But unlike hundreds of other first-wave internet companies, Lastminute.com is still here, and this year marks a decade in business. The anniversary comes at a time when the travel sector is braced for enforced consolidation after a series of high-profile airline and tour operator failures, including XL Leisure, Britain’s third largest package tour operator. So how has Lastminute made it in this brutally competitive sector?
‘The difference between Lastminute.com and the dotcom firms that didn’t make it is that it was actually a good idea and a sustainable business,’ says Lastminute.com’s chief executive, Ian McCaig. ‘At the time, it was possible to raise money for the unlikeliest projects but when I look back at the original business plan, it is not fluff.’
For many, Lastminute.com is forever associated with its founders, Brent Hoberman and Martha Lane Fox, who became pin-ups for the e-generation. The premise was simple: to use the then-new internet to sell ‘distressed inventory’ such as holidays and theatre tickets. The young, good-looking pair generated reams of free PR and a high profile, and the ‘Brent and Martha show’ was a key ingredient of Lastminute.com’s wildly successful flotation in 2000, which saw the company achieve a market capitalisation of £400m.
‘We had a very singular birth – as dotcom was taking off – and two very charismatic and youthful founders,’ says McCaig. ‘Lastminute.com was born into a much hyped sector, topping it by doing its IPO the day before the dotcom crash.’
However, the duo got a rougher ride from the press as disillusioned investors watched their investments plummet. Hoberman and Lane Fox carried on regardless, expanding into Europe and embarking on a series of acquisitions. Intelligently, they populated the board with individuals experienced in the travel, technology and retail sectors; McCaig, a former IT and telecoms executive, joined it as chief operating officer in 2003.
Imitation is the sincerest form of flattery and the number of websites trying to address the same market has proliferated. Lastminute.com can no longer differentiate itself on price from rivals such as Expedia and eBookers, and exclusive content is hard to come by. Without the cachet of Hoberman and Lane Fox, what makes Lastminute.com different?
‘I believe no one else offers what we offer,’ says McCaig. ‘In the UK, the brand has transcended its literal meaning with people regarding it as a leisure brand.’
Didn’t its squeaky-clean founders start to get on his nerves? That couldn’t be further from the truth, says McCaig, as he lists his friends’ many good qualities. He says Hoberman has an ‘intellectual ego but is not arrogant’, and they speak regularly, having forged a close working relationship in the two years leading up to the business’s sale to Sabre Holdings, the owner of online travel shop Travelocity, in 2005.
Some things had to change – such as the wallpaper in Lastminute.com’s boardroom in London’s Victoria. An interior design contact of Hoberman’s wife Genevieve had decorated the meeting room in black paper with silver circles the size of 10p pieces. It became a DIY emergency when a colleague emailed McCaig asking to be excused board meetings as he feared the colour scheme was triggering his epilepsy.
‘We had to move on from that period as companies can become addicted to the past,’ says McCaig. ‘Brands need to change – at the beginning Lastminute.com was just a London thing.’
Its customers still tend to be savvy urbanites but they are now as likely to be based in Paris or Rome. In the two years since he took charge, McCaig has aimed to improve the technology behind the website while overseeing its integration with Travelocity’s European interests.
McCaig is pleased the company is no longer beholden to the public markets. Sabre has since been bought out by private equity firms TPG and Silver Lake Partners. Lastminute.com has a turnover in the region of €2bn (£1.6bn) but McCaig refuses to be specific.
For a new generation of internet users, who didn’t grow up with the Brent and Martha story, Lastminute.com is just another brand that pops up in a Google search. Recent market surveys have suggested that Lastminute has lost ground to rivals such as Expedia and Tripadvisor.com this year. McCaig, however, bristles when the subject is raised: ‘We have got scale, so I am not obsessed with market share. I am obsessed with growing profits.’
To take the business to the next stage, McCaig wants to widen the brand’s appeal, making it a kind of social secretary for its customers rather than just a travel operator. Its lifestyle business is an increasingly important part of the mix, with the company expected to sell 1 million theatre tickets this year. The core demographic remains 28-to 42-year-old city-dwellers, but key to its success will be gaining recognition as a leisure brand – as opposed to travel website – in markets beyond the UK.
The industry’s favourite cliche is that customers will give up a lot before they give up their holiday, but McCaig says the credit crunch means the sector faces tough conditions. Tour operators cut capacity this year to preserve margin and he says demand is under pressure in a lot of markets. He predicts some big-name brands will fall as the travel market polarises between a handful of global operators, such as TUI, which owns First Choice Holidays, and niche operators. McCaig wants Lastminute.com to be in the former group. ‘When Lastminute.com started, it was a bit adolescent – there were great moments and some terrible ones,’ says McCaig. ‘We then had a period where we had to study a bit and got interested in going to university.’
If that is the case, though, it is applying for a course with only five or six places – and competing with 10 other applicants.