Cheapflights is celebrating its 10th anniversary this year. Chief executive, and Travolution’s guest editor for this edition, David Soskin, tells Kevin May why the company has stuck to its beliefs through a decade of change and how the industry needs to look out for the next generation.
Cheapflights is a new media phenomenon. It has a simple business model. It has been in the top 10 travel websites in the UK for years. It has been profitable since day one. And, against all the odds and popular convention, it was created by a journalist.
However, since 1996 John Hatt has retreated into the shadows. The company is now run by chief executive David Soskin and a relatively small group of developers, sales executives and strategists, both in the UK and in an office in Massachusetts, US.
But while travel firms have come and gone over the past decade, Cheapflights has stuck to its straightforward yet effective principle of price comparison – publishing air fares and referring users to a seller’s website or call centre.
It estimates its partnerships with around 500 leading suppliers have led to £300 million worth of air tickets being sold via the site each year.
Indeed, in recent years the company has bucked the trend of traditional offline media companies, who by their own admission are struggling, by turning away some advertisers.
It is this reason alone that sets Cheapflights aside from other websites on the Internet – and perhaps why it should be better known as a new media success story, like Google and others, rather than solely a travel-related one.
Unlike other leading online travel brands, Cheapflights has spent a paltry £100,000 on offline advertising since 1996, although spend on online and pay-per-click marketing is – regrettably, for its rivals – a closely guarded secret.
In some respects, it would be nice for Cheapflights to sit back and enjoy its 10th birthday, but after running the company since March 2000, Soskin believes Cheapflights and the travel industry are approaching a critical time.
The company itself is about to enter a crucial period – Soskin admits 2007 could see the company floated on the stock exchange, a sale, or new investment coming in. He is tight-lipped on the company’s market valuation or potential suitors, but admits a deal this summer to sell its subsidiaries Cheapaccomodation.com and Cheapholidaydeals.com to Internet Business Group for £1.1 million was both good business and part of a streamlining of operations, enabling it to “concentrate on flights”.
Where Soskin is far more forthcoming is in his opinions of the travel industry in general – with the so-called Web 2.0 a key area as the “next generation” of consumers push the boundaries of what online retailers should be offering.
“The travel industry has got to adapt to this new world of sophisticated, young users,” he says. “The pace of technology improvement has always been very rapid. But in the next few years it is going to be even more rapid and websites are going to have to improve faster than they’ve done over the past 10 years.”
A huge admirer of online retail giant Amazon, Soskin says some travel websites should use its model of intense familiarity with a user’s previous purchases when marketing their own travel products.
This is already happening in some quarters, but the industry could and should do more.
A ‘non-commercial’ blog for consumer news was launched in 2005 and this year has seen the development of products such as an editorial-led newsletter and a service called Hand-Picked Deals.
Advertisers have also been handed improved functionality, with real-time performance of campaigns running on the site, based on similar tools available on the likes of Google, Yahoo! Search Marketing and Miva.
However, Soskin admits to being “completely paranoid” about potential competition. “We never think we are good enough and we are always terrified that others will come in and do what we do better than us,” he says.
Soskin is equally candid about what the company should do in the future. “We have to up our game and we’ve got to make far more progress,” he admits.
One threat to the price-comparison model coveted by Cheapflights is that of the meta search engines. Sites such as Travelsupermarket and Kelkoo, alongside the influx of US-owned operations such as Sidestep and Kayak, are growing traffic as they attempt – some with hefty sums of marketing money – to grab a share of the market. But while Soskin concedes that some have produced clever websites, he believes none can come close to replicating the success of Cheapflights.
“The problem the meta search companies have is that they compete head-on with each other,” he argues. “From a user’s point of view the experience of being on a meta search site is quite similar to a travel agency site.
“Our combination of price lists, a sophisticated booking engine, a huge opt-in newsletter, a successful travel blog and a regularly hand-picked deals section is a more powerful user application than meta search.”
Soskin’s criticism is not concentrated solely on potential competitors. He is also critical of other unnamed travel websites that, in his words, “fall way short” of the progressive functionality and dynamism of his favourite in the retail world, Amazon.
“There are very few scheduled airline sites that are as strong as BA’s,” he adds. “Some are very good, but equally they aren’t nearly as good in providing a decent user interface.”
The word “transparency” is one that crops up regularly in most conversations with Soskin. He is deeply scathing of the air industry’s sometimes rather murky methods of producing air fares, only for the consumer to be faced with a stream of hidden costs.
This, he hopes, will change as the web hands more power to consumers. “The Internet is such a wonderfully enabling platform that it is incumbent on everybody in travel to publicise everything to do with the service they are providing.”
But, despite acknowledging how much work needs to be done by Cheapflights and the industry as a whole, Soskin is full of praise for how much has been achieved in the past 10 years. “If you look at the UK, the numbers of people using airports has doubled in the past decade. There is no question that is due to the growth of the Internet,” he argues. “Because the web is so transparent for seeing rivals’ charges, the whole world of travel pricing has also become more competitive. This has meant the industry has had to be much more agile to make tickets affordable.”
The area of research has also developed massively due to information being made freely available on the Internet, Soskin believes, enabling consumers to make better and more informed choices about where they spend their money.
These features of the Internet will need even more care and attention in the next few years as a new generation of users start buying travel products.
In the meantime, Soskin believes Cheapflights as a business is well placed to deal with another 10 years of change.
Equally unpredictable will be whether the structure of the company will be the same when it celebrates its 11th year in the summer of 2007.
It feels to many in the industry that Cheapflights 2.0 is also just around the corner.