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Online Travel Entrepreneurs
28 February 2000

"Who wants to be a millionaire? We do!" So the song goes (or so it ought to). Hardly a day goes by without reading about another Internet millionaire or another Internet business with a massive share valuation far beyond its revenue stream and its profitability (or perhaps lossability, as few Internet businesses actually make money). 

Some of these new Internet businesses are concerned with travel and it's good to know that our industry is doing its bit to enrich the few. But doesn't it make you wonder, "If they can do it, why can't I?" 

How have the existing online travel entrepreneurs managed to get into the market and be so successful? They typically have five qualities: 

1. Foresight - The current crop of established Internet entrepreneurs saw the Internet coming and realised that it would affect everyone's lives and become a viable channel for commerce.

2. Confidence - When everyone told them, "You must be joking, get a job as a bank clerk," they stuck to their beliefs. They had the self-assurance in their ideas to think big and persuade financial backers to help make the vision a reality.

3. Resolve - In spite of the media hype that venture capital is growing on trees waiting to be picked by Internet entrepreneurs, this is not so. Those that have been successful, kept plugging away at finding backers to put up the big money and did not give up in the face of business problems that would have made many of us walk away.

4. A willingness to take the risk - Many founders of Internet businesses are young and single with no mortgage. This does make it easier to take a chance on launching a new business venture where there is a real likelihood of failure. 

5. Motivation - Starting any business, never mind an Internet business where you are running hard to stay ahead of the potential competition, is hard work. Internet entrepreneurs work long days and a weekend off becomes a forgotten concept.
 
Those whose businesses are trading online in travel include Dinesh Dhamija, CEO of ebookers.com who had the foresight to develop Flightbookers' Web site before many people had even seen the Web. He then engineered what many consider to be the most professionally executed spin out of an Internet business from an existing bricks and mortar operation. Here is a telling quote from Dinesh, "It took the business approximately 156 weeks from November 1996 to November 14th 1999 to reach the first 1,000 online passengers per week figure; it took only 11 additional weeks to double the figure to 2,000 online passengers per week."

There are Brent Hoberman and Marsh Lane Fox who founded lastminute.com, following their vision for a completely new business concept that would only work online. I had the pleasure of meeting Brent in March 1998 when lastminute.com was little more than an idea in his head. He and Marsha were willing to give up good consultancy careers to follow their dream. 

There is also Tim Jackson who, as a journalist reporting on the Internet, appreciated there was an exciting online business opportunity to be realised. He founded QXL and is now a multi-millionaire. 

These are people who had the vision and tenacity to go boldly where others did not even realise they could tread, never mind feared to and, thanks to these pioneers, we now all know the truth. It is possible to start an Internet venture and make huge sums of money out of your equity, even if your new Internet business runs up massive losses. 

So could you launch an online travel business that will make you millions? Unless you are already some way down the road to the docks, I believe you may have already missed the boat. I will explain why.

The model of an Internet business is one that invests heavily in marketing to build its brand. So heavy is this investment that it is utterly unsustainable. At some point in time, the business plan calls for a substantial reduction in marketing spend, so turning the company into profit. The assumption behind the plan is that by then the brand will be established and a long term customer base secured. Venture capitalists and world financial markets have swallowed this story without question, but try this game with your friends. Given Web sites of equal quality, offering the same products and prices, with whom would you rather book your holiday: ebookers.com, Expedia Inc, Going Places, Lunn Poly, Thomas Cook or travelstore.com? I expect you will find that nine times out of ten your friends will feel more comfortable booking with the travel intermediaries that have a track record.

In the meantime, city observers are suggesting that lastminute.com's forthcoming flotation will value the business at £400 million. (Well, it did earn £195,000 in commissions in its financial year to September 1999.) QXL floated with a market valuation of about £240 million, making Tim Jackson's shareholding worth about £50 million (give or take £10 mill). ebookers.com floated some equity on Nasdaq. Current share price values ebookers at around £186 million. (The business only lost £4.25 million in 1999.)

However, the battle has not even begun yet. Once our well known travel businesses get their online acts together, surely their long term brand investment will win through, with the new online players realising that their brand building exercises did not count for as much as they thought. This is why I think it is too late to start planning an online travel business with the prospect of a sky high market valuation. I just cannot believe that the financial markets can continue to think that all these new brands will establish themselves and meet their earnings expectations. The bubble is sure to burst. I do not think that there is any more room in the online world for another undifferentiated, commodity travel business, competing on convenience and low prices. But, if you have the qualities needed to be an Internet entrepreneur and an idea for a differentiated travel business that is going to be unique, pan-European or even global, that is a different matter. You'd better get business planning. 

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