Secret Escapes has developed into a business turning over in excess of a third of a billion pounds, since its launch seven years ago, selling what founder Alex Saint calls the ‘light bulb moment’. He says it’s the point when customers decide to book a stay in one of the several hundred luxury hotels on the travel group’s books, in response to a compelling email.
Certainly it’s the strategy through which Secret Escapes has managed to grow exponentially, first in the UK, and then in the last couple of years in Europe- capturing the prized German market which is now the most lucrative business for the group ahead of the UK, with Poland third biggest- as the group builds out in Europe and is making headway in a handful of Asian countries.
The crucial ingredient was matching the million strong database of consumers that Saint and Valentine developed in travel price comparison website Dealchecker to a select group of 400-500 luxury hotels. The balance is crucial, says Saint. “You have to ratchet up both sides of the marketplace, carefully in line with each other- it has enabled us to break the chicken and egg problem which you often have with marketplace businesses,” he says.
Building the base
The Secret Escapes story begins with the Daily Mail owner DMGT’s efforts to offset the collapse in classified advertising revenues across its newspaper titles brought about mainly by the growth of online disrupters. Via a search directory and an online travel business owned by DMGT called Associated New Media, Saint built up expertise in online marketing before launching travel price comparison website Dealchecker.
But it was French online fashion and accessories business Vente-Privee and unrelated travel site Voyage Prive, also based in France, that inspired Saint and the team that joined him from DMGT to launch Secret Escapes. “We were already producing a travel email newsletter product and we didn’t really see anybody really capturing that space in the UK,” he says.
They ditched an advertising model that saw customer dispatched early to partners such as British Airways (that were using Dealchecker to build their own leads), recognising they needed to hold on to the customer base for longer. “The power of all that data is when you understand what the customer is doing. You can use that to try and drive repeat purchase, and just be much cleverer about how you interact with your customers,” he informs.
Finding the sweet spot
Sensing the risk of a business model highly dependent on Google, after the search engine briefly pulled the plug on the nascent business- recognising its commercial threat, a new model featuring an email newsletter was born. “It gave us the right to talk to customers on an ongoing basis and send them content by email, and without having to rely solely on Google for sending us audience,” says Saint.
Bulletins feature “beautiful, mainly boutique hotels, significantly cheaper than you can find anywhere else online,” Saint enthuses. “The curation is important, there are so many businesses that have had access to email databases, that have just churned out poor quality deals that are not inspiring, how many emails can you cope with that are about leg waxing and teeth whitening?” he asks.
This hotels are vetted by an in-house team who decide whether they’re ‘Secret Escapes-quality’. Saints describes the sites as “remarkable, either through their luxury or exceptional location, or in some other way that make them the best hotels in their category.” He say that on top of that “when they’re on sale with us they will be significantly cheaper than anywhere else.”
The level of discount is what Saint insists is crucial to the model. “The best available rate- which is typically largely accepted as being the price that all the major online travel agents will sell at, is what we regard as the watermark. What we’re doing is getting below that,” he insists.
Saint says this pricing is achieved partly through the strength of relationships the company holds with hotels, but also in the way they are marketed. “To market the average 30 per cent of their rooms which aren’t sold at any given time, hotels can use us as a discrete marketing channel. They can get to people they know will be new customers or weren’t definitely thinking of going there,” he says.
When it comes to financial backing, Saint says he was always confident that investors would identify the attributes of team, market opportunity and traction that he believes any good investment should feature. “We were proven entrepreneurs, the market opportunity is totally proven in travel, but with the database we had the beginnings of traction, which was key in giving us the edge.”
Given that the business was starting afresh, there was scope to reconfigure any aspect, using evidence-based solutions to fix problems such as conversion rates not being high enough or people not opening the email, by studying the analytics available. “A web business is like a big chemistry set, you run experiments and scientifically determine which route is the winner,” he enthuses.
In essence, that means testing a new feature – tiny changes such as moving the position of a sell button or pictel or bigger developments like package flights with hotels during the purchase process- against a control group and seeing the degree of change in returns as a result, says Saint. “We’re building our own software so we can tackle problems quickly- although the ability to move in an agile way becomes more of a challenge as you get bigger,” he reveals.
As the proposition has developed, investors have shelled out millions of pounds in several rounds of funding since the first £1 million was raised in early 2011, with further rounds to support a TV advertising campaign the following year. That medium was identified after rigorous testing to be the ideal channel for marketing Secret Escapes, says Saint. “We only worked on the channels and in the spots during the day- where a lot of our influencers are women in their forties,” he reveals.
Further fundraisings enabled a launch into Sweden in April 2013- a helpful testbed before hitting a month later the all-important market of Germany- which features a population of “high numbers of days of holiday a year, a high propensity to travel and a high propensity to spend on travel,” says Saint.
The group’s growth trajectory appears healthy with 2017 revenues of £375 million, a 40 per cent increase on 2016, which Saint says was itself a 50 per cent rise on the previous year. Although the group is loss-making, the mature businesses in the UK, Germany and Poland are all substantially profitable,” he informs.
The next challenge is developing new territories- 13 countries were added in the last two years, including four in Asia- Hong Kong, Singapore, Malaysia and Indonesia- where purchases on mobile are far more common than in Europe, requiring a rethink in formatting.
But is Secret Escapes a disrupter? Saint would put the firm in that category. “We’ve changed the way hotels market their spare inventory- something they previously hadn’t had. We’ve also pioneered direct response TV advertising. I’m not aware of anybody in 2012 who was able to track and confidently give themselves a return on investment for TV ad spend at that time,” he says.
Although the pitch of Secret Escapes appears straightforward, the thinking behind it is anything but, says Saint. “We don’t ever assume that received wisdom is the right way to go. We’re always happy to question everything because we know that science and analytics can help us figure out the answer,” he adds.
The future looks very positive- despite headwinds of Brexit and legislation around data protection and payment services that will impact the model, Saint remains upbeat. “I think there are times in life when adversity is chucked at you. You can either moan about it, or you can make the best of it,” says Saint. So far, that approach seems to be paying off.