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Century 21 - New Business Models in Travel

Speaker Transcripts

Richard Downs
The Virtual Tour Operator

Thank you, Paul. Just to give you a brief introduction, we have been going for about a year now - we launched in October 1998 and we are just approaching our second season. It is a very exciting time for us in terms of paralleling business development, operations and marketing and it is a pleasure to come here and speak to you all and interact with you.

I'd like to tell you a little bit about our model in terms of being a joint tour operator and travel agent and to explain the reasons why we think that is appropriate. Also to give an insight into how we view the world in terms of this new digital media space and customer service within that environment and then to round off with some salient thoughts.

A little bit about Iglu. Last night, I had the great fortune to sit next to Charles Handy at a dinner. Charles is a great guy - the grandfather that everyone would like to have. He was saying that, 20 years ago, everything seemed set. There were TV's, cars, mainframe computers and the world was all about big companies and optimisation. It looks different now, we are entering this period which is probably the bigget period of flux -i.e. change - in terms of products, formation, partners, distribution etc, since World War II. 

Why is skiing interesting and why is Europe interesting within that? Skiing is a niche market, within which the suppliers are relatively fragmented, if not relatively parochial, regionalistic, nationalistic and the consumer base is very much on-line, particularly in the UK. The skiing customer base being 80% male, 25-30% professional, educated, probably got some discretionary spend in their pocket and like spending it on shiny pieces of kit. There is a correlation between skiiers, the product and the propensity to buy on-line. We have seen this, and others today from some great companies have talked about internet penetration, so I won't go into that.

If I can explain the Iglu model in this slide. Essentially, on the left hand side as you look at it, there is a vast array of products and chalets across Europe that the skiers on the right hand side would love to search, identify and book in some manner. We work closely, particularly in the UK but also Continental Europe, with a number of operators who put together product - very good product - and they add a lot of value in that process. They add less value in selling that product through their existing travel agency network. The reason for that is that the sales agent in a typical travel agency has a vast array of products to sell and their interest in and knowledge of skiing is probably way down there on the list. Compare that with the consumer - the B/C1, 25-35 professional, generally knows a lot about skiing. So you are generally in the situation in a normal travel agency store that the customer knows more about the product than the person trying to sell it. So operators are very good at putting together product and we like to add value in the sales function. However, just stepping back and looking at the market across Europe, the aggregation of different services into a package product, doesn't fit the European consumer when you look at it across the whole market. Pierre in France and Paulo in Italy or wherever prefer to book their accommodation individually and prefer to take their car and drive. So, we see ourselves as a European company of origin (one of our founding partners was born in the French Alps) and we have more continental Europeans working in our team than UK people. Essentially, what we have tried to do is to pull together product around the interests of the consumer. Some of our other products that you can see below. 

Why is this worthwhile? For the chalet owner and operator, it is about increased utilisation and reduced marketing costs over time. Zero marketing costs when they come with us. Clearly, for those that don't have the experience or the expertise to develop their own websites and market them with distribution partners, we can help them do that and provide them with internet space. There are fixed costs and maintenance costs to put your product on-line, but we can partner with suppliers to help you do that and we are very supportive of interactive TV as a medium - an interface - for the consumer to buy. 

From the point of view of the skier, it is all about reduced search costs. This 25-35 professional typically has money to spend and not much time to spend it in. If they can come to us, probably during their work time, (Mondays and Tuesdays are busy for us) we can reduce the search time that it takes to identify a chalet or product that meets their needs. Our goal is to pull together a vast array of products and to put together a search engine that sits on top of those products to enable the consumer to quickly identify which product meets their needs. For example, are Wednesday to Wednesday flights possible? Is it possible to go for three months? Trying to get that information in your local travel agent can be quite difficult. We are trying to meet the whole gambit of consumer needs in the space - not always easy.

Partners are crucial for helping develop our business model and for getting our product out there in the marketplace. It is very important to have good funding from partners who offer intellectual capital as well as economic capital. Geocapital have immense intellectual capital in the US in this space. They are now a US-based company over here. Their previous investments in on-line space include Autoweb in the US and Jobshop.no in Europe etc. Charles - former MD of Thomson Holidays - brings some travel expertise to the table; David Potter of Symbion is interesting because he can see the product we are pulling together and the knowledge base that we are assembling as a team and can see all the WAP-type, SMS messaging links. Is it snowing in Val d'Isere this week? It is interesting to know that if you're going. Chris Ingram runs CIA media and also runs the Tempus Group, the UK's largest and world's 8th largest media buying company. They are doing interesting stuff in this space. We are looking to partners that can add value over and above just dollars. Interestingly, London Business School is also an investor in us. We were the first company that they invested in in that format and it is great for them, as a business school, to learn via experience and it's great for us because we can tap into a network of bright, intelligent faculty and students. Extensive distribution partners. No one content led company can reach the marketplace on their own. Whether they have an email list of 10,000 or 100,000 or whatever, they need to partner with suppliers and distribution partners and we have done this with a number of significant companies. The list is not exhaustive on this slide, but you can see that we have partnered in France and Germany with Voila, Libertysurf, in cable NTL etc. 

I thought it would be useful just to show our website for those of you who haven't seen it. It doesn't come out particularly well here but you can see some product offerings, together with some other informational content. Essentially to inform the consumer, to enable them to make the best choice.

So what do we focus on when we are building our business? We have two customer bases - the suppliers and the end consumer. We love to partner with both large and small suppliers, because that is the way that we can present the customer with a great selection of chalets and packages. For the suppliers, it is another avenue to increase distribution. It is a kind of win-win situation. It doesn't stop there just at doing a deal, because there is ongoing maintenance and relationship management, understanding the product so that we can then relay that to the customer in an informed way. And this is the core of the business - we are a service orientated company. Customers come to our website and interact with us because they want a product or information. We need to understand when they want it, what price they want, what platform they want and then to do our best to deliver it. It sounds easy, but there is a lot of hard work behind the scenes to deliver that experience to the customer. There is a question there - what is quality? Is it on-line service, is it responding within 5 minutes, 2 minutes, half an hour, next day probably not good enough. Is it about flexibility in terms of product? Is it about platform (i.e. internet space, interactive TV, WAP mobile communications)? You need to localise the content - personalisation and customisation. An example of customisation is The Times newspaper who we currently partner with. The Times customer typically wants a very nice chalet and is not too concerned on price, so we customise the products within the Times website to have those chalets we think are best suited to Times readers come up first. With other partners, it might be more price driven and they would have a different profile. This is customisation. But personalisation is knowing about the individual. If they have enquired about a trip to Canada, don't bombard them with an email about St. Anton in Switzerland.

Internal culture: to get this service driven culture, we need to build a team. We have a great team of 30, plus some great outsource partners as well. We are lucky enough to be in a business - both internet space and skiing - where it is not too difficult to get passionate people. We are not selling a bag of nails on-line and people are passionate about selling this product and delivering service to their customers. I have left the office at 2.30 in the morning and not been the last one.

Speed: Everyone has talked about it, but still probably not enough. This is partly driven by first mover, partly by the PR advantages that can be derived from this, partly from just getting momentum in the marketplace - people like to be doing exciting things. 

Experimentation: Nobody has really cracked it yet! There have been great companies and speakers here today, but I am convinced that not all of them will be around this time next year. The game is not over, you need to continually experiment and adapt, based on customer feedback. This is something we work very hard to do and that brings in the learning and continuous improvement - almost the Japanese Keizan approach. We get lots of emails per day with customers suggesting can we do this, can we do that. It is sometimes very difficult to get back to them, but we do. It is great to be able to capture all that information on customers and hear their suggestions. We don't have a monopoly on great ideas or great products. If we can tap in to the customer base, that is far more exciting than 30 people within Iglu thinking up ideas.

Incentives: It was touched on before that incentives for everyone in the organisation and outside are needed. The economic model is that it is free for partners to come in to our database and it is commission driven or success driven. This takes the pressures off suppliers and whether they are happy to be with us. We do spend time with them going over their product and make sure we understand it. This comes back to the customer service element. There are incentives for all stakeholders and all distribution partners. If they are incentivised and we can create a risk sharing, risk-benefit relationship, there will effectively be alignment between our interests. Also, all full time members of our team have stock options and this is probably worth about 50% of their annual pay. This is everyone. This is interesting in terms of setting up a new business. This has implications for businesses worldwide. If you are training staff and giving them a knowledge base, how are you going to keep them? Staff retention is a huge issue. Even McKinseys in the US in San Francisco, the average duration of new graduate recruits with them is just 6 months. That's awesome. These guys are just learning about the industry, going out and drawing up a business plan and getting $10million. This will impact you.

Developing a 'can-do' attitude. This is endemic in us because we have a passion to succeed, a passion about the product and the medium. Clearly, we have to temper that with some realism - and that is probably our greatest challenge - clearly we'd like to be able to do everything yesterday. So there is an expectation management process, but the philosophy within the company is 'Yes that's great, how can we make that happen'. This is driven by customer feedback etc.

In summary, I know this has been brief (I actually cut out a lot of my content, because I didn't want to just repeat everything that has gone on before), the angle I wanted to come at today was to explain our business model and how it is really orientated around the customer. The classic cliché- the customer is king! You need to orientate your product - and non-traditional products - around the customer. For example, weather information is nice to have if you are going this weekend, resort information is nice, ski equipment may be interesting, gloves etc. There is the capacity in the space to reinvent business models, not necessarily now, around the customer and that is our focus. Some people say that skiing is niche in this market and is also cyclical. Both of those are true, but if you add up the niches in the UK, France, Germany it is a big market. It is also cyclical, but so be it. In reality, when you look at most businesses, they are cyclical. This is not a problem, as long as you align your sales, your fulfillment operations etc with customer demand. We probably need to do that more acutely than anyone else and this will be uppermost in our minds as to whether we partner with someone or do it in-house and it can be a bit of a positive for us.

So, I hope this has been an interesting, if brief, update and information session on Iglu and how we see the world and our positioning vis a vis tour operators in the UK, France and Germany. 

Thank you.


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