OTA founder Simon Cooper was interviewed at the first Travel Weekly Business Breakfast of 2016 last month. Juliet Dennis reports…
From founding ‘upstart’ online agent On The Beach in a Manchester terrace house to successfully floating it on the London Stock Exchange, Simon Cooper has plenty to be proud of.
Now 12 years old, On The Beach has firmly established itself in the UK, challenging established operators while fending off competition from the global web giants.
And it’s achieved this through a focus on an area many in the industry saw as being in decline – the traditional short-haul European beach package holiday.
“People thought package holidays would shrink,” recalled Cooper, who admits he had no idea his business would enjoy the success it has today.
In its first trading update since its flotation, the OTA recently reported a period of outstanding growth.
For the six months to January 31, 2016, revenues rose by a quarter year on year, with unique visitors to its website up 18.9%, and mobile visitors making up a record 67% of traffic, up 31 percentage points year on year.
Cooper said: “In 2004 I didn’t think I’d end up with a publicly listed business – the first stepping stone was to create a business that turned over £100,000.”
Cooper had previously founded “lifestyle” business On The Piste, an escorted tours company specialising in the French Alps.
He said he then realised “it was time to get a bit serious” and set up On The Beach.
“I took the first booking in May 2004 and at that time it was on the phone and I was doing all the marketing and IT,” he recalled.
“Now it’s about trying to make sure the vision I started with is as clear as possible and keeping an entrepreneurial business.
“I have learnt valuable lessons in running a travel business but nothing prepared me for the last 10 years.”
The company now sends 1.2 million passengers a year to short-haul beach destinations and claims to sell more of these packages online than Tui.
Cooper has set his sights on expanding the company’s international reach over the next few years. It already operates in Scandinavia, where it trades under the ebeach brand.
Targeting two million passengers and a £1 billion turnover, he added: “We have got a youngish management team and my target is £500 million market cap[italisation] and then £1 billion.”
He credits On The Beach’s success in part to luck, saying “we were in the right place at the right time”, but adding that it had not been viewed as a threat by traditional players and operated in an arena not occupied by online giants such as Expedia and Priceline.
“When the business was founded there was little thought about what it would become in three to five years: there was no thought of an IPO (initial public offering) or [seeking] private equity.
“We were a contact centre that quickly flipped online.
“Their [Expedia and Priceline’s] global dominance is not in UK beach holidays. I would not say we compete against them. They don’t bid on traffic on beach holidays.”
Key to the business’s success had been moving transactions from the telephone to online, advertising on paid search and building sophisticated personalisation technology.
Cooper added: “Building personalisation technology is complex. It doesn’t make sense for the global OTAs to build that kind of technology [for the UK package beach market].”
On OTB flotation: The process was so nerve-racking
Becoming a listed company has put On The Beach in a more advantageous position financially but increased scrutiny dramatically, according to founder Simon Cooper.
He said the OTA had performed well since floating on the London Stock Exchange in September last year.
Its share price was 184p when it floated and within two weeks had risen to 220p. “Our performance has been good since the initial public offering (IPO). The share price goes up and down by 10p or 20p every day,” he said.
He added: “A strong performance post-IPO has a strong influence on the sector. But if others don’t perform well you get tarred with the same brush.” vOn The Beach’s flotation saw majority private equity investor Inflexion realise a substantial return on its two-year investment in the company and has helped to raise the company’s profile.
It had also led to the company being viewed more favourably by the banks, said Cooper.
“Certainly in response to availability to debt, being a listed business puts you in an advantageous position when negotiating with the banks,” he said. “It costs us a quarter of what it did pre the IPO.”
But there are some key differences between being listed and owned privately, added Cooper.
“The biggest difference is the number of meetings. With private equity you might meet 20 to 25 investors. With an IPO you meet 100-plus,” he said.
“The other difference is the level of scrutiny; it is phenomenal. You cannot say anything on paper that you cannot verify.”
The process of the IPO was nerve-racking, he admitted, adding: “You never know until the funds start flowing in whether you are going to achieve it.”
Asked why On The Beach had not been snapped up by a trade buyer, Cooper said: “We seemed to be a risk. Back in 2007 we were a young, high-growth business. We were seen as upstarts who would be around for [just] a few years.”
On getting an Atol: It gave huge boost to our conversions
On The Beach’s decision to offer Atol protection five years ago led to a “huge boost” in conversions.
In 2011 the company acquired an Atol for 300,000 holidaymakers, with trust arrangements approved by the CAA and Abta.
The company was the first major online travel agent to offer full financial protection when it set up its trust fund.
The move followed a landmark case against On The Beach’s rival Travel Republic in 2009, in which the OTA was cleared of breaching regulations for selling flights and accommodation in combination without an Atol.
“The decision in the court was one thing. To say we [OTAs] are not operating outside the boundaries of the law was what was more important to us,” said Cooper.
The company decided to take out an Atol after research with consumers, who had become more aware of Atol and Abta, and wanted financial protection.
Cooper recalled: “There was a huge boost to conversions to say we held an Atol.
On Google: We’d expect to be a partner
On The Beach expects to be one of Google’s travel partners as the search giant looks to expand in the sector.
Founder Simon Cooper said the online travel agency had a long history of working with the search engine.
“We have a very close relationship with Google. We have spent a lot of money with them,” he said.
“They talk about a holiday metatype path and they will look for partners. Given the quality of our relationship we’d expect to be one of those partners.”
OTB also advertises on metasearch sites TravelSupermarket and TripAdvisor but says greater brand recognition, partly due to new TV ad campaigns, is reducing its reliance on these sites.
Google this month unveiled a new holiday search function for mobile which was described by one industry observer as a potential “game changer”.
Destinations on Google combines flight and hotel search with maps, destination guides, price indications and suggested itineraries.
On EU: It would be less disruptive for the UK to stay in
On The Beach founder and chief executive Simon Cooper believes it would be “less disruptive” forBritain to stay in Europe.
He said that although he hadn’t completely made his mind up ahead of the EU referendum in June, he favoured a united Europe over a British exit.
“For most people it’s better the devil you know than the devil you don’t. It will be less disruptive if we stay in,” Cooper said.
“No one can say how much impact staying in or out will have or how much holidays will cost and if they will go up; but no one is telling me that [price rises] will be the case.”
His comments follow those of other industry leaders, including Sir Richard Branson, Ryanair chief executive Michael O’Leary and Monarch Group chief executive Andrew Swaffield, who have come out in favour of staying in Europe.