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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