Zuji boss Roshan Mendis on Travelocity buying Travelguru

Ease of adjustment in logo colours is never a factor in an acquisition but it has not taken long or much design work to add a few Travelocity stars to the logo of the newly acquired Indian online hotel player Travelguru. Thankfully they avoided the branding redundancy of adding the Zuji tag line of "your online travel guru".

A week or so after the purchase by Travelocity/Zuji of Travelguru I had a chance to sit down (virtually) with Zuji boss and Travelocity regional head Roshan Mendis to talk about the deal, the Indian market and regional plans generally. Roshan took over from former Zuji boss Scott Blume in June and now has a portfolio of brands to manage including Zuji in Australia, Hong Kong and Singapore , Nextour in Korea, Travelocity in India and New Zealand, and now Travelguru in India. [note that the Travelocity owned brand of Lastminute.com does operate in Australia and New Zealand but is not owned by Travelocity. Instead the business operates under a franchise structure wholly owned by the Wotif group].

Roshan is very bullish about the acquisition, as he should be for something he has likely just paid tens of millions if not a hundred or so for. He feels the Indian market is at the right time for acquisition and expansion. But he is also upfront that the deal is not without risk. He admits that integration will be a challenge especially on the people front.

Here is some more detail from our interview

BOOT: This acquisition was your first big move as the new regional lead for Travelocity. Why India and why this company?

Roshan : Couple of reasons. We see India as a top three market in region. Looking ahead to 2012 – research indicates will be right next to China, Japan and Australia as top online travel market. In addition the OTA, general market and accommodation market growth rates in India are attractive. But it is still an emerging market. So this is not a deal without risk.

BOOT: you have plenty of competition to contend with. Expedia is in India and the local big three - Cleartrip, Makemytrip and Yatra are very aggressive.

Roshan: Absolutely – big three make up 80% of market. Competition is stiff and irrational at times. Certainly attractive bits in online space but domestic flights are unattractive and that is where competition is most fierce. Looking to compete differently through Travelguru.

BOOT: Will you bring the supply facing teams together?

Roshan: Putting integration plans together now. The Intent is for a unified partner marketing [Travelocity name for supply team] to represent Travelocity India for all brands.

BOOT: I read there were a lot of challenges in integrating Travelocity and Lastminute supply operations in Europe, are you concerned about the integration task here?

Roshan: I won't comment on the Travelocity and Lastminute integration but generally acquiring and integrating a company particularly on the people side is not a small job. [We are going into the integration effort] with a common purpose and goal between Travelocity.co.in and Travelguru. [Including] clear expectations in leadership between the two. Under no allusions that going to be a cake walk putting people, processes and culture together.

BOOT: In the press release Travelguru founder and CEO Ashwin Damera, said "he was excited with the deal and would want to replicate the story in other Asian". Tell me more about this idea?

Roshan: Purpose of the deal and intent is to focus on India and make success in India – over and above that – the model might work in other market but don’t think that is where short term effort will be.

BOOT: Ram Badrinathan of PhoCusWright asked this question in his blog post "Travelocity Acquires TravelGuru—Will it Change Anything in India?" [Will Travelocity] back TravelGuru and Travelocity with at least a $2.5 million annual marketing budget (to build the brand and business)?

Roshan: [regarding the marketing plans of Travelocity and Travelguru in India] past behaviour is the best indication of future behaviour. If you look at Travelocity.co.in, it is has grown in last few years. [On marketing we are] very analytical and invest in those channels that allow for growth and maximise profit. [BOOT I took this to mean a focus on online channels rather than offline spend]

BOOT: At last year's TRAVELtech your predecessor Scott Blume said that Zuji was firing in Asia on "most" cylinders. "when one country is firing, other aren't" he said. You have a large portfolio now in Asia. What are your plans for firing on all cylinders?

Roshan: In our portfolio in AP have a number of assets and they have certain kinds of potential determined by size of market, size of online pie, balance between supply.com and intermediates etc. Different expectations for the different markets and invest in those markets according to our expectations on what it should and can deliver. [delicately keeping with the analogy] We have a set of cylinders that are not the same size and horse power. Need to recognise and pump with the appropriate level of fuel to achieve the maximum potential. We take a portfolio view – have a place and role for each asset in the portfolio and will support to meet full potential.

BOOT: Finally - what worries you? What things do you want to make sure you get right?

Roshan: The acquisition. Lots of things to determine success of acquisition. There are social and economic events to keep track of as well as the maturity of the space, consumers, online penetration etc.

What do you think? Bold move? Too soon? Wrong market? Right time?

PS - looks like we can finally kill off the rumours of Expedia's investment in Travelguru

Webjet to relaunch hotels with a GDS backed retail model. Three reasons why I don' think this is the best plan available

Webjet are having a great time selling domestic air in Australia. As we have discussed before their tech leadership in developing the Travel Services Aggregator back in 2004 enabled them to sell multi-carrier domestic air including low cost carriers before anyone else. Even though other sites now have similar functionality, Webjet continues to enjoy customer loyalty and growth (despite charging dramatically higher fees per booking).

The company has made a number of attempts at diversifying their
revenue with land product. In mid 2003 they launched Bookabed as a standalone hotel brand. In 2006 they revamped the product under the new name Lotsofhotels. Then in June 2008 they announced plans to take Lotsofhotels onto the eBay platform. Unfortunately none of these efforts have developed traction in a very competitive market.

In their recent results they announced the launch of new hotel product called "Stay and Pay" (Travel Weekly story here). This new product moves them away from merchant sales to the retail model (consumer pay at the hotel, Webjet collects commission from hotel). They are launching two twists on the retail models you see from big players like Booking.com and Venere. Firstly there is no negotiated inventory. The inventory is drawn from the publicly available rates distributed through a GDS feed from Travelport. Secondly there is a service fee of $10 per booking charged up front by Webjet.

I like the fact that Webjet are trying hotels again. Fees on air make up 97% of their operating revenue (just down from 98% last year). They need to have other revenue streams to compete with packaging experts Expedia and Zuji (Travelocity) and the Wotif group owned air intermediaries Travel.com.au and Lastminute.com.au (not to forget the Orbitz owned hotel only players HotelClub and RatesToGo) [disclosure]. That said there are three reasons why I don' think this is the best way to go about hotels for Webjet:

1. Webjet will struggle for Rate Parity: The GDS companies (Travelport included) have done an admirable job working with the Chains and some independent properties to secure rate parity through GDS distribution. By that I mean working with hotels to have the rates that are loaded in the GDS be on par with the negotiated rates provided to the OTAs. However the rates in the GDS are never cheaper and by charging a $10 booking fee, Webjet will end up with pricing that is almost always more expensive than any other channel. There will be a convenience factor for consumers but this will be at the margins compared to the consumers who will be turned away by the higher price on Webjet;
   
2. Webjet will not have access to important Inventory Types: Again the GDS companies have worked hard to expand the range of hotels and properties available. However there is still a bias towards chains and a bias towards geographies with a history of GDS distribution. This means Webjet will be missing important independent properties and have less coverage in the Asia Pacific, Latin American and Middle East regions than the negotiated hotel agencies and OTA competitors; and
   
3. Webjet will miss out of the the best Specials and Promos: In this "year of the deal", hoteliers are providing deals and promos the likes of which have not been seen since 9/11. Most of these come with conditions, specifically a range of cancellation options ranging up to non-refundable. The GDS is not able to support this functionality as well as the negotiated inventory providers. Means that many of the great deals (especially last minute ones) will not be in the feed accessed by Webjet.

I can understand why Webjet went down this route. It would be very expensive for them to build a hotel contracting team from scratch. Impossible in fact if they wanted to gain coverage outside of Australia. Therefore they need to work with partners to access inventory. However my recommendation would be to work with an inventory provider with negotiated rates rather than the GDS. [disclosure - I work for a company that provides negotiated hotel rates]. It will provide them with a fix to each of the issues above.

The new Stay and Pay product is due for beta-launch today (18 Aug 2009). Will put in a functionality review post later.

Update - make sure you check out the comments where Richard Noon (Webjet CEO) puts his side of the story

Update 2 - I thought of one more reason why this product won't give consumers as good an experience as a negotiated provider will. The room type description and hotel content on the GDS is not as clear or attractive as those from a negotiated provider. Here is an example of a room type for a Sydney hotel in a GDS " PREMIER ROOM CITY VIEW 1 QUEEN OR 2 SGLSNON SMOKING LCD TV HI SPEED INTERNET FOR A FEE".

PS - last year at TRAVELtech Webjet CEO Richard Noon gave his estimates of the turnover of the various Austrlaia online air intemediaries.

Roshan Mendis replaces Scott Blume as Zuji Boss (Travelocity in Asia)

Have been deep in work so missed the story from a a week ago that Travelocity in Asia (operating under the brand name Zuji) has a new Boss. Scott Blume was CEO for about six years leading up until 1 June this year. Roshan Mendis is the new internal appointment. He is not listed as CEO on the Zuji site, instead they list him as President of Zuji and Regional Vice President of Travelocity Asia Pacific. Prior to this role, Mendis was the Zuji Director of Supplier Relationships.

Siew Hoon over at the WebInTravel blog has an interview with Scott Blume on his thoughts on life post Zuji and the outlook for the industry for the rest of 2009.

Cheapflights.com.au launches in Australia - but this is not meta-search as it should be

It is supposed to be interesting when an international online travel company launches in the land of the barbecuing shrimp. So here I am on staycation leave quietly reading my newsfeed and blog email address when I spot care of m-travel and an email from Steve Sherlock of Oodles that "Cheapflights have launched an Australian and New Zealand version of their site". I should be excited by an international launch in Australia but Cheapflights is not exciting for two reasons.

Firstly, as I said back in July 07 when the rumours first started of Cheapflights coming to town (where 2008 was the planned launch date), this market (online air in Australia) is already too crowded for a domestic market with 2/3 carriers. OTAs like Webjet, Travel.com.au (owned by Wotif), Flight Centre, Expedia, Zuji (Travelocity) and Bestflights and regional meta-search player Wego (part owned by News Corp) are fighting for scraps left over by the online air dominance of the major airline websites (Virgin-Blue, Qantas and the Qantas owned Jetsar). Granted those scraps are getting bigger and bigger but still this is not an easy market to enter. Secondly, the Cheapflights product is simply not good enough to be of value to the consumer.

For those that don't know, Cheapflights is a quasi meta-search company started in the UK way back in 1996. Even describing them as "quasi" is generous because to me the hallmark of a meta-search business is an integrated display of up to date results in one place. The UK version of Cheapflights has the integrated display but the results are not up to date. Have a look at this extract from a London to Paris search

Notice where it says "updated 9 minutes ago" next to the BA quote and "updated 2 days ago" for ebookers. Also have a look at the URL for the page

It is a static landing page - http://www.cheapflights.co.uk/flights/Paris/London/ - rather than a dynamically generated page based on the timings of my specific search. The results are not timely or up-to-date. I clicked on a few of the links and they ended up on either dead search pages or some other destination page where the results did not match the search terms. In short the UK version Cheapflights - the oldest and most established version - does not work on a stand alone basis nor meet the minimum criteria for a meta-search player.

The Australia version of Cheapflights is even worse. It may be just early days for the product but the AU version is many steps behind the UK product which itself is steps behind competitors Kayak and TripAdvisor.

To give them some due, meta-search in Australia is not easy. As I discussed here in a Webjet vs Wego post (another Steve Sherlock tip) it is has proven very difficult to facilitae multi-carrier domestic meta-search in Australia. Wego has tried a work around (again go back to this post for more) but Cheapflights are not even trying. Have a look at this shot below of Cheapflights.com.au

This is the results of a search of Sydney to Melbourne. Rather than being presented with a set of even un-integrated (or disintegrated if you prefer) results I am given four options, four different websites that I can click on. Each click generates a new pop up with search results from the named party. If I want to do what meta-search is supposed to be for - comparing multiple sites - I have to open all four sites and looked at the results one by one. In other words do exactly what we used to do before meta-search came along. In some other words, it adds no value to the standard surfing practices of a regular internet consumer. In some more blunt words, next to useless.

In truth I don't think even Cheapflights think of themselves internally as a meta-search company. They target more of their effort and energies in their Travelzoo style Hot Travel Deals newsletter. Am undecided if there is value here,

Either way I am not predicting success for this product. The product in its current form adds little to the market and the competitors have more money to spend on marketing.

Told you I would get tough again? Am I being too tough?

No Vacancy Conference Sydney March 19

MartinKelly of TravelTrends has been kind enough to offer me a media pass to attend the No Vacancy accommodation industry conference in Sydney on March 19. If you are going, look out for me in the back blogging away.

Speakers include Wotif CEO Robbie Cooke, HotelClub's head of central marketing Jon Wild, Adrian Currie of Booking.com and Agoda, Cyril Ranque of Expedia and Grant Colquhoun of Travelocity/Zuji (full list here).

Expedia and Travelocity team up (in Asia at least): Zuji is carrying Tripadvisor reviews

Am sure you know by now that Travelocity is operating in Asia under a number of brands including Zuji in Australia, Hong Kong, Singapore, New Zealand and Taiwan. You definitely know that Expedia owns Tripadvisor (though I keep getting search engine travel from people that don't). But did you know that Zuji is now including Tripadvisor branded reviews in their hotel search results. In other words a content sharing deal between a Expedia company and a Travelocity company.

WebInTravel. Next week. See you there.

WebInTravel Only days away. Oct 21-22 at ITB in Singapore.

On day one I am joining a session with Phillip Wolf and Ram Badrinathan of PhoCusWright. We will be talking the industrying apart and putting it back together.

Later in the day conference boss Siew Hoon Yeoh and I will be running the WIT Challenge - firing questions and issues at top exes from Abacus, Wego, Yahoo!, T2 Impact and PhoCusWright.

On day two I am moderating a panel with the top reps for for Agoda, Wotif, Zuji and Expedia. The big guns from the biggest online companies in the region.

Great event. See you there.

TRAVELtech: Webjet CEO Noon calls the AU market sales of Expedia, Zuji and more

Final speaker of the first session was Webjet CEO Richard Noon. Had a great slide that I was able to quickly copy down to share with you. He showed his estimation of the annual Gross Bookings of major full service OTAs in Australia. Here is that graph as I copied it.

If you are interested in the Australian turnover of Webjet, Expedia, Bestflights, Zuji, Lastminute.com.au, travel.com.au and online for flight centre check it out.



He prepared a formula using comparative page views and PhoCusWright estimates of the Australia online travel market. He took the page views of each of the players locally and then apportioned gross bookings from the PhoCusWright estimates of total Australian OTA sales.

Later during the panel session these numbers were put to each of the bosses of Zuji and Expedia.

Expedia AU MD Arthur Hoffman dismissed the $80mm estimate for Expedia saying that this was a very pessimistic view. That actual number was "far north of that".

Zuji CEO Scott Blume - "took the fifth" when asked about the $30mm estimate. Saying that they do not break out their bookings.

TRAVELtech: Zuji firing in Asia on "most" cylinders

Next up at TRAVELtech - Scott Blume the CEO Zuji (Travelocity's operations in Asia Pacific).

Zuji ha been prolific in launching across Asia Pacific. Has spread the business through organic, acquisition and multi-brand approach. Organic in Australia, Singapore and Hong Kong through the Zuji brand, Organic under the Travelocity brand in India and New Zealand (though NZ used to be a relationship with an offline player) and acquisitions in Taiwan and Korea (Nextour brand). Blume said that he like this diversity in markets because

"When one country is firing, others aren't. Would love to have all 7 countries firing at once. Has not happened in in my tenure [as CEO]."

His biggest concern and view on the biggest challenges being faced by the industry are the dramatic increases in search costs.

New Marketing for Zuji - can the Travel Guru and open the Beans

The above is a image of a real can of beans being used to promote the Travelocity owned Zuji.com in the Asia Pacific region. I am (again) late to comment (too much work and sick recently) but here are my thoughts on this.

Zuji is used to spending money on big marketing ideas and used to it not working. Back in 2003 Zuji burnt through cash in a bonfire of marketing activity not see since the pre April 2000 dotcom boom days. It looked like they bought out Sydney Airport with posters and paraphernalia everywhere. On television and radio they ran a very peculiar - almost psychedelic - series of campaigns around how the Zuji Travel Guru would help customers find the right price and right product. I have been (unsuccessfully) searching high and low for an online copy of the ad to show you as it cannot be described accurately in words. M&C Saatchi put together the piece under the tag line "your online travel guru". Even as a travel insider the ads made no sense - all I understood at the time was that a lot of money was being spent for no gain.

On Martin Kelly's Traveltrends I first read that Zuji was trying a different but no less weird marketing tack some 5 years after this less that successful TV effort. The new campaign is to promote the savings from Zuji's dynamic packaging through selling cheap consumables. First beans with toothpaste and toilet paper to come. You don't believe me. Here is the video. I had my mouth open in disbelief watching this campaign outline.


My tip to Zuji - this is not a good idea. It trivialises your brand by associating it with a basic food stuff. In addition you are asking consumers to make a complicated link between the beans and your product. Finally if you think somehow that this is working with beans for the love of marketing do not put your brand on a packet of toilet paper.

At least they are sticking to the famous marketing idiom "if at first you don't succeed spending millions on a Travel Guru idea, then spend more on FMCG". Oh - that's right there is no such idiom.

PhoCusWright and Viator Meetup in Sydney

Rod Cuthbert of Viator was kind enough to invite me to a drinks event with PhoCusWright CEO Phillip Wolf. Wolf was in Australia to attend the Tourism Futures conference on the Gold Coast. I talked all the attendees into joining in for a group photo. Rod had managed to put together a very influential group of attendees for this event - and I wanted to capture the moment. Not least of all because the photo includes local senior execs for each of Travelocity (Zuji), Expedia and Orbitz in the same room as well as me playing nice with people from Qantas.

Phillip gave an brief but interesting speech. Two things he said particularly stuck with me.

Firstly he put an new spin on how to think about the battle between the big OTAs and meta-search/content companies. Rather than defining sites such as Kayak and TripAdvisor by their business model and functionality (meta-search and user generated content) he described them with reference to their control over content. He calls them "zero percent sites". That is sites where zero (or near zero) percent of the site content is controlled or produced by the owner. I like that as a descriptor because it goes to the heart of the difference with online retail sites. In telling the story of the battle between the zero percent sites and the OTAs he mentioned a stat I had heard before by is worth repeating. Currently Kayak is generating more air fare searches than Travelocity. Not to say that Kayak is selling more air that Travelocity but more people are clicking the search button on Kayak and generating a search result. Why is that so amazing? Well says Wolf, "Kayak has 58 employees, Travelocity 5,000". Four of the top ten online travel sites by traffic are zero percent sites.

He then took this analysis a little further through taking us through PhoCusWright's current Perfect Storm thesis (The Perfect Storm: Search Shop Buy). It is one thing for us as an industry to have better means for classifying the models and categorisation for each competitor but do our customers care. We as an industry think about supplier sites, OTAs, Hotel Only, Meta/Zero, Affiliates, white-label, last minute, etc etc. But the consumers don't do any of this. All they think about is buying travel. On the whole the distinctions between the models and methodologies are meaningless to the consumer. Wolf encapsulated this through this comment "In our study of consumer behaviour a statistically significant number of consumers actually believe that they buy their travel from Google".

This resonated with me. No matter how much we want consumers to see the market segmented like with think it is and no matter how much with want to believe that brand and model distinctions are being understood by consumers, in the end the average customer types in what they want into Google and are not at all certain who they are booking on in the end. Frightening stuff.

Back to the photo. Here are the attendees from left to right: Fergus Kelly (Qantas Holidays), Rod Cuthbert (Viator), Grant Swinbourne (Qantas Holidays), Peter Smith (Zuji), Arthur Hoffman (Expedia), Me , Philip Wolf (Phocuswright) , Vicki Potts (Viator), Steve Sherlock (Oodles), Carol Hutzelman (Phocuswright) & Mike Thompson (Stella)

Zuji is dead. Travelocity Lives (in NZ at least)

Back in August last year we saw a new logo for Zuji in Asia Pacific. Important elements were the Travelocity "stars" and font and change from "powered by Travelocity" to "A Travelocity Company". At the time I said that

"you could even start a long odds bet that Zuji will change its name - at least in AU and NZ"

It has taken a while but I have now been proven half right in that long odds bet. News today (from Australian TravelWeekly) that the Zuji NZ business will now be rebranded Travelocity.co.nz. This follows the termination of the New Zealand relationship with Stella. Is the right step and overdue. Even though Zuji Australia boss Pete Smith says there is no intention to change the AU name, I am sure it is only a matter of time.

NZ - Expedia In, Zuji/Travelocity out

Hot on the heals of Expedia announcing its entry into the New Zealand market, the NZ Herald is reporting that Zuji (the Travelocity operation in Asia) is shutting down its New Zealand site. Zuji.co.nz was being operated under a franchise style relationship with Stella Travel Services. Site will shut down on November 30. There is a chance that Travelocity may try and re-launch Zuji New Zealand with their own team but I think they have more issues to face in growing the Australian business first.

UPDATE - received an email from Phang Shueh Chyan, Zuji's Singaporean based Head of Business Development. Tells me that in while the Zuji/Stella relationship is coming to an end, Zuji will retain the NZ site and operation. We wait to see what resources/team will be used to operate the business when the Stella deal ends on 30 November (assuming that date is still correct).