Over the last year, lastminute.com have delivered some impressive service enhancements and through dedicated investment in technology and constant focus on customer experience, they have taken a market leadership. 24 months of relevant acquisitions in key sectors, (including TravelSelect, Travelprice.com and Holiday Autos) means that they are leading the consolidation of the European online travel market
ITN brings you snippets from an intimate Q&A session at ITB Berlin in which Brent Hoberman, CEO, lastminute.com revealed lastminute.com’s 2004 strategy.Q. Are you more a retail company or a technology company?
That is an interesting debate. You could ask the same question of Amazon - is Amazon a retail business rather than a technology business. Recent interviews from Amazon will see Jeff Bezos quote: “Technology, technology, technology”.
Technology is definitely very important and very critical, however on the other side of argument, retail is essential and we are travel. We need the retail side and we absolutely have to have that technology there.
Will you replace tour operators?
I think we can co-exist alongside traditional tour operators and that is our objective. We have a good relationship in some of the tour operator markets - for example in the UK, we now work very well with 4 leading tour operators.
Ultimately, we believe that it is about customer choice. Dynamic packaging has a different model and is particularly strong today - especially with city breaks, which is where tour operators are not as strong.
What is your look-to-book ratio and what are your strategies to increase them?
There is a tremendous diversity in look-to-book ration by product type.
Package holidays have the highest look-to-book ratio as it is a high value item. Customers are more likely to shop on multiple sources and they are also more likely to be dreaming - not even that interested in buying. But you don’t dream that much looking for a flight search.
The key to look-to-book is both technology interface, enabling ease of use for customers to find what they want. Customers are also very smart and will go to the exclusive bargains.
A customer may seek over 100,000 hotels but if they are looking at 500 exclusive deals, their look-to-book ratio will be very poor. So we approach that the other way around - we have 10 - 15, 000 exclusive hotel deals and this drives look-to-book, so hotels on lastminute.com have a high look-to-book ratio since we have access to some extremely exclusive deals.
The other dimension of look to book is Geographic. There is a cascading look-to-book by market and that will change as people in each market get more comfortable and more suppliers put exclusive products online.
One of the biggest issues that we are finding in the German market (which has the second lowest look-to-book ratio) is that a lot of suppliers are not putting their own channel product online. You are able to get the same product offline. The UK and France is a bit different with a lot of exclusive products which encourages customers to look online.
What is exciting about the whole segment is how much can be done to improve it and I think this segment is still in its infancy in terms of distribution.
How much revenue did you bring in for booking restaurants?
We are starting to move towards the restaurant GDSs so I think there is a great opportunity for us here. Restaurants have a very high look-to-book rate. Now that we have a greater demand, the next step is to move our integration.
Lufthansa announced plans to cut commissions to zero from September 1 this year and issue all tickets at net price. It also disclosed that it will charge customers a service fee of EUR 30 for domestic and European flights and of EUR 45 for intercontinental tickets.
Lufthansa has also confirmed that it plans to offer cheaper net fares online than offline via agencies or other channels. How is lastminute going to respond to that?
Flights for us as a group is less than 10% of our product, whereas if you look at our competitors, flights probably ranges from 60 - 90% of their business models.
We do have a much more diversified business model, however we are obviously constantly looking at strategy. We have a similar issue in the UK today where most major players are charging booking fees, even though ba.com is not charging booking fees.
How do you intend to integrate low cost carriers into lastminute.com?
We are working on integration with some of the low cost carriers.
Charter markets are a profitable business with a profitable revenue. We are looking to level that into an integrated package booking tool.
Do you think you that lastminute.com should have another name?
You have to consider travelling patterns. Many online businesses without lastminute in their name happen to be selling 80 - 90 % of their products within 6 weeks of departure anyway (for example Travelselect).
Our view is that increasingly the brand will stand for good value management of leisure time inspiration solutions. We can go beyond the inspiration element into the solutions market, which is something we can use much more regularly. The example is carphone warehouse, which sells neither carphones, nor is it a warehouse.
Can you comment on your lifestyle packaging technology?
It’s been around for a lot longer in the UK and is where you would expect it to grow faster and you would expect customers to be more familiar with the slightly more sophisticated use of e-commerce.
We are starting to see good revenue in all the other markets where we launched it and we are still optimistic about the program and about our ability to improve customer experience.
In terms of destination how fast is growth in South Africa going to happen and are you exploring those areas already.
We have joint ventures in South Africa, Australia and Japan so we are currently in all those markets. We would be very careful to make sure they are joint ventures because to do them as 100% entities of our own would be a recipe for doing too much. So we have found strong markers in South Africa.