Pictured: Simon Cooper
The founder and chief executive of UK online travel agency On The Beach says this week’s move to float the company was not driven by a need to raise funds for expansion.
Speaking to Travolution following this week’s IPO on the London Stock Exchange, Simon Cooper said plans were already in place for expansion in overseas markets, and in the direct contracting side of the business funded by profits.
On The Beach’s float saw majority private equity investor Inflexion realise a substantial return on on its two-year investment in the company and helped to raise the profile of a holiday specialist which Cooper described as a clear number three in the UK for beach holidays.
“We are a company that has been generating profits for every one of the 11 years we have been trading. We are very cash generative with very low levels of committed spend. That gives us the ability to invest in our technology, our offline advertising and direct contracting infrastructure.”
Cooper said the amount of business transacted by On The Beach in the nine months to June this year was £355 million, up from £271 million in the same period the year before. Gross revenue margin for the period was also up at £48.3m from £33.9m and EBITDA, earnings after tax, interest and other items, was up 49%.
Tuesday’s IPO valued the company at £240 million and raised £90 million, all but £6 million went to its private equity parent which retained a 37.1% holding.
Cooper said it was a testament to the strength of the firm that the IPO was completed so soon after the summer period and amid a period of instability in the international money markets due to the problems with the Chinese economy.
He said the possibility of floating was looked at last year but it was decided not to be the right time, this enabled On The Beach to execute some of its plans and to lay much of the ground work for this week’s IPO.
“The financial markets have been more volatile than anytime in the past four or five years. Against that back drop it’s very difficult to float a business. We are a business that continues to grow rapidly and that growth has accelerated. It was not the most benign market into which we floated so it was huge testament to to quality of the business we have built that we were still able to get the IPO away.”
On The Beach has already launched in one overseas territory, introducing its ‘ebeach’ international brand to Sweden in January. The agency plans to role out to two more European markets in the early part of next year. Cooper said while its overseas business was “expanding nicely” it was still tiny compared to its UK business.
He still sees plenty of growth potential in the UK as an improving economy grows the market and by further online penetration. On The Beach currently transacts 95% of its business online, which Cooper said makes the firm “incredibly efficient”, way ahead of the market’s big two mainstream beach tour operators TUI and Thomas Cook.
On The Beach currently employs around 300 people at its 20,000 square feet Manchester headquarters but the headcount has not grown appreciably for five years, despite its growth. The firm has just taken another half floor at the offices to accommodate future growth.
Areas where On The Beach has invested in more staff has been in its technology team, digital capabilities, customer service and overseas contracting.
“We can scale our business up 30% without having to add 30% in terms of staff,” Cooper said.
The greater focus on direct contracting, which On The Beach has invested in heavily for the last 18 months, has seen it consolidate its bed bank suppliers. It now works more closely with the three largest – Hotelbeds, Hotels4u and Youtravel – and has reduced the overall number of third party suppliers.
Cooper said key to the firm’s success has been embracing personalisation, so that all customers are not just presented with the product that offers the highest margin for the firm but product that is the most relevant to each customer.
He said this has allowed On The Beach to optimise the margin it makes from every customer so that it can afford to reinvest in marketing on platforms like Google but also to drive more loyal repeat bookings. Cooper said 55% of its traffic is now brand.
“What we do find is the more personalised the site experience the more engaging it is, the more likely it is people will re-engage via your brand because it’s the only place they get that personalised experience. The flip side of that is how efficient you can be in driving traffic. You are not having to bid for every one of your clicks.”
On The Beach says it currently has 30 million site visitors a year coming in through brand.