Tuesday, October 31, 2006

Diller getting back into travel...nah...

Travelmole is reporting IACI cheif and Expedia Chair Barry Diller as saying that he is thinking about acquisitions in the UK online travel scene. Diller getting back into online travel through ICAI to compete with Expedia?...really?....nah....couldn't be. I bet he is just messing with journalists heads...but sure would be funny if I was wrong and be a good challenge for new Expedia UK boss Caroline Cartellieri.

eDreams - first up, last out

One of the very first European online players has finally found a buyer - sort of. eDreams management backed by US PE firm TA Associates has put together €153 million to buy out the other shareholders (ie 100% of the capital) – Doll Capital Management, Apax Partners, Atlas Venture and 3i Group, among others. e-Tid and eyefortravel have also picked up the story.

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

Everyone's in India

Travelocity have already hired and head of India and rumours abound that Expedia is also looking for a in-country boss. The Business Standard also has a lot to say about it. If the article is to be believed then there is a strong chance that travelocity will choose the Zuji name for India - which I think is a mistake as it is a meaningless phrase in the Indian marketplace.

Must have been a busy week in New Dehli with everyone in town.

Friday, October 27, 2006

Someone has their eyes on Webjet

Two weeks ago Webjet sent out good news to the market that it was headed for a record quarter. Wednesday Webjet saw its biggest trading day ever with more than 10 mm shares changing hands and another 8mm on Thursday. Today is 3.5mm and climbing. The ASX asked Webjet to let us in on the big secret - who is buying and why - but Webjet says they have no idea who it is (ASX statement here - registration required). Stock rocketed from 34 to 42 cents as a result. No way is this just a reaction to good news. Someone is hunting for at least a strategic stake but maybe a magic 14.9-19.9% to get a board seat as a precursor to launching a full scale bid. Who could it be now knocking on that door.

Thursday, October 26, 2006

Scroo goes private, pockets hundreds of millions and blames suppliers

Flight Centre was once the darling of the Australian travel industry, stock market and corporate culture watchers. They were expanding around the globe, growing at 20% a year and had established a city, village, country, family etc culture that was the envy of retailers everywhere. Somehow it all started to go wrong. First Ansett went bust, then Qantas pulled commissions, the wrong CEO was appointed, the push in the US was failing, 9/11, SARS, domestic downturn, Santa Claus was late, the Tooth Fairy decentralised purchasing and dropped spending by 20% and Dr Seuss inc stopped booking long haul.

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

Singapore Seats - what a great way to fly

You have to see the new seats that Singapore Airlines is promoting for its Business Class re-launch. Wow!

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

Wotif is definately on the hunt

The rumours - first broken by the world beating Canberra Times - are clearly true. Wotif is looking to spend it their cash and capital on acquisitions. Traveltoday quotes COO Robbie Cook as saying that organic growth will now be enough, something I have been saying for a while (extract below). Breaking out of Australia for growth with (to date) just an English language product and limited white-labeling/affiliate engine capability has and always will be a challenge. The Australian market has a number of acquisition opportunities that can bring traffic growth to Wotif. However integration and product differentiation with junior acquired partners will be a huge challenge. Whatever you do, dont say the word synergy.

Monday, October 23, 2006

The human pop up ad

Received a good comment to my Ctrip post last week talking about the money flowing into China. It reminded me of my impressions of my first tourism visit to China in 1997 versus my experiences on a business trip in 2004. I was overwhelmed by the mixture of state control and outright hard core capitalism.

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

China pays up

Fresh from news about China Heating Up we see that Ctrip has committed to pay 30% of this years earnings as dividends. That is a large upfront committment for a you Internet company. Could be further proof that the China online general and online travel markets are maturing. Or maybe there are a bunch of investors that want money out of a relatively thinly traded stock.

Wednesday, October 18, 2006

Lonely times for Lonely Planet

Have always had in the back of mind how much Lonely Planet missed the chance to be the dominant online social network/content/destination site. They owned the backpacker market in the early days of the Internet and therefore arguably had the number one travel brand in the Internet demographic - I am assuming here that the young people backpacking and travelling in the early to mid nineties were also those discovering the early Mosaic/Netscape browser and opening their eyes to the world wide web. Even through the first boom period - 1997-2000 - everyone behind, in and around the bubble were travelling with a Lonely Planet book in their back pocket. Now in 2006 I don't know if book sales are up or down but I do know that the online hubs for information, reviews and comparative shopping are places like tripadvisor, kayak, sidestep, bezurk and blogs such as gridskipper not LonelyPlanet.com.

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

WTB: Elephant (Asian or African) - NA

New South Wales

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

No fly zone

Scores of stories are breaking of "regular" US travellers being put security check hell at US airports because their name matches that of someone on the "No Fly List" - a list meant to alert the Transport Safety Authority as to people considered a risk. Unfortunately the list is out of date and misses obvious candidates - like eleven of the people charged with the recent London bomb plot, all of whom were under survelliance for more than a year. There are 44,000 plus names on this list so the chances of cross over and mistake are enormous. Here are a couple
I am not arguing for removing security checks in America. Both the Brits and Americans have a right and duty to be paranoid about airport security. However there is some madness involved in a poorly maintained list being at the centre of that paranoia.

Monday, October 16, 2006

A donkey on the edge (of search)

Had a "great moments in search" moment last week. I wanted to take the family away for the weekend. Specially wanted to revisit a cottage in the nearby southern highlands that, as well as being in a beautiful spot, has a small menagerie of farm animals that are good around kids (ie don't bite, kick or otherwise traumatise). These include a pig, cow and personality filled donkey called Hector. My 4 year old son cannot stop talking about this donkey - simply loved the experience of running up towards Hector's paddock with a carrot or two stashed in his back pocket. However I had forgotten the name of the cottage - no worries as Google has the answer. The top result from my first off search "southern highlands hector donkey" produced the answer I needed - Little Forest. Strangely no-one has yet placed a key word bid for this term.

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

Nothing to do with travel - but a great moment in Schadenfreude

As an Australian and former resident of London I have to post this video of one of the greatest stuff ups in English sporting history.

Thursday, October 12, 2006

Maybe they just need the money for boring balance sheet issues

I mused earlier about Expedia's fund raising elements and wondered what hidden plans they had for spending all their cash. Exciting acquisitions and convoluted corporate dances played out in my head. However after having read some news today on Yahoo! Finance, maybe they simply needed the money as a back-up plan. The story has a dull financial element to it but let me try and tell the story

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

Hotels.com throughout the ages

Great slide transition from Guillaume Thevenot's Hotel-Blogs.com showing the transition over time of Hotels.com. Shows in pictures the trends of content first with search on the side, then open searchwith tabs and options to eventually the importance now placed on promotion and merchandising. Thanks also to the Travolution Blog where I first saw the story.

Tuesday, October 10, 2006

Qantas keeps telling itself that it has online figured out

Couple of announcements from and about Qantas renewed my thinking and ranting about their online plans:
  • 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
I have been a top tier Qantas frequent flyer for five years in a row and will likely be for the next five - which should mean that I love them. Nope.

Not another Travelport post

I am not going to say anything as I am over my former job and determined not to post so here is a cut and paste of parts of the latest story

"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

White label, agency label and change in the weather

If recent deal history is anything to go by it is going to be a White (label) Christmas
Most of these deals mean abandoning the traditional desires of the various players (customer acquisition for the online agents and segment fees for the GDS) for the raw activity of chasing volume. I applaud the creativity of all these guys in finding new models and distribution but it does not take a weather man to know that a change in model can mean that the growth in the existing one is going cold.

New Template - Label Searching

Have migrated the blog to the new Blogger Beta platform. It includes the ability to search old posts by labels/tag in the right hand navigation bar. Makes searching the archives and identifying themes of the blog much easier. Top two individual things I have blogged about are Travelport and me. Hmmm....

Friday, October 06, 2006

The dog is the new canary

In yea olden days a canary was used in a mine to test whether or not the air was toxic. When the canary died you ran. In the new economy the Dog themed start up is now the new canary.

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.

They say

"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

Is brand spend back in favour in online travel?

Interesting podcast interview on the iMedia Connection network with Dean Harris the CMO of travel meta-search player Kayak.com. He talks through not only the online and offline marketing activities of Kayak but also some general thoughts on the meta-search market. His comments are based on the premise that dedicated meta-search outside of the general search of Google, Yahoo! and MSN (GYM) is a proven model (I agree). He therefore focuses on the brand and customer loyalty building challenges of running a targeted search business.

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

The power of advice and recommendation

Amadeus has received approval for its acquisition of 85 people strong, German based Traveltainment. Amadeus have been promoting Traveltainment services in Germany since 2004 so this has not come out of the blue. I have not seen Traveltainment in action but it is claimed that as well as providing an IBE they have a recommendation/advisory capability that works well in the German leisure market. Expedia has also been using Traveltainment at it's DE and AT sites.

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

Changing faces good, changing prices bad...

Online retail - particularly in a market like travel - is a tough balance between finding a global marketing and product approach to ensure consistency in experience and local targeting to ensure you do the best for (and make the most out of) customers in each local market. In the hotel world I have often ranted against different prices for different markets as customers find out too easily and turn against you. However there is a layout and promotions role that has to be different for each market. Expedia/Hotels.com has often taken the lead in this. Was looking today at the differences in the Hotels.com AU site, UK site and US site. Very different layouts, promotions, sort order and targeting but (I think) the same pricing and inventory.

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

101 Not Out

Have now completed more than 100 posts in this blog and am enjoying myself - hope you are too. Being part of a smaller team focused on more than the travel biz I was missing having people to rant at. Nothing beats coming out of your office and ranting (in)coherently at people who have to look like they're interested because you are their boss..but this comes close.

Lots has happened in a hundred posts

Hope you have enjoyed the story so far