Tobias Ragge, CEO
HRS took a significant turn a few years back, ducking out of the expensive battle that is leisure travel accommodation booking.
The founder's son has run the company for 10 years, with a particular emphasis on pushing it into new markets around the world and, more recently, concentrating on its core corporate travel service.
What would you say is the biggest challenge to HRS at the
moment?
It’s finding the right talent. We have a clear strategy and
where we want to go, and it’s proven to be successful, so it’s all about
finding the right people to do what we want to do.
We’re in 34 different markets, so we have to find the right
people to drive things.
It took us a while but we now have clearly defined path –
then you realize it’s only execution, which is the hardest piece.
I could be the best CEO in the world, but if I didn’t have
the right people, then we’re going to achieve nothing.
When we last met, three years ago, we were having a very
different conversation. Why since then did you perform the pivot to focusing
mostly on corporate travel?
It’s very simple: I have to think about sustainability.
Yes, it’s easy to grow revenues as a B2C business – you just
need to spend enough money on Google. The hard piece is to make it a profitable
business.
China will be the force of the 21st century and will eventually kick the ass of Silicon Valley, with regards to digitisation and artificial intelligence.
Tobias Ragge
The more that Google monopolizes the customer acquisition
piece, the harder it is for everyone to get in – it just becomes a marketing
war.
There’s little customer loyalty on the B2C side – really just a commodity around
the search and book model.
We realized we need to look for something that can create
bigger points of difference. We have this core strength traditionally of the
business traveler, so we thought, let’s also get more into the enterprise
sector, building an end-to-end system – procurement, rate auditing, payment,
expense.
We now go to a company and say “give us your problem,” we
deal with it, and if we don’t deliver it we’ll pay a fine. We really want to
lock our success with that of the customer.
We think that was very unique as the industry is not very
transparent and has been served by many years by those who want to keep transparency
away from what’s going on, so we saw there was room for disrupting things.
This is an agreement we’ve struck with our recent Siemens deal.
Do you feel rather relieved that you’ve got out of the B2C sector
and all issues that you’ve just mentioned?
We were only competing locally, not globally. And that said,
Expedia got close to us in Germany, but we lost some market share to
Booking.com simply because it was doing such a tremendous job, I have to acknowledge.
It became important for us to define where we can win.
So, a relief, yes, but also a motivation as that keeps you
driving on.
Given the aforementioned pivot, who do you now consider to
be your biggest competitors and how do you compete with them?
First of all, I’d say ourselves! Not to execute too soon
against what we need to do.
What we’re building is unique. There are companies that we
compete with on different pieces, but nobody does the full integration.
But customers perceive our competitors as the travel
management companies.
What is your impression of private accommodation and where
it sits within what you do and your customers?
What we see from all corporates is that they are trying to
understand what is it all about, first of all. Then they’re trying to think of
the governance around it, just because it’s completely unmanaged.
Now they’re in the space of figuring out how private
accommodation can be part of the program but also be able to control it
somehow.
Airbnb is perhaps at 5% business travel now. Some companies
have 1 to 2% of employees staying at Airbnb, but it is still something to figure
out how to integrate the content into programs. There is a relevancy for it,
especially longer stays.
But in terms of the media coverage it gets for corporate
travel, it’s over-hyped.
What’s your strategy around supply of accommodation?
Everything that is suitable for a company, we want to have
them all bookable. Globally, we are going after the entire inventory – we think
it’s around 485,000 properties, and we are at around 360,000.
The question becomes how you do that, of course.
In terms of our monetization strategy, we treat everybody
equally. There are a few global brands where we have different deals in place.
But we don’t want to be biased in our business or shift any business to
suppliers.
We also look at demand, availability, price competitiveness,
service record.
How do you sense the business travel sector and its
relationship with accommodation is evolving?
It always comes back to the corporate – they are setting
frameworks for their travelers, such as duty of care.
The corporate social responsibility aspect will always give companies
a need to know where people are.
Yes, it’s easy to grow revenues as a B2C business – you just need to spend enough money on Google. The hard piece is to make it a profitable business.
Tobias Ragge
In the fragmented world of hotels, you need a better system
of control than maybe the airlines, where there are fewer airlines to fly with
and they get you safely from A to B.
Hotels are different. And it’s why the
peer-to-peer business has that challenge – all the time a company cannot say
there’s nobody in the house with a gun, then they often not let them stay there.
The market has three elements for us: unmanaged travel and
corporate enterprise, within which there are two buckets: young, new-age, often
tech people, who don’t care about cost and want the freedom; and the majority
which will be the same for another five to 10 years who drive cost savings for
their companies with choice.
In what ways can HRS benefit from its new strategy and
pushing out globally?
I look at it in different ways.
What markets are the most interesting to us? We have a very
strong footprint in Europe, clearly, but then in APAC and especially China,
which is already our second-biggest market today.
The innovation there in business travel is tremendous, and we
can take a lot of that innovation there and put it into other markets.
China will be the force of the 21st century and will
eventually kick the ass of Silicon Valley, with regards to digitization and
artificial intelligence.
It’s amazing what’s going on there.
Also we have all the emerging markets to consider as well,
such as Brazil, India, Indonesia, etc. - we just follow the flow of the global
economic evolution.
But what are the difficulties, therefore, of that global
strategy?
Again, it’s about finding the right talent. We have a local
management approach, running a global strategy and standards.
But we have to localize things, with people, culture and
product development, such as a solution just for China. So it’s a challenge - how
do you manage a culture that was formally very centrally run to decentralized
but still with an entrepreneurial spirit.
Given your new competitor set, the TMC – do you have
ambitions to move out of accommodation?
We want to make sure we become the expert globally, but if
you want to do this you need a focus.
We’re focusing on what we think is the
biggest challenge, which is accommodation, and this is where we are full speed
ahead. We have no intentions to go into flights – there are
others that do a good job with it.
But a TMC can be a one-stop shop, whereas you arguably only
solve one part of it?
No. The world has evolved from an offline ecosystem to an
online sales service ecosystem.
We can integrate our technology into online booking engine,
and even in an offline world, so we don’t care ... we just provide a service.
Subscribe to our newsletter below
Nonetheless, some customers – a small minority – will say
they want everything from one provider, even if one provider doesn’t have the
best solutions.
The larger the accounts become, the more they say they will
need a TMC for offline stuff or vertical experts for others, or HRS for
accommodation.
You have an interest in startups (you invested in Conichi),
so is that a wider strategy for the business?
We’ve been investing in startups because we haven’t defined
exactly what we need from a customer perspective. Conichi is a valuable
component for the business traveler, is smart technology, and that complements
us as they will be better at it than us.
If we find good startups with good entrepreneurs, then we
will invest.
Do you feel that, as HRS is essentially a family business, you
have to fulfill some kind of legacy?
No. Never.
My dad built the business, and I learned everything from him.
But at some point, I completely changed things – business model, culture,
everything. So that is my legacy.
I’ve never had a feeling that I should do it. In fact, he
never asked me. I saw the opportunity and went for it myself.
The opportunity to create something is fun, but you also have
to have a passion for it.
If I was just administrating a company legacy, I would be
burned out by now, depressive and an alcoholic!