This past August, Lastminute tried to solve its
French problems, at least in part, by buying a
local company, Dégriftour, for $82 million.
It was the closest thing in France to Lastminute,
but far better established. Dégriftour started
with Minitel (a computer network in France), launched
a site in 1996 and today controls 50 percent of
the country's online-travel market. In France
alone, Dégriftour boasted almost quadruple
the global revenues of Lastminute, 2.5 times the
customer base and almost twice as many suppliers.
Lastminute CEO Hoberman had long joked about
buying Dégriftour, because the French site
had such a similar business model. "In France
they considered us cheeky competitors," Hoberman
recalls. "So when we first called, they said,
'No way. Who the hell are these upstarts?'" Undaunted,
Lastminute's bankers talked to Dégriftour
founder Francis Reversé. Finalizing the deal
took roughly half a year, but it still shocked
some analysts. "I'm amazed they pulled it off,
given the expansion they're doing," says Heidi
Fitzpatrick of Lehman Brothers London. "I'm not
sure where they found the time."
Integrating the two companies will prove a complex
operation, and Lastminute won't be going on an
eBay-style European acquisitions spree. "Most
competitors aren't a good fit," Lastminute's Virden
says. "We will not buy companies that we then
have to overhaul completely." The acquisition
has served to heavily tip the balance toward Paris
in the competition between the French and German
operations - a rivalry that almost inevitably
arises in the course of Pan-European expansion.
"The center of gravity in Lastminute just moved
eastward," says Stephan (TSC) Uhrenbacher, co-managing
director of Lastminute Germany, referring to the
Dégriftour deal. "But not eastward enough
for me."
While Lastminute struggled to staff its faltering
operation in Sweden - the last of the three countries
in its first round of expansion - the company
moved into Spain in April. Within the travel industry,
Spain is commonly called an "incoming" country,
meaning that there are more foreigners visiting
than citizens going abroad. In fact, entire towns
are known as being "German" or "Brit" tourist
colonies. Thus, Lastminute's strategy hinges more
on creating a new Spanish "supply" for all other
Lastminute sites than on selling to Spaniards.
By setting up local operations, the logic goes,
Lastminute will be able to secure more, and better,
offers for all its country sites. Which is not
to say that Lastminute doesn't expect Spanish
revenues; after years as an Internet also-ran
in Europe, Spain's cyberculture is starting to
take off.
But Lastminute is having a tough time taking
off in Spain because of bad coordination between
headquarters and the local outfit - a typical
issue for expanding companies. Considering the
frustrating summer he's had, Lastminute Spain's
Managing Director Alfonso Castellano, a former
star at travel giant TUI, is relaxed and amiable
as he recounts his problems with the London office.
Having rapidly ramped up Lastminute Spain to
nearly a full staff, Castellano planned to go
online by May. But then he learned that all his
hustling would not immediately translate into
a Spanish Internet presence. The launch was stalled,
pending completion of Lastminute's technology
for its version two, or V2, site. Estimated by
analysts to have cost $14 million, V2 offers new
interfaces, back-end efficiencies and personalization.
But it did not debut until late August, and then
only as a standalone version for Lastminute Australia
(a joint venture with Travel.com.au). By late
September, V2 was still in testing before worldwide
implementation. "Trying to move from V1 to V2
on a live site like the U.K.'s, which gets millions
of users a month, is like changing airplanes midflight,"
Virden explains. "You try to schedule a technology
such as V2, but you can't really say anything
for sure until it's done."
Had he known how long V2 would take, Castellano
would have launched last May, on the Version 1
platform. At the time Lastminute Spain would have
been a first mover in the local online travel
market. But while V2 was in testing, competitors
eDreams and Travelprice launched local sites.
"You can use V2, you can 'touch' it and it works
fantastically," Castellano says with frustration.
"But the technicians keep saying it can't handle
the load yet. Since June, it's always been 'two
or three weeks' away."
As Castellano waited for V2 to arrive, wired
Spaniards turned to the other travel sites. In
time, it became clear that the summer season would
be a washout for generating Spanish revenue. (Holland
and Italy, also stuck behind V2, are less far
along in their development, so in both cases the
lost potential sales were much smaller.) In fairness,
however, the summer hasn't been a complete disaster
for Lastminute Spain - Castellano crafted a successful
"Viva Espana" page that offers Spanish hotels,
events and goods for inbound tourists on all the
active Lastminute sites.
Still, one senses a restlessness in the Barcelona
office, akin to the energy and anxiousness in
a locker room before a championship game. All
the players have been trained. They've internalized
the game plan. But no one can tell exactly when
the match will start. Castellano's generally upbeat
these days, confident that the V2 launch will
rocket Lastminute Spain to success. "Now we see
the light at the end of the tunnel," he says,
then adds, "I just hope it's not a train coming
the other direction."
