A unique idea, a clever name and a web-based shopfront were crucial factors in catapulting Wotif.com to international acclaim in just a few years. Rebecca Spicer talks to Graeme Wood about leading the company through the competitive online market, and staying on top.
If you’ve ever left booking accommodation to the last minute, or have searched online for a one-stop-shop of affordable hotel options, chances are you’ve found Wotif.com , joining the two million other visitors to the website each month.
I last spoke with Graeme Wood, founder of the online market success story, around 18 months ago about exporting his business around the world. Then only five years old, Wotif was already a recognised brand in 32 countries and the Brisbane-based company was focused on expanding its international reach even further.
With similar goals still in sight, Wotif has gone through some major changes since then, not the least of which is a public listing. And it is on the up-and-up faster than ever, beating its prospectus forecast and recording a 2005–06 net profit of $16.5 million. Not bad, really, considering that when Wotif started back in 2000 there were just two staff members (today there are 145).
With an interest in internet technology and an entrepreneurial background, Wood stumbled across the idea for the business when chatting to a hotelier who wanted to sell rooms that would otherwise go unsold. “He was prepared to flex his prices for the last few days, and so I thought if I could find enough hoteliers like him and I could put a good website together, everything else would just kind of happen,” he recalls.
Nevertheless, it wasn’t as simple as that. Wood had to convince the hoteliers it was a good idea to provide flexible pricing based on market conditions. While the independents took to the opportunity, the large hotel chains resisted. “After all the money they’d spent building their brands, the last thing they wanted to be seen to be doing was discounting,” he admits. “So they resisted coming on board until the momentum had gathered so much, and we’d created a marketplace that was really working, then the big chains wanted to come along. And, of course, now they’re all on board.”
Wood also had the advantage of making his own rules on the internet because it was a relatively new business channel six years ago. “There weren’t that many examples out there, so it was like going into unchartered waters in lots of ways, which is certainly an advantage if you get it right. It turned out we got it right, but it’s easy to develop a poor website and it’s easy to come up with a business model that won’t work on the internet.”
What set them apart from other internet hopefuls, he says, was Wotif’s sound business model and completely new approach to selling hotel rooms. “No-one had ever seen it before so it was a combination of a good business model and a good idea, then all we had to do was execute that idea and we’ve managed to that, which is why I think we’ve managed to be so successful.”
The huge drawcard for hoteliers is they have nothing to lose. It doesn’t cost them anything to advertise their rooms on the site, and so the Wotif medium is an attractive one. Once a hotel can show evidence of a client completing a stay through Wotif.com, Wotif pays them the amount of the stay, minus the small margin that they take on the way through. “So we’ve got a good cash flow model there,” says Wood. “From the hoteliers’ point of view we are a very low cost distribution model; for the consumer, we give good deals and convenience and guarantees that if you see a room for sale you get immediate confirmation.
“So it works for the consumer and it works for the supplier and us in the middle—all we have to do is run a business, on very small margins admittedly, but run it efficiently and stay ahead of our competitors.” And competition is rife. All you need to do is search ‘last minute accommodation’ on your favourite search engine and there are countless sites offering similar services (we got 1,760,000 listings just from an Australian search). Lucky for Wotif, they were the innovators, and being one of the first in the market has always kept them a step ahead.
“We’ve got a trusted brand name,” Wood says. “People know they can rely on us. If they have a problem with the hotel we’ll always support the consumer and sort out the hotel later.
“In Australia and New Zealand, in particular, we have a much bigger range of properties on our website than any of our competitors and we typically have better deals. We also set the standard in terms of website design. And because we were into the business first, we’re always introducing things our competitors don’t have and they’re always playing catch-up.
“We also have very good relationships with the hotels and our competitors seldom have the same quality of relationship because they’re not doing the sort of volume we’re doing.”
Wood says it’s significantly more expensive to get an online business up and running successfully these days. “It’s difficult for people who now come in and try and compete with us (and lots do, good luck to them), because we’ve got a lot of money invested in our technology and we keep raising the bar a bit higher and higher.
“If you start in a completely new business sector that nobody’s been in before, maybe you’d get away with spending less money but it is becoming very expensive to ‘market’ on the internet. The cost of a search on keywords, on Google for example, can be very high these days, whereas five or six years ago it was a lot different.”
Wood designed the original Wotif website himself and a lot of thought went into the style and set-up of the site. “That’s our shopfront to the world so we had to get it right. We introduced a number of innovations in hotel-booking at the time. For example, the way we present the results in a matrix form so people can compare one hotel against another and see what other inclusions are available—that brought a new level of simplicity to the consumer market. We’ve always been very careful to maintain that simplicity even as we’ve added new functionality.”
And that’s the surprising thing. Though Wotif.com has changed significantly over the years—for example, the seven-day booking window has increased to 28 days—the basic format of the site hasn’t changed. “We have introduced lots of refinements but in terms of the way the website works it hasn’t changed much at all. People don’t like to see big changes, they get used to something working the way it works and if you change it too much they get really cranky. So when we do introduce changes they’re very subtle and we do them slowly.
“For whatever reason, the decisions I’ve made in the past have been pretty good. I’m happy to make changes other people come up with and I’m delegating more of that responsibility, but I’m still very close to what’s happening with the user-interface.”
And speaking of past decisions, Wood’s choice of business name has proved a winner when it comes to marketing. It cropped up one night as Wood was mulling over potential names. It was short and catchy, with just two syllables and has proved a hit with the media and consumers alike. “Because we had a unique website and the strong business model, the media generally cottoned onto it and enjoyed writing about it. With a name like Wotif, editors can always come up with headlines, so we’re playing more and more on the word ‘Wot’.” He even has a yacht named Wot’
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“We do have a very good relationship with print, radio and TV journos, so we do get good press, but word-of-mouth is what’s really driven the business. Because we don’t advertise in conventional areas such as on the back of buses or on the radio, TV, or in newspapers, there is a bit of an underground network there. People want to tell their friends about something they think is a pretty good deal.”
The decision to use the domain ‘.com’ was a deliberate strategy by Wood in the early days knowing the business would go global. In the same year Wotif launched in Australia, Wood went in search of interested hoteliers in New Zealand. His trip was successful and before long Wotif offered a New Zealand version of the site. However, he realised going international meant the hoteliers weren’t the only hurdles to overcome in making the business successful. It also meant new technology needed to be built to handle the different banking systems, credit card and tax structures, which is where a government grant from AusIndustry came in handy. “The money was certainly important and allowed us to bring things to market that we otherwise wouldn’t have,” says Wood.
The UK was his next target, and Wood lived there for eight months in 2001 to get things off the ground. Now Wotif uses its six international offices to conduct local marketing as well as develop and maintain relationships with international hotels in 38 countries.
Wotif’s international strategy has shifted since it first started exporting to largely English-speaking countries. “We see China as having bigger potential now than the UK and western Europe. The Asian markets are less mature, there aren’t any dominant competitors across the region, so we’re putting a lot of effort into Asia right now. And they’re also in our time zone so it’s a lot easier to manage from Australia. We’re still growing in Australia in the order of 40 percent per annum, but Asia is growing more at around 100 percent.”
In August last year, the decision was made to take Wotif.com public. “Some of the original shareholders were looking for a way to realise some of the assets that had been built up in the business,” Wood says. “We decided internally that the fairest way to value the business was to list it and let the market decide what the value of the business was. We also wanted a wider shareholding among the employees. We’ve got lots of really good people working for us and we wanted them to be involved in the profit of the business and to feel a sense of ownership. Now, around two-thirds of all employees have significant shareholdings or share options in the business.
“The other reason was, we knew if we got good publicity out of the float that would increase awareness of the company, certainly out of the Australian market, and that’s proved to be true. Our awareness before we went into the IPO [initial public offering] process was about 30 percent in Australia. Just before the float that had grown to 38 percent. It also gives us more credibility when we’re dealing internationally with hoteliers. If we’re just a little Aussie private company, it doesn’t have quite the same tone as being a public company. We’re more accountable and transparent as a public company, so there’s less risk that something is going to go wrong.”
Wotif.com listed on the Australian Stock Exchange in June this year, which Wood says has attracted some very strong people to the company’s board. So now, with a title of managing director and CEO, Wood is able to step back from a lot of the day-to-day running of the business and focus more on long-term strategic planning and new opportunities.
“I think going public is a major stepping stone for the business and it opens up so many new possibilities. I wouldn’t even like to guess where the business will be in five years. I know it will be successful and that it’ll be a lot bigger, as long as we keep our nose down, work hard, and don’t do anything silly.”
Wood has also managed to notch up some personal achievements along the way. The most recent of which was being awarded national winner of the Technology, Communications, E-commerce and Life Sciences category in the 2005 Ernst and Young Entrepreneur of the Year awards. “It made me feel a bit humbled to be honest,” says Wood. “It’s not my achievement alone, it’s a team achievement. I get the accolades but really it’s all the people in the business who have made that possible.
“Getting those awards just adds to the cache of the business, adds to the credibility of it, with somebody else saying these guys are doing a pretty good job. So all of those awards certainly help develop a personality for the business.”
Now Wood is sharing his experiences and business ideas with others by guest-speaking and doing presentations on topics such as innovation and entrepreneurship. “I’m doing quite a lot of public speaking and that’s because I enjoy it, number one, but also because it’s an opportunity for me to meet real customers and potential customers,” he says. “I learn just as much as the audience I think.”
One of the key messages Wood imparts to his audiences is a belief in what you’re doing. “If you’ve got any doubts about it, if there are weaknesses in the business model or in the way the business is run that you’re not prepared to resolve, then those weaknesses always come out. You really have to be very confident about the business and why it’s there, why it’s different, why it’s going to appeal to the consumer and why it’s going to make money. And that’s one of the toughest things—to be absolutely, ruthlessly honest with yourself.”
Wood never wanted to have to ask himself ‘what if’, and shares this motto with other budding entrepreneurs: “I’d hate to die wondering, so just go and do it.”
