ebookers
Story
ebookers was born out of the Internet boom of
the late 1990s but its origins stretch back much
further.
In the 1970s, Dinesh Dhamija, son of an Indian
diplomat, left Cambridge University with a degree
in law, a lot of ambition, but no real idea of
what to do with himself. Eventually he applied
for a job with IBM in London.
The job was enjoyable enough but this was a period
of high taxation and Dinesh was amazed at how
much of his monthly salary was going to the taxman.
"I was practically working for free for
the government as taxes were so high. The only
way I could see out of it was to start my own
business."
So this he did. He had no savings so borrowed
a small amount of money from friends and opened
up, with his wife Tani, a travel kiosk in a hole
in wall in Earl's Court tube station. This was
1980 and the travel agency was named Dabin travel,
after their two sons, Darun and Biren.
"It's a strange thought now, but there's
really no reason why it had to be travel. It really
could have been anything - computers or cars even.
If I could sell it, and make money selling it
then I would have done it."
Lessons learnt Back to the top
Business was a continual learning experience for
Dinesh.
"I learnt lessons then which have stayed
with me ever since. The first was where to focus
our business. Back in the '80s there were huge
price wars going on between the tour operators
in Europe, especially between Thomson and Airtours.
Things got out of hand and they ended up selling
European holidays at silly prices.
You could get a week full board in Spain with
flights for £25. Travel agents were making
10% of this. That's just £2.50 for selling
a holiday. No one could survive on this. So I
focused the business elsewhere, on the long and
mid haul with higher margins and higher spending
customers - Australia and the Far East, and America,
too. That's proven really fortunate for ebookers.
No-frills airlines have been really successful
on short-haul routes in Europe. That could have
been a threat for us, but in fact our business
complements theirs and actually benefits from
it. They are educating people to buy travel on
the Internet while not competing with our mid
and long haul routes."
"The other thing I learnt pretty quickly
was how to control costs. A high street travel
agent doesn't make easy money. The margins are
really slim. An agent is lucky to make more than
1% pre tax a year. What this means is one bad
day in a month and you could be in trouble. We
had some nerve-wracking times, especially during
downturns like the Gulf War. On the Internet our
potential margins our much, much more, but I've
still kept the cost culture from before. It's
in my blood now."
As well as controlling costs Dinesh had other
concerns.
"I also soon realised that travel is a people
business. To survive as a travel agency you need
privileged relationships with airlines, hotel
and car companies. You need them to give you access
to special fares called merchant fares. Once you
have these you can offer your customers discounts
of up to 75% off standard prices. Also the margin
you get on these fares is much better. Without
them it's so much more difficult to make a profit."
" I knew I needed these fares, but travel
suppliers only give them to people they can rely
on. So I had to meet them all and gradually build
their trust. A lot of my business back then was
done on the golf course, meeting people and getting
to know them. I got pretty good at golf as well.
Unfortunately its gone downhill since! "
This relationship building began to pay off.
"It took us 3 years to get our first merchant
deal. It was with Malaysia Airlines."
Malaysia Airlines was a start, but it was small.
"As a British travel agent, the crown jewel
for us, what we were always aiming for, was a
merchant deal with British Airways. Finally, we
got this in 1995 after 15 years in the business.
That was a very good day for us."
There's a thing called the Internet Back to the
top
What was an even better day for Dinesh happened
just a year later, but he didn't realise its significance
at the time."A German friend of mine had
developed something to sell travel over the computer
and came to see me in London. It was the first
time I properly heard of the Internet. He wanted
me to use his machine to sell our flights."
Things could have been so different.
"I laugh now, but I was really very sceptical
at the time. He really had to persuade me!"
So it was that in 1996 flightbookers.com started.
It was the first interactive booking engine in
the UK, a pioneering project, and one that was
subject to much scepticism from the rest of the
travel industry.
"I had to put up with some flak from my
friends in the travel trade at first. Why would
anyone want to buy on an anonymous computer when
they could pick up a phone or call into a shop.
And at first it seemed as if they were right.
The system worked, but bookings were small. It's
not surprising really, given that very few people
in the UK were using the Internet at that time,
and far less to shop. "
ebookers is born Back to the top
But then suddenly things changed. In 1998, a few
bookings had turned into a lot more, and then
even more. By September, flightbookers.com had
achieved 1,000 passengers in a month, and Dinesh
realised that he was onto something.
"It was from this point that life started
going up a gear. This was when it all began I
suppose. I remember I got a call from the research
company Jupiter. They'd heard about my website
and wanted me to speak at a conference on the
Internet."
This was October 1998. The Internet was getting
big in the United States and the boom was about
to come to Europe.
"The speech at the conference went down
well and afterwards I got approached by a couple
of Venture Capitalists. They told me they wanted
to take the business public. At this point I knew
we had to start getting organised very quickly.
Step One was a business plan."
"I called up a business associate, Sanjiv
Talwar. He ran an accountancy firm and had done
our accounts for years. No one knew the figures
of our business like he did. I told him about
he Venture Capitalists and he agreed to start
work on a business plan."
On the 1 January 1999, Dinesh became Employee
No.1 of a new company called ebookers.com. By
March 1999 Sanjiv Talwar too had sensed that ebookers
could be something very exciting. He gave up his
business and joined ebookers.com as Employee No.2.
The two men shared either end of a desk.
From March the two men started the serious business
of fundraising, but it soon became clear that
this wasn't going to be easy in London.
"The contrast between the UK and the US
in attitudes to the Internet was amazing. I remember
we went to see Arthur Andersen in the City; they
valued our business at £15m and said they
could raise £5m by taking us public. We
knew that this wasn't going to be nearly enough
so we then went on to see a major airline. Things
got worse not better. This time they valued the
whole business including Flightbookers at just
£1.5m and offered to buy half. It was very
frustrating."
Going to America Back to the top
So Dinesh, not giving up yet, went to New York.
"The contrast couldn't have been greater.
I had dinner with friends there. It went pretty
well. On the spot I got an offer of $5m of funding
on a valuation of $55-60m. They know how to do
business in America"
And then the next day Dinesh was introduced to
JP Morgan.
JP Morgan has carried out high profile Internet
flotations before. They immediately liked Dinesh's
story and could see the opportunity for ebookers
in Europe. They offered to take ebookers public
on the Nasdaq and Germany's Neuer market.
"It sounds easy when you say, 'we were taken
public.' But anyone who has ever gone public knows
that it's one of those once in a lifetime business
experiences that you'll never want to repeat.
We had business plan after business plan, SEC
filings, presentation training, bankers and lawyers.
My lawyers, the bank's lawyers, ebookers' lawyers.
So many lawyers, I can't tell you how many."
"The investor Roadshow before the IPO was
like nothing else. We were sent on a Lear Jet
to 8 countries in 12 days. We had 72 meetings
giving the same presentation without a break.
Can you imagine what that does to your mind? Funnily
enough there was another online travel company,
a US one, going public at the same time. We kept
bumping into them. As they walked out of a bank,
we walked in. They've done pretty well too."
In August 1999, ebookers was separated from its
parent company Flightbookers. And on 11 November
1999, after months of preparation, ebookers went
public on the Nasdaq in New York and the Neuer
Markt in Germany.
This was the height of the Internet boom. The
shares floated at $18 raising $61m. Soon they'd
climbed to $43 giving ebookers a valuation of
$700m.
"Those were interesting times. In those
days you only had to put out a press release on
a small deal and the share price would go through
the roof. Investor relations has got a lot more
serious for us now."
Going to Europe Back to the top
The share price was booming but Dinesh and his
rapidly expanding staff had work to do. They had
to use their new funds to build a real business
that would one day bring a real return to investors.
So, leaving a growing ebookers staff hard at work
in new offices near Russell Square building the
websites and designing marketing campaigns, Dinesh
set to work on the acquisition trail to make ebookers
a truly pan-European company.
Dinesh decided early on that what makes a good
website was not just the technological wizardry,
but having something good to sell. In the UK he
could get hold of a huge range of discount travel
products through an arrangement with Flightbookers.
But these deals had taken years to get. In Europe
he didn't have time to build up supplier relationships
from scratch, so he decided to acquire companies
that, like Flightbookers, already had years of
supplier contacts and travel knowledge. Luckily
he could do this quicker than most. While running
Flightbookers Dinesh had also had another job
running the sales and marketing for Royal Nepal
Airlines at Europe. This meant that he knew exactly
which agencies to buy and where. And once the
companies were bought, ebookers would use its
brand, technology and marketing knowledge to take
their product range online and sell to a bigger
audience than they could ever reach before.
ebookers had already bought companies in 1999
in France and Germany. Very soon by the middle
of 2000 the company had expanded to Ireland, Norway,
Finland, Sweden, Denmark, Holland, and Spain.
It had become the first pan-European online travel
agency.
Boom times Back to the top
While getting down to business people at ebookers
were not immune to the fact that Europe was going
Internet crazy. This made it a very exciting time
to do business.
"Looking back it was a privilege to have
experienced being in business at the time of the
Internet bubble. I've never known a time when
business was so exciting. We were all learning
and learning fast. There was an infectious air
and a real energy about. Everyone felt that the
world was ours to conquer and the rising booking
figures only added to this feeling. That was the
time when everyone wanted to be working for an
Internet company. We had a young staff who gave
it 150%. Some of the IT staff would even sleep
next to their computers they were so keen to get
the site built."
Thankfully despite the hysteria Dinesh and the
rest of his management kept their feet firmly
on the ground when it came to spending money.
They were from the travel industry, after all,
and didn't find it easy to spend too lavishly.
"There were lots of stories in the papers
of the incredible spending sprees that other Internet
companies were going on. Companies like Boo.com.
Huge staff perks, silly deals and crazy parties.
We avoided this which in retrospect isn't a bad
thing. None of the big spenders are still around.
Their parties were short lived."
The Bubble bursts Back to the top
By May 2000 the game was over. The bubble had
finally burst on the Internet. Share prices plummeted.
It was the end of many Internet companies. Trendy
office buildings in Soho and Clerkenwell were
suddenly left empty as their dot.com occupants
went to the wall.
ebookers survived, but only just.
"The Internet price crash could have been
the end of us. It came at a critical timing for
the company's finances. At the time of the IPO
in November 1999, we'd said that we would go back
to the market for a secondary fundraising in 2000.
This was all very well when the share price was
at $43. But suddenly the market was against us.
The press was against us too and some put us on
'dot com' death lists. No one believed in the
Internet any more."
ebookers share price slid to just $6. These were
trying times.
"We thought of everything to raise more
money. It was very frustrating. We knew that we
had a company that worked. We'd delivered all
our business promises to that date and we knew
we could continue to do so. The difficulty was
in convincing others. In the end I put in $3m
of my own personal money to show how much confidence
I had. We put out a good set of half year financial
results in July, and I went to visit some of our
major shareholders in Europe. Thankfully, we convinced
them. We raised $45m and the future of the business
and our 400 staff was secure. This was a huge
relief."
For the next year ebookers battened down the
hatches, trimmed costs and kept on working, ignoring
the negative sentiment in the outside world.
"The media and the City were against Internet
companies, but that was natural. It had been so
hyped before, it was a good story to reap the
backlash. But the main thing is that people, customers,
kept on using the Internet, more and more. It
became obvious that many areas were never going
to make money online - sites relying on advertising
or impractical useless technology like WAP. But
some areas were perfect for the net. These were
gambling, pornography and of course travel. The
web can sift through ever-changing complicated
fare information.
There are no warehousing costs, no parcels to
deliver. It just kept on working and every quarter
we kept putting out better and better figures,
moving further towards what the City thought no
Internet company could achieve: a profit."
September 11 Back to the top
Thing were going well for ebookers. The first
week of September 2001 saw the highest ever bookings
on the Internet. US internet travel companies
began to report their first profits. The scepticism
of the outside world was beginning to thaw.
Then came the tragedy of 9/11, and with it the
world travel industry was thrown into chaos.
"I remember seeing the first plane hit the
Twin Towers on CNN.com in the office. At the time
we had no idea what an awful tragedy was about
to unfold and the impact it would have on ebookers
as a business."
"Then suddenly the phones started ringing,
but not with customers wanting to buy, but customers
wanting to cancel. We helped them do this, but
we soon realised that we had to take some pretty
drastic measures if we were to survive".
Dinesh drew from his twenty years experience
in travel.
"I remember going through the Gulf War in
1991 and then the Oklaholma bombing. I knew that
Europeans would start travelling again eventually.
I knew we had to cut back, tighten our belts,
stop spending and wait for the market to recover
again. I knew that in the end people will always
want to travel, whether for work or for discovery.
It's the way people are. In the long term the
travel market is only going upwards"
Tough decisions were made
"We had to make redundancies which was difficult
and depressing for everyone. But in the end we
had to make less people go than we had thought
and a lot less than most traditional travel companies."
Soon as well, Dinesh's optimism was realised.
While much of the rest of the travel industry
went into a long and drawn out decline, ebookers
started to grow again, actually even faster than
before. The popularity of the Internet was powering
the business out of difficulty. By September 2002,
while the airline industry had still not recovered
from the year before, ebookers' business was growing
at 60%, with some of its European businesses at
over 100%.
But Dinesh had learnt from September 11.
I learnt then that we had to always be
prepared for such terrible events in the future.
We had to be lean and nimble as a business the
whole time. So we set about giving ebookers the
lowest and most flexible cost structure in the
industry."
Profitability and India Back to the top
September 11 was the first of several incidents
including SARS and the Iraq War, that have made
the last few years some of the most tumultuous
in travel history. Nevertheless, ebookers survived
and thrived. It acquired the leading UK travel
company Travelbag Holdings in February 2002, and
soon after reported its first quarterly profit
- incidentally one of the first European consumer
ecommerce companies to do so.
And then, in August, came the announcement of
an extra dimension to the ebookers' business;
India.
ebookers has operated a Business Process Outsourcing
facility in New Delhi India since 2001. There,
a graduate workforce carry out a whole range of
business processes for the ebookers group, including
customer service, and email sales. This facility
has been critical to both the growth and the profitability
of the European businesses.
As Dinesh comments: "My family is of Indian
origin therefore I am probably more aware of the
potential of the country than many UK CEOs. I
also have a lot of business contact in the United
States and over there BPOs are practically the
'new internet'. Once more the States appears to
be one step ahead with the business game. I mean
almost half of FORTUNE 500 outsource some functions
to India while we are really just waking up to
the idea over here in Europe."
"India is a centre of IT and academic excellence.
Every year it produces hundreds of thousands of
highly qualified graduates eager to make their
way in the world of commerce. Companies can pay
these graduates excellent local salaries and still
make significant cost savings on equivalent business
costs in the West. "
"These are competitive times, and there
are very few chief executives who are not under
pressure to reduce their operating costs. India
is becoming an increasingly interesting option
to many. Communications technology is cheap and
reliable, and other major corporations from Citibank
to General Electric have shown that it can be
a highly successful move. For me, it was a no-brainer
that ebookers should open a BPO in India."
ebookers' India operation - known as Tecnovate
- started on a relatively small scale. But by
the first half of 2003 the facility in India numbered
over 600 staff and was producing costs savings
to the group of nearly £1.5m per quarter.
In August ebookers announced that it would be
opening up its BPO to third party clients. This
would produce a new revenue stream for the group
and allow ebookers to be one of very few companies
to attempt to turn its business processing from
cost centre into a profit centre.
"We'd always set the operation up with a
view to it taking on third party work from the
raft of international travel companies we deal
with a on a daily basis" comments Dinesh.
"In fact we were approached very soon by
many potential clients eager to benefit from our
expertise in the area. But we wanted to get the
BPO right for ebookers business before looking
to third parties."
The story to come Back to the top
Dinesh: "When I look at where we were just
three years ago, two men and a desk, and then
look at where we are now - 1,500 staff all over
the world and sales in the hundreds of millions
- I put it down to Internet time. With the Internet
things happen much quicker than in the other business
world, maybe five or seven times faster."
"As for the future my aim is for ebookers
to be at the top of Internet travel in Europe.
I want people to think 'ebookers - that's excellent
value, that's the best range on the web, and that's
a company that really knows travel.' That's what
I'm aiming for. I also want to prove to the sceptics
that Indian BPOs are a reliable and efficient
way for businesses to reduce costs"
What will happen in the next few years remains
to be seen. But wherever ebookers and Dinesh will
be, there's no doubt that it will be a far cry
from a kiosk in Earl's Court Rd Tube station where
it all began.
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