Like its fellow European online travel agency lastminute.com, eDreams Odigeo has been trying to diversify its revenue stream away from a reliance on flight-only sales.
After all it’s a low-margin business and there’s only so far that can take you in today’s sophisticated consumer environment.
EDreams’ big plan is its subscription service, called — somewhat unimaginatively — Prime. It had been quietly testing the operation for a couple of years before going public earlier this year.
“We are moving away from the transaction-only model to one that includes a revolutionary subscription model and engaging with the customer throughout the full travel journey. And we are having excellent success with it,” CEO Dana Dunne told investors on an earnings call on Thursday.
“In addition, our goal is to leverage our media market position in flights and attach other products by building differentiating content and products like ground transportation, tours and in-destination activities while continuing to grow revenues as we create value for our shareholders.”
The firm said it now had 325,000 subscribers, an 8 percent increase on the previous quarter. The product, which includes discounts and a range of other perks, is on offer in four markets of Spain, Italy, Germany and France with the price ranging from $44 (€40) to $83 (€75) for a year.
In its last update in June, eDreams said the renewal rate was around 63 percent in the Italian market. The company plans to give a further update on the product at an investor day later on this year.
Prime is part of eDreams’s drive to expand into other revenue areas. It breaks this out into what it calls “diversification revenue”, which includes things such as package holidays and airline ancillaries. The total generated in the three months to the end of June rose 25 percent to $79.9 million (€72.2 million).
“Classic” revenue, which eDreams divides into customer-related, think flight cancelation fees, and supplier, e.g. incentives from flight intermediaries, fell 11 percent to $69.5 million (€62.8 million).
EDreams said its first-quarter performance was in line with previous guidance. Revenue rose 8 percent to $164 million (€148 million) but pre-tax profit slipped 52 percent to $4.8 million (€4.3 million). The decline was mainly down to a $8.6 million (€7.8 million) provision related to the closure of the Milan and Berlin call centers. eDreams expects to add another $4 million (€3.6 million) to this over the next two quarters.
The closures are part of the company’s “Operational Optimisation Plan” designed to “streamline operations” so that it can “focus its efforts on its innovation and technology expertise”.
Even with those additional costs, eDreams is still expecting a “much better year” than 2019. And this comes despite the macroeconomic and geopolitical challenges facing all European travel companies such as Brexit.
“I would say that the markets is all right. It’s not necessarily a market that has been booming. It’s not — definitely not a bad market at all,” Dunne said.
EDreams also has its eye on a number of potential acquisition targets, which could potentially add scale and new product lines.