mountain cabin, or a city apartment—with travelers looking for more space and privacy than a traditional hotel can offer. The acquisition of Vrbo was a crucial move that has made Expedia a major player in one of the fastest-growing sectors of the travel industry.

The “Managed Brands”: Orbitz, Travelocity, and Hotwire

This group includes the major OTAs that Expedia acquired in the mid-2010s. While they still operate as separate, consumer-facing brands, much of their backend technology, customer service, and supplier relationships have been integrated into the core Expedia platform. They serve as important acquisition channels, capturing diverse market segments. For example, Hotwire continues to appeal to the most price-sensitive, flexible travelers with its opaque booking model.

Egencia: The Corporate Travel Powerhouse

Egencia is Expedia Group’s full-service travel management company (TMC), focused on the lucrative business travel market. It provides companies with a platform to manage their employees’ travel bookings, enforce travel policies, and control costs. Egencia competes with traditional corporate travel giants like American Express Global Business Travel and CWT. (Note: In 2021, Expedia announced a deal to sell Egencia to Amex GBT, while retaining a long-term partnership to provide hotel inventory.)

Trivago: The Metasearch Engine

Trivago is the group’s major play in the metasearch space. Unlike an OTA, Trivago doesn’t sell travel directly. It aggregates hotel deals from hundreds of websites (including Expedia’s own brands and competitors like Booking.com). It lets users compare prices in one place before clicking through to the booking site to complete their transaction.

The Great Rivalry: Expedia vs. Booking Holdings

No discussion of Expedia is complete without a discussion of its arch-rival, Booking Holdings (formerly The Priceline Group). The battle between these two U.S.-based giants for global supremacy in the online travel market has been one of the defining business stories of the 21st century.

A Tale of Two Strategies

While both companies have grown through acquisition, they have historically had very different strategic approaches and geographic strengths.

This comparison highlights the fundamental differences in how the two giants approached the global market for many years. This rivalry has forced both companies to innovate and has shaped the entire online travel landscape.

• Expedia Group: Historically stronger in the U.S. market, with a more balanced mix of business models (agency and merchant) and a greater focus on air travel and package bookings. Large, headline-grabbing acquisitions of major U.S. brands, such as Travelocity and Orbitz, often drove its growth.
• Booking Holdings: Historically stronger in the European market, with an almost exclusive focus on the agency model for hotel bookings through its powerhouse brand, Booking.com. Its growth was more organic, driven by a relentless focus on performance marketing (particularly Google advertising) and a ground game of signing up millions of independent hotels across Europe and Asia.

The Performance Marketing Battleground

For years, the primary battleground between Expedia and Booking has been Google. Both companies are among the largest advertisers in the world, spending billions of dollars annually on Google Ads to capture travelers at the very moment they are searching for a flight or a hotel. The competition for keywords like “hotels in Paris” or “flights to New York” is incredibly intense and expensive. Success in this arena requires sophisticated data science, machine learning, and a massive budget. This “Google duopoly” has been a defining feature of the online travel industry.

A New Era of Transformation: From a “House of Brands” to a Unified Platform

For much of its history, Expedia’s “house of brands” strategy was a major strength. However, by the late 2010s, it had become a source of inefficiency. The company was running multiple, siloed technology platforms, duplicating efforts in marketing and product development, and missing opportunities to leverage its scale. The user experience was often inconsistent across its different brands.

In late 2019, the company’s board, led by Chairman Barry Diller, initiated a major leadership shake-up, citing a sluggish strategy and a lack of clear vision. Peter Kern, a board member, was appointed as the new CEO. Kern, along with Diller, embarked on a radical and ambitious new strategy: to transform Expedia Group from a holding company of disparate brands into a single, unified, platform-based technology company.

The “One Platform” Strategy

The core of the new strategy is to simplify and unify the entire company onto a single technology platform. The goal is to have one loyalty program, one data lake, one AI and machine learning stack, and one set of supplier relationships that can power all of the company’s consumer-facing brands.

This is a massive and complex undertaking, but the potential benefits are enormous. It promises to:

• Increase Efficiency: By eliminating redundant technology and processes, the company can significantly reduce costs.
• Accelerate Innovation: A single platform allows the company to build and deploy new features and products much faster across all its brands.
• Create a More Seamless User Experience: A unified platform will deliver a more consistent, personalized experience for travelers, regardless of which Expedia Group brand they use. For example, a user’s loyalty status or trip history from Expedia.com could be recognized on Vrbo.
• Better Leverage Data: By combining all of its data into a single platform, the company can gain deeper insights into traveler behavior and use AI and machine learning to create more personalized recommendations and offers.

B2B: Powering the Broader Travel Industry

A key part of the new strategy is a major push into the Business-to-Business (B2B) market. Expedia Group is leveraging the powerful technology and vast travel supply it has built for its own brands and offering them as a service to thousands of partners across the travel ecosystem.

Through its “Expedia for Partners” division, the company provides:

• White-Label Solutions: Allowing partners like airlines, banks, and loyalty programs to offer a full-service, Expedia-powered travel booking engine on their own websites. For example, a credit card company can offer its cardholders a way to book travel using their points, and Expedia can power the entire backend system.
• API Access: Providing direct API access to its vast inventory of flights, hotels, and other travel products to other travel companies and startups.

This strategy aims to make Expedia Group the “platform of choice” for the entire industry, creating a new, high-margin revenue stream and further embedding its technology into the fabric of global travel.

Navigating the Ultimate Crisis: The COVID-19 Pandemic

Just as Expedia was embarking on this massive internal transformation, the world was hit by the COVID-19 pandemic in early 2020. The impact on the travel industry was swift and catastrophic. Borders closed, flights were grounded, and travel demand evaporated overnight. For a company like Expedia, whose revenue is directly tied to travel volumes, it was the greatest crisis in its history.

A Company on the Brink

Expedia’s revenue plummeted by over 90% in the second quarter of 2020. The company was forced to take drastic measures to survive. It raised billions of dollars in new debt and private equity financing to shore up its balance sheet. It also undertook a massive cost-cutting program, including significant layoffs.

The crisis was a brutal test of the company’s resilience. It had to handle an unprecedented wave of cancellations and customer service requests, all while its own employees were transitioning to remote work.

The Silver Lining: An Accelerator for Transformation

Strangely, the pandemic, while devastating, also acted as a powerful accelerator for the company’s new strategy. The dramatic slowdown in travel gave the company the breathing room it needed to undertake the difficult and complex work of re-platforming and reorganizing its business. With booking volumes at near zero, it was easier to migrate systems and retrain teams.

The crisis also forced the company to become leaner, more disciplined, and more focused. As travel began its slow and uneven recovery, Expedia emerged from the crisis as a more efficient and strategically aligned organization, fully committed to its new platform-based vision. The pandemic also highlighted the growing importance of domestic travel and the vacation rental market, underscoring the strategic significance of the Vrbo acquisition.

The Modern Expedia Group: A Look at the Company Today

Today, Expedia Group is a leaner, more focused company than it was just a few years ago. It has weathered the pandemic and is well on its way to completing its platform transformation.

The Three Pillars of the Modern Business

The company now organizes its business around three main pillars:

• Expedia Brands: This encompasses the entire portfolio of consumer-facing brands, including Expedia, Hotels.com, and Vrbo, all of which are increasingly powered by the same underlying technology.
• Expedia Business Services (B2B): This rapidly growing division focuses on providing its technology and supply to partners around the world.
• Trivago: The metasearch brand, which continues to operate as a separately-traded public company in which Expedia holds a majority stake.

A Renewed Focus on Loyalty and Direct Relationships

A key part of the modern strategy is to build more direct relationships with travelers and reduce the company’s heavy reliance on performance marketing channels like Google. The company has launched a new, unified loyalty program, “One Key,” which allows travelers to earn and redeem rewards across its major brands (Expedia, Hotels.com, and Vrbo). The goal is to create a more compelling reason for travelers to book directly with an Expedia Group brand, rather than starting their search on Google every time.

The Future of Travel: Challenges and Opportunities for Expedia Group

The travel industry is in constant flux, shaped by new technologies, shifting consumer preferences, and global economic forces. Expedia Group faces several significant challenges and opportunities as it navigates this dynamic landscape.

The Challenges Ahead

• The Rise of AI and Generative Search: The emergence of generative AI and new search paradigms (like Google’s Search Generative Experience) could disrupt the traditional search marketing landscape. This could be a threat to a company that has relied so heavily on Google for customer acquisition. (It could also be an opportunity, as Expedia is integrating AI into its own trip planning tools.)
• The “Direct Booking” Push: Hotels and airlines are constantly working to encourage travelers to book directly on their own websites, offering their best prices and loyalty benefits to cut out the OTA “middleman.” Expedia must continually prove its value proposition of choice, convenience, and rewards to combat this trend.
• Intense Competition: The rivalry with Booking Holdings remains fierce, and a new wave of venture-backed travel startups is constantly emerging, looking to chip away at the incumbents’ market share.
• Regulatory Scrutiny: As dominant players in the market, both Expedia and Booking face increasing regulatory scrutiny in Europe and the U.S. over issues of market power and their relationships with hotel partners.

The Opportunities on the Horizon

Despite the challenges, Expedia Group is well-positioned to capitalize on several major trends. The fundamental human desire to travel is a powerful and enduring tailwind. The company’s massive scale, its vast repository of travel data, and its trusted brands are formidable assets. The growth of its B2B business opens up a massive new addressable market. The vacation rental market, powered by Vrbo, continues to grow faster than the traditional hotel market. Its investment in a unified technology platform and AI should enable it to innovate more quickly and deliver more personalized, seamless experiences for the next generation of travelers.

Conclusion

The story of Expedia Group is the story of the online travel revolution itself. It is a story of a company that took a powerful, disruptive idea and, through a combination of technological innovation and aggressive business strategy, fundamentally changed the way the world travels. It has been a journey of incredible highs—pioneering a new industry, building a house of iconic brands—and profound lows, including surviving the dot-com bust, the 9/11 attacks, and a global pandemic that brought the industry to its knees.

Today, Expedia Group is a company in the midst of a great transformation. It is moving from a collection of well-known brands to a unified global travel platform. It is evolving from a company that primarily serves consumers to one that also aims to be the underlying technology that powers the entire travel ecosystem. The challenges are immense, the competition is relentless, but the mission remains as clear and as compelling as it was in Rich Barton’s original pitch to Bill Gates: to use the power of technology to bring the world within reach.

From a small team within Microsoft to a global behemoth facilitating hundreds of billions of dollars in travel bookings, Expedia’s journey is a testament to the enduring power of a simple, customer-centric vision. It is the invisible engine behind millions of honeymoons, family vacations, and business trips, a quiet and essential partner in the human quest for connection, discovery, and adventure.