Love the idea! I’ve been looking for these type of businesses ever since reading the Noman letters and they are rare. 2 questions: 1. How can they compete with the prices of the larger players like Booking/Expedia; 2. How are you thinking about valuation? Is it via FCF multiple and cash EBITDA (should that be compared to “normal” EBITDA in other companies?) as you mentioned or do you have other ways to assess it?
Thanks for your thoughts M G. The Nomad letters are an interesting read.
Cash EBITDA and FCF are the metrics I currently consider when thinking about valuation.
If I was comparing valuations between companies I would be happy to compare eDreams Cash EBITDA to another companies EBITDA under certain assumptions.
There are some negative reviews out there that can be concerning, but there are also some counterpoints. I can expand on these and pricing in a future post.
Thanks for the response. As I mentioned in the first comment, this is a really interesting idea which made me check them out a bit.
If you were to write a future post on this, here are a couple of thoughts: There are several characteristics of “scale economies shared” in eDreams, but 2 main things are holding me back:
1. Customer experience reviews - if you were to ask a random client two decades ago (and arguably today) how they felt about Amazon or Costco, you’d probably receive an outstanding review, both regarding price and overall experience. Based on some of the reviews I read online on Reddit and on a couple of review websites (almost all of them except for TrustPilot), there are hundreds of reviews which are predominantly negative. Specifically, there are a bunch of accounts accusing them of being a scam, overcharging/not delivering and preventing the customers to receive a refund. When I checked the past few earnings calls to see if this was addressed by the company, the only place customer experience is mentioned is the company boasting great NPS results. The reviews might be fake or exaggerated, but I currently have some doubts, and was wondering if you had any insights.
2. Source of price advantage - I understand the prices to clients are cheapest on eDreams, but are the costs the cheapest as well when comparing them to other booking sites like Booking and Expedia? With Amazon and Costco there were good reasons for lower COGS vs strong incumbents - Amazon was internet-first, and Costco created their warehouse infrastructure with few SKUs etc. If the eDreams cost structure is indeed cheaper that competitors, what is the source this advantage over larger incumbents (naively, “larger” would potentially imply higher negotiation power vs hotels and airlines)?
No one leaves a positive review for a flight that lands on time, so the reviews will appear to skew negative. See the NPI metrics in their quarterly reports for a more balanced look. Regarding their price advantage, they give the take rate back to the subscriber. Other OTAs need the take rate to survive, where eDreams survives on the Prime fees.
Love the idea! I’ve been looking for these type of businesses ever since reading the Noman letters and they are rare. 2 questions: 1. How can they compete with the prices of the larger players like Booking/Expedia; 2. How are you thinking about valuation? Is it via FCF multiple and cash EBITDA (should that be compared to “normal” EBITDA in other companies?) as you mentioned or do you have other ways to assess it?
I just read a bunch of online reviews, and unfortunately they were overwhelmingly negative
Thanks for your thoughts M G. The Nomad letters are an interesting read.
Cash EBITDA and FCF are the metrics I currently consider when thinking about valuation.
If I was comparing valuations between companies I would be happy to compare eDreams Cash EBITDA to another companies EBITDA under certain assumptions.
There are some negative reviews out there that can be concerning, but there are also some counterpoints. I can expand on these and pricing in a future post.
Thanks for the response. As I mentioned in the first comment, this is a really interesting idea which made me check them out a bit.
If you were to write a future post on this, here are a couple of thoughts: There are several characteristics of “scale economies shared” in eDreams, but 2 main things are holding me back:
1. Customer experience reviews - if you were to ask a random client two decades ago (and arguably today) how they felt about Amazon or Costco, you’d probably receive an outstanding review, both regarding price and overall experience. Based on some of the reviews I read online on Reddit and on a couple of review websites (almost all of them except for TrustPilot), there are hundreds of reviews which are predominantly negative. Specifically, there are a bunch of accounts accusing them of being a scam, overcharging/not delivering and preventing the customers to receive a refund. When I checked the past few earnings calls to see if this was addressed by the company, the only place customer experience is mentioned is the company boasting great NPS results. The reviews might be fake or exaggerated, but I currently have some doubts, and was wondering if you had any insights.
2. Source of price advantage - I understand the prices to clients are cheapest on eDreams, but are the costs the cheapest as well when comparing them to other booking sites like Booking and Expedia? With Amazon and Costco there were good reasons for lower COGS vs strong incumbents - Amazon was internet-first, and Costco created their warehouse infrastructure with few SKUs etc. If the eDreams cost structure is indeed cheaper that competitors, what is the source this advantage over larger incumbents (naively, “larger” would potentially imply higher negotiation power vs hotels and airlines)?
No one leaves a positive review for a flight that lands on time, so the reviews will appear to skew negative. See the NPI metrics in their quarterly reports for a more balanced look. Regarding their price advantage, they give the take rate back to the subscriber. Other OTAs need the take rate to survive, where eDreams survives on the Prime fees.