Thursday, December 21, 2006
Thanks for being a reader over the last six months or so. Thanks to the comment posters for adding to the experience and keeping the volume of Travelport posts in check. And thanks to those other bloggers that have shared the link love this year including Travolution, Hotel-Blogs, dottourism, HotelReview, Social Media on the Fly, our Spanish friends Megustaelturismo, Go Man Go and even those crazy sploggers that somehow think they can make money out of stealing my posts and surrounding them with gibberish (here's an example).
All the best to you and yours and see you in 2007
It has been great to come to this realisation but once I did, sadly, I had to resign from Netus. I will take the next few months off to work on a few private projects and rest on the beach with my kids before announcing my new plans. You can stay in touch with me through my BOOT email address or my linkedin profile.
Wednesday, December 20, 2006
On the eve of the announcement of the deal I ran into Founder and CMO Craig Hewett on the train. He is looking confident and should be pleased with the state of the product.
Tuesday, December 19, 2006
I don't know why but Travelocity have launched a blog called the Window Seat. I get the business model based on generating huge amounts of traffic and the great SEO boost from large amounts of user generated content and reviews as captured in Sidestep buying Travelpost, Expedia when it bought Tripadvisor and Travelport's (original plans) when it bought asia-hotels. I also believe you do a lot to improve your relationship with your customer's when they can see behind the scenes in of the business through a corporate or CEO blog such as Tripadvisor's fantastic blog on actual customer queries.
But I do not see the benefit to Travelocity in setting up a generalist, editorially driven travel blog. The general travel blog is one of the top three crowded blog spaces on the planet (next to porn and tech). Sure Travelocity have a good writer in Amy Ziff but there are well established players here such as Gridskipper and uber blogs like RealTravel that collect together the blogs and commentary of others so Travelocity is entering this space late.
It is not just second mover status that makes me question this strategy, it is that by definition Window Seat cannot speak to all or even a majority of the huge customer base of Travelocity. The chances of Amy or her team writing anything that more than 5% of the Travelocity customer base is interested in is near zero. That has nothing to do with Amy's writing ability it is because there are just so many Travelocity customers from so many different countries - each with different ideas, plans and needs around travel - that it is impossible. Travel itself is a big category, combine that with hundreds of thousands, if not millions of different customers and you do not have a chance to target them in a single catch all blog. Travelocity would have to replicate the travel section of the local bookstore or newsagent to get close - with a blog for each of the major areas (backpacking, cruise, VFR, adventure, romantic, gay & lesbian etc...).
This is why UGC is so fantastic because each viewer/user/reader can find the other viewers/users/readers with the same interests without having to wait for the journalist to get round to it.
I like the look of the blog and I enjoyed this little piece on Venice but Travelocity should be spending its blogging time and energy helping IgoUgo catch up with Tripadvisor not musing on the fat content of pre-prepared food.
Monday, December 18, 2006
When frequent flyer programs became popular in the 80s in the US and 90s in Australia it was seen by airlines as a means for reducing price competition. The hope was that you would lock in a customer in such a way that it would take significant price differences for them to shift to another airline. The advantages were obvious. The disadvantage was that it also made customer acquisition a little harder. Pretty soon every airline had a program up and running, it made it easier for each Airline to retain it's customers but harder to steam customers from another airline. If Airline A wanted to steal customer from Airline B it had to drop its prices dramatically or carry over the tier status of the customer to convince the customer to abandon years of miles and free booze in the lounge. Frequent flyer programs in competitive markets began to lock in the market shares of the players - strangely enough reducing competition. You can read more about this fascinating phenomenon in the book Thinking Strategically.
In Australia Qantas does not have this problem as it killed off its main frequent flyer competitor - Ansett Airlines. Virgin-Blue has just recently abandoned the Low Cost Carrier "code of conduct" that prohibits frequent flyer programs and launched one (Velocity) in late 2005. However the gap between the death of Ansett and the launch of the Velocity program allowed Qantas to not only grow its program dramatically but establish the Qantas Frequent Flyer program as the dominant rewards program in Australia. All airlines have made money selling/sharing points with alliance partners and other travel providers (hotels, cars etc) but Qantas have turned it into an art form allowing partners as diverse as real-estate agents, financial services providers, retailers, wine clubs, telecoms companies and more to buy points/miles and provide them to customers. It became possible to rack up hundreds of thousands of miles needing to eat a single airline meal.
There is now enormous financial value in the buying and selling of miles for Qantas (and other airlines). Canadian airlines actually spun off its whole frequent flyer program in July 05, Aeroplan, a business that is valued at the time at CAD$2bil (now about $900mm) based on 4.8mm members.
With the plan to privatise Qantas, questions are being raised about whether or not the soon to be new owners will want to spin off parts of the company such as catering, cargo and the frequent flyer program. Qantas are assuring their frequent flyers that it is "business as usual" including sending out a dedicated email to that effect. But with a value range of AUD$400mm to $2 billion (Australian newspaper article) it is almost certainly at the top of the list for the consortium that will be sitting on a debt pile in the AU$10billion range.
So - should you rush off and book your frequent flyer seat? The answer is yes - but not because Qantas may spin off the program. The answer is yes because there are simply too many frequent flyer miles in the world - including Australia. It is inevitable that over time the value of a frequent flyer mile will decline. Qantas re-valued the program about a year ago making it more expensive to buy international flight. They re-wrote the program in 2000 converting from kilometres to miles (effective 38% devaluation). AND - it costs of hundreds of dollars per "free" ticket.
As the Economist stated more than a year ago - it is like the printing of a currency by a failing state - the more the print, the less the value. So the more miles that Qantas sells into the market the more regular will be the "updating" of the program to find ways to reduce the value of miles. There is no need to use up miles just because of the sale of Qantas but my standing order advice is have to use up your miles on a regular basis. The winner is the person who had the most holidays not the one that dies with the most miles in the bank.
Here is a great post from a finance blog about other frequent flyer valuation activity in the US
Friday, December 15, 2006
The story behind the deal is a simple/traditional PE deal - large US group (Texas Pacific Group) joins forces with with the Australian Millionaires Factory (Macquarie) and another Australian group Allco to de-list the Red Rat. I would normally say that owning an airline is a dangerous aim to have. The airline business is subject to constant out of your control shocks (SARS, War, Terrorism, etc), huge capital outlays for airlines and the number one cost element (gas) is not only variable but wildly so. However the Texas Pacific Group are good at owning airlines - they are credited with the turn around of Continental Airlines. Oh - and they now own Sabre. We always used to joke at Galileo that one way to protect segment fee margins was to own and airline...
Thursday, December 14, 2006
Wednesday, December 13, 2006
The fantastic underground site not mentioned is SeatGuru - do not fly without looking here first. Shows you the layout of each of the major configurations of each of the major airlines - which seats to look for and which to avoid. Green for good, yellow for something to note and red for reach for the sleeping tablets. Even SeatGuru can't help you if you are flying Qantas to the US code sharing with American as you will end up on a MD S-80 aircraft, which as you can see here has nothing in Business Class that is recommended. Not a seat.
Thanks to Mark Fridgen's blog where I first saw the link to the 50 best.
Tuesday, December 12, 2006
Not that it will likely weigh much in the mind of the PE bidders - their weakness is in the Asian online market. Zuji talks a good game with localised sites in many countries - Hong Kong, Singapore, Australia, New Zealand, Taiwan and Korea- but in each of those (except I think Taiwan) they are well behind the leaders despite years in the market and millions in marketing money. Mainly this is due to the product - both functionality and inventory - always being a step behind the competition. The single ownerships structure (as opposed to their early life under a dozen or more airlines) should help fix this however that will depend on them having the right management and almost flawless execution.
UPDATE - here is RedHerring's take on the announced deal. Thanks to Anon in the comments below for being the first to let me know of confirmation of the deal.
Monday, December 11, 2006
You may recall my quote of then Federal Transport Minister Warren Truss when to defend excluding Singapore Airlines from this lucrative rout he said
"The economic modelling work [on the Pacific Route] that we have done suggests that the benefits of an airline such as Singapore entering that route would be very, very small to the Australian tourism industry,"Now comes something even more stupid out of the mouths of Australian parliamentarians and an admission that Truss was making it up. Here is a quote from a Melbourne newspaper
...several Liberal MPs [government parliamentarians] have told The Age they believe the Prime Minister is more likely to embrace an open-skies policy if Macquarie and its national private equity partners succeed in their $11 billion takeover.That is - that despite all claims of making decisions based on economic realities, the government would abandon its protection of Qantas on the pacific route if it ceased to be a public company because, well just because. If this proves true then it will go down as one of the greatest acts of business hypocrisy by any centre right/conservative government in living memory. If this becomes policy then Truss will be proven to have lied to the public earlier this year.
I am mad not just for the principle of the thing but because I/my company has to pay almost twice the per km cost to go the US than the UK while being forced to use an inferior product to market leaders Singapore Airlines, Emirates, Cathay Pacific etc. Just as before there is no justification in the pacific route duopoly and even less justification in believing a government that says that there is.
Friday, December 08, 2006
First it was a strange rumour. Then it was a search term here and there. Finally it became a mountain (well a small hill) of traffic to travel blogs such as yours truly, Travolution and Travel.Beat. Now it is reality - Travelport (Galileo) has acquired Worldspan.
Interesting points from the deal:
- Cendant bought Orbitz in part because of the huge revenues that Galileo would gain from migrating Orbitz from Worlspan to Gal. Presumably part of the reason behind Galileo buying Worldspan is eliminating the litigation risk and migration cost that arose from that strategy - how serendipitous;
- Worldspan itself has been in some financial trouble. This deal will not simply be a case of cutting costs. The Worldspan and Gal products will both have to be kept alive for some time. Reviving Worldspan will be a enormous integration task for Gal; and
- There are lots of financial machinations behind the deal - an immediate recapitalisation of Worldspan and a $125mm loan to Worldspan. The item to keep a close eye on is the comment that
The initial integration focus will be on consolidating technology and administrative operations resulting in near-term cost savings of approximately $50 millionThat is - a lot more head count to go.
Now comes the fun part - need to pick a new name for the combined company. "Worldport", "Travelspan", "Portspan", "Worldtravel"...all too corporate and boring. We need something fresh that speaks to generation Y - which is why I propose "Gal-World"....OK, maybe not...it probably wouldn't work too well typed in a search engine.
Thanks to Ed Silver who was first to forward the PR news to me.
UPDATE - e-tid are reporting that (registration required)
Worldspan will assume the Galileo name
Thursday, December 07, 2006
Tuesday, December 05, 2006
The Reuters article says
"Priceline.com said it continued to do business with Hutchison Whampoa through a joint venture, Hutchison-Priceline in Asia"but almost certainly this means that joint venture is on life support - soon to be put out of its misery. As I discussed earlier Priceline Asia has unfortunately been in trouble from the start, never living up to its promise in Asia. Priceline has not had much luck in Asia. In addition to the troubles of Priceline Asia, it's efforts in Australia went through a lot of money - mainly largest teleco Telstra's - under a different name (www.myprice.com.au - domain name now belongs to a car company) before shutting down moments after launch in a barrage of expensive post/early bubble bust redundancy payments.
Priceline should take this chance to close down its Asia JV and relaunch efforts under Bookings.com brand (I would have liked to have said the Activehotels brand but no more).
- worldspan + travelport
- worldspan travelport announcement
- travelport acquires worldspan
- galileo rumour
- worlspan rumour
- and so on....
Monday, December 04, 2006
Thursday, November 30, 2006
Worldspan has long been the rumored target of acquisition by Amadeus, but the attention has now shifted to Travelport's Galileo.I have no idea either way but the searches of "Worldspan" and "Travelport" in the same search entry are one of the leading drivers of traffic to my blog. Clearly someone/people are typing that a lot into Google.
On the hotel side there have been two issues that have been hard for non-Japanese players to solve for a launch. Firstly that Rakuten Travel (Mytrip) charge hotels a low as 6.5% commission setting an expectation for the hotels on pricing for domestic demand and secondly how to load, sell and fulfil the traditional Ryokan inventory. Not sure if Expedia have solved these but congratulations are due in putting the site into double byte Kanji and in setting up a local fulfilment system.
Wednesday, November 29, 2006
"its websites will continue to be marketed with differentiated products".The change is yet to make the front page of www.activehotels.com (at publications date).
I don't understand how Priceline plan to make this work. I have praised in the past their integration work and they have enjoyed the results with huge growth in online hotels sales in Europe. However it can only be a mistake to assume that you can market the same brand [Booking.com] to different customers with differentiated products. The only way to try and do this is that I can think of is to have different product or pricing depending on where a customer comes from (either by country or marketing channel). That never works online - as I have said before. Will have to wait for the site launch to see if Priceline can make this work - but I fear for them. Sounds like the word "synergy" and "costs savings" have been overly used across the board-rooms of Priceline Europe.
UPDATE - found an interview with Adrian Currie - Priceline CFO - from ITB in October. Talks about ActiveHotels and Bookings in Europe. Talks of successful integration but no mention of killing the Active Brand.
UPDATE 2 - in the Q4 2006 earnings call the CEO of Priceline Jeff Boyd talked more about the plans for the ActiveHotels brand in Europe. There is no intention of killing off the brand - rather the marketing focus will go behind the Bookings brand. I think that is a good balance. Would continue to caution against making the products inter-changeable to avoid the problems that best Expedia and Hotels.com when they first began to work on common inventory pools. But there does come a point when you have to balance the cost of marketing against the potential cannibalisation.
Tuesday, November 28, 2006
Paidcontent are saying that WAYN are claiming 7 million subscribers across 220 countries.
This is the scale that new comers to content like Sidestep and Webjet's Plantit have to come up against in their plans to enter the social networking battle-ground.
Monday, November 27, 2006
That's a good start but I don't yet understand the compulsion for a travel company to have a .travel domain. Am sure most companies will buy the domain for their brand to stop somebody else (though a quick search shows that Webjet, Wotif and Expedia are yet to buy theirs - or at least switch on a referral). But aside from the defensive move it is not clear what the benefits area. Don't understand how having a .travel domain is better than having a .com, .co.uk, .com.au etc domain. You would never want to launch a business on the basis of having a .travel domain where someone had the same name under .com. The key for success then for Tralliance is to win support for their search product - search.travel. If this search engine gains traction then that could provide the positive reason for companies to support the .travel domain. Without it I see little benefit. Winning in search will also be hard work as Tralliance will be battling well established providers from Google at the top end through Sidestep, Kayak and Tripadvisor in the middle and Bezurk at the focused end.
Am not going to count out Daniela but am starting off very sceptical.
UPDATE - 16 July 2007 TravelWeekly are carrying the story that Ron Andruff the President of Tralliance and Cherian Mathai the COO will leave the company "pending finalization of certain agreements.". Which is later clarified to mean that their severance packages are still being formulated. The announcement has comments from Triallance parent company (theglobe.com) boss Michael Egan using very positive language about transition, growth plans and other improvements however as the annual report shows (and TravelWeekly quote).
According to theglobe.com's annual report, 25,200 domain names had been sold as of March. The company collects $100 a year for a dot-travel domain name.That does not sound like a lot and fuels my continued scepticism in this business. To put this in perspective, Godaddy.com one of the world's largest domain name registrar services has more than 20 million URLs under management.
UPDATE 2 - here are HotelMarketing.com's comments.
Friday, November 24, 2006
Thank you Lonely Planet.
Thursday, November 23, 2006
- Acquisitions - Talks about his acquisition thinking saying that they have "external advisors looking at possibilities". Quite rightly he is only looking in the online space and only at product ranges they don't have - ie not air. Says he has "no current target in mind".
- International - Also talked about thoughts on future of international bookings online. Believes that consumers will soon be able to booking multi-sector international fares with different airlines - like domestic.
- Hotels - Admits hotel business is very small but is confident of growth. "Will not be a material component of profit in the next six months".
Wednesday, November 22, 2006
Two big questions from this line.
Firstly - how are they still being laboured with the hang over of turning $7b into $4.3b? I thought it clear that his monkey was off the back last quarter?
Secondly - a non-cash impairment of $1.2 bil means that there is a net loss of $1.2bil means a zero EBITDA (actually -$1.3mm).
The answer in the first one is buried deep in the Q3 press release where they say
"the Company recorded a total impairment charge of $2.4 billion (which includes the estimate of $1.2 billion taken in the June quarter), representing the difference in the carrying value of goodwill of the Company’s B2C and B2B reporting units and the implied fair value of goodwill of those reporting units"
In other words - I called the "monkey off the back" too early. I went back to the Q2 results and listened to Q3 call to see if I missed it. I did not. In the Q2 results they estimated the impairment of $1bil but through the period of Q2 realised that it was double that. Ouch!
The second - appears to be legitimately put down to continued restructuring and business challenges. They say on the conference call that B2C (Oribit, HotelClub/RatesToGo, Cheaptickets and eBookers) are at break even. Presumably held back mainly by eBookers (see also the delay in role out of their new Orbitz backed platform).
Hopefully finally we can call Travelport free.
Tuesday, November 21, 2006
Site looks good - videos of white beaches, rolling hills, rushing waterfalls, ancient cities and (like every other video destination site), booze and soft porn.
You can tell from the monetisation efforts (lots of pre-roll video and good Google Adsense integration) and video quality that the founders know what they are doing. Will have a challenge in keeping out the porn and antics that are so popular on the other site while at the same time building scale but a great start.
Monday, November 20, 2006
Unbelievable. Simply Unbelievable.
10 years after the launch of Expedia, 9 years after the float of Travel.com.au on the ASX, 7 years after the birth of comparative shopping engines with the launch of Sidestep and 6 years after the launch of Wotif, Jetset have announced that they will have a site up and running by mid next year. The CEO is competing with himself for understatements of the century when he says that Jetset is "late to market...and..to some extent playing catch up" and even better "The lack of a bookable online engine was my first priority".
That truly is like one dinosaur up to their nose in tar, with a tsunami, meteor and earthquake all on the way, turning to another and saying "next year I am going to grow an opposable thumb"
Here is the full article thanks to Travelweekly.
Thursday, November 16, 2006
Wednesday, November 15, 2006
Qantas was a sponsor of the event and a representative of their corporate sales department opened the event with a speech and general introduction. Now, keep in mind that this Qantas rep is speaking to a room of FCM clients. That is hard core road/air warrior travellers. Almost certainly everyone present is a top tier Qantas flyer. The Qantas rep spoke for 15 minutes on "what is happening about Qantas". He talked about the airlines they plan to buy, the battles they plan to fight with their unions and the costs they plan to cut. Also took a few minutes to complain about fuel prices and low cost carriers. I found this staggering. Here he is with a captive audience of some of the top individual customers of the business and not once did he say thank you. Not once did he talk about a commitment to the corporate travel, about quality of product and customer service...nothing about how he was going to make things better for us as top customers. It was like he was talking to a room of share holders, not customers.
To me this summarises all that is wrong with Qantas. They have become so bottom line focused that they have lost a sense of how to keep customer's happy. They have monopoly or near monopoly rights on key routes (especially the Pacific Route and the politician traffic out of Canberra) that they are not aware of the growing disquiet among their customers. If I was the Qantas rep at this luncheon I would have spent less time basking in the reflective glory of being at Steve Waugh's table and more time shaking the hand of every single customer in the audience thanking profusely and begging for feedback.
Tuesday, November 14, 2006
eLong's good results came a day after a mixed by investment heavy announcement from CTRIP. Sales were up more than 50% year on year to a very healthy $26+ mm, increasing the gap on eLong. However net profit and EPS were dead flat. The blame falls on "compensation expenses". In their formal announcement there a series of comments like
- "Sales and marketing expenses...increased... due to hiring of new sales and marketing staffs"
- "General and administrative expenses... increased...primarily due to the hiring of additional staffs"; and
- "Product development expenses...increased...primarily due to hiring of additional product development staffs"
The CTRIP and eLong battle is a look back in time at the battle between Travelocity and Expedia in 1999 and 2000 where Expedia took over Travelocity as the largest of the time. Though in the case it seems that CTRIP's lead is expanding and they are finding time to invest in people and product to go further. Am going to enjoy watching this battle.
Monday, November 13, 2006
According to Travelweekly, Fairfax will launch four sites in the next six months. The first is Hotelz. The quote from the article is that Fairfax and Zuji have entered into a "content deal". Unclear what that means but from the look of the hotelz beta site it involves a white-label booking engine. The site is in beta so can't be too critical yet but if they want to challenge Wotif, Lastminute, RatesToGo etc then it is going to need a better search functionality. Typing Sydney into the Hotelz search box and choosing Australia it still asks me for clarification - if I have chosen Sydney Australia, how could I possibly be thinking about Nova Scotia?
The engine url has regular references to travelpn.com - not heard of them before though judging by Alexa they provide white-label solutions for a number of airlines and Zuji. Could be an offshoot of Travelocity.
I like the Chutzpah and drive of Fairfax Digital travel boss James Cassidy claiming that "within 18 months it [Fairfax] will become a major force in online travel, even rivalling Wotif". However the basis for his claim does not stand up to scrutiny. He says “Wotif offers bookings within one month and only 30 per cent of the market book in that window,”. It will be a fatal error for Fairfax to chase the other 70% (assuming this number is true) as all of the money to date in online travel is in a booking window within one month. The sectors that are booking beyond that date are the least likely to book online.
I also caution them on relying too much on white-labels. Controlling product and inventory is critical to success in online travel. Telstra' s Sensis jumped into online travel through GoStay - a white-label of AOT's needitnow - and it has gone nowhere. My earlier comments on that are here. Rumours are Travelport is also remembering that lesson and unwinding its efforts to combine offline and online hotel contracting.
Sunday, November 12, 2006
The review sites have a lot in common - search box at the centre top, highlighted reviews at centre and either banner space or sectional draw outs in the right hand page groups. The problem with most - and this is my main criticism of Travelpost - is that the contents of the middle or main section are determined either by timeliness of the review, broad (automated) assumptions about me based on my profile or IP address or general site popularity. In other words the community has chosen the layout of this valuable real estate. I do not think this should be left to the community or a full technical solution. In review/community based travel travel a person/producer/marketer should own the home page and merchandise it with the same professionalism that the full service sites employ. This is why Tripadvisor continues to lead the bunch - it has matched the community strength of content with the Expedia strength of monetisation and production.
My recommendation to Travelpost then is to take a more hands on approach to management of the home page. Combine the science of the analysing consumer data with the emotion of a good production team to deliver a home page that at best speaks to me as an individual or at worst I could find interesting in general sense (ie the content is good in is own right even if not targeted). Compare that to the current home page where the top of the fold is just a list of hotel reviews by date showing hotels and destinations that I do not care about.
PS - Posted a review on Travelpost while looking into this blog post. Here is my sample review.
Thursday, November 09, 2006
Credit where credit is due - came across this hotel while looking at the latest Zuji AU newsletter.
Wednesday, November 08, 2006
Tuesday, November 07, 2006
Monday, November 06, 2006
Friday, November 03, 2006
Thursday, November 02, 2006
Wednesday, November 01, 2006
Tuesday, October 31, 2006
eDreams has been around since 1999 and was ahead of its time. When I first met them in 2000 they had decided to avoid a head to head battle with lastminute, expedia, ebookers and travelocity etc by focusing on advice, user generated content and uber advisors - cant remember exactly what they were called but something like "DreamGuides" - who would provide advice and commentary on destinations. They would also target the markets that the bigger guys were avoiding - Italy, France, Spain. All very Web 2.0 and all dependent on online advertising - of which there was very little. Even then they were looking for a buy from one of the big guys and by 2003 every single one of the big players had 'kicked the tires" at eDreams - at least twice.
At the time I was a big nay-sayer about eDreams. Online travel at that time was all about scale, technology and big marketing budgets. There was no room for content heavy advisory sites, especially in Europe. The battle was being won by whoever could sell the most air with a cross-sold/packaged hotel. eDreams was not an effective part of that battle but has managed to survive through it with reports of 300 million euros in turnover and earnings of 9 million euros.
The interesting part of the transaction is that the VC shareholders are getting out but the founders are staying. Can't remember exactly how much eDreams raised but it was at least 40mm euros so a LBO at this price is not a huge return for the original VCs. That all said - congrats to eDreams of surviving one and half booms where hundreds have failed.
Monday, October 30, 2006
Must have been a busy week in New Dehli with everyone in town.
Friday, October 27, 2006
Thursday, October 26, 2006
As a result of all of this Flight Centre has decided to go private. To de-list and join the private equity bonanza. This will make the founders - especially Graham "Scroo" Turner - hundreds of millions while maintaining a lot of control (btw the staff are not happy). As part of the transaction Turner says that pressure will be applied to suppliers to improve the margin decline from reduced sales per store and airlines butchering of commissions.
That all sounds possible but truth be told I think it is because they have executed poorly online. For such a strong brand and company with such strong cash flows and supplier volume Flight Centre has done a terrible job building an online business. It is not like they haven't had the chance. Every single one of the big online travel B2B and B2C players have been through the Brisbane headquarters of Flight Centre (me included) trying to sell a solution for launching, enhancing, growing, molding, making etc Flight Centre online. Flight Centre was always receptive and keen but the culture that made them strong offline made them weak online. Their strength in incenting individual stores to think independently and drive sales in a decentralised fashion impeded the ability to create a centralised online sales function - stealing sales from the stores. Flight Centre was caught in the classic offline retailer dilemma - how do I grow online and not cannibalise offline. Well...you can't.. and they should have made that decision quickly in 2001 and gone on to dominate online travel in at least Australia. Flight Centre spent too long wrestling with this dilemma and thus ceded the online space to the Wotifs, HotelClubs, Webjets etc of the world. Purchases of Quickbeds and Travelthere were not aggressive enough plays and once bought were under invested in both in technology and marketing.
You can't doubt the power of the Flight Centre brand but they had the chance to learn from the mistakes of American Express in the US and Thomas Cook in the UK and take their huge brand online and own the market. Going private looks like a great deal for the Flight Centre management, a good deal for shareholders but it is an admission of the failures of the Flight Centre online strategy.
Wednesday, October 25, 2006
This is a $360mm upgrade and will change the game for everyone. Check out the built-in computers in case you forget your laptop (or security puts in the hold)
Tuesday, October 24, 2006
Monday, October 23, 2006
On my tourism visit I took two days to explore Guangzhou - the former Canton and nearest provincial capital to Hong Kong. Though a very large industrial city, Guangzhou has a number of large and beautiful parks and monuments. After half a day of sight seeing I noticed a trend - none of these moments or parks was dated earlier than 1949. I then upped the pace but no matter where I went all of that I could find was dated post communist revolution. There was commerce, industry and growth all around me but the cultural underpinning was all state controlled.
Contrast this to my first business trip. I was in Beijing for a Friday night and asked one of my local colleagues to take us out for a drink etc. She asked us where we would like to go. "Where ever the locals go" we replied. So she took us to that bastion of consumerist celebration TGI Fridays where "every day is Friday". It was here that I saw capitalism in the rawest form ever. Much like a bar anywhere else in the world, TGI's in Beijing has waitresses. However here each individual waitress is sponsored by a beer company. There was one in a Heineken t-shirt, one dressed in Corona, one in the green of Carlsberg etc. They all approached us on mass - jumping around the table promoting the benefits of each. Nothing lecherous or sexual but certainly employing forceful sales techniques. We ordered Carlsbergs and the Carlsberg waitress celebrated. It turns out that these waitresses work exclusively on commission. They share a piece of every sale they make - sell nothing, get nothing. As we approached the end of our beers they began to circle again looking to take a piece of the next round. Truly they were human pop up ads working on a CPA basis. We began to see more and more of this across China. Sales teams working exclusively on commission and therefore stopping at nothing to make sales - accommodation staff for eLong and Ctrip working the aisle of trains between Beijing and Shanghai handing out loyalty cards and dim sum staff bombarding you with food if (like some auction room from a romantic comedy) you raised your hand the wrong way in a conversation.
Made us "born and bred" capitalists look pathetic.
Friday, October 20, 2006
Wednesday, October 18, 2006
Lonely Planet made an announcement on one way to fight back - classifieds. An open network (craigslist style) for people to trade in travel services. Nice idea but this does not match the Lonely Planet brand story that I have in my head from my backpacker days - that no-one knows a place like LP does. It also opens itself for ridiculous posts and programs. I ran a simple search for what was on offer in my area (NSW, Australia) and came up with this. Love the humour but does not bode well for LP's online strategy.
In case the post is removed here is the text
Wanted: price for an elephant. Later i'll want an elephant, but first i would like to know what an elephant costs. If anyone knows the price of an elephant, please contact me.
Don't worry about transportation costs, I'll work that out later.
Tuesday, October 17, 2006
- Connecticut resident Robert Johnson is being stopped regularly because his name matches a former Black Panther and arms dealer
- Sixty-eight year old grandmother Mary McCabe now knows that she is on some kind of list but cannot find which one or why; and
- My favourite - 4 year old Sam Adams - a boy born after September 11 2001 is on the same list as 14 of the 19 dead 9/11 hijackers
Monday, October 16, 2006
Was a lovely weekend away with the family rested and recharged and the local carrot farmer's share price up 10% on the demand surge from our visit.
Not sure what to make of the fourth result in the search "Insurgency In Peru: the Shining Path" which goes on to describe the guerrilla war tactic of the donkey bomb (think suicide bomber but with a presumably unenthusiastically conscripted donkey) pioneered in southern parts of Peru.
Friday, October 13, 2006
Thursday, October 12, 2006
Expedia's falling stock price could have a snowballing effect. Not just as a result of sentiment turning against them but because balance sheet items may need to be revalued further impacting earnings results further impacting share prices. So What you say? What are you talking about Tim? Well news today from the Dow Jones Newswire says that Expedia's accounting of Goodwill gives it a value that is actually higher than Expedia's market capitalisation. In other words that Expedia values its goodwill as an asset on the balance sheet by more than the stock market values the whole company. Current market cap is ~ $5.3billion while goodwill is listed in its balance sheet as $5.86 billion.
Paraphrasing the Dow Jones article - this could force Expedia to revalue its goodwill - take a goodwill impairment charge to its P&L. That is bad as no-one likes to report hits to earnings. But there might also be further consequences. The article goes on to say that Expedia has to maintain a minimum share-holder equity level of around $5.36billion otherwise a covenant is tripped in its $1billion credit facility. This would block Expedia from drawing down from the facility and seek waivers etc from its lenders which will certainly cost money.
So maybe the debt raising was just a safety net plan by the CFO to ensure an extra reserve if their credit line dries up after a revaluation of goodwill. Understandable but dull. Would much prefer to see it spent on furious rounds of spurious acquisitions to give me interesting things to rant about.
Wednesday, October 11, 2006
Tuesday, October 10, 2006
- This week they announced that they will be launching web check-in. I love web check-in, it gives you thirty more minutes for domestic flights allowing you to get to the airport 20 minutes before departure. How Web 2.0 of Qantas. Another example of Qantas ahead of the game? Nope. This is 367 days after Virgin Blue launched theirs;
- World Airline Entertainment Association awarded Qantas the award for "Best Entertainment for Inseat Systems". Another piece of valuable recognition for Qantas' technology lead? Nope. This has to be an at best random, at worst corrupt, award as there are a string of leading carriers with Video on Demand, Audio on Demand and Nintendo 16bit games in economy that work. All of which kick the arse of Qantas' fixed movie roll that starts 1hour after take off, forcing you to watch not only the legal disclaimer DVT video but also a channel nine news update that is a day out of date. Even if Qantas' VOD system worked it would be second rate compared to Singapore, Cathay, Virgin Atlantic and Emirates. SMH travel blog is filled with a disbelieving public aghast at Qantas receiving this award; and
- Qantas Travel has closed six travel shops across Australia in response to the shift in business to online. Should mean they have their holiday business under control and shifted online? Nope - as per my earlier experience
"Travelport CEO Jeff Clarke has provided more details about the $75m-worth of cost savings first mentioned during last month’s Q2 earnings call with US analysts.....
...they relate to service contract renegotiations and identified headcount reductions
By category, Travelport expects to realise savings of $15m from telecoms, $45m from information technology and $15m of other general and administrative.
In terms of the headcount reductions, Travelport is ‘re-aligning staffing levels in IT application, development and maintenance’"
Monday, October 09, 2006
- Expedia does the full online white label for John Lewis (large UK dept store chain) - first major deal with a non-travel retailer or activity based site;
- Sabre launches a full travel agency white label tool for dynamic packaging, matching (maybe bettering- will have to wait and see) Galileo's Leisure product; and
- Zuji has been quietly putting together a collection of Asian white-label partners including taking over the Virgin Blue Holiday business from Spree holidays and a reverse white-label in all of market deal in NZ with Gullivers (where it is all Gullivers in the back end)
Friday, October 06, 2006
The float and flop of Pets.com was the canary for the Web 1.0 era. They raised US$82.5mm at an IPO in Feb 2000 and were dead in less an a year. Cnet rates it as number 2 on the top 10 dot-com flops. Now BigDogsWelcom.com is online with tips and tricks on which hotels take large dogs.
"Nearly 48% of travelers with pets travel with pets over 31 pounds, while 34% of those travel with dogs over 50 pounds,"
"Hotels are quickly realizing this untapped market and are adjusting weight limits to coincide with the growing market for large dog accommodations,"
Dont really care, so long as it remains privately funded the air is still clean. However, as soon as you hear of BDW raising any money - run.....
Thursday, October 05, 2006
Clearly Kayak has spent a fortune buying keywords from GYM but they are also strong believes on building community through user generated "buzz" but also from a TV campaign with a user built element (here are some examples on YouTube). I liked hearing a "search guy" being so prepared to invest in brand and consumer experience.
I think we are starting to see a bit of that shift back to brand spend in the Australian market as well. First there was Wotif's deal with ninemsn - which I am assuming had an upfront spend or at least is being measure on more than an incremental transaction basis. (I also did not mean to ignore Wotif's sponsorship of a yachting series in Australia - though I assume this is more for owner relaxation than marketing returns). GoStay's first marketing effort was buying bus stop advertising. Webjet has long loved buying distressed spots for TV advertising. HotelClub recently renewed its train station bill board campaign...and so on.
I am sure that branding (vs direct response) is a big part of reasoning behind these campaign - but also suspect that ever increasing PPC costs of GYM and CPM costs on the big 5 Australian online publishers (Yahoo7, ninemsn, Fairfax, News and Sensis) making offline marketing costs more competitive is also a factor.