Skift Travel News Blog

Nick Jones said on Wednesday that he would step down from being CEO of Membership Collective Group nearly three decades since he founded the original Soho House that eventually led to the creation of the public company and owner of the Soho House chain.

Andrew Carnie, president of Membership Collective Group, will succeed Jones as CEO.

Jones battled prostate cancer earlier this year successfully but said he now wants a change of life priorities.

On Wednesday the company cut its guidance for this year’s adjusted earnings from between $70 million and $80 million to between $55 million and $60 million. The company also said it would scale back on its growth ambitions by cutting costs across all its operations, refocusing the business back to its core of Soho House properties vs other extensions such as Ned, Scorpios, its digital memberships, and most importantly cutting back on plans to open nine properties this year to instead only opening between five and seven, including delaying planned venues in Mexico City and Bangkok until next year. It is also cutting down its in-house digital content unit by 40 percent, it said.

More on its cuts, from its earnings call: ” To give members the best possible experience and to ensure reduced pressure on the organization, we are returning to our previous target of five to seven new houses a year, and this is in line with our already signed pipeline for the next three years. At the same time, our cities at houses offer will continue to provide a clear path for longer-term growth at a minimal expense to the company. As part of prioritizing the right investments for our business and our members, we are no longer pursuing the external digital membership…We are reducing our in-house operating expenses. Post COVID, we rush to get all our houses open as quickly as possible in the manner we were used to operating them. In addition, it was a tough and unpredictable labor market, which means our costs increased significantly. What we’ve learned is our members are using our houses just as much, but at different times, so we’re adjusting our cost base accordingly….we’re refocusing our G&A with targeted reductions on content, digital and other corporate expenses, without impacting the member experience. For example, we are reducing our editorial content spend by about 40% going forward. We can raise prices, but the real opportunity is to run a more efficient business.”

The group went public in 2021. Its shares lost about two-thirds of their value this year after the company’s post-pandemic recovery ran up against the pressure of inflation, unfavorable foreign exchange rates, and sudden layoffs in the tech sector.

In the third quarter, revenues at Membership Collective rose 48 percent to $266 million, while the company’s net losses widened from $77 million to $91.7 million. Its net debt rose from $326.2 million to $462.6 million.

The news of the company scaling back its growth trajectory helped to send Membership Collective shares down by roughly 18 percent.

The company owns dozens of Soho House clubs, plus The Ned hotel in London and New York, and the Scorpios beach club in Greece.

Although some advertisers reined in their budgets for some Google products, the company’s travel and retail verticals led Google’s search and other revenues in the third quarter.

Parent company Alphabet recently reported that its search and other revenue categories grew 4 percent during the third quarter to $40 billion, spearheaded by travel and retail.

The company declined, during an earnings call with analysts last month about the quarter that ended September 30, to provide additional detail on the performance of its various verticals.

“In challenging times like these, advertisers are carefully evaluating the effectiveness of their budgets,” said Chief Business Officer Philipp Schindler. “Search tends to do relatively well in such an environment, given its strong measurability and focus on delivering ROI (Return on Investment). It’s also well-suited to quickly adjust to changes in consumer behavior.”

Travel’s strength in Google search — notice the company mentioned travel first, before retail — came as a variety of travel businesses posted strong third quarters based on consumers still wanting to board flights despite the cancellation crapshoot over the summer.

Alphabet’s net income for the third quarter fell 26 percent to $13.9 billion on $69 billion in revenue, a 6 percent increase.

Airbnb executives have talked a lot about how they have reduced their spending on performance marketing (think: buying ads in Google search results) to focus on brand marketing (think: subway posters advertising the company’s new “OMG” category of properties). So how much do they spend on brand and how much on performance?

The short answer is we don’t know for sure. In its first year after going public in December 2020, the short-term rental giant didn’t break out its brand marketing as a share of sales and marketing expenses in its financial results.

This year, though, it began to provide a touch more color, though not enough detail for a full picture.

The company doesn’t disclose how much it spends on performance marketing. Yet it has begun disclosing its year-over-year increases in search engine marketing and advertising spending. In the first nine months of the year, its search engine marketing and advertising expenditure rose by $76.9 million year-over-year. Sadly we don’t know what the total amount of performance marketing was in 2021 to compare it with.

What we can see for sure is that the bump in performance marketing represented a comparatively smaller increase than the company’s increased expenditure on brand marketing. We know that the company increased its brand campaign spending and that the increase was two-and-a-half times as much as the increase of its performance marketing.

In the first nine months this year, the company spent $771.9 million on “brand and performance marketing,” according to financial filings published on Thursday. Of that, $202 million, or 26 percent, represented increased spending on specific brand marketing campaigns.

Sadly, we don’t know the company’s total spending on brand marketing.

But we know the increased spending was meant to support campaigns including its “OMG” category of properties. Since the category’s introduction, the OMG listings have been viewed more than 300 million views, the company claimed this week.

Brand marketing is critical to the company’s ability to continue to attract guests and hosts through direct and unpaid channels, which executives say are cheaper than advertising on Google, Facebook, and other channels.

The company’s other “sales and marketing” costs included personnel-related expenses for its communications teams and for “policy,” which cost a separate $335.7 million in the first nine months of the year — representing a 3 percent increase year-over-year.

Added up, the company spent about $1.1 billion on “sales and marketing” in the first nine months of this year. That was about 17 percent of revenue, far lower than what traditional online travel agencies spend, as Skift has analyzed before.

Boosting Incentive Payments to Customers?

An unspecified amount of Airbnb’s other sales and marketing money was used for referral incentives and coupons. The company has for years made payments to customers via referral programs. Airbnb typically offers a coupon credit for a future booking after a person refers someone to the online agency and that new customer completes their first stay.

The company doesn’t spell out how much it spends on these incentive programs. It appears to mostly lump the amount along with refunds it offers to customers upset with something going wrong in their Airbnb experience.

Intriguingly, the total number of customer payouts for incentives and refunds has increased this year. In the comparable third quarters in 2020 and 2021, Airbnb kept these sums at about $85 million. But in the third quarter of 2022, the total number of incentive payments and refunds rose to $152 million. That was 78 percent more.

Have refunds gone up as the pandemic has ended? Perhaps. But it’s also possible that the company instead increased its referral and related marketing programs, such as where it offers coupons. The company hasn’t broken out the details.

Energy Credits for Hosts in Britain?

On Thursday, the company debuted another type of brand-boosting program. In the UK, Airbnb debuted a sustainable hosting fund worth about $1.1 million (£1 million) to help property managers who want to make their lodging more energy efficient.

Many hosts are struggling to cope with spiking energy costs in the UK because Russia is disrupting energy supplies to Europe during its war on Ukraine.

Airbnb will make grants to hosts of about $3,300 (£3,000). Qualifying actions include switching to a more energy-efficient boiler or heat pump and insulating a roof. Details are at the company’s sustainability fund site.

Overall, Airbnb appears to have found alternatives to paid performance marketing to be more cost-effective. For more context, watch Airbnb co-founder and CEO Brian Chesky explain the company’s strategy in this video from Skift Global Forum 2022.

Hilton reported its third-quarter earnings on Wednesday. During a call with investment bank analysts, executives were asked what role the company’s software for setting rates may play in the company’s performance.

“I’d say we have a long history of being really good at revenue management, and it is part of our special sauce,” said Kevin Jacobs, chief financial officer.

The hotel giant’s CFO didn’t name a travel technology vendor but did refer to “a vendor we work with” while praising the software. Skift knows that for some years Hilton has relied on a vendor IDeaS to help build its revenue management system.

“We have a vendor that we work with. We co-created the algorithm with them. They’ve been an amazing partner…. We’ve created the concept of the consolidated center. We drive more of our owners that sign up to be in these consolidated centers where we help them. We don’t set pricing for the vast majority of our system, right, because 75 percent of it’s franchise, and it’s ultimately up to the franchisees to set the pricing. But we can advise them on how we do it, and we’re really good at it, and it’s part of our special sauce.

“In the old days, [you would build a new system and then you let it run for a long time. [Today’s] algorithms are being tweaked constantly to add incremental data fields that used to be in revenue management in our world. The world is awash in data that are contributing to the decision-making in these algorithms and just make it smarter.”

“During COVID and the aftermath of COVID, one of the big things has not been less about [pricing] floors and more about [pricing] ceilings. And so I think we’ve been very thoughtful about that as well. So yes, it’s part of our — one of the many things that we think we — our commercial teams are second to none in the industry, not just in revenue management. But in every other regard, this is one area that we think we do a really good job.”

—Kevin Jacobs, chief financial officer of Hilton.

The executives cautioned that no one thing the company does uniquely drives its premiums. Even so, it is rare for a travel sector chief executive to talk about the importance of the technology under the hoods of their commercial engines. So this comment stood out.

CORRECTION: This post originally misattributed the executive speaking.

SAP, the parent company of the Concur suite of tools for managing travel expenses, said on Tuesday the company’s unit was recovering after the pandemic shock.

“Concur is actually recovering very nicely,” said Luka Mucic, chief financial officer for the German software giant. “They are only representing this quarter a 1 percent drag on the growth [in SAP’s Cloud Choice Profit (CCP) unit of cloud businesses].”

“Actually on the transactional revenue side, they are already showing very high growth in the high double digits,” Mucic said. “So that business will definitely exceed its pre-pandemic state next year, as we had projected.”

SAP cited increased use of Concur by existing clients. For example, Pennsylvania State University in the U.S. has used SAP Concur Solutions for over 15 years. But in the third quarter, it expanded its partnership because of increased student, faculty, and administrator travel.

“Our intelligence spend and business network is benefiting from a return to business travel combined with the increased focus on managing costs with cloud revenue growth in the mid-teens,” said Christian Klein, CEO of SAP.

As Skift recently reported, SAP Concur Travel is getting its first overhaul in more than 15 years. Earlier this week G2, a leading software rating service, named Concur as a market leader in its reviews-based ranking for travel expense management.

SoftBank Group has reportedly cut the valuation of Indian hotel-booking platform Oyo by more than 20 percent, Bloomberg reported on Thursday quoting people familiar with the matter.

According to the report, the Japanese investor, who owns 45 percent of Oyo, cut its estimated value for initial public offering-bound Oyo to $2.7 billion in the June quarter from an earlier $3.4 billion. In 2019, Oyo had been valued at $10 billion.

The $2.7 billion valuation is lower than the $3.23 billion that Oyo has been able to raise through primary and secondary equity and debt funding rounds from investors. 

Calling the valuation markdown a speculation and “patently incorrect,” Oyo said that having clocked $1 million in earnings before interest, taxes, depreciation, and amortization in its fiscal 2023 first quarter, there is no rational basis for a markdown.

“A 41 percent gross profit margin and a 45 percent increase in gross booking value per hotel per month compared to the last financial year are dramatically improved results and the strong performance trajectory is expected to continue,” Oyo said in a statement.

Earlier this week, Oyo updated its initial public offerings application to the Indian regulatory body — Securities and Exchange Board of India (SEBI). The company originally planned to raise around $1.16 billion through the initial public offering, seeking a valuation of around $12 billion.

Oyo said that SEBI has given the company permission to file updated financials till the September 2022 quarter and Oyo would initiate the approval process post the filing of its audited numbers. “We have not decided the exact timing for the IPO and the IPO valuation is also highly speculative,” Oyo added.

Expedia Group appointed board member Julie Whalen as the company’s new chief financial officer, replacing Eric Hart, effective September 26.

Whalen, the first female leader at this level at the company, will lead Expedia Group’s global finance organization, and will have a high-profile position, helping to explain the company’s performance during earnings call and conferences. She will remain on the Expedia board as a non-independent member.

Hart, who has been with Expedia Group for more than 13 years, and the company’s chief financial officer since 2019, will stay on for a brief transition period until October 1, and will remain on the supervisory board of Trivago, an Expedia Group brand, as well as on the board of the Global Business Travel Group, where Expedia is an investor.

Expedia Group said Hart will “pursue new opportunities.”

“Mr. Hart’s separation did not result from any disagreement with the Company on any matter relating to the Company’s or Expedia’s operations, policies or practices, including accounting principles and practices,” Expedia Group stated in a financial filing.

Whalen has been chief financial officer of Williams-Sonoma since 2012. Her estimated total compensation, as announced in 2021, was nearly $6 million.

“Ms. Whalen also has been a key proponent of driving the company’s ESG- [Environmental, Social and Governance] related priorities,” Williams-Sonoma said in a financial filing in April.

Whalen was a member of the Expedia Group board’s audit committee since June 2019, and has chaired the committee since 2020.

Hart also had the Expedia Group title chief strategy officer. Whalen does not have that official role.

SiteMinder, a hotel commerce services company, said on Tuesday it had acquired GuestJoy, a provider of tools to help hotels communicate digitally with travelers. The Sydney-based SiteMinder also reported its latest financial performance, showing that its revenue is recovering though it continues to suffer net losses.

The companies didn’t disclose the transaction details.

“GuestJoy’s capability to automate and personalize guest communications will allow SiteMinder to offer a fully integrated user experience for our hoteliers,” said SiteMinder CEO Sankar Narayan.

GuestJoy offers a mobile app that lets hoteliers use chatbots to streamline some communications with guests before, during, and after stays.

SiteMinder went public last November in Australia. As of Tuesday, it had a market capitalization of about $703 million ($1 billion Australian). Its flagship service is channel management, but the company also offers products and services for distribution, taking direct reservations, and business intelligence.

For the year ended June 30, SiteMinder suffered a net loss of about $76 million ($110 Australian) on revenue of $80 million ($116 million Australian). It now has 34,700 customers, which represents growth over the pre-pandemic period.

Fosun Tourism Group said on Monday that a partial recovery in its Club Med vacation resorts during the first half of the year didn’t compensate for continued steep losses across its travel businesses — partly because of pandemic-related travel restrictions in its home market of China.

Hong Kong-listed Fosun Tourism generated revenue in the first half of 2022 of about $937 million (6.4 billion renminbi). But it endured a net loss of about $28 million (196 million renminbi).

In the first half of the year, Club Med produced about $838 million (5.7431 billion renminbi) in revenue, representing a recovery to 90.2 percent of the first half of 2019.

But executives at Fosun Tourism are optimistic. They plan to open four new resorts in the second half, having opened 3 resorts so far this year. If the company’s plan for openings stays on track, its annual resort capacity will be 18 percent larger in 2024 than in pre-pandemic.

As more hotels strive to optimize costs, improve return on investment and reduce cost of customer acquisition by generating direct revenue through metasearch platforms, travel technology firm RateGain continues to see considerable demand for its metasearch and digital marketing offerings, Bhanu Chopra, RateGain’s founder and chairman, said.

“We continue to see little or no impact on the overall travel industry as well as our business due to the ongoing increase in inflation, talk about rising interest rates or the ongoing Ukraine conflict,” Chopra said.

Marketing technology has emerged as the biggest vertical for RateGain, with a recurring revenue of 99 percent contributing 41 percent of the company’s overall revenue for the quarter ending June 30, 2022.

Continuing on its path of fiscal prudence, Chopra said RateGain, which made its debut in the stock market in India last year, continues to be one of the very few profitable software-as-a-service companies globally.

“We stay committed to improving profitability through cost optimization and revisiting our commercial agreements to increase revenue per customer,” Chopra said during the earnings call.

The company registered a 59 percent year-on-year revenue growth with revenue from operations reaching $15 million compared to $9 million in the corresponding quarter last year.

“We see robust growth and our annual recurring revenue is now 20 percent higher than pre-Covid levels and is 10 percent higher level compared to the last quarter,” Chopra said.

Given the labor shortages in the travel industry, there has been an acceleration towards digitization and RateGain is well positioned to capture this opportunity, according to Chopra.

“Using artificial intelligence and machine learning we are innovating and launching new products to help our customers acquire guests, retain them and expand on their wallet share,” he said.

Citing Skift Travel Health Index, Chopra said there has been continued improvement in travel demand across the world with more countries now reporting numbers at pre-Covid levels or higher.

Given the return of travel, the company’s transactional volume is up by close to 40 percent. The bundling of data-as-a-service products with marketing technology businesses has resonated very well for the company.

The data-as-a-service business unit grew on the pack of strong volumes of its online travel agency and airline products driven by existing Tier 1 accounts and new accounts, Chopra said. “Also, we entered adjacent sub-verticals within travel such as destination management companies and vacation rental companies and signed up for a set of customers.”

RateGain has also said that it would be investing in launching new products and test piloting them this quarter.