“Everybody is competing and cooperating with everybody”
We recently had the pleasure of meeting Oliver Dlouhý, the founder and CEO of Kiwi.com. We discussed everything from a major unmet need in the travel industry to the increasing convergence of metadata players and OTAs. It also features a cautionary tale about the perils of currency-related errors, as well as an example of how FX management can be leveraged for gains through multi-currency ticketing.
How did you wind up working in the travel industry and founding Kiwi.com?
Earlier in my career, I had my sights set on launching something really big and global. I am an avid traveller and try to travel any time that I can, and since I wasn’t really making that much money back then, I was striving to travel really cheap.
One day, my then girlfriend – and now wife – and I wanted to travel from Prague to Portugal. As always, we looked for the cheapest tickets, but the cheapest option we were able to find was a direct TAP Air Portugal flight from Prague to Porto for around 10,000 koruna (roughly €400), which was too much for us.
We wanted to fly low-cost, but there were no direct low-cost connections available from Prague to Porto. There was a Ryanair flight from Prague to Milan, though, so we booked that and then a connecting EasyJet flight from Milan to Porto. On the way back, we flew from Porto to Eindhoven with Wizz Air and from Eindhoven back to Prague with Ryanair again, I think. So, we took four flights for one return trip, but we ended up only paying €80 overall, saving 75-80% of the original price.
However, it took us six or seven days to find these tickets and thoroughly check all the airlines’ websites to ensure they would really connect smoothly. That’s when I thought to myself, ‘OK, maybe we could automate this and provide it as a service. It could be a good business and, most importantly, offer good added value for customers.’
For someone who has never used Kiwi.com, what’s your main competitive advantage compared to search aggregation sites like Kayak or Skyscanner, or traditional OTAs?
Our biggest advantage or differentiator would be what we call ‘virtual interlining’; we connect carriers which do not officially cooperate with each other, in the process saving customers a lot of money. That’s the idea that we built the company around.
On the other hand, Kayak and Skyscanner are actually our partners rather than our competitors. Indeed, customers don’t need to go directly to Kiwi.com to book our tickets: they can browse Skyscanner or Kayak and they’ll find them there too.
However, if you go to Kiwi.com, you will see that we have a Price Map, which is very accurate. You can use it to search within wide date ranges and different radii, allowing you to search for multiple destinations and airports at the same time. For that reason, we are also the best site to go to for customers who don’t know exactly where they want to travel, but just want to save money, find the best ticket within a date range and a rough area and be inspired.
Do you think that there’s still room for new start-ups that don’t necessarily have huge digital marketing resources to compete with giants like Expedia, the Priceline Group and Ctrip? Do you see yourself competing with them?
Well, the situation in the travel business is a bit weird at the moment: everybody is competing with everybody, but everybody is also cooperating with everybody. The words ‘frenemies’ and ‘coopetition’ reflect the state of play in the travel industry right now.
But to answer your question, yes, I’m pretty sure that there’s space for newcomers to the travel industry. There are so many apps that people use when they travel, from Booking.com and Airbnb for accommodation to Yelp for restaurants, plus the likes of Google Flights and Rome2rio. It always makes sense for the customer – if they want to save money and get the best deal – to use all of them, because there is no single app that always offers the best prices and content.
Unless or until someone really designs a fully comprehensive travel app, aggregating all the relevant content and the best prices so that the customer doesn’t need to use anything else, then there will definitely be room for new players and innovators.
That’s a similar principle to what you initially did with flights, connecting all the flights and bringing them all under one roof. Are you working on something like that for travel as a whole?
Yes, we are. We are currently integrating ground transportation, which is the next step for us, but at the same time, we are also working on dynamic packages and hotels – things like that. So, that’s our ultimate goal: we want to be the go-to app that customers can install without needing to turn to any others, because all the best content is already at their fingertips.
Are you doing all of this under the Kiwi.com brand?
So far, yes, and there are no current plans to do it under any other brand. However, we are cooperating with many brands all around the world and doing some cool stuff. For example, we have a very nice two-way partnership with Logitravel. They are building a dynamic package solution that will be plugged into our software and it will be co-branded Logitravel/Kiwi.com. At the same time, they have integrated our API and are now packaging our flights with their hotels for their customers. So, we are open to such kinds of partnerships, but it would definitely need to be on our own website.
Your growth has been spectacular since you were established in 2012. You now have around 1,900 employees and branches in 11 different countries: what have been some of the challenges that have come with this international expansion? Are you thinking of entering any new markets?
It’s been a crazy ride. When we started out six years ago, there were three of us. Then that rose to five, 30, 300, 800, 1,600 and so on. I didn’t really expect it to be so crazy and, at some points, so difficult to manage the growth. The structure of the company has to change basically every quarter, which is extremely demanding for the management as well as the employees.
We do plan to keep expanding into other countries. With our customer service, which operates 24/7, we are applying the ‘follow the sun model’. We want to have a customer service centre in every time zone, to be able to serve our customers without the need for night shifts. The last location that is currently missing on our map is South America and we are going to open an office there, probably in Bogotá, Colombia.
Since Turbulence is powered by Kantox, we always ask a question about currency management. This is typically one of the major challenges faced by travel companies, particularly because of the internationalisation we just talked about. How do the fluctuations in currency markets affect your business and is it something that you actively manage?
We do actively manage it. We currently accept almost 70 currencies globally.
The fluctuations affect us a lot, albeit usually in a good way. We issue our tickets in over 40 countries all around the world. This allows us to capitalise on situations like the Russian rouble’s recent slump; since we are able to issue tickets in roubles, they ended up being cheaper for us to issue in Russia than anywhere in the world. This, of course, meant that we could outprice more competitors, which increased our sales.
That was a good experience, but I’ll share a bad experience too. It was back in 2015 and again, the rouble had fallen. However, we had an error in our currency system, so the exchange rate wasn’t updated and we spent almost a month selling the tickets cheaper than we were buying them for, losing a huge amount of money as a result. To save the company, we actually had to sell 10% of it just to make up for this one simple issue.
Hopefully, we are now quite well protected. We have a very strong CFO who engages in currency hedging so that the fluctuations don’t affect us that much anymore.
Could you tell us a bit more about how you issue tickets in different currencies? Do you have different IATA licences and take advantage of availability differences and rate differences, as well as the exchange-rate differences?
That’s correct. We have a sophisticated system that uses machine learning in order to determine the best place in which to issue a particular ticket, based on past experiences, prices and availabilities. This is our special know-how, which no one fully understands because it’s machine learning!
Besides having multiple IATA licences, we use ticketing partners around the world – we’re adding more and more every month. But the main part is the system.
In your opinion (and this is a question we’re asking all of our interviewees), what are the major challenges facing the travel industry today and your segment specifically?
There are lots of challenges in the air ticket segment, especially when it comes to carriers. Some carriers are very hostile to online travel agents, while some are more willing to cooperate. This is probably a relic from the past, with big national flight carriers having emerged in a highly regulated environment, with trade unions, forums and stuff like that.
They are now competing with super-low-cost carriers, modern companies that can afford to fire a lot of people if they don’t perform, aren’t happy with their salaries or something like that. This actually creates a huge amount of pressure on OTAs, who are trying to cooperate with everyone. I won’t name any names because it’s not my intention to upset anyone, but in fact, although it may look like some airlines are hostile, they actually don’t have any other option – they can’t be as open because they have much higher costs.
Another challenge is the fragmentation from the customer’s perspective. Customers are never really sure that they’re getting the best deal. Prices fluctuate every second of every minute and the customer really has a huge variety of tools to check in order to be even 50% sure that they’re getting the best price. This is something that we’re trying to tackle.
These days, customers are used to there being a multitude of sources and so tend to think that there might always be a cheaper rate out there somewhere. How can you reassure them that they’re really getting the best price?
We are trying to address this. We are currently integrating a metasearch API on top of our directly bookable OTA content. This means that when customers search on our site, they have the chance to compare the price with hundreds of other OTAs, our competitors, through metasearch.
What we are trying to do is to be fully transparent. If we have the best fare, great, book with us, but if we don’t, we are happy to display our competitor alongside our results and redirect the customer to them. We just believe that this is the right thing to do; we feel that the customer would end up with the competitor anyway, so why not help them and make it easier for them? Then they will come back to us next time as a valuable source of comprehensive information.
Do you get pay-per-click commission by doing that?
Yes. We at least get a small fraction of the revenue that the metasearch company gets, but most importantly, at some point, once we integrate all the metasearch APIs, I hope we’ll be able to say: ‘OK, come to Kiwi.com. You will always find the best price here, whether it’s directly from Kiwi.com or from any other player in the market.’
You mentioned Google Flights earlier. What is your view of the entry of tech giants into the travel industry? Do you see this as an opportunity, a threat or a bit of both?
I don’t see it as a threat, to be honest. It could be seen as more of a threat to ‘purer’ metasearch players, only I’m not sure such a thing exists any more! All the metasearch companies are now trying to become OTAs as well.
I actually think that Google is going to be the only pure metasearch player left in the market one day. For instance, Google Flights would have been a huge threat for Skyscanner three years ago, but Skyscanner is now integrated with Ctrip and they are digging deeper into the OTA sphere.
It’s an opportunity for us in terms of attracting people directly to our website, which has never been a core part of our DNA: we’re a content and customer service company, not a marketing company. So, Google could be a new source of traffic that we can serve with the tools and different parts of the chain that we are good at and it’s all about how we can accommodate this change and work with it. I’m not really afraid of losing market share to them any more.
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About Kiwi.com: Ranked seventh in Deloitte’s Fast 500 EMEA for 2017, Kiwi.com is a multiple award-winning hybrid OTA/metasearch company that helps travellers to find and book cheap flights. Its proprietary, algorithmic ‘virtual interlining’ technology combines flights from any airline into one ticket, allowing customers to make big savings and giving them a wider choice of options. Based in Brno, the Czech Republic, the company has processed over 3.5 million bookings, brings together more than 700 airlines on its platform and offers 24/7 customer support.
About Oliver Dlouhý: Prior to hitting the heights in the flight ticket industry, Kiwi.com founder Oliver Dlouhý worked in other ventures in the online space, including with the live video-streaming company Xpress TV and the e-commerce platform oXyShop. While still a teenager, he made money selling custom MP3 jukeboxes; before that, he had shown his entrepreneurial streak as a bulk blueberry salesman. He has been named on Forbes’ 30 Under 30 list for the Czech Republic.