TUI on AsiaRooms and LateRooms for Q4 2010

Mega Euro travel company TUI Group have just published their results for the final calendar quarter of 2010 (PDF here).

Online travel companies AsiaRooms and LateRooms make up part of TUI's A&D Sector (for more background on this group see this post on the 2009 performance, this post on the first re-org that combined AsiaRooms and LateRooms and this post on the operational internal merger of AsiaRooms and LateRooms). Here is an extract from the earning release (note where they say Q1 it refers to calendar Q4)

"The A&D Sector reported an improved underlying operating profit of £4m (Q1 10 £1m), driven by a strong increase in roomnights in our accommodation businesses. Our accommodation wholesalers, Bedsonline and Hotelbeds, delivered a 20% increase in roomnights following continued expansion in Latin America, with particularly strong growth in Brazil. LateRooms.com, our accommodation OTA, increased roomnights by 19% as it continued to increase its market share. The increase in profits was partially offset by marketing and product investment in AsiaRooms.com, where we are increasing our hotel content and translating our website into local languages to address the high growth domestic
markets in Asia."

Accoumpianying spreasheet shows that the revenue for sector increased 7% from £121mm to £130mm.

Agoda 2010 turnover ~$500mm. Combined Booking and Agoda doing $780mm per year

Back in March I shared with you a report from Citigroup which (at the time) gave us the only real insight into the turnover of Priceline's Agoda. That report estimated the 2009 gross bookings for Agoda to have been US$244mm. Citi projected that 2010 gross bookings would be US$433mm

Previous efforts to trawl for comments or numbers about Agoda in earnings release transcripts resulted in very little (see here and here).

At the Q3 earnings release (see seeking:alpha transcript here) Priceline CEO Jeff Boyd had a lot more to say about the performance of Agoda. He told the meeting the the combined turnover of Booking.com and Agoda in AsiaPacifc was ~U$780m for the 12 months to 30 September. His exact quote was

I want to provide on a one-time basis some data on our progress in new markets to help size their contribution to our international results. Booking.com and Agoda have made excellent progress in building the Group’s business in the Asia Pacific region. The combined business of Agoda plus Booking.com’s business for APAC destinations was approximately $780 million for the 12 months ended September 30, and the third quarter gross rate for that business was just shy of a 150%.

Note - that is the combined turnover, not Agoda on it's own. He went on to say that

Agoda continues to build its business in the Asian region and again reported triple digit year-over-year growth in gross bookings, contributing to the overall international and merchant growth we are reporting. The business has performed well following civil unrest in Thailand and is well positioned for its seasonally important fourth quarter

Also note that in the Q&A section CFO Dan Finnegan stated that there was not real difference in the numbers/turnover from a point of sale or destination basis he said

the point-of-sales businesses [for APAC] is a comparable size and growing in impressive rates. And when you think about the Asian business to the extent that includes business for Agoda, that’s it’s whole business which is point-of-sale Agoda business. Most of that is Asian but it’s the whole business.

If we match the three data points of Citi's estimate for 2009 results, Boyd on the combined Agoda and Booking number and Boyd on Agoda's growth rates then it looks like Agoda is on track for closer to a $500mm 2010 turnover level rather than the Citi estimated $433.

In a separate note we also read that Agoda CEO Michael Kenny was leaving the business to be replaced by Robert Rosenstein (the current COO). I presume (though don't know for sure) that his departure is connected to the fact that November marks the third anniversary of the purchase of Agoda by Priceline and therefore the end of the earn out period.

With the earn out over we can likely expect to see much greater levels of integration between Booking and Agoda (first pieces seen here in January).

Like to know more? Check out the full earnings transcript on seeking:alpaha or Dennis Schaal's recent post at Tnooz

Two great information pieces on Korea

I have had the good fortune to visit Korea twice for work in the last nine months. It has been fascinating getting to understand the market more and work on strategies and plans. In my quest for more information on Korea in general and the online industries in particular I have come across two articles that may interest you.

First - an article on search engine marketing in Korea via SearchEngineWatch and Michael Bonfils called "Search Around the World: South Korea". The first paragraph has the hook - South Korea has three search engines ahead of Google and "the highest CPC prices in the world". Local sites Naver, Daum and Nate have beat Google and Yahoo so badly that the two search giants are fighting to see which of them can claim 3 and which can claim 4 percent market share in search. G and Y have all but given up doing it on their own with Google providing Daum and Nate with their paid search and Yahoo! doing the same for Naver. If you are interested in how search is different in Asia then this is a great read.

Second - a collection of 5 essays on Korea from the McKinsey Quarterly called "South Korea: Finding its place on the world stage".

The first essay by Stephen S. Roach and Sharon Lam of Morgan Stanley examines the South Korean economy. A highlight for me was their reasoning behind the South's rapid recovery from the Global F'n Crisis. They credit an ability by the economy to hit a middle ground. Not trying to compete with the Chinese on price and not trying to compete with the Japanese on quality. Rather finding a price/quality balance not found in products from the two Asian eco-powerhouses.

The second by Christopher Graves of Ogilvy looks at South Korea the brand talks about how South Korea has broken away from the "Hermit Nation" history through World Cups and Olympic Games but still needs to do more to establish the brand identity that benefit neighbours like Japan.

In the third Richard Dobbs and Roland Villinger of McKinsey take a different look at the economy with particular focus on the rise of the services sector. Concluding that for the next level of growth and any chance of achieving Japan like levels of GDP per capita the South must dramatically increase the size of it's services sector

For the fourth essay Shen Dingli of Fudan University outlines "Four steps to prosperity for Korea" including an interesting discussion on how to turn North Korea into an economic asset.

In the final chapter former Economist editor Bill Emmott discussing Korea's geographical advantages as a cross road between China, Japan and Russia. Drawing (possible strained) parallels between South Korea and Italy.

Both are worth a read for their commentary on Asia as a whole as well as Korea.

thanks to yeowatzup for the photo via flickr

Agoda in Priceline Q1 2010 earnings call

I have to let the stalker in me control the blog every now and then. Hence my continued series of posts where I look through the Priceline earnings announcements to find mentions and information on their Agoda subsidiary. The Agoda turnover information void was substantially filled by a recent Citigroup report but I am still interested in the (tiny) pieces of information I can gather on Agoda's performance.

Two things I am keeping an ear/eye out for in Agoda/Priceline announcements/transcripts (thanks to Morning Star for the Q1 2010 transcript). Firstly general information on performance and secondly anything on integration of inventory between the three models (opaque of Priceline, negotiated retail of Booking.com and merchant of Agoda). Here is what the transcript has on those questions.

On performance

On general performance CEO Jeffrey Boyd made a number of positive comments on Agoda’s performance. Saying that Agoda and year on year improvements in ADR were strong contributors to the 73% increase in international gross bookings growth (on a local currency basis). Agoda’s growth now seems to be having enough of an impact to shift the overall retail/merchant model mix. In this area Boyd said.

"Merchant gross bookings increased 25% as merchant hotel gross bookings both at priceline and Agoda offset year-over-year decreases in opaque airline ticket and rental car sales, where reduced industry capacity squeezed inventory available for opaque discounting."

But the future is not without challenge or risk – as we should expect for a business based in Thailand. As Boyd observed

"...civil unrest has reemerged in Thailand, severely disrupting certain sections of Bangkok and forcing Agoda’s team to relocate to temporary offices. As a result, business for Bangkok and other Thai destinations is under pressure for both Agoda and Booking.com. Nevertheless, both businesses continue to grow their overall Asian pacific businesses at impressive rates."

During the Q&A Mark Mahaney of Citigroup (author of the Agoda turnover report). Asked Boyd to give some more details on the Asian business. Here is the exchange edited to focus only on the Asia elements:

“Mahaney: ...could you comment a little bit more on the Asia business, particularly the Agoda asset? In the past, you’ve said that’s been growing close to triple digits year-over-year. Were the disruptions in the March quarter significant enough to take that growth rate materially below that level?

Boyd: With respect to Asia and Agoda... the disruptions had a very significant impact on business for Bangkok and Thai destinations. And while I don’t want to give a specific growth rate for Agoda, their business notwithstanding those disruptions are still growing at a faster rate than our overall business ...I’ll also add that the Booking.com business is growing, again..at impressive rates in Asia. So, Thailand is certainly having an impact, but the business is diverse within the region and the region is having very strong growth for us just in general”

On Inventory integration

He was then asked about the integration of inventory between the different brands. Boyd is still not giving away much here. It is clear that we have seen and can expect to see Booking and Agoda inventory appear on both sites but is not clear from his comments whether we can expect to see merchant and negotiated retail seamlessly integrated in the way that Expedia has started to do with its merchant and Venere backed Expedia “EasyManage” hotels. Here is that exchange (edited for focus on integration).

"James Cakmak - Sidoti & Company: Can you talk about the progress made on sharing supply inventory across your multiple brands and sites?

Boyd: With respect to sharing supply, we now have on priceline.com, Booking.com inventory available not only in Europe, but also in North America and Agoda has been selling for several quarters inventory of Booking.com to its customers in Asia. I think that we’ve made very good progress in getting that integration up and running, and we believe it’s been additive to the business. The next phase of that is really one of optimization to make sure that we’re able to display the inventory in a way that is additive to the Group as a whole and understand the relationships between how various inventory performs in different marketing channels. It’s not a trivial exercise, but in our view we’ve got plenty of time to get it just right, because as we optimize over time it will be beneficial to our results. So we’re encouraged by our progress on that front, but there is plenty of work left to do in that regard.”