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.
Wednesday, October 04, 2006
Advice and recommendation is a core part of the success in the general web market of social networking. For example I have been having a great time learning about new music and artists through streaming radio station and social network last.fm. It develops personal and artist based streaming radio stations based on the listening patterns of all users. The community decides what to recommend to you, not an algorithm or computer. For example I am a big fan of both Stevie Wonder and Black Crowes - artists that do not have much in common. Through last.fm I have discovered others that have similar tastes and have been recommended songs that fans of both like. The big last.fm competitor Pandora on the other hand looks to music analysts to cut a song and artist into hundreds of "genetic" identifiers to help automatically create recommendations list. Both result in automated recommendations that work. Tripadvisor has been trying to do this for travel through access to an enormous quantity of user reviews and submissions and its new wiki service however has a lot to do before it can automated recommendations as a result.
As I say - do not know if Traveltainment uses tech or community to generate recommendations (though suspect it is tech) but believe that this is the time when the combination of technology and social media have made reliable automated recommendation services a viable - maybe necessary - product in online travel.
Update 15 April 08 - TravelTainment is now the basis for a new Leisure focused division of Amadeus. The group has a cumbersome name "TravelTainment – The Amadeus Leisure Group". According to the press release it will be the "the only multi-market, multi-channel, community distribution system for selling leisure content of all types" (sure, ok, nice, what does that mean). Ralf Usbeck will be the boss/CEO.
Tuesday, October 03, 2006
I also like the HotelClub and RatesToGo approach of global layout with specials, language and currency options providing the targeting but (mainly) with single market pricing. I do not think their sister site Octopustravel.com's approach of asking you at the beginning where you are from and change their pricing accordingly works. The analogy I have heard defending different pricing for different markets it is like McDonalds or 7-11 where you have the same general theme but different products and pricing to reflect that different lunch time tastes and economic conditions in each market. However while I cannot go to a McDonalds in Tokyo or San Fran for lunch I can go to a Japanese based or US based online hotel property or intermediary and obtain a room.
Sunday, October 01, 2006
Lots has happened in a hundred posts
- Wotif floated, did its first major online marketing deal and hinted at acquisions
- Webjet (eventually) put together its hotel strategy, came out with some big results (and charges) and is working on some creative marketing plans
- I ranted about Qantas and the the airline gods paid me back by sending me to Brisbane and denying me a chance to walk around Tokyo and charging me a fortune for free tickets
- Expedia went live in Australia, raised a shed load of money for as yet unknown reasons and (presumably) fired their auditors for being idiots
- Travelocity branding spread to Asia and the CEO was so excited about the product that he ...well...quitely mentioned it to a few friends
- The boom came back because RedHerring said so and meta-search is attracting millions
- Oh...and a few things happended at Cendant/Travelport but I wasn't really paying attention....