‘Everything to play for’: Hugo Burge on Cheapflights’ present and future

The Cheapflights chairman and ceo talks to Lee Hayhurst about growth, grief and Google

When Travolution first started covering the online travel sector, Cheapflights was on the verge of something its current chief executive now considers would have been a terrible error.

Buoyed by a sector in growth and a travel media model that was proving its worth, the company had spent a fortune putting everything in place to float on the London Stock Exchange.

It was, chief executive Hugo Burge now concedes, an idea that had “seduced” Cheapflights’ shareholders who had become “boggle-eyed” by the numbers and maybe even a bit greedy.

Given the experience of other dot-com pioneers that went public, such as lastminute.com, the decision not to pursue a flotation was almost certainly a wise one.

Five years on, and with the company enjoying what it says is the best trading in its history, Burge says Cheapflights has a renewed focus, prompted in no small part by a tragic “bolt from the blue”.

A new world order

In July, Cheapflights finance director Simon Bicket, the fifth person the firm employed, died suddenly after a heart attack, aged just 54.

Bicket had been brought in as only the fifth employee of Cheapflights after Burge led the original buyout from founder John Hatt in 2000, so it was, said Burge, a chastening experience to suddenly lose someone who had been a driving force for a decade.

“He was a real powerhouse in the company, and can take credit for helping us achieving the successes we enjoy today,” Burge said.

“I had spent more time with him than many of my friends and family for years. His death meant we started to see the world differently.

“We don’t taking anything for granted and we celebrate our achievements. We have worked through our emotions. We learnt so much from Simon and his spirit is still with us.”

On the wall in the Cheapflights office, a picture of Bicket is proudly displayed in his honour to mark the second appearance of the firm in the Sunday Times Profit Track 100.

“The awful thing was, on the one hand, we had this emotional train wreck and we wanted to celebrate Simon’s life, on the other we had a business to run.

“But Simon was the most pragmatic and ruthless person I have known, and he would have said ‘get on with it’. We have gone through a lot of changes in recent months, notwithstanding Simon’s death.”

Part of that change saw Burge take on the role of chief executive after Chris Cuddy left in March – one of a number of senior departures this year.

“We decided not to recruit new people but we’ve promoted from within the company and that’s been energising for some hugely talented people who have made a contribution to Cheapflights,” says Burge.

International expansion and the purchase of Denmark-based metasearch Momondo, giving it a leg-up into a market in which it had taken the first steps with the short-lived Zugu, are what has been driving the company forward.

But Burge says he cannot envisage reviving the idea of going public. “In 2006, we were building up and getting overexcited about selling the company. We were all ready to float on the London Stock Exchange, we had a non-executive board, glamorous US lawyers and PricewaterhouseCoopers had done our memorandum of association.

“We’d spent fortunes on this having looked at what was best for the company and the investors, who had been in for some time. We had had some nice offers, but we were seduced by the idea of a float because the numbers made us boggle-eyed and a bit greedy.”

But Burge now adds: “It would have been a nightmare. The markets were over-promoting people. It would have been a huge distraction from focusing on what matters to be a long-term business. We were maybe trying to grow up too quickly and we were not ready. We needed to focus on the hands-on. It’s easy to get too focused on the short term.”

Short-termism is a particular issue today amid the financial turmoil that’s having an impact on the disposable incomes of Cheapflights’ customers and customers’ customers.

Taking over the world

Establishing an international footprint has been vital and Cheapflights now has a strong business in the US, but also a presence in emerging markets such as Russia and new bases in Spain and Australia among 15 countries.

With Momondo proving “transformative”, according to Burge, the original Cheapflights media model is still considered to have great potential to make inroads.

“Our international expansion is going extremely well and we are being successful in new markets. We are very proud of the things we do and the array of partners we work with.

“Sometimes, we feel Cheapflights is not as sexy as some of the other metasearch products out there but we do offer good value and a wide range of deals, and sometimes that fact gets lost.

“We want to play on the strengths of both models.”

This diversification of the businesses prompted a change of parent name to Cheapflights Media this year to encompass its travel guides and newsletter, which has five million subscribers.

Looking back, Burge admits it hasn’t all been plain sailing and mistakes have been made.

In the early days, in particular, he recalls “putting his foot in it” in a meeting with a US airline.

“My sense of humour in Houston didn’t go down too well. We still don’t work with that airline – the meeting was an absolute disaster,” he recalled.

However, the setback didn’t put the brakes on entering a competitive US market successfully.

“One of the bravest decisions we made, and what seemed like a terrifying decision at the time, was using the .com domain in the US and switching to .co.uk in the UK.

“But it worked. The US was an extremely competitive market, there were a lot of people investing in it, but at the same time we believed we had a unique model to work with a broader range of advertisers.”

Led by commercial director Mo Bulbrook and Yogesh Sharma, global head of newsletters, the newsletter service has been rolled out and is operating in five different markets.

“Newsletters have been extraordinary for us. We always believed in it but frankly we have messed it up a few times,” says Burge. “It’s easy to get it wrong, spend a lot of money and not get your numbers right and you get a huge churn of subscribers.

“We’re not interested in volume, we want an active, engaged audience. We’ve still got a long way to go. It’s not rocket science or cutting edge but it’s a successful business.”

The Google effect

No discussion with a player in the metasearch sector is complete without bringing up the “elephant in the room” – Google’s buyout of software firm ITA and launch of Flight Search in the US. The great fear is that Google’s new search engine for flights will freeze out intermediaries in favour of airlines’ own sites.

“I see it as a vote of confidence in the model,” says Burge. “It’s a little confusing for business partners whose advertising spend is on Google – we all like natural search.

“But I’m not going to guess what the anti-trust investigation in the US is going to come up with. The key challenge for everybody is it raises the bar. Google has created something that’s fast, they have some great technology but at the moment it’s not comprehensive. It does not do what metasearch does.

“The beauty of metasearch is it does compare the market. It has its strengths and weaknesses but at the moment there are other metasearch sites out there that have better diversity of information.”

This, says Burge, is where Momondo comes in. He believes it is a more characterful, more fun answer to Google’s geeky, austere, technology-driven product.

“I expect Google to come up with a very good product. We see them as a competitor but at the same time feel there is every reason for confidence in our model,” Burge says.

A factor that’s allowing many in Europe to sleep at night is that ITA software was developed ostensibly for the US and not for the more complex and diverse overseas markets.

So, great store is being placed on the potential for Momondo, which has won critical acclaim here and in the US.

“We are excited to be in a position to have made a material acquisition. We feel like we have just had a big meal and are digesting it. We are just beginning to scratch the surface with Momondo. This will be our biggest and best year to date and we are feeling optimistic about the future,” says Burge.

“Our international markets are doing very well and we feel there is everything to play for.”

Career at Cheapflights

• 2011: Chairman and chief executive
  
• 2009: Executive chairman: after a decision to pull UK flotation
  
• 2008: Board member and consultant
  
• 2006: Vice-chairman and head of international: helped to build team to lead expected exit; targeted flotation for 2008
  
• 2003: President US: launched US business and Boston office
  
• 2000: Co-chief executive: bought company with investors
  
• 1993: Graduated, Cambridge Univ

Hugo’s favourite places

“I love to visit new places and enjoy the thrill of seeing somewhere different. If I was forced under pain of death to recommend a favourite holiday destination I might suggest Belle-Île in Brittany, which is utterly charming; but then I might quietly slip in Madagascar too, which is mind-bogglingly interesting.”
 
“My most memorable holiday was hitch-hiking from Zimbabwe to Kenya. The highlight was the very humbling experience of seeing the mountain gorillas at Kahuzi-Biega National Park, in what was then Zaire.”
 
“I usually take two or three trips abroad a year for leisure, but it utterly depends whether it is a busy or frantic time on the gerbil wheel. I try to blend work and leisure, plus actually take quite a few short breaks in the wonderful treasure that is the UK.”