Lastminute.com Group is looking to take market share away from tour operators across Europe as it puts more effort into growing its package vacation business.
In 2018, non-flight products, which includes vacations hotels and cruises, generated more revenue than flight-only sales for the first time in the company’s history. Dynamic packaging — where travelers combine flights and hotels, creating their own products — grew 41 percent, generating revenue of $68.3 million (€60.1 million.)
Lastminute.com also has a foothold in the traditional tour operator market, where it resells other companies’ vacations, thanks to its 2017 purchase of German booking site Weg.de. Eventually Lastminute.com expects to shift consumers towards its own dynamic packages in order to generate better margins.
“This means we move from a classical online travel agent like Booking.com or Expedia to a more modern tour operator that is focusing on vacations,” said Marco Corradino,
Lastminute.com CEO, on an earnings call with media and analysts on Tuesday.
There’s an interesting dynamic at play between Lastminute.com and one of its big rivals, in particular. Lastminute.com actually powers Booking.com’s package travel offering in certain markets. It’s not necessarily a big money spinner but it does help to drive volumes and demonstrates that its technology is up to scratch.
“Booking.com last year did a sort of contest in order to be their provider for this kind of solution and they adopted our solution versus all our competitors… we are pretty happy about the partnership that we have,” Corradino said.
While Lastminute.com might not think of the big online travel agencies as its main rivals per se it is honing in on another big player, TUI Group – or at least its online platform.
“I don’t see Booking.com or Expedia as a competitor… Tui.com is the market share that we want,” Corradino said.
Lastminute.com’s investor presentations shows just why it thinks there is room for disruption. It claims to be “strategically positioned in countries with expected higher digitalization growth rate countries (Germany, Italy, Spain, France)” and likely sees these markets as ones it can take market share from more traditional tour operators.
But given TUI’s push to sell more of its own exclusive product — something rival Thomas Cook is also doing — Lastminute.com might find taking market share more challenging.
The ability for consumers to exercise flexibility when booking vacations is a certainly a plus. For example Lastminute.com and others with a similar model like On The Beach allow customers to mix and match flights from different airlines, combine them with hotels and car hire over as long or short a period as they want.
But if consumers can buy these components elsewhere than price is really the only differentiator, and that is a competitive market especially for sun and beach vacations.
Lastminute.com said it expected dynamic packages to be a big contributor to revenue growth and therefore profit growth in 2019.
Running online travel agencies across Europe is one of Lastminute.com’s three main business areas. The other two are metasearch and media.
|2017 Revenue||2018 Revenue|
|OTA Travel and Leisure||$89m||$127m|
They contribute less revenue than flights and vacation packages but are still important in the company’s pursuit of diversification.
The media side of the business in particular interesting. Lastminute.com calculates that of say 100 people that visit one of its sites, only four will buy something, so it needs to work out how to monetize the other 96.
A lot of the time it does this through advertising but has also branched out into consultancy work and content creation.
“When you go to speak with some tourist boards, for example the China tourist board or Dubai tourist board, they would like to produce content but they don’t have the capabilities. And so we started to produce content for them,” Corradino said.
The media side of the business could also benefit from any deals Lastminute.com decides to do in the future. It has already bought social network WAYN (Where Are You Now) and video production agency Madfish.
However he added: “For sure we are actively looking in that sector.”
Lastminute.com Group’s annual revenue jumped 12 percent to $330 million (€291 million) in 2018 helping it swing from a pre-tax loss of $4.1 million (€3.7 million) in 2017 to a profit of $13.9 million (€12.2 million.)
“We have implemented a shift from a pure transactional-oriented flight-centric proposition to a diversified OTA-Meta-Media holiday-driven business model, and it generated a robust set of results in which our vision translated into numbers very clearly,” said group CEO Fabio Cannavale.