Kayak’s new corporate headquarters fills an abandoned Stamford, Conn., police station. It looks like the office of a startup, not that of a company valued at nearly $2 billion. Exposed brick walls are unadorned. Employees, including executives, sit at desk clusters throughout one big room. Goofy accoutrements, such as an old British telephone booth, do the work of actual décor.
CEO Steve Hafner and his partners sold the business to Priceline in November 2012 for a significant payout. Yet Hafner still doesn’t have an office.
It’s all by design. A decade into Kayak’s life span, Hafner still perceives the travel search engine as a work in progress. The sale to Priceline wasn’t so much an example of an entrepreneur cashing out (ending the business-creation arc in order to eventually begin it again elsewhere) as it was getting the economy of scale Hafner needed to fulfill his vision. “There’s so much left to be done,” he says, pulling up a chair to a round plastic table in a makeshift coffee area.
Hafner was part of the team that launched Orbitz in 2001. Yet he doesn’t see himself as a serial entrepreneur. A former Boston Consulting Group foot soldier with a degree from Dartmouth’s Tuck School of Business, he hardly fits that profile. “Steve was on a blue-chip path,” says Robert Birge, Kayak’s CMO. “He was as establishment as you can get.”
Instead, what Hafner had back then was a single insight. He grew up living in Texas, Peru, Costa Rica and Guatemala and traveling widely. As the internet gained traction, his instinct told him that people would want to buy plane tickets online, from a virtual travel agent as opposed to a real one.
But by getting airline-industry funding for 80 percent of Orbitz, he denied himself the chance to create his ultimate product: a one-stop site for planning an entire trip. “The airlines’ objectives weren’t always in the best interest of our users,” he says.
It’s important to start with a simple idea, it might be really hard to execute, but it should be very easy to explain.
–Steve Hafner, Kayak
Hafner also realized early on that coupling the search and purchase features in a single place meant that neither could be maximized: If you showed only the flights you were able to sell, consumers inevitably would leave to see what else was available–and they wouldn’t come back to buy from you. “We saw that it was silly to bolt together ‘Here’s the information’ and ‘I’ll sell you a ticket,'” he says.
That was the impetus for Kayak, which Hafner founded in 2004 with ace code-writer Paul English. It brought to the travel industry the Google model of attracting enough search traffic to entice a critical mass of advertising. By merely listing information and then sending consumers to websites where they could finish their transactions–Avis or Hertz, United or Delta, Orbitz or Expedia–the number of employees involved in the process could be minimized. The software did all the work. And with nothing being sold, there were no customer-service issues to address. “Our goal,” Hafner says, “was to create the world’s best travel website with the fewest people.” (As of 2011, bookings can be made directly through Kayak, but the service is handled by a third party and offered as a convenience rather than a selling point.)
That has made Kayak wildly profitable. Priceline, which owns Booking.com and several other travel sites, started courting the company several years ago, but agreeing on a real-world valuation of Kayak was difficult until Hafner launched an IPO in 2012. Soon after, the two sides negotiated the $1.8 billion sale on their own. “It might actually be the largest deal ever done without an investment bank,” Hafner muses.
Priceline is little more than a holding company that operates its businesses independently. It displays their logos on its letterhead in order of profitability, and Hafner is determined to get Kayak to the No. 1 spot in the far left-hand side. But what drives his continuing interest in the business is the unique opportunity he perceives for the brand: to consolidate all aspects of a consumer’s trip under one umbrella and use new technologies to make travel more efficient.
“We already have the critical mass of information,” he says. “We have the app on the phone. We know who you are and, through GPS technology, we know where you are. It makes sense for us to connect it all.”
So if you’ve searched for a room through Kayak and booked it using the flow-through software, why not get your room key delivered to your phone as you approach the hotel and avoid the check-in process entirely?
“We already can send you boarding passes when you arrive at the airport,” Hafner points out. “The airlines have asked us not to, so we don’t, but it’s technically possible today. And that’s just the beginning.” Having founded the company on the principle of decoupling, he now sees a reason to start putting the pieces back together.
Such ambition helps explain Kayak’s spartan office space. “We’ve been through something like five different buildings in Connecticut in less than 10 years,” Hafner says. “We keep outgrowing them. I have a feeling this isn’t the last one.”