Below is the transcript of a CNBC interview Glenn Fogel, President and CEO, Booking Holdings. The interview played out in CNBC’s latest episode of Managing Asia on 2 October 2020, 5.30PM SG/HK (in APAC). If you choose to use anything, please attribute to CNBC and Christine Tan.
Christine Tan (CT): Thank you so much for being with us. It’s really good to see you. I understand you are in crisis management since pandemic outbreak, did you imagine the magnitude and scale of what you’re facing right now?
Glenn Fogel (GF): Well, first, thank you for having me. That’s a great question because we’ve been through a lot of crises. I’ve been now with this company for over 20 years. We’ve gone through, there was 9-11, there were recessions, there was SARS, there was the great recession of 2008, 2009. But I’ll be perfectly honest, nothing has ever, ever equaled what we’re currently going through. It has just been a disaster. It has been a human disaster with the number of people who have died. It’s a human disaster for the people who’ve been ill and are terribly debilitated by it. It’s terrible economically for everybody who’s lost a job. It’s terrible for economies in general. How bad it has been is what has been so shocking.
CT: Tell us about the anxiety customers felt and the wave of cancellations you faced at the height of the pandemic. How did you respond?
GF: Yes, of course the first anxiety is always going to be the illness. First thing people are concerned about, are they going to get sick? Then if they get over that, they say, okay, I’m okay, my family’s okay, but wait, we’re supposed to go traveling next month or two months and we’re not going to be able to go now. We want to cancel and get our money back. So, immediately, they’re obviously going to want to try and contact someone to get it back. So, immediately, they’re obviously going to want to try and contact someone to get it back. The problem that ended up though, we had such a mass number of people all the same time wanting to cancel. We were never set up for that kind of cancellations.
CT: You’re looking at a tsunami here?
GF: Oh, it’s unbelievable. Here’s the really bad part about it. So, many times legally, the hotel supplier, for example or the airline, whatever is supposed to return the money under these types of circumstances, force majeure and you’re not allowed to go by the government who says you cannot travel there. So, the hotel should give the money back, but many times the hotel can’t give the money back. They don’t have any money. They’ve gone bankrupt or they’ve shut down or whatever. Now, we’re in the middle. We’ve got, on one hand, customers screaming, they need the money back please, particularly if they lost their job or they’re concerned. On the other hand, you have hotels who said, I can’t pay it back. We don’t have it, we can’t. We’re in the middle. What we do is we dip into our own pocket, even though the hotels are legally obligated to do it. We paid that customer to make them whole, and we will go out in the long run to get the money back hopefully from the hotels over time. That’s what we did because it was the right thing to do. We are the person who are supposed to be supporting that customer. We’re not going to let them be high and dry. We will help them out.
CT: How much money did you eventually dole out when it comes to offering them back the full refund?
GF: Tens and tens and tens of millions of dollars.
CT: And you’re okay with that?
GF: It’s the right thing to do. Now, of course, we’re working with hotels now to recover, and we are recovering. Hotels are lowering that outstanding obligation to us, that is happening over time. We’re working with hotels to make that all come out right. But I’ll tell you, it’s one of those things where it’s not like anybody is really being a bad person here. It’s a situation because of the pandemic. It wasn’t like people were trying to avoid having to pay out money, they don’t have it or they weren’t even there – there was nobody to contact at the hotels. Take Italy, for example, when it shut down, everybody was supposed to be locked down in their home. There was nobody at the hotel to talk about refunds, you have to wait until they come back when the lockdowns get lifted, so we can have a business conversation talking about what the obligations are. Of course, the customer can’t wait six weeks for that. They need the money now.
CT: To complicate matters further, you and your family tested positive for the coronavirus, how are you feeling now?
GF: Oh, I feel fine and it was a little bit of a reverse. We were sick, so we went to get tested. Yes, the test proved what we kind of knew which was that we were ill. I was so fortunate. My illness was so short. It was two days of fever, one night of a headache and I was fine. In fact, in the United States, it was taking a long time to get the results back then in March, that I actually felt fine before the results came back. I tested on a Thursday and by the weekend, I was already doing work outs. I didn’t find out till Tuesday that, oh yeah, you tested positive. I’m like, well, it’s interesting news but I’m feeling better already. I and my family, we have actually come out fine. We’re so lucky because there are so many people we all know who unfortunately either they lost their fight entirely and I know people who lost their fight with this virus, it’s horrible, or yes, they didn’t die but they’re still suffering the illness in some form. It’s sad. It’s very sad.
CT: Since then, you’ve had to make some really difficult decisions. You’ve had to announce on August 5th an extensive round of layoffs, 25 percent of your global workforce, letting go some 4,000 people. How did you carry out such a painful exercise?
GF. Yes, this is just one of the things you never ever want to have to do, it’s any type of mass layoffs. Unfortunately, having been at this company for as long as I have over 20 years, we’ve actually had to do this in the past a couple times – after 911 way back then when those terrorist attacks hit, we had to do some things and recessions in the early parts of the last decade, we had to do some of those. So, you never want to do it, but you do what you have to do to make sure that the company comes out right. We’ve been actually doing this because we have a number of different companies that are part of Booking Holdings. We have Agoda, we have Kayak, we are OpenTable and our biggest Booking.com. Priceline.com is also another company. We’ve been doing, unfortunately, these reductions and restructurings for some time, for several months. Because we are so global, it takes a long time to get this done. Different rules, different regulations in different countries, and it’s a long drawn out process which makes it even more painful, but we’ll get through it. I keep telling everybody that it’s terribly sad when things like this happen, but I make I want everyone to know when they’re listening to what I am talking about is that there is a future for everybody. Even though people can be laid off, that’s not the end, there will be opportunities, there will be a future for everyone. It’s one of the sad things, but I’ve been on both sides of restructuring. I’ve been a person who’s given the bad news, and I actually in my career, 58 I’ve been, I’ve been around when I’ve gotten that bad news. So, I know that you can recover, you can have a great, great career, just because one particular company or industry has had some hard times.
CT: Since the pandemic started, I understand bookings on your travel platforms have plunged more than 80 percent. You’ve already suspended share buybacks and you’ve already raised some $4 billion in debts from investors, give us an idea of the cash position you’re in right now, and how long a runway does it give you?
GF: Yes, in the second quarter, we did our earnings announcement and we are absolutely fine. Financially, absolutely there’s no liquidity problem at all, at all. But that being said, it’s not just good enough to not run out of cash. That’s not the game, that’s not what we’re trying to achieve. We’re trying to achieve profits in the long run. We’re trying to develop a company that in the long run is producing a great service. I do feel that one of the advantages of our companies is that we are so much better capitalised and our liquidity is so much better than some of our competitors. It really is a competitive advantage.
CT: So, how long a runway does it give you, you think, gut feel?
GF: There’s not a drain right now. It’s not like there’s some sort of cash outflow that we have to worry about right now. The element is not a case of a burn rate, like if in three years, if things don’t turn around, you’re going to run out of money. Thank God, we’re nowhere near one of those types of situations.
CT: You’ve been quoted saying, it’s going to take you years before the travel market actually returns to pre-pandemic levels. Give us an idea of what sort of timeframe, what’s the earliest timeframe you’re looking at?
GF: I think everybody has fun guessing when is that going to be? The truth is, nobody knows because it’s so dependent on a couple variables that are just guesses. The first thing is safety. Do people feel safe going on a trip or not? What is going to determine that is, is there a vaccine? Are there effective treatments? Is there herd immunity? Let’s say, there’s an announcement in the next few months that there is one or more than one vaccine that is effective and considered to be safe, we know there’s a high probability given the number of pharmaceutical companies that are doing phase three trials right now, I wouldn’t put that as a low probability, I put that as a good probability, but then you still have to distribute it, you got to get that actual drug out to a huge number of people around the world. People are going to be a little bit nervous about traveling until they feel that everybody knows people have been inoculated, so it’s safe to travel. And nobody knows that, because nobody really knows when will that level of immunity from a vaccine actually hit the right level that people feel, okay, everything is good? Everybody’s guessing, you’ve heard my guess already, I’m not going to change it, but I’ll certainly say that I don’t think anybody expects it to be anytime soon, that’s for sure.
CT: There have been some improvements in your bookings since April, does this somehow give you an indication that the worst might be over?
GF: I think the worst, hopefully, please, please never ever go back to where it was in April or March or things like that, and I don’t think we’re going to because even though we see areas in the world that the virus is going back up in terms of number of infections, and even though you see some parts of the world going to a lockdown situation again, etc, I don’t think we’re going to end up with that mass lockdown that was in April. Yes, I’m fairly confident the worst is over. You do see people are traveling, just nowhere near the rate they were traveling last year.
CT: But you’re confident at least, or you’re hopeful at least, that the worst is over?
GF: Yes, I’m fairly confident the worst is over, and you do see people are traveling, just nowhere near the rate they’re traveling last year.
CT: While international travel continues to struggle because of restrictions, I understand you are seeing pockets of recovery in domestic travel and tourism. Are you hopeful it could help cushion some of the impact till we see a recovery in international tourism?
GF: Yes, absolutely. People want to travel. One of the first things people want to do when a lockdown situation is lifted, or some type of travel restriction is eliminated, the first thing they want to do is travel. As soon as people felt it was safe enough to just go local travel, they did it, and many people said they wanted to go to what we call alternative accommodations, that means not going to a hotel with a big lobby with lots of people in an elevator where you’re concerned how many people in the elevator, you wanted to go to a home or a villa or something where only you and your family were there and that is what we’ve seen. So, it’s local, it’s domestic and there’s a higher number of people choosing a home rather than a hotel.
CT: So, the trend is increasing?
GF: Yes, absolutely. Now, that doesn’t mean that people aren’t using hotels anymore. In fact, the statistics we gave in our earnings report was that 40% – four-zero percent of our new bookings were on the alternative accommodations. The majority was still hotels, but the interesting is that 40% was a much bigger number than a year ago.
CT: Is the shift away from hotels permanent?
GF: Well, interesting question. It has accelerated a trend that already has been happening. For many, more and more people were discovering the benefits of alternative accommodations, and considering that and using that. What the COVID crisis has done is accelerated and brought forward what would have happened anyway, essentially more people doing it. What that means is going forward, everybody who used that alternative accommodation and experimented it, this is good, I like this. So, what will happen next time they do a trip, they’re going to say, hmm, maybe I want the alternative accommodations and maybe I want to have a hotel, I’m not sure which one I want. The great thing about our site Booking.com site is that we have the largest availability of both types of accommodations. We’ve got that alternative accommodations – a huge number and we also have the largest number of hotels. It’s a great advantage.
CT: So, essentially, you’re in both worlds?
CT: Right now, you’re already taking advantage of government programs in the U.K. and the Netherlands to keep staff on your payroll. You think governments should do a lot more to help stimulate the travel and tourism industry?
GF: Absolutely. I’ve been talking about this for some time, and a lot of governments are doing that. For example, we’re working with the Japanese government. They have a program out and we are participating with them where they are giving out money to stimulate the travel business. In Thailand, we’re working with the government. In Italy, there’s a program, we’re working with them. So are many governments around the world that are specifically targeting money to help rebuild the travel industry. Now, some of the biggest markets, though, like the United States, they haven’t done that yet, and that’s really unfortunate because the travel and tourism business is such a bedrock for employment. It’s really quite amazing to me that approximately a third of a billion jobs are in the travel and tourism industry. Some of the big, different types of think tank people who do all sorts of analysis research groups, they came out and said that we may lose 100 million to 200 million jobs in the travel and tourism industry, which will be horrific, particularly because so many of these jobs are entry level jobs, people who are just starting out at the lowest level. They’re really starting to get a job and they can move up. If we don’t have those entry level jobs and those first rungs on that ladder to success, how are they going to do it? I tell you, this industry is an industry that brings people together. I really believe that when people travel, they get an understanding of other people, and that makes the world a better place. To me, investing in our future by helping to rebuild the industry is something I think every government should be absolutely focused on.
CT: Before the pandemic, you’ve made some aggressive moves into China. You’ve invested in Ctrip, a Chinese online travel agency, consumer platform Meituan Dianping and Chinese ride hailing app Didi, has the escalating geopolitical tensions made you cautious about the Chinese market?
GF: Well, it has made me sad. It has made me sad that there is such discord and animosity among different people, and it’s not, you know, let’s face it, it’s not just China and the U.S. You see this concept of nationalism and protecting one’s own data, one’s own part of cyberspace and breaking up the Internet, essentially, it’s a splinternet. It’s fracturing things throughout the industry. For example, you may have seen the other day when Ireland came out with a rule of their data privacy, saying Facebook should no longer send their data over to the United States. These types of things make it so much harder to have a connected world, and the costs of course go way up. It just makes it more difficult to operate what we do, which is bringing people together. Now, look, we follow the rules, wherever the laws are, we will follow them, of course, but what we’d really like is for people to understand the benefits that come from one unified Internet, in which case you can absolutely still be able to use any application anywhere. You don’t have to be worried about, well, my app works in my country, but is it going to work in that country or not? That just destroys the whole greatness of the internet, which was supposed to connect everybody. Instead, it ends up with everybody having their own Internet within their own country, that’s not helpful.
CT: So, this what you called it yourself, a “splinternet”. What does that ultimately mean for a global online travel company like Booking Holdings as you have to navigate through different tech ecosystems?
GF: It increases costs hugely. It makes it more difficult to do things that are good for the consumer. I’ll give you an example. Right now, one of the things we mentioned the investment in Didi. Now, one of the reason we did that is what we want to develop is a seamless frictionless way for a customer who’s coming from, let’s say, France and going to, let’s say Beijing, and we want when they land in Beijing, they can go to the Booking.com app and they can just press one button and they can get a car through Didi — smooth, seamless whenever. Now imagine if there are regulations that make that very difficult, well that’s making it harder for the consumer to get what really be very effective very good for the consumer. It helps to promote travel to China, helps the French traveller – easier for them, it’s a great thing. So, when you come up with these things that split things up – just makes it more costly and maybe, maybe in the future, we wouldn’t even be able to do those things. I think that’s just a loss for everybody.
CT: So, what does that mean essentially for your China strategy? You’ve already reduced your stake in Ctrip. Are you comfortable with the sort of investments you’re having in China? Could you divest further if geopolitical tensions continue to escalate between U.S. and China?
GF: Well, first of all, when we sold those shares in what is now Trip.com, formerly Ctrip, we sold those shares in the midst of the worst, of the worst of the pandemic. We were looking to make sure we had liquidity, and nobody knew what anybody’s valuation is going to be. We looked at that, okay, these shares are liquid, we can liquidate them and have more cash available in case things end up being like it was in March and April, all the way for the year or two years or something like that. Thank god, it turned out, we didn’t need to do that in retrospect, 2020 hindsight, but at the time, it was the right thing to do. So, I don’t think we should misinterpret what was done is anything to do with a lack of interest in investments in China or our belief in the future of China at all. We seem to have a belief that China is going to be the largest travel market throughout the world, and we continue to want to be a part of that great outbound business.
CT: So, just to be clear, no plans to divest from China and you will remain committed to your investments in China right now?
CT: Has the pandemic made you think about how you can operate as an online travel company?
GF: Yes, we’re definitely looking at going forward, what should be the correct model for working because a lot of people said, hey, I like this work from home. Some people said, I don’t like this work from home, but yeah, it’s okay for now but we still need to meet some time. So, we’re coming up with what is the policy? Should it be four days a week in the office? Three days in the office? Do you get your own flexibility? We don’t know yet. We’re working how to do that, but I think it’s definitely going to be different than what it was in the past.
CT: So, as CEO of Booking Holdings, do you think you could possibly be working from home all the time?
G: Well, it’s interesting because it is entirely opposite of how I’ve been doing the last few years when I was never home. I’m basically traveling the world, going all over. Look, I think there’s still a lot of value between working from home which is effective and showing up in person. There is something to showing up in person anyway. There is just more energy in that. So, I don’t think people will be working from home all the time and I personally know that I need to be out in the field talking with our employees, sometimes having meetings for some of our biggest suppliers. There is actual physical connectedness that you get from being with people that is very helpful. So, no, I’m not going to be working from home only.
CT: I understand you and your 3 brand CEOs have decided to forgo your salaries for the rest of the year, as part of this drive to conserve cash. Do you feel it’s important to help share in some of the pain?
GF: Yes, absolutely, it’s not just the CEOs and I are taking no salary, but you also have our board of directors who are not taking their fees. You also have the senior management who report to the CEOs have taken significant pay cuts. So, a lot of people cut their salaries. I’ll say something that is, it’s something that I think is what everybody thinks is the right thing to do. It’s a good thing to do. But I know in the end, where the company is as big as our company, it’s the right thing to do. So, unfortunately, you don’t save a lot of jobs, because you have thousands and thousands of people. So, you save money there and it’s good, it’s symbolic, it’s the right thing to do, share that pain. But I’ll tell you, I wish we have other ways we can also save even more. We’ve tried so many ways. Before we cut any job, we did everything we could to cut costs as much we could in every single area to try and save as many jobs we could. So, we are where we are though. Sigh, it is something that weighs on you though. Well, we’re going through that right now for Booking.com, and it’s a hard thing.
CT: Well, you’re in the process of laying off 25 percent of your global workforce, what are you telling the rest of your employees about whether there are more cuts to come?
GF: Well, what we told is that we don’t think there would be. We really don’t think there would be.
CT: And that’s the honest gut feel?
GF: Absolutely, it’s more than a gut feel. I think that we’ve done it the right way. I look at the numbers and I feel this is the right number, this is going to be a good thing. Look, again, as we said earlier, we can’t predict what this virus is going to do. I can’t predict whether or not there’s going to be a… I can’t make a vaccine appear. I can only think that it’s going to come in the not so distant future. But even if it doesn’t come, even the vaccine does not come right away, I still feel pretty comfortable where we were sitting right now. There’s no immunity, and we’re doing business the way we are and I’m looking at the numbers, I’m feeling okay, that we won’t have another significant layoff. On the other hand, though, I can’t guarantee anything because the same way nobody knew this virus is going to come in the first place, and nobody can guarantee that there’s not some other bad things going to happen down the road, but I really think that’s a low chance.
CT: As the CEO of Booking Holdings, what sort of leadership do you want to provide at a time like this?
GF: Well, I think it’s very important is: when things are looking so dark, and people are very, very scared, a lot of anxiety for very good reasons, what’s really important is to make sure people understand what I absolutely believe and make sure I’m able to transmit this to them and give them the hope. Here are a couple things I know to be true. One, pandemics always end, they do. The second thing is, we’ve seen lots of crises around the world before. It’s horrible but the world doesn’t stop spinning. It really doesn’t. Even the worst of cases, it comes back, and you look at that, and that’s how I try and get give that hope that it will come back, and we’ll come through it.
CT: And finally, how do you see Booking Holdings emerging from this pandemic crisis? Any idea what the company will look like on the other side?
GF: What we are trying to do is position the company, so when that demand comes back, when people are feeling safe to travel and they want to travel, that we are still the great leader in the industry and we have gone from where we were to where I want to be in this connected trip strategy. I’m looking at what the developers are working on? What the people are coding? What the new services that we’re putting together and tying together, and I see it coming together. It’s going to take time to get there for sure, but I do believe that in a few years, people will go to Booking.com and say, yeah, this is a lot easier than it used to be, and that will make me pretty happy.
CT: Glenn, thank you so much for talking to me. Please stay safe and well during this time.
GF: You too.
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