[back]

Century 21 - New Business Models in Travel

Speaker Transcripts

Andrew Weir
Leaving the Luggage Behind

My talk today is about eBookers.com and our experience, where we have come from and where we are going to. I am also going to talk a bit at the end about where I think technology will be relevant, going forward, for the travel industry.

First, a little bit of history about eBookers. We are an on-line travel agent. We have been on-line now for about three years, initially under the name Flightbookers.com and in September 1999 we launched the new eBookers.com website and eBookers.com is a separate company from Flightbookers, but we use Flightbookers as our fulfillment partner and eBookers.com could not be where it is today without Flightbookers' help and support.

This is a picture of our website. Basically, we sell discounted airfares, car hire, hotels and travel insurance. Nothing fancy, fairly standard, but it is a large marketplace and we feel that we do a particularly good job in that marketplace. We sell both discounted negotiated airfares and also published fares on our website, however, the main focus of eBookers is on negotiated fares. For those of you who are not particularly familiar with the distinction between published and negotiated fares, published fares are the standard fares that you will get if you phone up British Airways or Virgin or look on their website - non-discounted, sold directly by airlines or through travel agents. Negotiated fares, on the other hand, are heavily discounted - between 55 and 60% - and these fares are negotiated directly with consolidators such as ourselves. We currently have negotiated deals with 64 airlines - all the major players. They give us these fares in order to help them reduce excess capacity and the reason they don't sell these direct is that they don't want to cannibalise their own brand - they don't want someone who has paid £500 for a seat over the phone to then phone back and get it for £300. So it is a way of them managing their excess inventory and, on average, European airlines flew with 28% of their seats empty in 1998 - even with all of these negotiated fares available. So we believe that negotiated fares will still be around for some time and it is possible to have negotiated rates for car rental and hotels too and we sell those as well. So, the major proposition for our customers is that they can come to our website, look at 64 different airlines and find fares substantially lower than the published fares. It is really a one-stop shop and, if you can find it cheaper on any airline than it is on our website you are doing really well as a customer! We have fares from all the major brand names - 64 currently - plus all the major car hire companies and several of the major hotel chains.

Just running over our history again - in November l996, Flightbookers originally launched their website. It was the first on-line travel website in the UK, where you were able to book a flight and pay for it on-line. So we have now had just over three years' experience of running this type of website, selling this same type of product to customers, so we have become very familiar with what the customers like, what they don't like, how much they are willing to pay, what their concerns are and so on. In 1998, we were the leading on-line UK travel site in terms of revenue and in June 1999 eBookers.com as a company was separated from Flightbookers. A new management team was brought in from outside - I was one of those new managers - and in August l999 we acquired La Compagnie de Voyages - a French on-line travel agent. In September l999 we acquired Teletravel, which is a German on-line travel agent. In November l999 we had a successful IPO on Nasdaq and also the Neuer Markt - 24 times over-subscribed. So this was quite successful and the share price is quite reasonable at the moment and I strongly recommend it!! As I said, we were the first interacticve travel website in both the UK and France; we are the first travel company to offer GSM technology services and I can be specific about that as we have a product on our website right now called "Flightwatch". For example, if you were going to the airport to meet somebody from a flight, you could type in the name of the airline and the flight number of the flight you are interested in and we will send SMS messages to your pager or your mobile phone telling you the status of that flight - whether it is delayed, or on time etc - it's a free service and I suggest you try it out! We were also the first on-line travel company in the UK, France and Germany at the same time.

But we have only just started. We believe that, by the end of the third quarter of 2000, we will be the first pan-European on-line travel company. At the moment we have UK, France and Germany, by October 2000 we should have a presence which covers 95% of European internet users and all the major countries. The key for us is to move into each country and to establish a presence across the whole of Europe and we believe we can do it faster than other people. How will we do this? We will do it by acquiring travel agents across Europe. The reason for doing that is that, firstly we believe that, if you take an English website and translate it into umpteen different languages, it doesn't work. People in Finland or Sweden, for example, are not impressed by that kind of thing. We've seen, in the UK, American websites specifically trying to enter the European market and they just look laughable. So we will try and source content for each of the different language versions of our website from each of the different countries where we have a presence. Those countries will be responsible for sourcing content for each country, for editorial content of their language version of the website.

Another reason for acquiring businesses throughout Europe is so that we comply with all the consumer protection rules throughout Europe. Europe is still a fragmented market with lots of different rules and regulations and, by having a physical presence in every country, we believe we will satisfy all the trading requirements. We believe this is the best way of expanding rapidly. Also, we have a high touch customer service (for those of you not familiar with the phrase "high touch", it means, basically, that we own the whole customer experience, right from when they come to our website, right through the whole booking process until they receive their ticket - we own and control all aspects of that whole process, we don't outsource that to anybody). We believe this is the fastest way to expand and establish our brand across Europe. Critically important - first mover advantage - as we have heard several times today.

So that's a brief history of eBookers and what we do. Now what is the business opportunity for on-line travel in Europe? We've heard that it's fantastic, but let me just put some figures on it for you. Compared with the US, the population in Europe is bigger and the number of vacation days per person per year in Europe is nearly three times that of the US. Europe is projected to have much faster internet growth over the next 3 years than the US. So between 1998 and 2002 in the US the on-line population will grow from 48million to 88million. In Europe we are starting from a lower base of 25million and it is expected to expand by about 3 ½ times to roughly the same figure as in the US in three years' time. In addition, for on-line shopping it is even more dramatic. The US is expected to grow by over 6 times over the next three years and in Europe it is expected to grow by 15 times, so the growth potential in Europe is much bigger because we are starting from a smaller base. America has seen fantastically rapid growth over the last three years, but the rate of growth is now slowing in the US, whereas in Europe it is just starting. We have also heard that on-line travel is expected to be the largest category of e-commerce in Europe. Someone asked me if that was true and whether, in fact, sex would be the largest category of e-commerce in Europe, but I don't know the figures for sex, I only know the figures for travel and - in the year 2002 - it is expected that one third of all European on-line revenue will be in travel and that is a staggering amount of money!

For us, over the last 2 ½ years, we have found that the number of bookings done on-line has increased dramatically. In l997 we did approximately 1,600 on-line bookings, in l998 7,000 and up to end September l999 we've done about 16,000 on-line bookings. A particularly interesting figure is the average booking size i.e. the average amount of money each person booking with us has put on their credit card. In l999, the average booking size is over $800. I don't know what the averages are for Amazon, eBay and all the well known sites, but I bet they are not that high. So we don't have to be a fantastically high volume site and have many millions of hits per day, all we have to do is make sure that those customers who book with us are treated with great care and respect and that they will come back and book with us again. This has fuelled explosive revenue growth for us, so that in the third quarter of l999 our revenues we $8.1million, greater that the total revenue for 1998 and we are seeing growth of revenue of approximately 7% per week. We had approximately 320,000 visits to our site in October l999, but this is nothing like as big as Yahoo or Amazon, however it is growing very fast. So I hope I've given you plenty of reasons to go out and buy shares in eBookers.com, but this is not just specifically eBookers.coms market. There are many other players out there in the market and it is not because we have a fantastic business model, it is just because there are going to be millions of people coming on-line over the next few years and they will want to book travel, they will book it from somebody. If you are one of the people that is there, they will book it with you. It's as simple as that.

Let me just spend a few minutes talking about some technology things that are going on in the market place and how I think they will affect the travel agent of the future. I should just preface this by saying that I don't have a fantastic record of predicting things. About 10 years ago I was working at the European Centre for Nuclear Research in Geneva, which is a research lab for physicists and, when I first arrived, I was looking around for a project to work on and I went round to talk to the various different teams there
and talked to them about what they were doing in their project and I remember coming away from one group and thinking that sounds really boring, not a very interesting project at all. It was basically a project to make it easier for people searching for pieces of research to search for it electronically. I thought it sounded very boring, but it turns out the guy running it was Tim Berners Lee and the project he was working on was developing the protocols for the world wide web. Tim Berners Lee is the person who is the grandfather of the world wide web. Still, you can't win 'em all! Two years later along came Mark Andreyessen - a graduate student at University of Indiana. He produced the first commercial browser, which became Netscape Corporation and he's now a multi billionaire - could've been me guys!

So we've heard already today about these new distribution channels - the internet, where you have business to customer interaction (a lot of people are doing business to customer through direct selling, such as the airlines) and this is one model. Another model we've heard about today from QXL is the auction model, which is called customer to business. Here the customer says "I want to pay this much for a particular product, will you sell it to me?". A third model is the business to business model, EDI (Electronic Data Interchange), which means the ability for different organisations to electronically exchange information such as invoices, payment instructions and so on. So, the internet is facilitating each of these three business models and there is enormous growth in each one of these.

The second very important channel is the wireless internet, which is the mobile market - mobile phones and devices like the Palm Pilots that are increasingly becoming connected to the internet through a telephone service provider. Those will develop and become almost ubiquitous, I believe, because what will happen quite soon is that there will be massive bandwidth available to your mobile device. At the moment it is about 9.6 thousand bits per second, which is incredibly slow, but fairly soon it will be a megabyte or two megabytes, which is probably faster than the connection between your PC and your webserver.

A third very important channel is digital TV and cable, which we have heard about this morning. Penetration of that will be, I believe, quite large and could well be equally important in terms of technology in selling travel as the internet itself.

Here is a rather technical diagram about how currently businesses interact with a customer. At the bottom you can see there is a business and they are exchanging information through various layers, which eventually ends up at the customer. The three arrows at the top are the three current mechanisms for a business to reach a customer. The one on the left is a standard HTML browser, delivered through the internet, then WAP technology is the mobile phone which is provided through a Telco, and typically also through the internet backbone directly from the business. Similarly, TV is delivered through a broadband network of some kind or a satellite channel which (at least for satellite) has a return path with interactivity coming through a telephone line and then the business can connect to that through the internet. One of the problems with this model is that, if you are a business and you want to reach your customers through these different channels, you have to write software which talks a whole variety of different languages at the moment. (For those of you who are not technically minded, you can switch off now for a minute or so). Just to be specific, those technologies are HTML - which is the standard language that browsers understand, then there is a whole host of other technologies, proprietary standards which have evolved and supply particular niche markets like cable, like the wireless market. So, from the business perspective this is awkward, because each time you want to talk to your customer through a different channel, you have to write a whole load of different software. OK there are companies trying to make it easier for you, but it is not ideal and a very important technology which is emerging now, which we haven't heard mentioned today and which, to be honest, is fairly technical, is a technology called XML. XML stands for extensible mark-up language. I'm not going to dwell on it for too long, but the main benefit of it is that it finally allows you as a business - if you are exchanging data with anybody across the internet - it gives you a single way of expressing the information you want to transfer. This is something the internet has needed for some time and it is finally emerging. So, this means that not only can you as a business exchange information directly with your customers through a variety of delivery channels using one single mechanism but it also means that you can exchange information with other businesses using that same mechanism. That is the real potential of XML and that is why many people in the internet world and the world of e-commerce (though not necessarily in the travel world) are getting quite excited about XML. 

So, if I had a list of technology points related to the internet for you to take away with you today (if you want to take them away!) the internet is THE global data distribution system. GDS's fulfill a very useful function but the internet will be the backbone, I believe, across which GDS's work going forward. This technology XML will define the linguafranca of internet data. If you want to send some internet data to somebody, for example if you want to query some of our fares, there would be a mechanism using XML where you could express your query, we would understand it and we could return and answer to you completely electronically. In many people's view it will replace EDI - it is EDI for the internet age. So one thing you can expect, in the same way as humans have evolved different languages over time to communicate with each other, it is extremely likely that different versions of XML - different vocabularies and languages will be developed over the next year or two and we've already seen that in different industries. You will have groups of people within a particular industry who want to exchange information with each other. They have developed their own language and vocabulary using this XML technology and there is quite a strong effort going on in the travel industry - being pioneered by the Open Travel Alliance and others - to develop these standards for XML, so that there will be standard ways of expressing information that you want to exchange with other people across the internet. These standards, as they develop, will lower the barriers to entry for infomediaries (people who collect information, repackage it and send it on to other people). For user devices, what the end-user actually looks at, we are pretty close to having global voice and data networks available which use internet standards. We are within a year or two of that happening. At the moment, we have the internet backbone which carries data - things like e-mail and the web - but all the telephone companies in the world have also built their own proprietary backbones for carrying voice data and you will see those merge over the next year or two using standard internet protocols.

A second thing is that hand held devices that you currently see - like a Palm Pilot or a Psion - are in the process of merging with mobile phones and, in particular, high bandwidth mobile phones, so in the next year or two you will find increasing numbers of mobile phones that look like Palm Pilots and vice versa, so not only will you be able to speak into it, but also you will be able to send information to a little screen that you can then annotate or make choices from - it's quite a compelling product - particularly when you start having high bandwidth for that device and can download lots of information like video etc. But one of the problems of a hand held device is that it is relatively small, it's not like a keyboard, so the user interface to that device typically is fairly awkward and there's not a whole lot you can do with it. For those of you who have ever tried to use a TV remote control to type in an email message you will realise that it just doesn't work properly and is difficult to use. So, I believe that voice recognition technology will be a very important part of making that device useful, and instead of having to type commands in on tiny little keys or using some sort of stylus and learn some obscure way of writing in as a Palm Pilot does, you will actually be able to speak to the device and it will understand what you are saying. I think that's a technology that needs to be developed in order to make these things really useful.

Another point that has already been made so I won't dwell on it, is that digital TV and cable penetration will, I believe, be comparable with browser usage in this country and across Europe. It is a very compelling product, particularly for selling travel.

Another given is that the internet backbone - the amount of data that you can transfer on the internet - is growing all the time so, both on the internet and for mobile devices, that increased bandwidth means much richer content. So, over the next year or two, your websites and your hand held devices will start seeing much more exciting things being delivered, including video and 3D etc.

Here is a particular scenario that I thought up the other day about an interaction between a future travel agent and a potential customer. Initially, the agent has gone away and has access to a large selection of travel products, so he has already done the hard work of consolidating together all the information that the customer would actually like. Because, if I am a customer, my preference would not be to go to the BA website, then the Virgin website, then the Delta website and compare prices that way, but I would like to go to one site and see all of the fares on there and make my choice. The customer in three years time is very likely going to be a mobile customer, he won't necessarily be sitting at his desk looking at a PC, but will have a mobile device that he can talk to. What appears on his screen will look a little bit like a website but obviously much smaller and he'll talk to this thing and it will understand what he wants. The system will recognise the customer - a little bit like the personalisation aspects of current websites. It will suggest things, it will provide advice, it will understand what he wants, it will give him information and, if the voice recognition software doesn't work it will have a human agent in the background to take over if it becomes complicated. So, I believe there is always going to be a need for some sort of call centre and I disagree with the speaker earlier who said that you should avoid having a call centre altogether. I think it is actually essential because you are never going to have a technology which will understand precisely what you want all the time and will offer you exactly what you want. So then the customer decides what he wants to do and then he is billed, not by Flightbookers, but by the phone company. The billing is outsourced to give the phone company the job of collecting payment as we don't want to have to get involved in that. The phone companies have a very good model for charging people, they can take payment and they can credit the hotel, car hire company etc. So then, on this mobile device, not just an e-ticket but a whole electronic version of the journey can be downloaded onto the mobile and he can travel around with it. Effectively, that is his e-ticket sitting on his mobile device. So when he shows up at the airport or ferry or whatever, that mobile will also contain a means of identifying this person. A lot of these mobile phones, as they develop, will have things like fingerprint recognition and you will be able to put your finger on part of it and it will be able to confirm that 'Yes, you are Andrew Weir'. It will have a digital certificate inside it and be able to broadcast that to somebody who will be able to confirm you are who you say you are and let you get on the plane. That is my scenario for two or three years time.

So, my advice is - use technology wisely to build on your core strengths and I would say also, wherever you can, outsource technology. Application Service Provision is a 3-letter acronym which is very common at the moment. For example, we needed a system to manage incoming e-mails and to be able to route that accurately to call centre staff, as we are getting large numbers of emails from customers nowadays. So we went to a company who offerred us a hosted service for that, the email management system sits on their server and they watch it constantly, hosting it 24 by 7 and all our customer service people just have a browser and they log on to this system that runs remotely. It's brilliant. I believe you will see more and more of this technology developing where, instead of you buying all this equipment and running it locally in your company and you having to manage all that complexity, you will give that complexity to somebody else and it is just delivered to you on a browser and you just run it like any other application you run on your intranet. 

I've already mentioned XML so I won't go into that now, but it is particularly relevant for systems integration and also for offering internet services.

A very important aspect of technology is the customer relationship. Knowing who your customers are and being able to personalise your offerring to them in such a way that you can actually suggest sensible things to them. Things that might interest them that they might not have thought about. But built in to them you have to have the ability to be sensible about what you offer them. You need artificial intelligence built in to be able to offer sensible products that they might be interested in, not things that are totally inane as this would just put them off. 

In wrapping up, I wanted to say what I think will be the key skills for so-called "new" travel agents. You may be surprised to see that these are not very different from the key skills for "old" travel agents:
Really know your customers. You can't sell to a customer that you don't understand. If you try and sell them products they don't like, they won't buy from you.
Make it very easy for them to use you. Anticipate their needs, anticipate the sorts of things they would like and offer it to them.
Give great service. This is an argument for having a call centre. You don't want a huge call centre because it is a great cost but, on the other hand, if you have customers who are putting down their credit card and paying more than $800 per booking, you've got to look after them. If they've got a query you've got to answer it, either through e-mail or a call centre.
Lastly, use technology wisely. Outsource it where you can and then use it to build on your core strengths. Then let your whole offering be driven by your technology policy.

Thank you.

[back]