Tuesday, July 31, 2007

Flight Centre and PEP: This time it is really over

First Australasian private equity giant Pacific Equity Parnters (PEP) wanted to buy all of Flight Centre. But shareholder Lazard said "No".

Then, PEP and the Flight Centre founders came back fighting with a new proposal to give PEP control of 33% of the business - a proposal that did not need shareholder approval.

Now the word on the street (or stock exchange in this case via e-travel blackboard) is that this deal is also dead. This time the deal died not at the hands of an errant shareholder but at the hands of the founders. Seems the founders commissioned an expert's report from Ernst & Young that valued the company at more than was being offered by PEP. In business stock exchange announcement double speak the Chairman Bruce Brown is quoted as saying
“While the creation of a leveraged joint venture had the potential to deliver significant benefits to FLT and its shareholders, it was also a highly complex and costly transaction, and the value proposition has become considerably less attractive for shareholders as a clearer picture of the costs of the transaction has emerged,”
No idea what that means. This one sentence has those great "stock" phrases "creation of a leveraged joint venture" and "value proposition". Wouldn't we all love it one day to see a Chairman say "the financial terms were crap and we think we can do it better alone".

Regardless of the way they phrased it, I do not believe that Flight Centre can do it alone. As I said before this highly successful business needs a business model rewrite. It needs a clear and unambiguous refocus on Internet distribution. I was asked once how a shareholder would be able to tell that the Flight Centre management was taking the Internet seriously. My answer was a quick and simple one - you will know that Flight Centre "gets it" online when the Chairman announces:
  1. That a new Head of Online has been appointed, reporting directly to the CEO with direct control over all brands online, free reign on how to market and promote those brands and with a fund of money to invest in large acquisitions;
  2. That a target for online sales has been set at [some big number like 20%] of turnover by 2009 (maybe 2010); and
  3. That Flight Centre is embracing the need to be a technology company. Setting up a team of developers (or buying a development shop) devoted to online only activities, reporting to the new Head of Online.
That is - separate online from offline, make online growth the number one target of the business and embrace the geeks needed to make it happen.

If history is a guide this is not the type of announcement we could expect out of Flight Centre under the current management or structure. They will need another private equity deal or other structural shake-up to provide the drive for this change.

UPDATE - News reports are that the PEP is very unhappy with this decision (no surprises). The amazing part from the report is after PEP and Flight Centre working on this deal for what must be more than a year, the SMH is reporting that PEP and its advisers found out that the deal was dead with only 20 minutes notice before Flight Centre send the obituary to the stockmarket.

UPDATE 2 - Am trying to understand the Flight Centre Board machinations that led to this deal being killed by Flight Centre. Specifically - who on the Board was pro the PEP deal and who was against it. From my original post it seemed that the Board was behind Chairman Bruce Brown when he said the deal was a dud. But he update with news reports indicating that PEP has almost no warning of the deal being pulled indicated that there were some senior execs/Board members that were as surprised as PEP was.

A quote from CEO Graham Turner (in August 24 2007 Travel Today quoting an AFR.com report) confuses things even more. He says
"The shareholders have been the big losers in this [the failed bid]...I suspect Iwill be proved right in two or three years when shareholders could have got a serious dividend or buyback as well as retained significant equity in the company."
This indicates that Skroo is unhappy with the failure of the bid and means that Flight Centre's top boss and largest shareholder does not agree with the structure of the company. Weird.

Monday, July 30, 2007

Who's coming to Australia next?

Often it is the job ads the give you the best guidance as to who is launching where when. There was an advertisement in this weekend's paper for this role
General Manager- Global Internet Media Company - Australia Launch!

A unique opportunity exists to launch a new venture for one of the world’s leading online media companies. This NASDAQ listed company, headquartered in New York, is experiencing significant growth and is well positioned for expansion into the Australian market.

The General Manager, Australia will be responsible for launching the business, winning and maintaining key accounts as well as the online consumer. This appointment requires an entrepreneurial leader with a passion for new media and the travel sector....[MORE]
I have a very strong suspicion as to who this is but have a little bit of inside knowledge that I promised not to reveal. What do you think, what's your guess? Either way - interesting to see the Australian market having reached a new stage where a media/advertising supported travel business model is attractive enough to support expansion plans.

UPDATE - the cat is out of the zoo, the role was for Travelzoo and ex-Lastminute.com.au Hotels GM Brad Gurrie got the job

Friday, July 27, 2007

The Airline Industry - Wharton Style

Did not mean for a series to develop but it has. First I pointed to the Economist talking about the ills of the US aviation industry (esp customer service) and then NPR. Now a good read from Wharton called "Feel Free to Move About the Airport: Turbulence Continues to Roil the Airline Industry".

The article continues the list of horror stories for delays and customer non-service but in Wharton style tries to find the reasons (beyond Airline stupidity). Reasons discussed include:
  • The hub and spoke system being at fault because it is not a scalable and small shocks at one airport effect everyone;
  • Over protective bankruptcy laws making airlines inefficient;
  • Simply the record demand levels;
  • Antiquated safety rules slowing down take off and landing (such a prohibition on being within 20 miles of a plane that took off before you);
  • The lack of an economic penalty for bad service and delays meaning then is no incentive to improve; and
  • Limited access for better run and more customer focused competitors.
Agree with all of these. Thanks to Madame BOOT for sending through the article.

If you love a list of hotel sites, you'll like (and hate) TOP 100 HOTEL SITES

Found this site while surfing around. Claims to be a list of the "Top 100 Hotel Sites". List is generated using
The URL of every Hotel site was found in multiple internet searches and the amount of mentions of site's addresses is used to generate the rating. Hotel directory and travel guide. Includes information on tours attractions, restaurants, hotels reservations, travel jobs and more.
Whatever. There are some really bizarre rankings here. TripAdvisor is number one, Orbitz three, Booking.com four, Hotels.com five and Expedia six - all of which sounds find. However stuck at number two is myswitzerland.com, which undermines the whole list. Missing from the list are Wotif, HotelClub, RatesToGo, Rakuten and probably many more. Can't say either way if this is run by legitimate enthusiasts or just a link farm...and don't care. If you ignore the rankings and order, it provides a decent list a lot of the main (but also the minor) online hotel players.

Wednesday, July 25, 2007

The Internet in a tube map

Japanese based design agency iA have put out what they call a "Web Trend Map". Using the eye catching mechanism of a tube/subway map they try to visually track the "200 most successful websites on the web, ordered by category, proximity, success, popularity and perspective". Can't see how this improves your thinking or planning but sure is interesting to look at and worth a few minutes of your time. As it comes out of Japan it has a much more global feel than any other trend documents that I have seen. Travel companies Expedia and Rakuten get a mention. Unclear why Rakuten gets a mention but the equally large Booking.com and Hotels.com do not but who cares as it is fun to look at anyway.

Tuesday, July 24, 2007

The BOOT goes Old School at an ATEC industry lunch

Has been a long time between drinks but your BOOT correspondent attend an "Old School" industry event today. I went along to the ATEC NSW branch meeting and lunch. ATEC is the Australian Tourism Export Council - the industry group for supporting and promoting the inbound tourism industry in Australia. A place/group for Government, Inbound Tourism Operators (ITOs) and Suppliers to meet and promote the industry.

As an event it is not a usual place for an online retailer to spend time. The talk at the event is typically about issues that do not often cross my mind such as "series growth", scheduling of famils, brochure placement and cursing airline capacity constraints and actions (OK maybe I do the the last part). What was on interest was that since my last "traditional" industry event was not just the the increased talk about online retailing and the challenges face by that but of the impacts of dynamic pricing, direct connections, flexible allotments and advanced revenue management techniques. This should indicate a change in the whole industry but the vast majority of this talk was coming from the suppliers (especially hotels) and not from the ITOs and intermediaries. Clear evidence of the continued shift in power back to the hotels in the traditional industry brought about by the overall economic good times. and that the Internet industry is mature and finally changing the way the traditional industry works and operates.

SMINTair - Smoker's International Airways. This has to be a joke...please be a joke

Not sure I am reporting a funny, mad anecdote or falling for a scam but here is a link to SMINTair's website. While we have seen business class only airlines and low cost bucket shop airlines, SMINTair's claim to fame is to be the only all smoking airline. They claim to be on track in applying for a licence but also have a lot of jobs to fill. Here is their main promise to customers

As the World's first airline re-allowing their guests to smoke, SMINTAIR is entering many uncovered niches in aviation, designed to give the traveller maximum pleasure out of their flight experience. SMINTAIR spends more than three times the amount usually invested on passenger's nourishment. Signature recipes created by internationally renowned chefs will make each meal a feast. Charming and beautiful flight attendants in uniforms designed by famous couturiers are there to take the very best care of you. Every two years, a new designer will be elected to keep the uniform design รก la mode. SMINTAIR is currently talking to potential sponsors offering luxurious merchandise. Everything from caviar to clothes and smoker's utensils to jewellery will be offered for free consumption or at special duty free prices during our flights. Main sponsors will also be able to host events aboard our third aircraft, displaying their latest fashion or merchandise, thus taking SMINTAIR in-flight entertainment and service to new levels.

Has to be a hoax. Please let this be a hoax. On my knees praying that this is a joke.

Monday, July 23, 2007

When search becomes proactive and biased

New branches of search appear almost daily. Beyond the standard search of Google the online travel industry has had to adjust to meta-search, review based search such as TripAdvisor and advertising led search players such as Cheapflights. Recently web personality and serial entrepreneur Jason Calacanis added a new version - people powered search. In his well funded start up Mahalo, Jason and his team use scores of editors and interns combined with feed technologies and user community driven responses to generate the search responses. The pitch being that this will dramatic reduce spam and black hat behaviour in general.

Why should the online travel industry care? If Mahalo or people powered search gather strength then their traffic will be diverted to pages such as this one on Mahalo called "How to Book a Cheap Hotel Room". Jason is already impressed by the amount of traffic and exposure this page is getting. From a consumer perspective this article offers good advice. From an intermediary/online agent perspective it is scary. Not because it gives the consumer good tips. If you are a good intermediary and good online retailer you should not be scared of informed consumers. Rather it is concerning because as hard as they have tried at Mahalo to back up their recommendation with good research it is not conclusive. For example, Accor is missing from the list of hotels that offer a best rate guarantee, there is no mention of the regional meta-search sites (ie Bezurk or Sprice or Hotelscombined) and nothing about the price advantage for packaging hotels with other goods.

That said, there is no need to worry too much about this new form of search as the traffic generating power is not yet proven and has a lot to do to be proven. I have received one link so far Mahalo and that was from the catch all/backup Google results. Valleywag are (true to form) very scathing on the traffic potential for Mahalo.

Human based search is trying to beat Google and meta-search on quality rather than quantity. However humans cannot help but be biased in making quality assessments.

UPDATE - Have added a How To for cheap booking flights as well.

Friday, July 20, 2007

Quicky on fare comparisons for FastCompany

With Red Herring and Business 2.0 near death we turn to Fast Company to try an keep us up to date with the business side of the new economy. Here is a quick snippet from them on the new trends in fare tracking. In this brief piece FC tries to sum up the differences and value propositions of Farecast.com, FareCompare.com and recently boosted by $2.3mm in funding Yapta. Interesting and quick read.

Wednesday, July 18, 2007

Cheapflights in Australia - but this is not open territory

UK flight meta-search leader Cheapflights has announced and launched a holding site for an Australian version of the business. The Australian version of Travel Today claims the site is beta but as there is no booking engine it yet in place it is clear there is still a lot of work to do if they are to meet the planned end of year launch date a launch date next year.

Cheapflights is the first of the global players to announce a meta-search launch in Australia. Kayak and Sidestep have made European moves but are so far silent on Asia. Bezurk is the only local player targeting Australia. Sprice have an Asian business launched but have lost out on the chance for the Australia URL (currently owned by an Australian based Asian grocery store).

That does not mean they have a first mover advantage or guaranteed meta-search product lead in Australia. By the very nature of the Australian market all of the major online air players (Webjet, Travel.com.au, Flight Centre, Expedia and Bestflights) have built there domestic (and trans-Tasman) air businesses around meta-search principles. As neither Virgin-Blue or Jetstar (the number two and three domestic carriers) participate to any meaningful degree in the GDS', the only way for the local full service agents to access their inventory through screen scraping and API based aggregation technologies that result in the booking actually being made directly with the carrier. In many respects the whole of the domestic online intermediary air business is already a version of meta-search. Welcome to the party Cheapflights.

Also of interest from the article is they are already quoting the pricing for the Australian offering - AU 70 cents for a click on a short haul route and AU 81 cents for a long haul route. Though there is some confusion on this number as they are quoting 81 cents as equalling GBP 81 pence. My guess is that the 81 pence is right - making the long haul click price closer to AU$2.

UPDATE - made some minor changes to the launch date note above based on comments from (I think) an insider at Cheapflights.

Tuesday, July 17, 2007

TripHub Interview – another approach to group travel (and outlet for ex-Expedia staff)

UPDATE - unfortunately for the company, TripHub is no more. Quote from the TripHub Blog as to "what happen".
"There is no single, simple answer to this question. Certainly we made mistakes, and unfortunately we were impacted by factors beyond our control including the current economic environment and state of the travel industry. We came close to realizing a different outcome for our venture but, as the saying goes, close doesn't count. At the end of the day, despite a well-received, market-leading product and early success with strategic partners such as Orbitz and Alaska Airlines, we simply ran out of money to continue executing on our vision. We continue to believe there's a rich opportunity to improve the travel planning experience and, while it's no longer our destiny, we look forward to watching as others carry on down the path we helped to pave."
Original Post

I have mused in the past about the new players launching and obtaining funding with a focus on group and MICE travel. The main angle of my discussion in those earlier posts was about the challenge that a product specific site has in capturing audience attention fast enough while staying ahead of the well funded big guys and keeping costs low. This first came up in my discussion of Groople and then Asdoo. Now the latest that has come across my email box is TripHub.

While Asdoo and Groople have approached the group market by going direct to suppliers and seeking to negotiate super commissions based on volume and F&B contribution, TripHub is instead building a networking, co-ordination and information collection tool that allows informal and private of people to research, track, book and distribute information on a trip. It is part mash up (ability to bring different bits of information together in one place), part wiki/blog (different people contributing comments, information and ideas) and part affiliate and meta-search network (providing links to different providers with different booking options).

Distribution comes under its own brand and site but the main strategy for distribution is to provide white labels for partners.

The company launched in March 2006 but came to my attention recently from an number of angles. They hit the news with a white label deal with Alaska Airlines and most recently a deal with Orbitz. However it was an email exchange with VP of Marketing John Pope that helped form the basis of this post

By being a facilitator/information exchange, TripHup is giving up the supplier control (and therefore potential product margin) available to someone like Groople or Asdoo however TripHub wll have a much lower cost structure, simpler implementation and more destination coverage.

I put a few questions to John Pope, the VP Marketing for TripHub. Here is the email interview in full providing insight into the company, the product, the model and results so far.

The BOOT on the Company - I see that Paul Goodrich is on the Board and Rich Barton is an advisor. Is there anything you can tell me about VC interest in TripHub? Did either of Madrona Venture Group or Benchmark put in any money in and if so how much?

John Pope replies: Madrona Venture Group is an investor along with our founder & CEO and private individuals. Benchmark is not. Josh Herst, our founder, worked for Rich in the early days of Expedia. He hired me onto the Expedia team in 1996 and that's where we got a start together. Michael McGinn joined TripHub in March 2006 and also, coincidentally, came from Expedia and worked with Rich. We have not publicly disclosed the amount of financing raised but I can say that we are a very capital efficient company with only 6 FTE and a handful of contractors. Paul Goodrich led the round for Madrona. There are a few more details here.

The BOOT on the product- What are your thoughts about the need for a social networking element. For example do you plan to add your own social networking features (ie bringing together people of common interests that do not know each other) or will you prefer to either let people form that own trip groups with people they know or build applications into other social networks (ie Facebook)?

John Pope replies Our strategy to date has been to focus on what we call "existing social networks". Your friends, your family, etc. The majority of trips we see on TripHub are trips with friends, weddings, bachelor parties, family reunions, and membership organizations like club/teams and religious groups etc. These are not conducive to inviting random people. Certainly extending the TripHub tools into other social networks (i.e. Facebook as you suggested) is an interesting strategy and one that we're considering. In time, we do intend to expand the services to work even better for shared interest groups where trip members may not know each other but have a common bond through an interest, lifestyle, what have you. Stack ranked we are targeting friends & family groups; membership organisations; shared interest groups; and unmanaged and small business.

The BOOT on the model - In group travel, the perfect world as a planner or organiser is to earn enlarged commissions because of not only the volume generated but the likelihood of contributing to the F&B and other revenue streams of the hotel. If I read your model right you filter most of the bookings though the partner. While this keeps your operational costs low it denies you access to this enlarged commission. Do you have plans for your own booking engines and supplier deals in the future or are you happy working with just an affiliate/advertising model?

John Pope: We do not believe in re-inventing wheels. There are more than enough booking engines. So we're focused on the communication, collaboration, and sharing aspects of planning trips with others. Our low overhead does help the ROI of our affiliate/advertising model. But that's only part of the story. We have a two pronged business model. Private label fees provide an additional revenue base. Orbitz is our third private label partner, with Alaska Airlines and People to People Student Ambassador Programs (a leader in student travel - not available for public use) being the other two. We are talking to a number of others and our partnering strategy will continue to be to work with a select group of market leaders across the travel and media industries.

The BOOT on the early days - Any early metrics you can share with me such as number of groups organised or trip home pages built

John Pope: Thousands of groups have used TripHub to date. Group sizes average about 9. Of course, we expect exposure to the Orbitz customer base to significantly increase adoption. We've published some of our early learnings here:

I like the functionality of the site. A trip home page can be set up in a few easy to follow steps and it is simple for friends to add comments and content. By avoiding direct supplier negotiations they are keeping their operational costs low.

However, on the challenges front, they have what are now my regular comments on the issues that content based company have with loyalty and innovation (have discussed at length loyalty in content based businesses here, here and here).

In addition they have a challenge in early scale. As I say their monetisation model is based on advertising and affiliate commission rather than commission. That puts them in the early days in the role of traffic arbitragers. Needing to play the search and affiliate traffic generation game in a very mechanical and technical way to ensure that they can generate clicks cheaper than they can buy them. This means either being very patient or spending money.

NB - I edited a very small amount of John's response to me to reflect that I was not attaching any of the documents from our exchange and some other inconsequential elements. None of these amendments are material or even that noticeable but in the spirit of open blogging I am letting you know

Monday, July 16, 2007

The Airline Industry - NPR Style

I recommended a link last week to an Economist podcast on the Airline industry. This week I have a story from Scott Simon of NPR's Weekend edition. While light in tone and filled with humour this piece proposes an interesting link between the perpetual rescuing and protection of bankrupt and debt laden airlines in the US and the horrendous customer service and acts of deceit (such as discussed here). If airlines can be inefficient and so bad at what they do, resulting in debt piles and losses that are borne by the economy, yet can still fly and can rely on the protection of the government and regulation, then there is no incentive for them to work hard to retain and please customers. Anyone who has sat on a US tarmac for hours (like me), had luggage lost and no-one care (like me) or spent time talking to a customer service person who clearly does not care if you ever fly again with the airline regardless of status (like me) would surely agree.

The podcast is good for a laugh and worth a listen.

Friday, July 13, 2007

No reason except it is Friday and it is my blog

Absolutely no business or thematic justification for this video...but I can't help myself. Am blaming it on being a Friday and 25 years later it is still funny

Will even give it a tag (and the proper Italian one at that)

UPDATE - have been asked what the Italian connection is (and therefore the only minor link to the wife inspired Italian themes in this blog). The composer of the original song was an Italian called Piero Umiliani. Here is the Wikipedia entry though they do not use the Italian spelling of the song title.

Wednesday, July 11, 2007

Sidestep can't stay out of the news - what will be next

Sidestep seemed very comfortable for a long time being a pure meta-search company (is arguable that they invented the model). The economics were simple - buy traffic from GYM (Google, Yahoo, MSN) cheaper than you can sell it to advertisers who will come to the site because you can deliver highly qualified traffic. However somewhere something started to break in the model, most likely this was that PPC costs for the best of the travel keywords were becoming too expensive. Traffic had to be acquired in cheaper ways. So Sidestep has gone on and acquisition and content deal blitz-a-thon.

The latest is today's announcement of the acquisition of travel social network TripUp (here is the paidContent story). TripUp has all the usual features of a social network around travel - reviews, videos, photos, community, interest matching etc. What it does not have is a way to search and book travel.

Rolling up all Sidestep's recent activity now they:
That means content, distribution, meta-search and money. There are also very strong confirmed rumours of profitability.

So what is next for them? Not sure if it is time yet for a sale. To extract the most from their valuation they probably want to have a longer period of earnings growth. But I expect them to continue with content and distribution acquisition through either buying more companies or further licence and affiliate deals. On the product side there is more international expansion to do. I am also sure they are contemplating more in the area of video and photos (Hotelsbycity for example). To round off the speculation, what about a technology buy. Something that would improve their ability to push contextual deals in automated forms - think Google Adsense but for travel deals.

Tuesday, July 10, 2007

Non-Travel blogs I read

Have been asked a few times what is the best way to keep up to date on general (ie beyond travel) online news. Have added a new blog roll on the right with the top news blogs in my RSS/news reader covering general Internet, VC, search, online and media industry news. The sites are
  • Valleywag - Gawker Media's trash talkin', no holds barred silcon valley insider gossip blog;
  • alarm:clock - constantly updated feed of who invested what in whom;
  • paidContent - Rafat Ali's great insider blog on media, venture capital activity and (as he says "the economics of content")
  • TechCrunch - the new Red Herring. Michael Arrington's must read technology and online deal tracker blog;
  • John Battelle's Searchblog - search engine expert and blog advertising network boss John Battelle provides continues open access to the word of search marketing; and
  • GigaOM - Business 2.0 columnest and Internet trend spotter Om Malik and team add a lot of great commentary and crystal ball gazing to the deals of the moment.

There is nothing revolutionary about this list. These are the well known top of the Internet industry blogs. If you want a picture of what is going on in the wider online space then add them to your subscription lists.

Monday, July 09, 2007

The Airline Industry - Economist Style

Interesting little podcast here from the Economist speaking to Paul Markillie the author of their recent report on the aviation industry.

Couple of points from the interview
  • On the whole the industry is carrying $200 billion dollars in debt;
  • It was a fantastic year for turnover with more than $473 billion in revenues however this generated only a a profit of $5billion for a net margin <1%;
  • Continues the hype build up on the Beoing Dreamliner on fuel efficiency and the supposed increased consumer comfort from the carbon fibre hull;
  • Asian aviation market will be bigger than US domestic by 2010; and
  • The airline industry is unique in that it is a mature industry but no one carrier owns more than a few percentage points of the market. This is of course caused by the the obsession of nations to restrict ownership and consolidation. As Markville notes
"as the result you have an industry that brought the world globalisation but has been unable to globalise".
What a staggering industry. Such a critical part of the model world, employs so many people, pays such high salaries for executives and generates so much for the media industry through advertising revenues, yet is such an inefficient and poorly structured industry.

Worth eight and half minutes of your time if you enjoy tracking the airline industry

The Dead Herring?

We could be on the cusp on the end of an era in online industry / ecommerce publishing. Valleywag, the Silcon Valley gossip and insider blog, has been running a series of posts in their Deathwatch collection on the possible death of former must read Red Herring. The latest posts from Friday talks about contractor staff being pulled, potential eviction and more. Previous posts looked at missed publications and serious cash flow issues.

Back in the bubble days this was the top venture capital and tech business publication there was. It was required reading for anyone hoping to stay informed on trends in capital flows, business models and competitor activity. I recall issues that were hundreds of pages long. So big that the binding could not hold them together, with pages falling out all over the place. It broke all the big stories and for markets in Europe and particularly Asia it allowed you to look into a virtual time machine to see what the business models of the eFuture (ie in the US) were going to be.

Will be sad to say goodbye if the deathwatch proves true but not unsurprising. The magazine is a poor comparison to the bust days. Now it is a sad looking flip through magazine that it little more than a pamphlet. The stories have all be broken before on Techcrunch, Valleywag, alarm:clock, GigaOM and Paidcontent.

UPDATE - the news is getting worse and worse for new economy business magazines. The NY Times is reporting that Business 2.0 may be joining Red Herring in the magazine emergency ward and will be soon shut down. Falling advertising revenues and stagnant circulations are the reasons quoted - though in truth these are the symptoms of the changing media consumption discussed above. Om Malik who has written for both Red Herring and Business 2.0 is very sad about the possible closure of the magazine. He has an interesting post on that and his experiences at Red Herring here.

UPDATE 2 - 1 August Valleywag is reporting that Business 2.0 may be back from the brink

UPDATE 3 - 4 Sept TechCrunch is reporting that it is all over for Business 2.0. October will be the last issue and Time will not sell to another publishing house

Friday, July 06, 2007

Speaking at TRAVELtech August 28

If you are interested in hearing me put the BOOT in in real life then come join me at the Traveltrend.biz event TRAVELtech 2007 on August 28 in Sydney.

Here is the official blurb on my presentation
Putting ‘The Boot’ Into Online Travel. Industry commentator, former venture capitalist and industry executive, Tim Hughes, takes a look at the crazy world of online travel, providing opinion, analysis and some predictions on where the industry is heading and which business models are best equipped to survive.
Not sure about the word "crazy" but will definately give you all the insight you'll ever need.

Thursday, July 05, 2007

When does a 24 hour delay equal a 2 hour delay? When an airline is doing the maths.

Thanks to my younger but more worldly uncle David for sending through a link to this article from the New York times that tells the sad sob stories of delayed passengers from a new and air rage creating angle.

The main thrust of the article is that once again airlines are being dodgy with their reporting and the truth (remember our friend stranded on a Delta flight for seven hours). He is the jist of the article. The on time statistics are all wrong

because these statistics track how late airplanes are, not how late passengers are. The longest delays — those resulting from missed connections and canceled flights — involve sitting around for hours or even days in airports and hotels and do not officially get counted. Researchers and consumer advocates have taken notice and urged more accurate reporting.

Researchers at the Massachusetts Institute of Technology did a study several years ago and found that when missed connections and flight cancellations are factored in, the average wait was two-thirds longer than the official statistic. They also determined that as planes become more crowded — and jets have never been as jammed as they are today — the delays grow much longer because it becomes harder to find a seat on a later flight.

That finding prompted the M.I.T. researchers to dust off their study, which they are updating now. But with domestic flights running 85 to 90 percent full, meaning that virtually all planes on desirable routes are full, Cynthia Barnhart, an M.I.T. professor who studies transportation systems, has a pretty good idea of what the new research will show when it is completed this fall: “There will be severe increases in delays,” she said.

I will never understand why airlines think that lying to passengers is a good marketing tactic.

Travelpod Traveller IQ test - a great piece of marketing/a dangerous addiction

Travelpod (the Travel blogging platform recently acquired by TripAdvisor - see CEO interview here) have put out a highly addictive Facebook application/game. In the game you have to race the clock to pinpoint where on the globe various cities and locations are.

It meets all the criteria for viral marketing apps - easy to use, fun, good but not excessive branding, easy to share and you keep wanting to go back to try one more time. In other words (unlike the recent Jetstar marketing effort) it keeps consumers happy and wanting more.

If you have a Facebook account (and are prepared to lose lots of time in addictive play), the go here to download the app. If you don't have a Facebook account then...well..go to Facebook.com and get one.

Thanks and curses to Kevin May at Travolution for sending me the app and condeming me to hours each evening searching for Bamako, Mali.

Jetstar promotion - if you do this, this, this, that and pay more then we'll do something for you

Jetstar is Australia's third domestic carrier - the low cost off shoot of Qantas. They were launched a few years back by Qantas to fight the increasing market share gains of Virgin Blue. While Virgin Blue have broken a number of the low cost carrier rules with lounges, flexible tickets, fixed seating and more, Jetstar has proven itself to be an old fashion low cost carrier with no arranged seating and flying to secondary airports (who even knew Australia had secondary airports). Virgin Blue have been doing as much to fight Qantas at the top of the market with service as they have to fight Jetstar at the bottom with prince. It has found DJ (Virgin Blue two letter code) stuck in the middle.

To continue the squeeze and prove their pedigree in the price competition, Jetstar have launched a new fare guarantee campaign. They guarantee to double the difference if you find a lower fare. Great idea for a campaign - right? Should generate good press and help build up the price credibility story- right? It would, except in a classic low cost carrier move (and Qantas move for that matter) the terms and conditions are so rigorous and ridiculous that it is more likely to annoy customers, than win them over.

This is what you have to do to claim your "double the difference"
  1. Find the lower fare
  2. Call the Jetstar call centre - making sure there is availability in the competitors fare and ONLY ONE CLASS of Jetstar fare
  3. Departure of the lower fare must be within one hour of departure of the compared Jetstar fare
  4. Wait for Jetstar to verify
  6. Then A VOUCHER voucher for a subsequent purchase will be sent for double the difference VALID FOR ONLY SIX MONTHS.
Who the hell in the marketing department thought this would be a good deal for customers. You have jump through a series of hoops to prove that Jetstar is more expensive, then you actually have to buy a more expensive ticket to get vouchers that have a very limited time of validity. Jetstar can avoid liability by simply closing out a class of fare. Price guarantees are simple - find a more expensive fare and we'll match it or give you x% off. Easy. When you make marketing promises that are complicated and painful for consumers they will inevitably have the opposite effect by generating bad experiences and word of mouth.

Monday, July 02, 2007

When does lastminute.com not own lastminute.com?

A while back I introduced international readers to the joint venture running Lastminute.com in Australia. At the time Lastminute.com.au was majority owned and operated by Australian pubic company Travel.com.au. I discussed that the privatisation of Sabre (owner of Lastminute.com) meant that Travel.com.au had the right to put the joint venture to Sabre. It was expected by all - me included - that this is exactly what they would do, with the result that Sabre would own the operations of Lasminute.com.au and Zuji.com.au in Australia. However, in a twist that I did not see coming, Travel.com.au has instead waived the put right and bought out Lastminute.com's share of the venture to become the 100% owners of the brand in Australian and New Zealand (here is the stock market filing pdf).

According to the filing the price was $4.75mm (half now, half later). This values the Lastminute.com.au business at $19mm versus the total market cap of TVL at $32mm based on today's close. Announcement was after the close so will have to wait until tomorrow to see what the market thinks.

Produces a fascinating outcome where other than general brand guidelines, Lastminute.com will have no operational control or influence on the Australian business as it goes head to head battling with the Zuji operation. The challenge for the Travel.com.au management and board is that they will have to look outside of the online travel industry for a potential buyer of the business should they ultimately seek to delist as part of a trade sale as it is highly unlikely that any global online travel company other than Sabre would want to operate a Lasminute.com branded business.

Venere.com - unravelling the numbers behind the success

Venere.com's results and performance have recently become a very secretive affair - you could could call it the European online hotel misterioso. There was no doubt about their success and growth from their general presence in Europe and feedback from customers and hoteliers but since 2004 we have heard little in the form of concrete performance metrics and results.

For background, Venere is one of the older online hotel players - having established itself in 1995. The founders -Matteo Fago, Renata Sarno and Gianandrea Strekelj- took some funding earlier in 2000 and 2001. However recently they sold down their their holdings, bringing in private equity firm Advent International - who took majority control at the end of 2006 through it's Italian director Filippo de Vecchi.

Up until 2004 they published on their site their turn-over under the heading "Key Figures" shown here below
You can see more than a million room nights and Euro 100mm in turn over. Since then the information flow has dried up....until now.

The Relations blog has posted an informative interview with Venere.com's SEO Manager, Susan Geraeds. Well worth a read.

Interesting facts out of the article are:
  • 9,000,000 unique vistors per month;
  • 16,500 contracted hotels;
  • 4,500 international destinations;
  • 160 members of staff;
  • over 350,000 hotel reviews;
  • affiliate program with 3000 partners, an offline travel agent program with more than 1000 travel agents;
  • hotels do not pay commission on no-show bookings; and
  • no booking fees and no cancellation fees
No update on turn-over and room nights. However clear evidence of growth and success. Assuming that growth rates for 2005 and 2006 were in the same range as that for 2003 to 2005, the current turnover is likely in excess of Euro 200 million on 2 million room nights but will have to wait for another interview or leak to unravel the mystery more.

UPDATE - June 07 PhoCusWright European Online Travel report (have to subscribe to get it) puts the Venere.com 2006 turnover at EUR290mm. If true it means little to no slowing in their growth last 3 years.