HolidayLets: Growing a successful internet-based business
The dot com fall-out following 2000 was a tough time for businesses that made their living out of clicks, rather than bricks. BGP participant business Netsquared was no exception. Co-directors Ross Hugo and Trevor Barnes joined BGP 2001 to take a long, hard look at how their web development company could reinvent itself for the future. Since then the business has not only weathered the storm, creating and maintaining websites for clients, but has created a new division to build its own highly successful venture, HolidayLets.Net. With over 4,000 subscribers in little more than two years, HolidayLets is profitable in its own right and has become one of the UK’s most-visited property sites.
The idea for matching holiday property owners with holidaymakers had first occurred to Ross and Trevor back in 1997. At that time a lack of resources forced them to put it on the back burner. The business was fully occupied in designing and hosting websites for a burgeoning client base. Almost by chance, Netsquared had developed a niche business servicing property clients. The firm developed one of the first national portals for estate agents, which attracted some 200 agents and 7,000 properties. The credentials gained led to a commission from Countrywide, the UK’s biggest grouping of agents, to build a website to service their base of 800 offices. This was the site that was to become eventually www.rightmove.co.uk, the market-leader and owned today by a consortium of big players.
From hero…to (almost) zero
From 1997 to 2000 the business was at maximum stretch, servicing the growing demand for websites. In 1999 alone Netsquared doubled their staff with freelancers, paying them large sums a month just to secure their services. It was, as Ross recalls, a crazy period. Then, in the run-up to 2000, they sold a 30% stake in the company to Countrywide. Like every other traditional listed business Countrywide were desperate to establish their virtual street-cred., having seen firms like Reuters more or less double their value through repositioning themselves as a dotcom. The deal gave Ross and Trevor a partial exit, and the business a war-chest in the bank account.
In the twelve months that followed they went, as Ross puts it, "from hero to zero". Being a web-based business was no longer sexy. Every man and his dog were offering design and hosting, and demand was plummeting. Amassing a war chest proved to have been far-sighted, since it saw them through a couple of very lean years.
On BGP the pair formulated their recovery strategy. Part one was to recover, retain and grow their core customer base. While on the programme they learned that their single biggest client, rightmove, was about to be taken in-house as its ownership changed from Countrywide alone to a consortium of property interests. At a stroke that lost Netsquared 40% of its turnover. This gave a new urgency to part one of the strategy. Fortunately the business had a loyal core of blue-chip clients such as Haymarket Publishing and Kier Construction. They provided a base load of hosting and maintenance, plus new projects. "We stemmed the losses and brought new business in from our existing clients," says Trevor, who looks after the core web development activity. Even so, the business dipped into the red for a couple of years and they were forced to make redundancies.
The second leg of the strategy was to do what they did for others, but on their own account. Ross took on responsibility for new projects, and first in line was HolidayLets, which had continued to hover in the background. There are at least half a million UK residents who own a second property. In 2003, when the project was launched, the economy was back in full swing and the overseas property market was going strong. "We had the market knowledge, the contacts and the technical skills," says Ross. "Even though one player had already established a good position we were convinced that the market was big enough and that we could do a better job."
Creating the new business
HolidayLets is the classic transaction website, bringing buyers and sellers together. Making this kind of project work is a chicken and egg problem: there have to be sufficient sellers to attract buyers, and enough buyers to interest the sellers. Ross’s strategy was to trawl the net for individual owners with their own rental sites, capture their details and, with their permission, display them on the site. Between April and December 2002 Netsquared populated the site and, when 1,000 owners were listed, HolidayLets went live at the end of the year. To attract enquirers, Ross spent £30,000 on advertising in the travel pages of the mainstream press, supplemented by buying google adwords. And of course Netsquared fully leveraged its skills in search engine optimisation: the site still, today, generates 80% of its traffic from google searches.
For the first nine months of 2003 advertisers were able to display their properties free of charge. From then on they paid an annual subscription - currently £99 for private individuals, with a scale of discounts for multiple properties. Advertisers and enquirers built steadily during 2003 and by mid 2004 the operation was breaking even. By September 2005, two years after launch, Holidaylets featured over 4,000 properties in the UK and overseas. User sessions were running at over 250,000 per month, and the site was generating some 6,000 booking enquiry emails per month. In 2004 Holidaylets received the DTI E-commerce award for smaller businesses and a year later won the local Rising Stars Business Excellence Award. Today, the site lists 6,000 properties and traffic stands at 400,000 site visits per month. "We measure five key indicators," says Ross. "One - the number of site visits. Two – the number of property views . Three – the number of email enquiries. Four – the rate of new subscription. And five - the rate of re-subscription. On all five metrics the business has outperformed our expectations."
The ease of use and flexibility of the site has also been continually improved. Not only can you search for properties by country and region, but you can look for places by the sea, for example, or city-centre apartments, right across the site. There are late offers, special deals, seasonal sections for golfers and skiers, links to area guides, and so forth. Pages of testimonials bear witness to happy advertisers. This year Ross expects to see a net financial return of over 20% on sales generated, while continuing to invest in improvements and additions.
The challenge to stay ahead of the pack is relentless. Among other ideas, Ross’s team is currently exploring expanding the offer to advertisers to include a common booking process. Not only will this simplify the transactional process for buyer and seller, it will improve the information available to HolidayLets, and the quality of service they can offer both enquirers and advertisers. The experience gained through HolidayLets has also provided a springboard to the next Netsquared new development: a site dedicated to premium bed and breakfast operators in the UK, which goes live in October 2006.
Based on the Holidaylets experience, Ross has the following top tips to offer aspiring web-based businesses:
Ross’s Top Tips
Be passionate about what you do. Be it web-based or not, without belief in what you do, enthusiasm and a can-do approach, you won’t succeed.
Provide exceptional customer service. Too many web sites out there are a triumph of style over substance. Respond promptly to emails and always have somebody on the end of a phone should clients wish to talk to you.
Keep it simple. Decide what it is you offer and do it better than anybody else. Don’t dilute the offering with an over-complicated site.
Innovate constantly. If you don’t, the competition will.
Site design. Search Engine optimisation is hugely important to the success of your site and a well thought-out site structure along with plenty of relevant content will drive traffic to your site.
To view the Netsquared, Holidaylets and B&B sites, visit www.netsquared.com, www.holidaylets.net, and www.bnbselect.com.