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The Foundr Podcast with Nathan Chan
535: How a Former Lawyer Built a $450M Global Travel Brand | Adam Schwab [VIDEO]
01:26:23
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- [00:00]
A
Eight years of sweat, of putting together furniture, of dealing with bed bugs. Business goes under after six months. People go, whatever gave a crack, no mark product, market fit. We had all that. So it would have been a death by stupidity. We started a backpacker apartments business. I drove around Melbourne with my dad's trailer and bought secondhand furniture. So furnished the apartment for a couple grand and we were making sort of 10 grand, 20 grand a year actually off that one apartment. We thought, how good is this business making 20 grand? We could do 50 apartments, that's a million bucks a year. And bear in mind I was earning 50 grand as a lawyer to work all night.
- [00:29]
B
So yeah, wow.
- [00:30]
A
The bar was low. What we had to get over to. So we knew we needed to create a travel itemly website so we'd have the world's best travel deals. Travel deals you couldn't get anywhere else. We had a cornered resource. They think we're a fraud. This is too good to be true. How can they be so much cheaper than everyone else? There's something going to be a catch because it actually is unbelievable. You have runs of bad things and runs of good things. We had like bad, bad, bad, bad. Just through pure grit got through, took all our money out, put it back in like when you were playing poker, you just chuck everything you have in that last hand. And we literally did that. Hear the stories, learn the proven methods and accelera and future through entrepreneurship. Welcome to the founder podcast with Nathan Chan.
- [01:13]
B
Adam, thanks so much for joining us today, man.
- [01:16]
A
It's great to be here. It's a huge honor.
- [01:18]
B
I know, long time coming.
- [01:20]
A
Hey, I think of two great sort of aims of our business. One's to get on Guy Raz's show and the other one's get on your show. So one out of two so far.
- [01:28]
B
There you go. That's awesome. Thanks man. So look, tell us about luxury escapes. How'd you start it? Like how did it all come together? Like so just for context for everyone, I knew of Adam early days when I started founder because I met one of his co founders in many of his businesses, Jeremy Same. And he was like a little bit of a mentor to me. And I'd never met Adam, I met him through ypo. And so I know like the journey that Adam's been on and Jeremy's been on with these businesses and Adam's in a lot of online businesses. Like you've done a lot of brands, you've done a lot of stuff. So yeah, talk us through. How did luxuryscapes come to be funny.
- [02:08]
A
Jez always regrets not being able to invest in your business. One of his great. He's a good investor but he missed out on that one. He's still angry about it. But I think let's go back from like one step before luxury escapes is probably relevant is our pre Lux story. So we, I was a lawyer, Jess was a banker. And we say our very first business started when we were 24 in 2004, like Melbourne Cup Day for those Australians who are watching. November 2004, we started a backpacker apartments business. Yeah, we literally saw a friend of ours was, was backpacking in Australia and living in just this, this hovel of a place in a suburb called St Kilda. And we're paying some 150 bucks per person each. So somebody who was running this apartment was making like 400 bucks a week for. And it was terrible. And we thought we saw in real life classic, classic problem. We thought we can solve this problem. And I'd sort of done a bit of this stuff. I lived in Whistler and did something similar when I was living in the apartment. This is pre Airbnb. Don't forget this. So we started our first apartment. We literally furnished the apartment. I drove around Melbourne with a trailer, my dad's trail, bought secondhand furniture. So furnished the apartment for a couple of grand and thought well how are we going to get people to fill it? We had to get backpackers and sort of high end professional backpackers, if that makes sense. I mean finished studying uni or halfway through a uni course or working at a really good job, but didn't want to obviously couldn't get their own house, didn't want to stay in a hostel, couldn't afford a hotel that's kind of forgotten about market. So we thought how do we target these people? And back then, this is 2004, there was something called Internet cafes and you were probably pretty young. So Internet cafes had like a ball, like a board on the side of every Internet cafe and people would stick like posters on there like I need a cat or whatever, like here's a trailer you want to. And so I'd go in there and we printed off this sort of piece of paper with my phone number down the bottom. They rip off and I'd go there, rip everybody else's sign off, put my sign outside on there and had our first open house. And we thought people are going to rock up to this open house. And sort of 100 people rocked up and we ended up renting that very first apartment to A bunch of five English guys. In hindsight, we didn't do five guys ever again, but they were actually good guys. But other times we had some issues and we were making so 10 grand, 20 grand a year actually off that one apartment just by effectively making an arbitrage profit on what we rented it for versus what we rented it for, what we rented it for.
- [04:19]
B
So like an Airbnb, Like.
- [04:21]
A
Like someone running an Airbnb. Airbnb is a much better model and they were the platform. They're the platform. So you're much better off being the platform than the principal. Principal. You take vacancy risk. Yes. So we did this in November and we didn't realize that's the best time to be doing this kind of stuff because it's coming Melbourne summer, so we're inundated. We thought, how good is this business making 20 grand? We could do 50 apartments. That's a million bucks a year. And bear in mind, we were earning 50 grand, I was earning 50 grand as a lawyer to work all night. So the bar was low. What we had to get over, started this first apartment, did another apartment. I then took a leave of absence from. From the law firm. What we didn't realize, we then started another team. What we didn't realize is winter is much quieter in the summer, and this is a super seasonal business. So the next few, like the few apartments after that, we had to drop the price a lot and had to sort of hustle through the sort of cold winter months, the four months. And then come sort November, October, November starts warming up again. So we sort of learned that cycle. That was our first foray into business. So we went from professional services to running out. It was just a lot of trial, mostly error, bit of trial. And we just sort of slowly learned how to. What the best places to market were, how we dealt with customers, clients, how we. We had to. We put computers in it because this is before everybody had phones and iPads. So we put. One of our big selling points was putting computer in the apartment. And people could use the Internet and they download viruses. All we have to go and clean the computer off every week. It was a lot of stuff like that. We once had a bedbug infestation. We thought, what are we going to do? We never knew what bedbugs were. So how we. We then we thought, oh, we'll call one of those fumigators. And that was like a thousand bucks. So we couldn't. That was like a whole month's profit. We couldn't do that. So then Jez found out and a lot of our apartments are in like big nice buildings with saunas and spas and swimming pools. And Jez is pretty industrious and Jez found out that if you heat just kills bedbugs. So we thought this apartment building has a sauna. Why don't we put the beds in the sauna and that'll kill them. So we got the beds, put them in the sauna, we went for a swim. People are trying to go in the sauna. The beds like falling on their heads. Yeah. Anyway we put it for two hours, finish the swim, finish the spa, put out. The bedbug's still there. So and then we thought oh, maybe we'll use a steam cleaner. So Jez bought this cheap steam cleaner for a couple of grand, this plastic one, not like the hardcore ones you find in the supermarket, a really second rate one. And I was like spraying like these IKEA beds and the bedbugs are flying in your face and that was just too much hassle like taking us like five hours. That didn't work. We eventually found this amazing fumigator who would do natural remedies to get rid of bed bugs and that was like literally error, error, error worked. So we, and so it's just we got the years of doing that just like some sort of finding solutions to problems where we never thought we would have this problem.
- [06:57]
B
Yeah. And then what happened next?
- [07:00]
A
So we then moved to. So 2007 came and the rental market tight. So when we started the business it was really easy to rent an apartment and because even though we're putting backpackers in their owners that I've just, just take the apartment offices in the. Anyway rental market tightened a bit like what's happened the last few years in most lot of western countries and it's probably post debt funded. Boom. Same sort of thing. So you had that boom. Rental market suddenly became really tight. Suddenly some property managers and owners go hold on, I don't want these guys sub lessing our property. Even though we treated it really well and made sure that was always returned in perfect condition. Owners has changed their view on us. So we were seeing that and then we had a massive fight with one of the big property managers who essentially tried to defraud us. They went to all these owners saying, basically saying we were doing something we weren't. We managed to get hold of about half the owners and told them what happened. The owner said basically sided and gave up, gave us their properties. We couldn't get hold of everyone we ended up going to court and we won in court. So we got a stay of execution essentially and we're able to. We were in the process of doing this anyway and that was converting the apartments to corporate apartments. So imagine like Oakwood or a service department style setup, cleaned every week and sort of single tenants, which is a much more sustainable long term business. Flip to that. And so it was really a blessing in disguise. So that that property manager who was fraudulent really did us a massive favor in the end because we were able to accelerate the push to corporate. And as part of that we also bought half a dozen properties using pretty much all debt. We didn't have much money at the time and me and Jaz don't like debt. So about 18 months later we sort of sold those properties and we fixed them up a little bit. Bit of like block style. So bit of paint, dyed the carpet, put really styled it so it looked really nice. Made a million bucks essentially more money we'd ever made on anything. And then we took that million bucks and started our first E commerce business. That was called, originally called Zoopon based on Groupon in the States. Groupon had about a million clones around the world, God knows how many. In China, there was 82 Groupon clones. In Australia we were one of the 82. And we were the only ones who've really still alive. Groupon sort of still struggling on. And then there's us. And then we soon after pivoted to a travel business.
- [09:03]
B
Yeah, there you go. So man, there's some great stories in there because I remember you started as.
- [09:11]
A
Zoopon Groupon with a Z and one of the worst names in business. So apart from being a really dumb name, so we didn't. It was always meant to be a working name. It was never meant to be the E name. We just kept it. So as often happens with names. And there was a business in Australia called Scoopon who is run by a couple of good friends of ours. Now at the time we didn't know them. They had a business called Catch of the Day which was based on Woot, a guy called Guys called Gabby and Hezzy Leibovich. Very successful business people now, very good shareholders in luxury escapes before they were sort of enemies or people we copied. So we, and this is back in the sort of the rocket Internet days. We. So they did an amazing job with a business called Scoopon and we saw it and let's say we, we were inspired by a lot of what they did. They did an amazing job. So we looked a lot like them. And they didn't do anything about that. They sort of let us be and they were much bigger than us. And then Jez had the idea to have a second brand called Deal Scoop and that just said, hold on, these guys just take it. And we didn't actually mean to. There was no intention for us to pass off on them. We just didn't even think about it. We didn't. I wasn't even keen on that second brand. But anyway, we launched this. We were going to launch this Deal Scoop business and Hezzy goes, nah, I'm going to sue these guys. And he sued us and we got lawyers involved with all this stuff. And then they basically said, just change the name and you'll be right. So we changed the name and they said, fine, just go off, just get, get stuff, guys, change your name. We changed the name to deals.com that we pay 100 grand for deals.com, which is a much better name anyway. And we're off to the races with the new brand.
- [10:33]
B
Yeah, there you go. And then those guys that sued you, you ended up building friendships and they became great business partners.
- [10:40]
A
Yeah. So the first thing we did with these guys. So a couple years later, Hezzy contacts us. This is what this is about 18 months after the whole sort of name change in Bruglio and says, why don't we catch up? We caught up with him. He was thinking about maybe buying deals.com because he was looking at stuff and he offered. Made like a really low offer and we never really counted as that. But we met this guy and we thought he's actually a really good guy. Like, he's a super charming guy and super nice. And this is. I'm sure you speak to some really successful people. It's probably when people speak to you now that think the same. But we thought, amazing this guy's even talking to. Anyway, we kept in touch because we really liked him, obviously, super smart. Him and his brother are super smart people. And then we. Before we started deals, our first idea for E Commerce was actually a restaurant booking business. A bit like OpenTable, essentially, but with a discount element attached. We thought the Groupon clone would get to scale faster. We always wanted to go back to this business and Jez was running. Jez essentially was running that business and I was running the deals business. And we had probably 30 people in that business. It was actually decent size, but we just couldn't never get product market fit. It was losing a bunch. It was only 100 grand a month. I reckon that business, even though we loved the idea. We actually pivoted to a food like an Uber Eats style business.
- [11:49]
B
Yeah, yeah, yeah. I remember him telling me about that. And you guys had reps going out. Yeah, we had a Menu log thing.
- [11:54]
A
Yeah, we were Menulog. We put printers in Menu Log copied us putting printers in restaurants actually and Menu Log but Menu Log were well more established than us. They've been around doing other stuff for a long time. And Hesi had seen another business called Eat now run by a great entrepreneur called Matt Dyer. We'd known Matt really at a high, talked about doing a deal with Matt but we'd already sort of built our staff. It didn't make sense. We kind of were doing the same thing. He ended up buying Matt's business. Matt kept an equity stake and Nathan, his partner kept an equity stake and they went about their business and we were losing a bunch of money. So for us we just couldn't get product market fit. This is a sort of years gone past and we're going to have to shut up. We thought we're going to have to shut up. We had 700 restaurants signed up so we had some like real asset there had printers in there. And Hesi was just getting going with it now. So I reached out to Hessey and sent him a text message saying we can't, we couldn't get there on deals and scoop on why don't we deal with our business called My Table and your business called Eat Now. And anyway we went to see Hezzy at the same place we saw him the first time in Elster week, this restaurant in elsewhere. And Jez goes I'll take 5%. And I said I reckon we can get 10%. Anyway, go up and said to Hezi we'll do a deal for 10%. He goes we'll do a deal. And to his credit he stood by the deal. I think we went down to like 8% eventually but we owned 8% of his business and we gave him all our assets and Jez worked for them briefly and we were always very confident the business model would work and that these guys would do a great job of it. They had plenty of capital, they raised money from Tiger as well. They were profitable, they really knew E Commerce and to that credit did an unbelievable job. So they were the number two behind Menulog, which is the dominant Australian platform. Those two businesses eventually merged a couple years later. We just came along the ride as small shareholders. That business then got bought by a global business called Just Eat, which is now part of Takeaway which is actually part of GrubHub. So effectively sort of accumulated. And that business sold for almost a billion dollars. So we had 1% of that, which was I think the greatest unjustified windfall in Australian business history is probably this. So we had a business that was worth less than zero, probably worth negative 250 because we had to shut it down, pay redundancies, all that kind of stuff. Not only do we have to pay that, we got 2% between us of this billion dollar business. So it was. We stood on the shoulders of really good. So the menu log operators are amazing. Leon, Dan, all those guys. Matt, Nathan, Hesse. Jason did an incredible job at eat. Now we just stood in the background getting this equity, having this equity that became like quite valuable despite being complete, utterly inept. So we were running at the same time, running out deals, business in the back. And that was our main business. And this was just sitting in the background. We never dreamed we'd get any money for it. Like we were happy to get a million bucks. So you got $20 million between us.
- [14:26]
B
Wow.
- [14:27]
A
And we've invested in that. Jaz invested in a bunch of stuff and bitcoin, all this kind of stuff. And I've invested in stuff and some stupidly, some trudely and. But that was a huge unjustified windfall. And I think the lesson from that is no matter how bad the business is going, there's usually an asset and there's optionality. And our friend Tenille talks about this as well. It's maintain optionality as long as you can. Now obviously you don't want to flog a dead horse for 10 years and just can you lose money? But we knew there was optionality there. We knew there was a deal to be done because we had an asset that hesi needed and that hesi could use. So it was a great win win. And we were obviously super lucky that those guys executed so well. And pick the right partners is probably less than 2. Pick partners who are smarter than you and can do a really good job. So that was just such an unjustified lucky windfall that you don't get many of them.
- [15:16]
B
Yeah, man, that's a crazy story. And there's a couple of things I want to focus on because a lot of times people are watching shows like this, they might want to start something, they're just about to launch something or they look, look, they might be well on their way with something. And you guys, one thing that you and Jeremy did pretty well for a long time was you ran a Form of like the Rocket play, right. Where you'd look at a business, you'd identify whether it was worth copying or not and you'd go pretty close to modeling it. Like what would you say to people that want to do that and worry about like creating a me too company and that whole piece of the puzzle.
- [15:57]
A
Because the Rocket thing. So Rocket's a German company run by the Samurai brothers that made a business of copying, copied, ebay, sold it back to ebay, copy. Groupon sold it back to Groupon copied. I, I covered a bunch of businesses I copied. I think hellofresh copied. So I had always been that that's kind of gone out of vogue a bit. It was in the early 2010s. That's all everybody did.
- [16:13]
B
Yeah, 100%.
- [16:14]
A
I can't remember the last real imitator like that. And maybe it's because businesses need more capital now and people use capital as an advantage, as a competitive advantage. I don't know why this is not happening much anymore.
- [16:26]
B
But you could look at a business, right? You want to start a business and you can see it's doing well and you can just model everything and just copy it and just tweak a couple of things.
- [16:32]
A
I guess the. Probably the more recent example is and it's not that recent, but the Uber copy. So everybody copied, Uber did copy. Remember China had like 100 Ubers and eventually Didi won and Uber merged with Didi or got a part. So that's the last I can. Since the Uber clones, there hasn't really been a craze of cloning for what it is. Something I think about it a bit actually because Samurai brothers, so rockets kind of you don't hear about anymore. They've got their fashion businesses which are going okay. But it's a really strange phenomenon that the copying cloning doesn't seem to have happened lately. Yeah.
- [17:00]
B
And even if you don't want to do it like on a big scale, you know what I mean? Like how do you identify? Like how would you back in the day or even now, how would you identify an opportunity of a business that you think would be worth modeling or bringing it to your local region? Because that's what you effectively guys used to look at America. Like I said, that's how you look. You looked at the Groupon model.
- [17:21]
A
Like this is massive model. Yeah. I think these days people and I think the idea of startup has now moved from copying somebody to solving a problem. So I think now and now you've got obviously Y Combinator started in the us but you've got start made in Australia for example. Obviously Y Combinator and techstars in the US and most countries have a version of this incubator. Now there's a much more well trodden path for people with startups. So incubators take hundreds of businesses every year. Antler, for example, is a great one and they put you together. So I think the notion of just sort of coming up with a business yourself or copying a business just doesn't seem to happen because there's just much better routes for building bigger businesses that solve a real problem rather than just copying a. Copying a business. I think to an extent most of the copies haven't worked like the samurai brothers made a bit of money by effectively selling back. But the copying craze I think stopped just because it was less effective than people who are creating original businesses.
- [18:17]
B
Interesting. So when it comes to luxury escapes, how did you fall into starting that business?
- [18:24]
A
We didn't copy anyone on the only one. So we had, we had this deals business and the deals was essentially going to restaurants and day spas or activities and offering a big discount to customers. So going to a, let's say you own a restaurant, say we'll go to the restaurant, say we'll sell us $100 of food for 70 bucks and we'll take 20% commission. So the restaurant gets 50 bucks for giving away 100 bucks food. The customer gets 100 bucks, we get 20. So great deal for the customer. You're saving 30%. The restaurant should be a good deal. It just depends on how the, how good the restaurant was at understanding what they were buying. So what we're doing is we're saying the restaurant, well, you're getting 50 bucks cash and you're giving 100 bucks. But 100 bucks doesn't cost you 100 bucks because what's the marginal cost for you? You've already got your rent, you've already got your wages, you've got your fixed cost.
- [19:11]
B
We're driving you leads.
- [19:12]
A
Yeah, we're giving you. So it's a cost of acquisition. You need to be thinking about this as we're giving you leads which you think about in your business every day. And that's what all smart online businesses do. Offline business don't think that way. All I think about is I'm getting cash here, I'm paying cash there. A smart business takes that lead and turns into a higher lifetime value customer. And we still have that form of this business today with only with really good partners. They understand this. It's high end restaurants, it's really good day spas, it's much more premium stuff, it's hot springs who make money out of it and have a really high purchase price. And our discounts are a lot less big these days and our margin's a bit lower. But ultimately we still have the same business model on the side of our travel business. But essentially the play was we'll give you a really cheap or free or even negative cost acquisition. The problem in the business model was the restaurant or day spa didn't often treat or didn't always treat this customer well. Maybe 30% of the time they treated them really well. 30% of the time was kind of neutral, 30% was 30%. Terrible problem for us as the platform is when the customer has a bad experience, they blame us. They might demand a refund or they just don't come back. So the lifetime value for us wasn't that great yet. The cost of acquisition was high and because there were so many competitors, commissions are being dragged down. So in every respect the model wasn't great, which is why everybody died but us pretty much in Australia and Groupon globally. So there was all sorts of issues with that model. But we finally stumbled across this travel model. So if you travel like bed and breakfast, places will come to us. And with travel you have a couple of solutions that weren't there for experience. Firstly, a much higher basket size. If you sell an overseas trip, it's like 10 times 20, 30 times the basket size of a massage. So your cost of acquisition is the same. So you have unit economics, which is how much gross, gross margin you make, essentially were much better for travel. The other problem we solved in travel got solved in travel is travel. So hotels you work with and hospitality businesses, they naturally care about doing a good job for the customer and if they don't, something called TripAdvisor or something called booking.com where you can get rated. If you get a bad rating, you're stuffed as a business. So A, hotels cared about it naturally and B, there was A, this sort of, sort of democles hanging over their head. They're going to do a job. So the big problems, the two big problems with the deals business, which is just bad unit economics, bad ltv, were solved with travel. And we kind of didn't know one of these concepts were this is back in 2010, 11. We just could see this was a better business and we just lent into it. We had a great. One of our friends called Mark who went to did Law a few years behind me, just incredible negotiator. He'd be able to walk into a hotel and do a million dollar deal wearing a Bintang T shirt and thongs. Like he's possibly the best negotiator Australia's ever seen in this part of business. And not only that, he was a great merchandiser and really understood the customer, which is what every great salesperson can do. And he, he, along with Jez and I and Josh who was another person who was really big and deeply involved in the business, we just sort of stumbled across this model that didn't really exist for travel. And let's call it flash sales or tactical sales is what we talk in the industry. And basically the principle is we'll go into a hotel, ideally a sort of four, five, six star resort and hotels are never full, so, or very rarely full. And when they are, they know when they're going to be full. So for 50 weeks of the year hotels got either a lot of inventory or some inventory. They could be 70% occupied, 50% or 90. So we're basically coming into hotels. I will give you lots of sales really quickly and we'll give you the sales when you need them. So if you're full in Christmas, the Christmas week, we're not going to sell that week, we'll sell in all the other weeks where you're empty, where you're empty or empty and hotels go, okay, well I'm getting money for nothing, I'll give you a big discount. So we can then give a customer a 30 or 40 or 50% discount and inclusions like breakfast dinners, day spots, all that kind of stuff. So quotes a real win win hotel owner makes money and the customer saves a bunch of money and we just sit in the middle and facilitate and it becomes, it's become more complex than, a lot more complex than that. But the basic principle is hotels have empty rooms. Customers want to stay in those hotels and don't know these rooms exist will essentially be an early bird model for these hotels to sell these rooms in advance. So they say they sell rooms early, B they get to yield up, which means because they're not 0% full or 20% full going into a need period, they can charge more on other channels. And the other thing is because we never just sell the bed in the room, we include breakfast dinners, day spas, massages, blah blah, that's high margin for the hotel. Hotel's making 80% margin off F&B, they're making maybe 30, 40% off room. So we can give a much higher, what's called revenue per available room and much more profitability for the hotel. So customers love it. Who doesn't love a massage and a dinner and a breakfast? And hotels love it because they make more money. So we're creating that really great win, win.
- [23:38]
B
So when did you start to pivot into the Luxury escapes model and build out the brand? Because you've done an exceptional job with the. You got a retail store. Like retail stores, not just in Chadstone, but other places around Australia now too.
- [23:54]
A
You've got one soon, Sydney soon.
- [23:55]
B
Okay. All right. Can we talk about that?
- [23:58]
A
Yeah, it's coming soon.
- [23:59]
B
It's coming, but it's really, really cool. Like, what you've done with the brand is very, very impressive. And this is not a small business. Like, this is a big business.
- [24:07]
A
Yes. In terms of you. Right. And so we started doing Travel under the deals.com au brand and we started doing more and more deals and we realized probably within 18 months, 2012, 2013, that our customers loved it. But hotels didn't love being on deals.com because you're sitting in it. We had all sorts of stuff on that site. We had homewares on that site, fashion on that site, some cheap stuff, $25 massages, like all sorts of stuff. If you're the Ritz Carlton, you don't want to be next to that. You want your brand in a pristine environment. So we knew we needed to create a travel only website. And then Jez, I think Jez found luxuryscapes.com somehow. He was great at finding domain names. A lot of terrible ones. This really good one paid 100 grand for it, maybe 120 grand to it. It was a travel agent in Sydney who owned it, wasn't using it. Yeah. So great win for her and great win for us. We got. We created this brand that didn't really exist. That was. And then we bought a business called Getaway Lounge from Channel nine, which is a TV station in Australia. They had this business that wasn't going. It was a similar concept, but it wasn't going that well. And then we rolled to their members because we bought that business and they didn't want us to call it Getaway Lounge. We said, we don't want your name anyway, so shove your name. We'll take the customers and roll them into luxury escapes in 2013.
- [25:17]
B
So that's from the TV show Getaway.
- [25:19]
A
Yeah, exactly. Exactly.
- [25:20]
B
How'd you find that?
- [25:22]
A
That we bought a business called Kudo, which was very well known from Channel nine and they were linked together and that was run by a guy called Mike Sneezby who till recently was running Channel nine. So it was a really interesting business that was a really great, probably our best ever acquisition. We did did 15 or 16. Most of them terrible. That one really good.
- [25:37]
B
Yes.
- [25:38]
A
And yeah that probably put us to $100 million plus revenue. Doubled our staff to well over a hundred. We still had to learn a lot after that took us next and then so we launched Luxuryscape 2013. And the beauty of having a different brand for the first three years is you make all your mistakes on the first brand. So the customer service errors and not that we were always, we always lent hard into customer service and over indexed on CS spend but we learned so much over that third three first six year apprenticeship in the in the backpacker apartment, corporate apartment thing and then three year apprenticeship online web 2.0 and then we were ready to go. We had 100 person plus business by then when we started Luxury Escape. So we didn't make the brand mistakes that pretty much everyone makes when it's their first time running an online business.
- [26:19]
B
And you also had that portfolio of brands so you could see what the game was and what worked best. Why, why did you start acquiring other brands? Because you said you acquired 17.
- [26:33]
A
I think 15 or 16.
- [26:34]
B
Yeah. Why did you do that? Not just focus on one.
- [26:37]
A
We were trying to get scale. So we did actually weren't trying to acquire brands, we're trying to acquire customers. So we bought a business called Kudo, then a business called Living Social and a business called Uther and a business called Brands Exclusive. They're all sort of doing slightly different things. And a business called the home which was homewares. Be like Temple and Webster or Wayfair for us audience. So we bought all these businesses for a cheap customer acquisition cost. The problem is when you buy a business and you probably speak to a lot of people about this is it's not a simple matter of just putting. You can't just bolt business together. There's a bunch of tech work so we'd always want to bring them onto our platform. So Josh would lead that stream. And then the other thing with acquisition is you've got to be really careful about staff because usually some really good staff in the business, they're the first to leave. So you gotta be really. You gotta before you buy the business. We'd work out here's the best 50% business, here's the 20 staff you can't afford to lose. There's 30 that you can't. The ones that never really leave are the 20. You don't want to leave so you gotta. We'd work day one, go in straight in, spend a week in meetings with the top 20 staff and effectively begging them to stay and they generally would. And we've had people from acquisitions who are still with us eight, nine years later and they're cornerstones of our team and some that stayed four, five, six years who are incredible servants of our business and we were super grateful they joined us and stayed with us. So I'd run the people side. Joshua on the tech side we integrate but that's six months of hard work. You can't integrate a business in less than six months. Best case for like the fashion business it was longer because there was a whole warehouse piece and a massive tech integration. But so we buy the. We try to get to scale because these businesses dependent on scale but with the experiences business we just never got there. So we end up descaling and we scaled up the travel business and our travel business has grown organically for sort of 12 years now. We haven't bought anyone in travel obviously after the getaway lounge thing but that was very early and quite small and we just scaled up through combination a lot of organic, a lot of word of mouth and we spent a decent chunk of money marketing through digital channels. We have a TV show, we have a retail store which is really a big marketing piece. We do a lot of radio stuff, we do heaps of newspaper stuff. So we do a lot of affiliate. Every form of marketing that you would do, we do and we tend to zig with other zag. So we started a TV show and do a lot of content stuff so that's a big, big lift for us. We produce it ourselves, we show it on multiple channels in Australia, we cut it across digital channels. We work with some of the best celebrities in Australia to we contract with them. They come on our show. We have a big influencer team who does a lot of stuff with our out. We've got a couple million people who follow us across socials. Probably one of the biggest social followings in Australia and lean really we've got a great team that runs all that stuff. So it's a, it's a really interesting business from a marketing perspective. We don't have. We're not, we don't consider as experts at anything but we try lots of stuff and we're quick to learn.
- [29:17]
B
So you said something interesting around like some of these businesses that you started or acquired that you couldn't get scale or if you start them, you couldn't get product market fit. For people watching, listening, how would you describe, you know, when you hit product market fit?
- [29:36]
A
I think when you're starting to make profit, I think when you're generating profitability and typically your SaaS business, you're not going to be profitable that early. But certainly profitability on a unit level, if you're making gross margin, there's a degree of product. If you're making contribution margin, I think you can say you've got product market. So if you're getting back your cost of acquisition and it's different if your lifetime's 10 years, then you can obviously have a more lenient view of this. But if you're a retailer like we are, essentially, I think to get product market you want to be profitable on first purchase. To me that's always been the measure of a retailer. You can't rely on subsequent purchases because there's so often there's a thing called. It's called Google tax for a reason. Google will tax you every time a customer buys. And worse if you're a product business because you got Google shopping to pay. I think the really interesting piece is, and this is what we've learned probably more recently is having product market fits one thing. How do you build competitive advantage? And we've really spent the last, probably the last five years how do we build competitive advantage in this business? Because we were a nice business, had a pretty strong brand, like a reasonable brand, this is going to 2018, 2019, but we didn't have that great competitive advantage. And we spent the last five years trying to work out well how to as a D2C retailer, which is one of the hardest things to build competitive advantage in. Because I think the classic competitive advantage is switching costs. If you've got and no DTC retailer has that unless you can get a loyalty program up which we've recently launched and which obviously Amazon's the classic one. So the notion of one thing having product market fit and being profitable, it's a very different thing having competitive advantage and building sustainable business that out earns profitability compared to its contemporaries.
- [31:12]
B
Can you share some of the things that you guys have done to focus on competitive advantage? I know one of them is tech infrastructure and doubling down on tech.
- [31:20]
A
Yeah. So I guess what, what does tech give you is is though we don't really have process power. I think Hamilton Hellman seven forces that the acquired guys talk about so well, so brand we had a bit of brand before. And we've clearly got brands in Australia and you can tell that because our convergent Australia is double what it is. We operate in 29 countries, but really Australia is our biggest market, New Zealand's a great market and UK is becoming an increasingly good market for us and everywhere else. We're still working properly. Progress. Singapore is okay, US is not bad. India we've in and out of and Europe's actually showing some interesting promise. But UK is going really well and New Zealand's been a great market for many years for us. But Australia has double the conversion rates because our brand is so much stronger here. So brands. And you think of all the great businesses, especially great D to C, Coca Cola, Nike, McDonald's, they're selling largely commoditized products, but they've got brand differentiation. Nike, Adidas, there's literally no difference in product. It's pure brand. Brand. So. And we've seen Nike's brand drop off and hence probably why Nike's dropped off as a business in the last year. Nike's dropped off what share price is off 60. So if we're simply looking at what.
- [32:20]
B
Shareholders think, that's interesting because from a culture perspective, I don't see that.
- [32:26]
A
And Nike's had this issue with John Donahue, who was CEO after Mark Parker, who was designed the Pegasus, who followed obviously great field knight and came off conservice now, which has been a great business. But it's really strange struggle. So Nike. But the beauty of Nike's brand being so strong is it's been able to, to an extent, survive this catastrophe. Catastrophic business performance. So we've got a degree of brand, our brand allowed us to survive. Covert. So if you look at covert as a travel business and you obviously know travel very well, we were able to. Our customers trusted us to not demand a refund in almost all cases because they love luxury scapes. They knew we sold a unique product. They wanted to keep that product or they'd buy something else with us. So very few of our customers demanded a refund. Versus like a booking.com, booking.com is the best travel business in the world, or Google and booking.com are the best travel business in the world. But booking sells a commoditized product, so just gave refunds and they were fine. They did very well and continued on. But we were lucky enough that our brand was strong enough. Our customers loved us so much, they were happy to keep it as a credit or keep the actual package itself till Covid went away. So look at other competitive advantage. Cornered resources. Do we have a little bit of corner resource because we do exclusive deals with our hotel partners and we deliver more volume than anyone else in the world. So we go to our great friends at Hyatt Bali or Pan Pacific Singapore or Royal Horse Guards in London or these great partners of ours and we deliver a genuine amount of revenue for them. So we've got and they give us a really great package to sell to our customers and they don't give to anyone else. So we've got a cornered resource. Bit of cornered resource there. Yes, you can buy, you can buy those hotel rooms on booking.com, but you can pay double. So I'd say it's a bit. We don't really have process power and we had no switching costs which is a real challenge. So we have the highest mps of any retail travel business in the world. We think take out the. I'm not talking about the high end tour business like Abercrombie because that's a bit different. But for a non verticalized business we have an NPS of 72 which is unheard of given booking which is like the best in class is like 10. So we got unbelievable NPS. Yet our customers will buy from us and then go to booking next week because for any number of reasons there was zero switching costs in dtc. How do we build switching costs? I'll tell you how we trying to build it in a second. So switching costs cross process, power, cross counter positioning. Yeah, we have that. We did flash sales. Booking.com can't. But every startup has counter positioning so sort of put that away. I think I pretty much covered all the key competitive advantages I can think of. So how do we build. Oh, so network effects. Oh and scale. Didn't really have scale because we weren't global and had no network effects obviously. Obviously. So how do we build switching costs and how do we build some sort of network? So again this is not our idea, it's not original but Amazon prime, the absolute classic loyalty program. We wanted to. We've spent five or six years thinking about loyalty. Covid happened in the middle so we had to put on pause. But Covid finished up. How do we build loyalty? And we're doing two, we're doing one. We're about to launch a point scheme like the airlines have that launches in six months. But about four months ago we launched what we call Lux Plus. That's not the most original name but we like it. And actually that's $250 a year. $500 subscription fee and you get significant discounts on our core deals. You get lots of extra inclusions on our marketplace deals you might get, oh, you get 40% off insurance, which is, which is massive. You get priority customer support, you get a bunch of. You get access to hidden deals, you get exclusive access. We'll have a Lux plus week like Amazon has a prime week. So you get lots of things, but you basically get back your purchase cost in some cases on your first purchase. So you can save 250 bucks, not your 500 bucks, but you save your 250. So you basically pays yourself off day one and then everything's cream for the customer. So we want that as we want people to buy into, call it sun cost fallacy. But it's not a fallacy here because actually getting real value, we think customers can save 2000 bucks easily for 250 a year. And the reason we're happy to give those kind of discounts is we're not paying Google to reacquire the customer time after time after time. So we launched three months ago. We're seeing some incredible metrics. So we're seeing metrics like 30 to 40% more average sessions and average orders per user clicks are 50% up. We've seen every cohort's significantly better. And think about 10% of customers, 10 to 15% of customers have subscribed to Lux since we launched Lux Plus. So the LG universe, and they're now purchasing about 40 to 45% of the product being sold on the site. So almost half have been bought by sort of 10% of customers. So these are our best customers. And 38% of these customers weren't existing customers. So they became a customer after they a good customer after. So we're seeing some cost fallacy in real action. But not just that because people are getting great value. So we're able to give customers incredible value. We already have great value, we're giving them better value. So yeah, we're not making much margin, but we're not paying marketing costs. Our contribution margin gets higher. So it's a great win for the customers and it's a great win for our partners and also lots of travel partners. Hotels are willing to give bigger discounts if the public don't see it. So because this is a full paywall part of the site, a hotel can give a free dinner, free breakfast always through the year and know that the other partners aren't going to get annoyed because it's behind the paywall. They don't see it.
- [37:24]
B
Yes. Ah, very, very clever. So talk to me. There's been some hard times. You've been a founder for 20, 20 years now. You've seen the ups, the downs. I know some crazy stories where like, you know, you guys were pretty close to losing it all. Can you share like what that's looking.
- [37:46]
A
There's really been one time where we came pretty close and I talked about when we bought a couple of businesses and the first business we bought in 2012, it was a bit of an aqua hire. The business was actually a decent sized business, but it was really an aqua hire because Josh was running it and we bought that business. Then we bought a couple other businesses at Homeways business and a couple kind of pop culture business straight after. Had we just bought the first one would have been okay with me buying the three. Having to integrate three businesses all at once was just way. And we never done an acquisition before. So it was just. And we're changing tech platforms. We're doing just too much. So the original, the core deals business is profitable and doing all right. But these other businesses, especially the last two, had always massive liabilities. We didn't really understand. And we came towards Christmas that year. Christmas is always a bad time for travel because people, people aren't buying travel. Christmas, sort of the month before Christmas. And we were doing our modeling and thought we could very much, very likely run out of money. Here we're making money in our core business. We're about to run out of money, which is a weird situation to be in and probably you run out of money. You run out of money like you die. So we were, we were, we didn't get to like a day away. We saw if this. We had a month of cash basically. So basically shareholders got together and all but one shareholder put cash in the business. So we did made emergency. We didn't have that much money at the time. We put sort of all our cash in the business and Mitch Mark, who is that great negotiator, managed to do an incredible deal which gave us a couple hundred grand which sort of gave us that plus the cash put in. As soon as we put the cash in and did that deal, we knew it'd be okay. And then we did another great deal in January and then after that we were off to the races. But there was definitely. We were running around town into early December that year thinking we aren't going to survive, like unless something changes. And then Mitch did his magical deal and we all put cash in our own pocket or. But One put cash in our own pockets and we're able to sort of skate through. But I was waking up in a cold, like we were waking up 6:00 thinking, this is, I think it was 2012. We. That's eight years of being in business. I would have been a partner at a law firm or a managing director at an investment bank by then. Think of how much you'd be earning. Think I've done all this work. Eight years. I wasn't married then, but I was, I was living my then wife, who's going to become my wife. All this work we'd done like eight years of sweat, of putting together furniture, of dealing with bedbugs. Thinking about all this, you think about the, the end of Survivor and going through like, what happened. I could think about that in eight years of it. All the stuff we didn't get, all this stuff is for nothing. And you look like losers because people think, oh, you're a high flyer. How much money? How well by then people thought we were doing really well. This wasn't. People think, you know, you've been through this yourself. People think you're, you're a loser. And when we started in 2004, like entrepreneurial, being a founder wasn't cool. Now being a founder, people like you and me being a founder, cool, not cool. Back then. Back then it was like, you're a failure, you couldn't succeed in law. So you've done this one of this apartment thing. We finally got to the point where we weren't laughing stocks. We were sort of doing all right as founder. We weren't. We then became more successful. We were doing all right. We weren't in the rich list or anything like that at that point. But like we were, we were. People thought we were okay. And the humiliation of having a business go under at that point, it's different. Business goes under after six months. People go, whatever gave a crack, no mark, product, market fit, we had all that. So it would have been a death by stupidity. And this is before we got the 10 million bucks. Out of that came everything. You have runs of bad things and runs of good things. And we then had a run of good things not long after. We had like bad, bad, bad, bad. And we just through pure grit, got through and through backing it. We put money back, we took all our money out, put it back in. Like when you were playing poker, you just chuck everything you have in that last hand. And we literally did that. And yeah, we didn't come within a day or two of die I remember we've been with Josh and Sydney and thinking, what are we going to do? Like, who can we speak to? Can we speak this person? And nobody gave us a cent. Like, had anybody invested us then, somebody probably could have. Could have invested us for 10 million bucks then. And we'd have happily taken like, 5 mil on 10, and you could have had half our business and could have 50 bagged it, or 100 bagged it or whatever it was, but nobody would. But nobody takes those bets because they're too risky. Well, most people wouldn't and nobody did. Even our existing shareholders, like the founders put money in, but the other shareholders didn't. But I don't blame them. We had a few people who put together a deal for us and became shareholders. I don't blame them for not putting money in for a second. But we did, and we sort of got away with it in the end. But it could have, like, it could have gone the other way had Mark not got that deal. Had we not been able to put money in, have we not got the second deal, there's a fair chance I wouldn't be sitting here speaking to you. I'd be. God knows what I'd be doing.
- [42:03]
B
Yeah. Well, look, you have a great podcast and you interview and speak to all the successful founders, too. I'm curious to hear. Do you think every founder, if they are not getting an experience like what you described, and I've just.
- [42:21]
A
I've.
- [42:22]
B
I've experienced this, too, that you're just not pushing hard enough. And it's a rite of passage to. To build something of true worth and significance. Like, have you. Like, for me, I see this as a common theme.
- [42:32]
A
Yeah, it's a really good question. I don't think it's necessary.
- [42:36]
B
I think, like, I think it's not necessary.
- [42:38]
A
It just happens. Like the Airbnb guys with the Airbnb. Yeah. Or whatever they call. Like, it does happen. Uber guys had it happen every two weeks. Amazon happened a bunch of times. Like, I think when you think about it, if you're trying to build a big business, especially a really big business, you've got to take. You've got to double, double, double. Like, keep betting the farm. If you don't keep betting the. And we probably. We're a negative working capital business, so. And you're probably a similar sense in that we get paid by our customers in advance, so we always had that cash flow, but. But you always run the risk there as well. So when you run a negative working capital business. Yes. You don't have to raise external capital, which we didn't till after Covid, where we sort of fixed the balance sheet, because Covid impacted our balance sheet a bit. But you run a much riskier model. Or if you're raising cash, then you're trying to like, look how, how risk seeking Jeff Bezos was on Amazon. Of course he's gonna almost collapse. Cause he's kept betting the farm, like you're always gonna go on there. So I think it's a nature of almost. Because if you got really big, to get really big, you have to take massive risks. And if you're taking massive risk by implication, one of those may have gone wrong and killed you because you're taking existential risks repeatedly for the first probably five years of your business. So when you think about it, it actually makes sense that you speak to a lot of people. Can you speak to a lot better big entrepreneurs than I have ever spoken to? And you probably see the very best. And the very best have probably come like you're sort of playing, oh, you're about to crash. And you sort of. Just as you're about to crash, you sort of suddenly the propeller starts spinning again. And it's a bit like that where Reid Hoffman said there's great entrepreneurs. You sort of building the plane on the way down or putting the parachute together on the way down. That's kind of what you're doing as an entrepreneur.
- [44:08]
B
Yeah. And it's, it's, it's really interesting, right, because like most founders, I've had friends, you know, I'm sure you had friends that have come, had these close calls. And it's like every time it happens to you too, it's like the best thing. Like it's caused you to. To do things that you would have perhaps not have done. And you've always been better off. Have you found that you've always been better off as well?
- [44:29]
A
We'll think about instance one is when we had the Backpacker apartment business and then we chat, we pivoted to corporate apartments. We wouldn't have. We. Sorry. We probably would have pivoted at some point. We definitely wouldn't have pivoted as a forced. You wouldn't have forced us.
- [44:40]
B
That's right.
- [44:40]
A
We wouldn't have bought those properties. Have we not bought those properties? We wouldn't have had the million bucks. We wouldn't have had the million bucks to start our next business. So that was a massive stroke of what turned out to be luck and built resilience. And then if you look at the next one, the essential that we almost ran out of money. Money. We probably had less learnings from that other than just being a bit less aggressive, more conservative with cash flow. But that that was less beneficial. But I look at Covid so I think Covid travel business. Yeah.
- [45:06]
B
So what happened there, man? Like most people think travel business like you guys must got killed during COVID.
- [45:11]
A
From a pure profit and loss balance sheet perspective. Absolutely we did. If you look at value of business, the opposite happened. So just before COVID so year before COVID I stepped out of the business business. Me and the key shareholders agreed we'll try and sell a majority of this business. There's a lot I don't. You talk about founder mode, manager mode. Founder mode comes in and out of vogue. It's a bit like sort of baggy jeans. Like sometimes founder modes, sometimes everybody loves founders. As you see some of the people hate founders and we should bring Sequoia style sack the founder, bring in a manager. Eric Schmidt at Google Arguments Steve Jobs, John Scully, the most famous one. Now founder mode's very much in fashion, like more probably more than ever before. And you've got think of every founder. Obviously Steve Jobs isn't alive but is dytified. Jeff Bezos still considered one of the best CEOs of all time. Evan Spiegel still running the shop there. Zuck obviously still doing a great job. Jensen probably the king of founders now two jobs, Denny's and founding Nvidia. So founder modes come very much in fashion. 2019 it wasn't in fashion so we all thought founder's not there. We can get a better valuation from say private equity who's potentially buying a minority or strategic and we put a manager in to run the business. That manager will then go work with a new buyer and we'll get a better valuation that that way. And that was there was a lot of merit in that. So I wasn't 100% sold on that but I kind of thought yeah, there probably is enough merit that it's worth a try. And it gave me a chance to go traveling and do some other stuff. Covid happens. We literally had 50 people through a data room had people spend $2 million on DD, get to our final three, Covid happens and understandably all the final three run off. So looking at valuations that were kind of mid twos or early twos which we thought was massively undervaluing the business but the market is what the market is, we ran a fulsome approach process and the market was Right. We didn't have competitive advantage or we didn't apart from brand had very little competitive advantage and the market smartly recognized that. And certainly in hindsight, even at the time we kind of agreed, yes, we wanted a lot more and we thought we could, the business could be worth more. But the market doesn't lie in a fulsome process. So we ran this process and all the buyers went away. So we had to go back to the drawing board. So six months later the business Covid certainly impacted revenue. Obviously people. Our business was outbound travel, mostly from Australia and that wasn't illegal. So we could do a bit of inter Australia travel but then you had lockdowns that impacted that. So yeah, our revenue was impacted but not to zero like a lot of other. We sort of maintained 30 to 40 to 50% of our revenue. So it was really not the worst. We could sell domestic and we also could sell us to Maldives for example. We became a massive seller of us to Maldives product and UK was still going. So we didn't fire a single person because of COVID That's like specifically I think the only travel business in the world to not fire anybody. In fact we grew our team over the duration of COVID That caused a pretty big profit and loss balance sheet hole. So we had to raise money post Covid. But what Covid did, apart from kill the process that would have undervalued us. It really made us think about competitive advantage and we started building our first marketplace. So instead of having just a small number of short time really discounted deals, we had always on deals through the year and then two as we head on through the year and we had them started cruises and villas and experiences we sort of redid and put as a marketplace. So we and we went from 30 technology people in the business being product design, engineering to 140 now. So we went from business that was people maybe thought we were a tech business but really we were industrials deals business with a veneer of tech to being a genuine really strongly technology enabled business. Our tech team now is world class. Like we get people out of Atlassian, people out of Canva, people out of what people think are the best tech business in the country. We recruit really good people for them to work for us. We've got an incredible team led by an incredible leader in shy who's built an amazing. Shy left us, went to Amazon and came back and had all those Amazon learnings. Amazon's such an amazing business. We had the advantage of having somebody who was in There When I came back, I came back six months into Covid. First thing I did was got shy back and then brought a few other people back, rebuilt the team and really focused and the beauty of. And. And the guy who came in around it did some really good things, but did some things I wouldn't agree with. But a lot of the mistakes I was making, he just didn't. He just continued like it wasn't his fault. He just did what I was doing. And then I look at it go, hold on, that was stupid. So it gave such a new lease of life, being able to look at, effectively look at yourself from outside the window. And I could see everything I was doing wrong. I'm still doing stuff wrong, no doubt, but I could see a lot of things I was doing wrong as a CEO and really tried to fix that. So it was a huge benefit. Benefit. Stepping in and stepping out 18 months in. Obviously Covid gave us heaps of leeway to do experiment with lots of stuff. Especially when we raised capital, we could experiment lots of stuff we were private. We didn't have. We didn't have to raise dilutive capital like Webjet or like Flight Center. Great businesses had to do. Even Airbnb had to raise hugely diluted capital. So we didn't have to do any of that. We raised capital at a valuation that was like double what we were getting offered pre Covid. What we're going to sell for turned out to be the bargain we thought it was at the time. That's because we changed the business business. It was much more technology driven. We're now a business of 3x the size we were pre covered almost 3x the staff, 3x the revenue more profitable and a much more stable with business with significant, well, not significant, but with competitive advantages that we can see. So if you look at Lux plus, yeah, we've got sticky customers now. So switching costs also a bit of a network. So think of what that subscription business is, is we get more benefits for members, exclusive benefits that are hidden for members. So more people are likely to generate join. As more people join the platform, more hotels participate because there's more customers for them, which gives us so creating the famous Jeff Bezos flywheel. So more benefits to customers, which gives you more customers, which gives you more benefits, which is more customers. So we finally started to build our very first flywheel. We've never had a flywheel, really. We've now got a flywheel. We're seeing that with the metrics of Lux plus it's just leading to A halo effect. We had three of our most profitable months ever. Our biggest contribution margin month ever in September. September's usually a terrible month for us because it's called holidays and other stuff. We had a record month last month. From a contribution margin perspective, I think October could be better and January, November, December won't be because they're always sort of seasonally bad months. But January should be a huge month, assuming nothing goes wrong existentially. That's because we worked up, we had the COVID of COVID to work on a bunch of stuff that we otherwise wouldn't have done and wouldn't have the guts to do. Probably wouldn't even thought about. We probably would have sold half the business and tweaked on to being a business that made. Made 25 million bucks a year or whatever, but was growing pretty slowly and it was sort of a nice business and people loved it, but wasn't ever going to be a multi deca unicorn or Decacorn or whatever we now had. We've got a lot of work to do still and we've got an incredible team to do it. But we could become a Decacorn one day. I'm not saying we will. We have the foundation to keep growing into that. Whereas if you go back five years, we never would have, like, maybe we could have got to 5,600 million, whatever. We never would, would have hit unicorn and definitely wouldn't have got further than that. Now I think we have the team and the market to potentially do it. That's not to say we will, because there's competitors and markets change and all. Lots of things happen. But we have, I think, now got the real TAM to grow into, whereas I don't think we had that before, man.
- [52:12]
B
Just for everyone listening, watching. What's a Decacorn for people that don't.
- [52:15]
A
Know it's a 10 times unicorn, $10 million business. Yeah.
- [52:19]
B
And how far away, like, where would you say you guys would be valued at now?
- [52:24]
A
Oh, we did around 18 months ago. It's under 500, sort of 450 somewhere between there and Unicorn. Like it depends how you're valuing us. We get valued on ebitda. So because we make money, we don't get, like, if we got valued on Airbnb's valuation would be multibillion. But we don't consider ourselves, we don't consider that valuation to be right. We get valued on EBITDA multiple and potentially a PE multiple at some point. Can we make real ebitda, not fake ebitda and that's what. How do we keep growing cash flow? Like we like to think of ourselves, a real business that actually makes money. And when you're an E commerce business, you kind of. It's different when you're a SaaS business, you're a marketplace when you eventually can grow and scale into a really big valuation. If you're a retailer and you're not making money at a contribution margin level, you've probably got an issue and it's probably not a great business. And yes, you get benefits like we want to as we grow. What's called ttv. TTV is a bit of a vanity metric that isn't relevant for us, but our TTV is over a billion dollars. Now, that's irrelevant. It's money through the till. But if we can get our margin of TTV up to sort of 6, 7%, which we're not there at the moment, we're a lot lower than that. But as we scale, that's the challenge. So we want to scale ttv, we want to scale margin, really, and we want to scale margin percentage. So how do we become more and more profitable? And that to an extent happens as you get bigger because your fixed costs obviously scale out of them. We haven't grown our tech team in probably a year, so stay at 140 level. And the aim is to, obviously we will eke it up. Our customer service team scales to an extent, although we're trying to use AI to reduce that. Our sales team definitely scales, although our hotel team doesn't have to scale too much because we do it by region. So once all the regions are allocated, you don't need to scale that too much. So I think we can keep. We can definitely scale ahead. The question for us, can we keep getting our marketing more efficient? We've had a great marketing team's done a great job of significantly improving contribution margin. So we've reduced our marketing spend year on year and increased sales, which is sort of what you want. If we can keep getting marketing more efficient, hold employee costs, we probably can eventually get to that 6% margin. Six, 7%. And then if you get to a billion, $2 billion in $52 billion in turnover at 7%, that's a really good. That's $140 million in EBITDA. So can we get there one day?
- [54:27]
B
So impressive.
- [54:28]
A
Well, we're nowhere near that yet now. But can we get there? Well, time will tell, but that's what we're aiming for.
- [54:34]
B
And how long you think that will.
- [54:36]
A
Take, I hope we can get there within five years. There's a lot of ifs and variables. We've got to execute on loyalty, we've got to execute on bed bank switching. There's a bunch of hard stuff we're working on. On loyalty is really hard. So we've done the call. The easier loyalty, the subscription loyalty, which I think is a great product but it's a pretty easy product. It's a single product. Points loyalty, which is effectively creating your own currency is much harder. You've got liability on the balance sheet. You've got to make sure you get the points right. You've got to work with third parties like Amex, like the banks to sell points. There's a lot in there.
- [55:09]
B
Tap into the Amex stuff that'd be game changing. How do you tap into that?
- [55:14]
A
Amex only puts on one new partner of five years. So assuming you're going to be that one partner is probably wrong. But we work with a lot of banks, we work with Amex in a number of different senses. So we hope one day maybe we'll be able to work with them in that sense. But we work with a lot of the banks and we think the banks are much more likely to jump on. When we ask our customers, would you rather luxury escapes points or airline points? 72% said luxury escapes points. And part of the reason a lot of your customers are US based or Australian based, a lot of people know about points and the problem is it's really hard to spend points on airlines now because airlines are full, they don't want to give point seats.
- [55:46]
B
Yeah, I know that's a massive problem. And now they doubled the points, triple the points. Like they're not as valuable as they used to be.
- [55:53]
A
Yeah, that's what we think. So if you look at the value of a business class points, 5 cents a point historically but you can never redeem for business class. So yes, they were notionally worth 5% in this make believe land. In reality they're not worth that at all. Your economy points value is $0.01. We think we can come in at sort of just over $0.01. And that's before our deal value because remember our deals are 30, 40% off. So it's really like 1.5, 1.6 and it's always redeemable. It's not like an airline where you go, oh there's nothing available. People will be able to use it as cash on our side. So we think we can make an impact there. So for our, for our customers who actually have want to use their points and don't want to have points that sit there literally deflating because every, every minute these points deflating, A, there's inflation and B, there's actually points deflation as well. If you can actually use your points on Lux, that's we think a huge bit. So we want to target the everyday value of points. So yes, you're not getting the 5, 6 cents you got a business class, but I'd much rather get 1 1/2 cents I can use than 5 cents I can never use.
- [56:47]
B
No, that makes sense. So I want to switch gears and ask you a question about you personally. So you're actually very active on Twitter. You do throw a bit of shade around on certain companies or individuals and you're not afraid to share what you're thinking or if you think something is bullshit. You know, you are quite active. You write to mopeds and you're quite vocal there. Like you write controversial articles of. I'm going to be honest, man, like. But if somebody met you at a bar or like at a barbecue, you're a very unassuming guy and, and you don't have this kind of in your art, in your writing. It's. It is quite like full on, man. So like where does that come from and what, what inspired you to go out and kind of call or what you believe is bullshit on certain company valuations or even political like. Yeah, like it's, it's a very interesting side to you. Do many people ask you this?
- [57:46]
A
Not really. It's really into the business for a start. I never, I try to never punch down. So it's very, very rarely I'll speak badly about a small business or a startup. It's always punching up to big business. So if you look at the people I've. And I would usually I'd very. So I've been very vocal on the valuation of business called Atlassian Australia's 10th biggest business, but not on the founders are incredible founders who have done an amazing job and two of the best founders Australia's ever produced, Mike and Scott. Being critical of valuation is very different to being critical of people. So I tend to be critical of where the market has overvalued a business or if there is a CEO that's, I think being a bit dubious with what they're saying. That's a bit different. But again, that's punching up. I'd very rarely say that on the small business. That's usually a big business business. But if you look at most of the businesses we talk about on our pod, the contrarians where we talk about we delve deep into businesses. They're mostly billion, 10, 15, 20, like $50 billion businesses. It's not often we'll talk about certainly in a negative way about small business. We tend to talk. I don't love big business. I don't love government in terms of the waste. So that's what we'll sort of what I'll focus on. So I think if you look at the greatest range Earth, the Joe Astins like Joe's like the loveliest guy I'll ever meet people you think in his writing he was pretty sort of firm. But he would always never punch down as well. He'd only ever punch up. So I think it's a similar sort of context where if you see it's probably comes from like high justice. Like you see something that's wrong, you want to inform people about it. I wrote a book called Picks the trough in 2010. Yeah, 2010.
- [59:16]
B
I didn't know about that.
- [59:17]
A
Yeah, I'll get you a copy. Amazon.com microeconomics bestseller. And it was talking about the companies that collapsed during the global financial crisis. And not just any collapse. And there was some stuff on executive pay, but companies that collapsed and that the sort of founder or CEOs took a bunch of money out. So that was kind of the theme. So whereas shareholders have been ripped off by dubious sort of founders executives. So that was always, has always been the focus of high executive pay. Why should a CEO get 100x or 500x someone who's on the front line. If you look at our business, my pay is right probably below the 50th percentile of our business. And yeah, I'm a shareholder, but I get that either way, I think CEOs historically been fundamentally overpaid almost across the board. And look at Elon Musk's $50 million or whatever. $50 million at Tesla's clay. Look, he doesn't need the money. He's the richest guy in the world. Why is he getting extra money for running Tesla? Why is Tim Cook getting billions? Why Sheryl Sandberg and Tim Cook are both brilliant executives getting a billion dollars. It just doesn't make any sense. So a lot of what I've written about has been about executive pay. So it's again, these are wealthy people who are much wealthier than I am. I don't think I'd ever talk about a founder, like a single founder who's like the business collapsed. I never talk badly about that because I've given it a crack. They've tried their best. That's very different to the people I talk about.
- [60:34]
B
You know, you'd been hustling building business for eight years, you know, perceived successful. And this is the crazy thing, like sometimes on the outside it looks like your business is doing so well, but people don't really know truly what's going on behind the scenes. And from the outside it could look like it's, it's absolutely killing it, but you're not. And you said even then like, you know, imagine how you would be perceived by others. So like there's a little bit of like a trade off there. Like you're not worried to speak out but then you. And that's a fear of mine too. Like we all care about like what other people would think if we fail.
- [61:04]
A
You know, I've never been, if I've always felt that if I say something that's is insightful, that adds value to readers or watchers and that is correct, then it's a net positive for society and I'll generally try and make a well reasoned argument and know that sometimes people will disagree with it and you're not going to please everybody all the time. If you try and please 100 people, you'll drive yourself crazy. Like can I please enough people and can I change people's minds? And in terms of the other point which is sort of worrying what people think from a business perspective, I think probably, certainly the last five years we've sort of got to the point where like Covid, if Covid didn't kill our business, it's probably like something will kill it a bit like no business lasts forever. Like look at the business of the biggest business in 970. Like three of them are still around in the top 50, like Exxon, a couple others, but most weren't. So we'd love to build a 50 year business. That's certainly one of a big goal of ours or 100 year business. I'm not saying we'll be able to do it but when we like to be long term greedy, we'll be very generous for customer service. We want to keep customers, we understand that the lifetime value of customers, customers. We're willing to sacrifice short term profitability for long term profitability. We want to build a long standing business and we often think about that. But I don't think our business is going to topple over tomorrow or in six months or in 12 months. So it's a very different business now to it was in 2012. When we rely on a small number of great people, a small number of great deals. Now we've got 600 people on the team of which hundreds and hundreds of them are elite people who add a heap of value. We talk about founder manager mode like yeah, I'm a founder of this business, but doesn't matter how good a founder you are, you need 100amazing people to be able to make a great business. And Brian Chesky, who came up with a founder mode thing, Airbnb isn't because of him. Airbnb is because of Belinda Johnson, who was his great offsider for a number of years, I think is still there or maybe recently left. He had a number of people, hundreds of people who made Airbnb what it is. Yeah, having a great founder like Brian there is handy. But Brian himself ain't doing anything. Adam Schwab ain't doing anything by himself. Adam Schwab with an incredible lt, an amazing slt, an olt, some incredible talent for everybody from dealing, doing hotel deals to answering our phones, to doing the design work, to writing the words. It's an incredible team and my job is to assemble and retain that team and allocate capital and work on the product. But that's only a small part of the business. There's a bunch of people doing a lot of other stuff.
- [63:28]
B
Yeah, that's a really great point that you make because oftentimes we see the CEO, the founder, that's the person that gets all the recognition. A lot of the, you know, quote unquote, start like spotlight but behind them are just incredible people. Right. Like just like next level killers. Like just absolute machines and people don't talk about enough like that is so key if you want to scale a business. Like you build a million dollar business by yourself. Especially if I know I now like there is no doubt about you could build, build a million dollar one product. Ecom business, SaaS business, service based business. It is possible, right? Definitely. There's a one person business in you. But to get to 10, 20, 30, 50, 100, 200, a billion, you need to surround yourself with just really quality leaders. Great people, but not enough people talk about how to actually do it. You have to learn and it yourself. And there's just so many. Once again a common thread like hiring and overpaying for execs that promise the world. Like it's, it's, it's unfortunately a rite of passage. Right.
- [64:36]
A
We've both seen that. Yeah. And we know about that better than anyone probably. And sometimes you got to pay up for really good people. And sometimes you should be really quick when somebody isn't contributing to move them on because it's actually not helping them either. And I think we all know, like fire fast is really. And I never fire fast enough. And partly because you. It might not be the right time, might be coming to Christmas, or it might be like someone's had an issue at home or there's always. There's often a reason why not to do it. And sometimes actually you should just wait till there's a slightly better time for that person. But as soon as that window opens, sort of to jump through it. But when you do so a great. The main role of a manager, sort of for our businesses at our scale is finding really good people and keeping them and not having to pay 5x market. So paying markets, you want to make sure people are paid fairly. So you want to pay someone less than what they get elsewhere because it's not fair to them. So pay someone the market rate, but you want to pay someone double market rate because you're a terrible employer in other respects. But finding great people is. And as I think the one really, and this is something I'm sure you deal with a lot is how do you scale as a CEO, as a leader? So we all start. Start with zero employees. And then there's a different set of skill when you get to 150 and a very different set of skills at 300 and 500. I'm sure there's different set of skills at 1000 and 10,000. And as Reid Hoffman says, you got to be sort of continuous learner, infinite learner. You've got to constantly reinvent yourself. Every year, every six months. How am I learning? How am I growing? And if you're not learning and growing, you're probably going to stop contributing to the business. And I don't own all the business. So there'll be a time where she will say, actually, Adam, you've done all you can and we appreciate it. And let's bring in Nathan to run the business because Nathan's going to do a better job than you because Nathan's run a business that's this scale and whatever. So at the point, at the time, and it's really hard to recognize, very hard. Not many politicians quit when they're ahead. Very few CEOs resign at the right time. It's a real sort of challenge knowing when you're not adding value, but you also don't want to leave too early. You don't want to do a high odd shorts either and come back 17 times because how does that guy ever hire a CEO again? But you also don't want to stay, you also don't want to stay too long. So it's a really tough challenge. But the real key is how do you keep learning, how do you keep adding and also how do you recognize when you're not adding value?
- [66:49]
B
And so I'm curious, like you've obviously had some incredible people around. Like you talk about the deal making dude and like stuff like that. Like so what do you look for when it comes to hiring great people, having great people around you?
- [67:03]
A
It really depends on the role. Certainly grit resilience is a massive one. So what you look in a founder, you're also have looking for an employee. A great employee for us is an intrapreneur. If we can have 200 founders in our business and we've got a lot of people who are kind of like quasi founder or intrapreneurs or re founders as Reid Hoffman calls them. We've got a bunch of people who could quite easily have their own business. But being an entrepreneur in our business, we love that. So someone who's been an entrepreneur, someone who really shows that love of entrepreneurship. We've had lots of people and we have lots of people like that who work in our business business and there's some people just great workers. They're not entrepreneurial as such, but they're just super smart. Other people are really good sort of negotiators and create value. It's actually really hard to know day one interviews are shocking way to test it. But people prove pretty quickly how good they are when you, when you throw them in. So yeah, we look at, look at sort of what people have done. Someone's worked for a big bank or spent their career working for a big bank, probably not going to be a great fit in our business. If somebody's had a startup themselves themselves more likely be a good fit. Not always. If someone's worked in a scale up, that's great. If you've worked if you were employee five at Uber and grew the first 20 billion, that's perfect for a scale up. Like us, we love hiring people who have been in, who started early because you know they really take a risk and they're scaling up with the business, they're unbelievable people to have in your business. So someone who's worked in a scale up and has done it before is fantastic. We just want people who are lots of high initiatives, high eq, not a dickhead, love collaborating Love coming to the office where we'll soon be back five days a week, we're four days now. But we tell people that so they know. So someone doesn't want to come in. They're aware someone wants to work from home every day. And there are some exceptions of course, like carers, disabled. So let's take out the exceptions because there's reasons for that. But if you're able bodied and aren't a carer, we want you in five days a week as of January. And if you don't want to, that's completely fine. There's a lot of businesses, businesses who aren't five days a week and we go work with those guys and you'll have a great career, no doubt. But we want a certain type of person who just relishes being with other people and loves collaboration and that's what the model we've built and it's not for everyone. Atlassian takes a very different approach and they're a $40 billion US business. So there's different approaches that clearly work. That's our approach and we want a certain type of person and there are certain people who do really well in that business business and certain people just don't do as well and we want to try and when we're doing an environment interviewing people, it's not simply them trying to impress me, it's me trying to impress them and also being really honest and are you and saying what's good and what's bad about our business and we're not. No business is perfect, no person's perfect. No business is perfect. So we want to let people know we are a hard charging business. We can be pretty brutal. If you're not up to it, we'll probably move you on. But if you're really good, if you've got high initiative, if you want to work in a high performing team, if you want to make lots of money money you probably and you love working with people, then we're a great business for you. That's not everybody. So there's certain people who want to and if you're not that, there's lots of government businesses you can work for, there's lots of big businesses you can work for. So just pick and choose. And someone who's lifelong career at a bank. I'm talking about retail, not investment. Investment bank's different. If you've worked at JP Morgan your whole life or Commonwealth bank your whole life, probably not going to be a great fit for us. Like unlikely. If you worked at a big Corporate sleepy corporate government body. Probably not. That's it. If you worked at a startup, spent six months in a bank and hated it, maybe you right person for us because you hate that environment. You love this environment. So it generally sorts itself out. But we have a good idea of what works and what doesn't.
- [70:26]
B
So what's interesting is I used to work at a travel company, one that's been around for like 40 years now.
- [70:32]
A
Great travel business, Intrepid Travel.
- [70:34]
B
Like you know, I worked there. I ended up leaving not because I didn't love the company or the culture, but just the work wasn't for me and I wanted to do bigger things, but clearly have. Yeah, well there you go. But like man, what you just described is very, very different for like the travel business industry and the culture. It's usually very, very casual. Like so you don't, you don't really hire people from like the travel industry by sounds.
- [71:02]
A
Oh in some roles we do.
- [71:04]
B
Okay, maybe agents or rents.
- [71:06]
A
Yep. So if you work in. So if you're speaking to our hotels, that's usually not always but usually out of travel. But it's a certain type of sales negotiator.
- [71:17]
B
Very chill man.
- [71:18]
A
But if you look at flight center who's the great Australian travel business, they're pretty hardcore in many ways as well. And then we get a lot of great people from flight center and screw who runs it as a classic entrepreneur. So a lot of people have left flighties come to us or left flighty's gone somewhere else come to us. It's a pretty common route. But yeah, if you look at our tech team, it's not travel generally almost no one's come out of travel. It's, it's. Yeah, it's. And if you look at other sort of marketing teams generally not travel, for example finance, not travel. So yeah there's. But part of the reason why we've had some success in travel is every travel business has done a certain way and same reason flighty's had all that success. The same reason Trepid had that successes they came from generally not like sir Screw who runs flighties was a vet, I was a lawyer, James was a bank. Like not having that in that rusted on travel knowledge was a massive. So we, we didn't know anything about. I'd never stayed in a five star Tahoe resort ever and I started visiting luxury escapes. So that was helpful. So agents used to hate us and some still do, but now we work with agents. So agents sell our product and we give them commission. So we've gone from agents hating us almost across the board to some agents absolutely loving us because we make them lots of money. So we've sort of changed a bit there. But yeah, part of the reason we're able to succeed in some sense in travel is not being from travel because.
- [72:29]
B
Yeah, you guys basically like are a full blown travel agency now you would say. Yeah, in many ways we sell well.
- [72:34]
A
We consider really a tech driven travel seller and we create the world's best holiday. So we're not simply selling a dumb travel product. We can, we have a product called Trip Planner where you can drag and drop all your stuff, all your experiences, your hotels while you're on holiday. You can be adding stuff in as you go into the airport. You can add like tripit but better than tripit. Yeah, tripit you can't buy stuff on. So tripit you'll buy on Qantas or Delta and you're forward you things tripit. So we, we have that. But tripit you got to buy on another platform. You can buy on our platform or other platform so you can redeem your points on Chris fly on Singapore Airlines and then put your flight in our Trip Planner. Or you can buy Singapore Airline flight on luxury escapes or as you drive into Melbourne airport, you can go to the Aspire Lounge, one of the nicest lounges in the airport and for 62 bucks have. Or you can drink champagne and an unbelievable meal before your flight by swiping and bang, it comes right in. So. And then you can plan your trip. And part of the fun of travel is planning. Looking forward to it. So you have a. We sort of gamify the planning process. Once we have our point system established, we can do a lot more around that. But you can share it with your partner. And here's what I want to do. They can say no, I get rid of that. I want to say Ritz Carlton, not Park Hyatt and they can sort of chop jump. And then when you're on holiday, I think most itineraries travel agents give you this piece of paper and you kind of handwriting on the side or crossing it out of us. James with us it's all online dynamic and you're just changing it. So it's a really, it's a probably I think the best travel planning tool in the world and it's getting a lot better.
- [74:01]
B
Yeah. Wow, that's really cool. So a couple last questions. You have to work towards wrapping up man, I could, we could talk all day. This is awesome. So one thing I think you've done exceptionally well and you kind of talk to. It was brand, right? I think the Luxury Escapes brand is a very, very good brand. Like you've done a really great job. You and the team should be super proud. I'm curious, what advice would you give to early stage founders that want to create a brand in. In a space where it is easier than ever now to start a business, right? Easier than ever. You've got AI, you've got basically a co pilot helping you to speed up things. You've got so much information out there. Like, like, like founder. Like we provide so much gold for people, right? Like, you know what, what would you say to people that want to create a brand that is getting cut through, that speaks in a crowded market? Obviously it takes time, but what like. And you've got to chip away, just like with Founder. Like I've slowly built the brand and chipped away and it takes time to build brand. But like what do you have any principles or anything you could share?
- [75:08]
A
That's a really good point in that, like if you're like 30, 40 years, so don Draper Mad Men and you put an ad on TV and you get great reach and that's how you build a brand. Forget that, that doesn't, that's, that's just non existent. How have we built? I can certainly speak to us because it's hard to advise on the hypothetical, but if you look at us, how do we build our brand? And it was like you slowly. So we built one on just having the best, world's best product. So we'd have the world's best travel deals. Travel deals you couldn't get anywhere else. We had a cornered resource. So you want to spend say 40% when everything else is a part. You have to go through Luxury Escape so people would slowly discover us. They first see, they think we're a fraud. This is too good to be true. How can they be so much cheaper than everyone else? There's something going to be a catch. And some of the early adopters and the mavens start buying and they tell three or four friends, I did this amazing Luxury escapes. You wouldn't believe how good this was because it actually is unbelievable. You're at a resort and the person next to you has paid two grand and you've paid two grand and you've got seven dinner, seven breakfast transfers and massage. And this person's got nothing, is paying two grand for what you've just got for free. And then they find out. I go, oh my God. I'm doing that next time. So it's been a lot of someone tell someone, tell someone. So great product was one big reason. The second one is really good customer service. So we over invest in customer service. We always have. It's. We're a high, high not high margin, high cost product. So even more reason why we've got to put a big emphasis on customer service. We had phone service for the last of 10 years. Unheard of in travel. Booking.com has zero service. You literally cannot speak to anyone. Dial when you're I. Good luck speaking to someone booking these car. But they have no one Expedia the same. MMB the same or maybe is less bad actually in fairness we have 247 customer service on the phone all year. Christmas Day 2am will answer the phone. So it's. So there's great product, great customer service. And then we do do marketing but we actually did mostly direct response marketing. So we actually advertise our deals themselves. Not we've done a tiny bit, but like we're talking like sub 5% brand marketing. Probably sub 1%.
- [77:02]
B
1% of your total. Yeah, and total. So your total annual budget will be sub 1%. You reckon on brand now?
- [77:09]
A
It's probably eking up now. But I'm talking about the whole bit. The whole lifetime business. Yeah. The sort of difference is we've done some stuff, we've created a media business. So we've got. We run our own TV show. We produce it, we run it every year. So we had eight seasons of it. We have our own magazine. We had a podcast briefly. We do a lot of radio editorial stuff. So I'll go on the radio video. So two, three times a week for like five, 10, 15 minute segments. So do a lot of unused and a lot of newspaper ads which again people think newspaper's dying. Well, it's been incredible for travel sector. So we do a lot of stuff but sort of semi brand, semi content. Combine that with incredible product. Combine that with incredible customer service. That's how we've been able to sort of grow the brand to 6% recognition. We're still not booking dot com. We're still not flight center, we're still on Expedia. We're still at Airbnb. We're not at those levels. But I think our brand's always been bigger than our business, if that makes sense. And now you can speak to. It'd be rare that I'd speak to somebody in Australia who hasn't heard of us. And a good chunk of people I speak to have bought from us. UK, we're slowly making progress. Like most people in UK haven't heard of us, but maybe 1 in 15 have and eventually that might be 1 in 10, then 1 in 5, then 1 in 2 in the US no one's really heard of us yet. Some people, people who have bought from us love it. Like we sell more Maldives to US customers, I think anyone in the world, because we're great at Maldives, but clearly we're nothing like Expedia and booking in the us. But yeah, so we've had a few different ways to build a brand and always try to do the right thing by customers, I think is a really big one. If we provide a great product at a really good price and do the right thing by customers through the process. If you look at our reviews on trustpile or product review, it's probably the highest, highest retail travel at sort of 4.8, 4.9. And there's always been some people are unhappy and usually people aren't happy. It's because the hotel sort of done something wrong, which is not common. But occasionally hotels just want to do the wrong thing or there's confusion or there's a techie who knows. But it's pretty rare that a customer has an issue with what Luxury Escapes have done. They probably won the hundred.
- [79:08]
B
Yeah, well, yeah, look, I think when you think about. You said something really interesting. You said we are bigger than we're perceived. Like, like, why do you think that is? Is it because of the name Luxury Escapes?
- [79:24]
A
It's a very generic name, which should be a factor, I think, just because the stuff we do is because we're out there and the way we do our marketing is pretty sleek and the brands we work with are pretty impressive and the product we sell and because a lot of people have had a luxury scapes holiday, we have 800,000 people went on Luxury Escape last year, but.
- [79:42]
B
Still a lot small customers last year.
- [79:44]
A
That's people went on Luxury Escape because multiple people go on a book. Yeah, okay.
- [79:47]
B
But still that's pretty impressive.
- [79:48]
A
It's a lot bigger than we used to be when we started, but it's still probably like 100 million went on a booking. So it's still like a lot smaller than booking.com but I think people in many cases, because they know in Australia they know so many people who have used us or who do use us, it possibly appears we're bigger than we are. So yeah, we're, we're not a small business, but we're not a booking.com and Airbnb, who are giant global goliaths.
- [80:11]
B
Yes. So I'm curious, in terms of penetration, you said that US isn't as strong as you'd like it to be. Do you guys plan to. To have that media arm in. In the US and really start to build out there?
- [80:26]
A
Like, the US is the world's biggest travel market. So that's it. It's not that much bigger than Germany and the uk, surprisingly, just because more people in Germany, uk, UK sort of travel. So if you add up Germany and uk, they're bigger than us. Yeah. And then Australia is probably only like a fifth of the us even though it's tenth the size, because we travel more, we over index. So if you look at. We're in certain niches, we're dominant. So if you look at people traveling to Bali, we're like 20% of people who travel to Bali. We'd be the eighth largest country supplying Bali. Sorry, that's not. Sorry. We're about 10% of people go to Bali and 20% of Australians who go to Bali, which is pretty significant. Where 50% of Australians go to the Maldives. So certain routes were very dominant, other routes were less. So us, we were pretty good during COVID pretty aggressive during COVID but we probably focused too much on growth and not enough on profit. And now obviously, since COVID our focus has been how do we grow profitably rather than how to grow at any cost. So what we said, we seem to have more product market fit in the UK and potentially in Europe. Our products just more appropriate for those markets. So we're leaning. We've got 30 people in Barcelona now. We've got a call center for the services of the uk. Uk. We've got much more people in Europe sourcing European and UK hotel packages. So we're just saying let's focus on one or two markets, which is sort of uk, Germany, Netherlands, a couple of those really good markets there. Get them right and then look to the Asia and the US down the track. So we are still operating in Singapore, Hong Kong, India, Middle east, us they're not focused markets. We sell every day in those markets, but not to the extent where we sell into the uk. Are you the UK business becoming material? It's now our third largest market behind Australia, New Zealand, and it will probably overtake New Zealand in the next couple of months. Yeah.
- [82:04]
B
Wow.
- [82:05]
A
Grow well over 100% a year on year with. With no increase in marketing spend. So it's been a really great result. It's really Come from really smart people there and great, great supply.
- [82:14]
B
And do you need much boots on ground to launch in another country or to go harder there to launch?
- [82:19]
A
No, because we were in 30 countries and so. But to go hard, you need better supply. So if you look in Europe, we don't need people boots on the ground in Germany necessarily. We can probably do that from our Barcelona hub. So once you've got the supply, so we can do Europe. Supply is pretty relevant for Europe. So if we get hotel product in Czech Republic, in Germany, in France, in Turkey, in Morocco, it's kind of appropriate for everyone there. And we've got great product in Asia already. We dominate Asia, great product in Maldives, very solid product in the Middle East. So. So a lot of what we already have existingly is really good for these markets. So we probably won't put boots on the ground in every European country. But we want to grow through Europe. We've got some people in the US now sourcing product and we will rebuild that US demand side called the marketing side. And that might come. Probably won't come this year, but probably in the next two to three years. I suspect we really want to lean into Europe. We think that could be a really big growth engine for us. Look at Australian companies historically don't perform well overseas. So you want to be too arrogant and say, we succeed in Australia, we're going to do well. It's the ones that have. So at Lassian and Canva are actually inherently global businesses. There were actually very few businesses that started in Australia and then successful overseas. And it's pretty obvious why. Because you understand the Australian market, you're brand strong here at Brand zero everywhere else. So you get much lower conversion rates, much higher CPAs, you got much higher credit card fees in places like that. So it's certainly challenging. But the UK experience in the last year has been. Been a much better one. We're not. We're definitely not there yet, but we're getting there. And I'm much more confident we will hit genuine product market fit in the. In the UK and US will hopefully chat in two years and hopefully we've hit it. Yeah.
- [84:01]
B
Okay. There you go. Well, look, Adam, man, this has been a whirlwind. We've gone pretty deep on the business, the operations, the highs, the lows, economics, the crazy wins that you've had. So just anything kind of that you'd love to finish off on? Any questions that you wanted me to ask you? Any questions that you think interviewers don't ask that they should ask more often. As a fellow podcaster yourself, I think.
- [84:32]
A
You'Ve done this a few times. I think you've hit all the questions pretty well. It's a super honored to be on. You've done an incredible job as a family officer. We've been friends for a long time and I've watched on your business. Incredible business. And if you're watching, subscribe to Founder. It's a ripping program, but yeah, it's a real honor to be on the show. I've followed you for a number of years and Jess has said. Jess has been super envious that he's not a shareholder in, in your business. And yeah, just, just it's been a pleasure to chat.
- [84:56]
B
Awesome. Well, thanks so much, Adam.
- [84:58]
A
Thanks, Nate.
- [84:59]
B
Hey guys, if you love this episode, you've got to check out my interview with Davey Fogarty on how he finds trends in under capitalized markets and turns them into multimillion dollar businesses.
- [85:10]
A
I'm generally looking for trends globally. We find trends that haven't been kind of capitalized in certain markets or in certain marketing channels. And then we also obviously add our flair to it. You need to differentiate your product.