In his first Q&A with Skift, eDreams Odigeo CEO Dana Dunne says the travel company has made large gains since he took it over a couple of years ago. True. But more changes are needed before a conglomerate such as Ctrip would seriously consider buying it.
Today, critics continue to accuse eDreams Odigeo’s portfolio of consumer-facing brands of not innovating and mostly copying others — sometimes literally.
Dunne will have none of that, saying instead that, “in Europe, as a whole, we’re number one for flight bookings, on average, among online travel companies…. And our innovations in mobile have led us to be number one in mobile sales, putting us ahead of rivals.” He says in an interview that travelers make more than 30 percent of its flight bookings via its mobile websites and apps.
He also says his team is cutting the cost per booking that it spends on marketing while growing revenue at more than 10 percent a year.
Dunne and his team have had their work cut out for them.
Three years ago, eDreams Odigeo was floated on the stock market as a public company valued at about $1.5 billion (1.1 billion euro). But the company’s stock price sank. Today, its current market capitalization is a quarter of that amount, at about $370 million.
A few factors dented revenue and profits. Perhaps the biggest was a change in how Google ranks search results, which had the knock-on effect of making eDreams Odigeo brands appear less prominently in searches and hurting sales.
Another dark cloud has been litigation against the company by low-cost carrier Ryanair, which alleges eDreams has improperly scraped and presented its airfares and content. The case is ongoing, and eDreams denies wrongdoing.
A third challenge for eDreams Odigeo is that its brands tend to focus on selling flights, not unlike U.S.-based CheapOair and UK-headquartered Skyscanner. The problem is that flights have lower commissions and profits than hotels and car rentals, on average.
So investors have had a tough time seeing how its flight-focused model can lead to Booking.com-style, double-digit, year-over-year growth — though flights-heavy Skyscanner did recently get acquired by Ctrip for $1.74 billion.
Prior to Dunne’s appointment as CEO in January 2015, he served as chief commercial officer of EasyJet and chief executive of AOL Europe.
Since he got the new job, Dunne has made changes in management and strategy. He recently spoke with Skift about the company’s trajectory. (The interview has been edited for brevity and clarity.)
Skift: Let’s pick up the eDreams story with your arrival in the top job in January 2015.
Dana Dunne: We came in and we focused on plans for a half-dozen pillars of transformation. Our top goal is creating absolutely outstanding products and services that customers really value.
First thing to know is we’re already besting our competitors.
If you look at the individual countries, in Spain and Italy, eDreams is number one. If I go to France, Go Voyages is number one. If I go to Germany, Opodo is number one.
Skift: What about mobile?
Dunne: Mobile is another key pillar. We’ve grown, in two years, from having just 13 to 14 percent of our bookings coming from mobile, to now having well over 30 percent of our flight bookings taking place on mobile. We are now far outstripping Europe’s industry average for mobile transactions.
Skift: What’s driving that mobile bookings growth for flights?
Dunne: Speed. A customer only needs a minute-and-a-half to book on us, on average. From the time you open up the app, to the time you’ve got a confirmed booking. Go to an airline.com site in Europe and it’ll take you at least four minutes, typically.
After you save your payment details with us, we can bring down the booking time to a little bit less than a minute.
For consumers, that means we’re taking existing products and making them best-in-class.
Skift: What’s new in product?
Dunne: First we’ve picked up the pace of development. In the past year, we have had 67 updates to our mobile app, to improve the way in which consumers quickly see and can sort results.
A sign of our success is that people can go into Apple’s App store and rate our app. We have no influence on that… A little bit over two years ago, let’s say two and a half years ago, we rated 2.5 out of 5 stars. Today we rate 4 out of 5 stars on average, and this is an average of all the major European countries. That means we’re the number-one rated travel app in Europe.
Skift: OK. But what is new in product?
Dunne: Let’s take mobile flight notifications. You book on a mobile. We will notify you — and we’re the only one by the way to do in this world — we will notify you of almost any flight in terms of what the gate is when you’re at the airport, if there’s a gate change.
When you land at your destination, we will notify you what baggage belt you can find your bags on. That covers over 90 percent of all commercial flights flown in the entire world. There’s no other OTA that does that.
Skift: Don’t some airlines already do that via their mobile apps?
There are some airlines that are starting to do that and test it out with certain markets, certain airports, et cetera, for their supplier sites and apps. They’ll do that for gate notification today but they won’t do it for bags.
Skift: Hmm. Changing topics: Worldwide, many online travel brands find that their online advertising expenses are outpacing their revenue growth. How is eDreams Odigeo coping?
Dunne: We’re changing the whole emphasis of the way in which we attract and retain customers. While we’ve been growing the business significantly, we’ve also been reducing actually our marketing costs by about roughly 10 percent per annum.
Skift: How are you bringing down the marginal cost per acquiring a customer?
Dunne: A few ways. One big driver is that we’re getting better at attribution-based marketing. We’re getting better at figuring out how to spend our marketing money in the most effective way through a multi-site, multi-channel shopping experience.
Also, by improving our products and services, we attract more repeat customers and no longer have to spend on re-acquiring those loyal customers through marketing channels.
Skift: Got it. But eDreams is flight-centric. The conventional wisdom is that hotels make more money. Are you diversifying?
Dunne: I really want to diversify us away from flights. It’s a key pillar of our transformation. We’ve been making investments in this area for about a year, and we should reap the benefits within the next couple of years.
Skift: What’s new in product that helps you diversify?
Dunne: One of the big ones for us is dynamic packages, so that a customer comes in looking for a flight, and what we really have invested in significantly over the past year, is the capability to, in a sense, upsell the customer into a package. So it’s not just a flight, but it’s now a flight plus hotel, let’s say, and it’s then one price for that entire package. Package sales are much bigger in Europe than the U.S., and it’s under-exploited by online travel companies.
Skift: How well is eDreams Odigeo facing its competitors? From above, so to speak, there are the global giants, Expedia Inc., and Priceline Group.
Dunne: As you’ve noted, if you look at us, we are 80 percent flights, and they’re not.
So let me first take the Priceline Group which has a different model. They are more of a partner than a competitor of ours. We fulfill a lot of bookings referred via their metasearch brand Kayak. We are among their best partners in that.
Skift: You mention Priceline Group. Any other ways to collaborate with it besides Kayak?
Dunne: You could imagine whether it would be with OpenTable, or there are a number of other things in which we can collaborate with them much more.
Skift: What about Expedia Inc.?
Dunne: Expedia Inc., is an excellent company and very well-run. They have so many other products and services in the space that we don’t touch. They have corporate, they have HomeAway vacation rentals, they have Hotels.com, which is second after Booking.com and is a very very good company and it’s been able to translate that position to very very good returns as well.
For us, it’s flights. So we leverage our flight scale, and we are besting all of our European online competitors in selling flights.
Skift: Among online travel agencies, right?
Dunne: We’re number one for flights sold online in Europe. So we are actively taking market share within many markets. We are growing faster than the average competitor. We’re growing faster than the market, and from most of my known competitors, we’re taking market share from them, consistently.
Skift: What about worldwide?
Dunne: Now on a global basis, it’s difficult to tell, but we are up there with Expedia, and they may be slightly larger than us in flights, but we have the scale and the focus to absolutely compete and actually take market share.
Skift: What about competition from below, so to speak? There are companies like MisterFly, which has appeared in France in the past couple of years, and other online travel agencies and metasearch brands rising, like Dutch company Otravo, and the Icelandic metasearch DoHop which sells a lot via Yandex in Russia. How do you defend your position?
Dunne: Now there may be some niche players in certain parts of the market that may be growing faster than us, but again, also when you have a much lower base, if you’re starting from 1 as opposed to 100, it’s very different. I can go from 1 to 2, that can show 100 percent growth.
I would question the long-term viability of them being able to sustain their growth over the long-term.
We, on the other hand, are focused exclusively on building a long-term sustainable business that is far stronger, far more competitive in the years to come.
Skift: In the U.S. there’s a different flight dynamic for online travel. There’s a lot of consolidation in the airline market, and that small handful of remaining airlines are making a big push for supplier direct. What’s your take on the European market?
Dunne: The U.S. market dynamics are not the norm. Meaning, Europe would be closer to Latin America or Asia in having a fragmented market.
But let me, for the sake of argument, just compare and contrast Europe with the US market. There are two fundamental differences.
The first one is around supplier concentration. In the US, it’s an oligopoly. The top four airlines control almost 75 percent of seats flown. So supplier direct initiatives can work well.
If I look at Europe, the top four largest airlines have 29 percent of seats flown. So that’s much more fragmented market.
Second, let me couple it with consumer behavior as well. In the US, roughly 80 percent of air travel is domestic.
In Europe, it’s almost the exact opposite. Almost 80 percent of air travel is international, not domestic.
So, when you think about this, you then have a very different dynamic of high fragmentation, many airlines, and customers leaving their boundaries, and having a lot of uncertainty about managing all of this, from brands, from currency, from lots of other things.
So the ability for an online travel agencies [OTAs] to come in and help a customer in the US versus in Europe is very different in the flights markets, and the value that an OTA can bring therefore is incredible, and is much stronger in Europe.
Again, I was also asserting that Europe is more like the rest of the world, so when you think about it from a non-American context, there is a much greater value that eDreams Odigeo’s model can provide globally than many U.S.-based competitors can provide.
Let met give you a specific example. Let’s say London to Istanbul. Beyond British Airways, most Brits are gonna think, “Okay, I know there’s a Turkish carrier, let me think what that’s called. Is it Air Turk? Is it Airlines Turkey? Is it Turkey Airlines? Is it Turkish Airways?” We can sort that confusion out for them.
In short, in Europe, there are many more choices in airlines.
In fact, on the London to Istanbul route, the number-two carrier is Pegasus, which is the 12th largest carrier in Europe. It is a totally modern fleet of Airbuses and Boeing, and it flies three times a day from London to Istanbul, and it’s price competitive.
Skift: So an online travel agency like eDreams has more reason for existence in Europe because there are more options to sort through?
Dunne: Yes. What’s more, an increasing number of European customers are flying there and back with a different airline to save money.
Let me get the exact figures here to make this point….
According to a customer survey of 16,000 Europeans we conducted in September 2016, 71 percent of European travelers have said they have previously flown there and back with a different airline. When it comes to this type of flight booking with two carriers, we’ve seen a 21 percent increase in 2016, versus 2015, in travelers purchasing combination flights (with two airlines).
Skift: So how does that help eDreams Odigeo? Why do online travel agencies have an advantage in Europe?
Dunne: Flights don’t work so well as a commission business in the U.S. because of market dynamics, but they have higher commissions, on average, in Europe.
The only way you can charge a fee to customers is if you really provide value to those customers, and I would assert that the ability to provide value in the US is less than in a European context.
In a European context, you can provide tremendously more value. You help a customer immediately search the marketplace, see all of the results, and click, and done. If you go on our mobile app, and you do … I don’t know, London-Istanbul if I just take that example, and I haven’t done it, but you will see much greater price savings, on average, versus going to airline.com.
Skift: It sounds like eDreams is focusing on cheap tickets by leisure travelers, who do not spend as much as business travelers. Sounds like you’re focusing on slices of slices of a discounted market. It doesn’t sound lucrative.
Dunne: Well, because we’re number one in the marketplace, we’re not a niche. Meaning, we appeal to everyone. So if you are a business traveler, we’ve got loads and loads of business travelers, because we help give them the full range of flights and prices they want, quickly.
Skift: You’ve made a broader point that the airline market in Europe is fragmented. Point taken. But airline groups like Lufthansa and IAG and Air France/KLM want more to take more control over the merchandising? Are they going to freeze out eDreams?
Dunne: By the way, you should know that I used to be the chief commercial officer of easyJet, so I have a solid understanding of the airline supply market.
One of the things that airlines are really trying to do is they’re pushing to unbundle and create additional products out of the basic products that they have. Bags were the first, then seats.
There are lots of things that are being unbundled in that. And so for us, that actually is an advantage. This is great for us, mainly because this is increasing amount of complexity, increasing amount of products and services, and from a customer point of view, the customer wants increasingly to be able to help sort this out, understand it, and again, that’s where it plays to our competitive strengths because …
Airlines’ competitive strength is about keeping aircraft flying, that is their core key capability. For us, it’s around technology platforms, it’s around user experience in an online world, and it’s around leveraging data on massive amounts of scale to be able to help customers really through all that an easy way.
The move toward airline merchandizing plays very much actually to more of our strengths and the way in which we provide value to customers.
Skift: But if Lufthansa and other airline groups want customer information and data for easier re-selling, they seem to be heading to a car crash against, which need to “control” the customer as a key part of the model. Most of the eDreams Odigeo business is online travel agency-based.
Dunno: Look, two fundamental elements: One is about business and, one is about consumer.
At the end of the day, in most markets, the consumer ultimately wins. If you try to create a business model against customer desires, against customer trends, then on average you’re gonna lose. You’re not necessarily destroying shareholder value, but you are going to leave opportunities to maximize shareholder value on the table if you go against customer preferences and trends. And that has been shown out time and time again from the hundred years of business.
So it’s not in the airline’s best interest to fight with OTAs. The OTAs and airlines will work jointly. To maximize value, airlines can’t just rely on direct.
We can help maximize airlines’ capture of customers, maximize their yield and their revenue capture, and we can help them sell additional products and services. So the long-term trend is a greater interest and desire to collaborate.
Skift: I have to ask about Ryanair having sued eDreams Odigeo over the use of trademarks in its Google AdWords campaigns, and how eDreams mentions Ryanair’s website. What’s the latest on that?
Dunne: I mean, look. It’s a legal case, and I cannot be making any public statements about a legal case.
Skift: You’ve had success in improving some metrics, seems like. But nothing big picture.
Dunne: I disagree. The culture shift is huge, but it takes time to pay dividends. It will.
We’re already being recognized for our improvements. Before I became CEO, we had never been included by Google in any kind of pilots as members of special test groups. But now Google includes us in testing potential features and functionalities because they see we’ve improved fantastically.
Skift: How did you achieve that change?
We have automated benchmarking tools, and we’ve benchmarked 400,000 different itineraries. That lets us deliver speedier results.
Since early 2015 we have built up one of the largest in-house development groups in the European travel industry. The engineers have been organized in 50 autonomous teams.
We have been able to significantly reduce the time lapse between the ideation and product launch across our websites and native apps. In 2016, we reduced our development time by up to 70 percent and increased the number of A/B tests we are running by up to three times.
Skift: You’ve come in as sort of a turnaround artist. How have you implemented the plan for change? What has been your approach?
Dunne: I would say the people first and foremost, in the sense of … You know, to be a bit pejorative, almost anybody can create a great PowerPoint presentation, but it stays only as a PowerPoint presentation until someone does something different.
And so, my job very much comes down to people. Making sure that you have the right people in the right organization, making certain that it works as a team, and that you in a sense, have many different layers and many different teams within the company.
A key pillar of our transformation that I should mention is that we’re making sure that we improve the culture. We are changing the way in which we, collectively as an organization, operate. We are doing more to attract the best talent globally, too.
So that it’s not a whole set of individuals, but it’s a collection of teams, and the teams are very clear about roles, responsibility, they’re very engaged in driving forward and improving the business, they feel very motivated and passionate about it.
In the past five months, we’ve used our user experience lab over 150 times to test and trial our products and features with more than 1,800 customers and consumers who have not yet booked with us from different nationalities. That’s a sign of the changed attitude I’m proud of.
Photo credit: Dunne, the chief executive of eDreams Odigeo since 2015, has previously been chief commercial officer of EasyJet and chief executive of AOL Europe Sarl. eDreams Odigeo