PP65

Adam Schwab

Co-Founder of Luxury Escapes
Simon chats with Adam Schwab, Co-Founder of Luxury Escapes.

Show Notes

Luxury Escapes curate amazing hotel, cruise and tour packages for customers at discounted prices.

You can contact Adam Schwab here: https://www.linkedin.com/in/adam-schwab-64b439a/


Transcript

Simon Dell: Welcome to the show, Adam Schwab. You’re down in Melbourne. How is Melbourne today?

Adam Schwab: Stunning down here, as it usually is.

Simon Dell: That’s a lie, Adam. It’s never stunning. Don’t sell that lie to people, mate. It’ll be snowing by this afternoon.

Adam Schwab: Blue skies and 20 degrees, so certainly.

Simon Dell: Are you the CEO or just the co-founder of Luxury Escapes?

Adam Schwab: I’m now just the co-founder. So we have very luckily got someone to do the CEO duties as of a couple months ago. Co-founder is my official title.

Simon Dell: Explain to us watch Luxury Escapes is. I don’t think it’s hard for us to understand, but just give us an overview as to what you guys do and your mission behind the company.

Adam Schwab: We do two things. Like any marketplace, we help buyers and sellers. Our buyers are our customers, so those people looking for holidays. What we do for people wanting to travel, is we curate the most amazing hotels, and tours, and cruises on Earth and offer them for a significant discount to what everybody else sells them for. This can be 20-50% off. For the customers, we not only help them discover, but we also give an amazing price.

For our supply side, our hotel owners and brand partners, we actually make money. We’re a marketing channel for our hotel partners. We essentially, in really simple terms, fill beds, and rooms that otherwise would’ve been empty. There’s a lot more to that as well.

Simon Dell: I’d imagine there’s more to it than that. That’s pretty clear. And for those of you that get a chance, LuxuryEscapes.com, you just scroll down the front page and you just go, “Yep, I want to go there.” It’s the real top-end places, isn’t it?

Adam Schwab: Luxury is different to different people. We’ve had hotels like Arman, like Ritz-Carlton, top-end, Park Hyatt. We’ve definitely had most of the top-end brands on the site and have them, but the luxury can also be a four-star hotel in Australia. Sometimes, $200 a night, it can be luxury. We don’t intend to be serving the 1% of the 1%. We want to serve as many people around the world as we can.

Simon Dell: I want to talk about Luxury Escapes in a bit of detail, and how you go to market. I want to take a step back, because like me, you are somebody who went to university and did law. What you’re doing now is a significant step away from getting a degree in law, but what made you want to choose law in the first place when you went to university?

Adam Schwab: That’s a good question. I think there’s an element when you finish your final year at school and if you get a good enough mark, there’s a pretty general pressure to use it, in a way. That’s medicine. That’s law. It could be commerce, engineering. I did want to be a lawyer, as well, not really knowing exactly what that involved, but you watch enough TV shows and read enough books to get a glamorous picture of what it is.

The actual job as a lawyer is incredibly boring and hard to imagine anybody liking it, having worked there for four to five years. But you do learn some incredible skills as a lawyer, precision and not getting things wrong, especially the top tier firms. You’re amongst generally really intelligent people and really hard working people. You learn unbelievable discipline that you probably don’t get outside a high level professional services firm, be it law firm, investment bank, top tier accounting firm, and consulting firms.

Simon Dell: Post that law career, you’ve gone into roles that have much more of an entrepreneurial slant to them. Is that something that you’ve had growing up? Did you feel that you were destined for some sort of entrepreneurial kind of career, or were you quite happy to be one of those cogs in the wheel, in terms of that corporate kind of person?

Adam Schwab: I was growing up, I finished school in ’97, uni in 2002. Back then, being an entrepreneur wasn’t that cool. Being an entrepreneur, people talk about the Skase and Bond and all those kind of guys. Entrepreneurialism was almost analogous to bankruptcy and criminality.

Now, when you’ve got your Zuckerbergs and Musks, entrepreneurship is cool and everybody wants to be an entrepreneur. When I finished uni, everyone wanted to be an investment banker, and a lawyer, and a consultant. I probably envisioned myself going to banking, I suspect. Ultimately, I took a different route. I was pretty grateful about it.

But when I left Freehills in ’05, I took a leave of absence initially but never went back. People looked at us, certainly looked at me as being insane. Like, why would you leave a blue chip law firm to start what was essentially a backpacker apartments business with no money? And it worked out in my favour, god knows if I went back what it would have been.

Simon Dell: What was going through your head at that time? You’ve made the decision that being a lawyer… And you’ve done that for nearly 5 years, but you made the decision that being a lawyer probably wasn’t for you, and you’re going into a backpacker’s business. Was that a light bulb moment one night? Was that something that evolved over a couple of years?

Adam Schwab: I was a lawyer for 2 1/2 years. And apparently, over 2 1/2 years. I lasted 5 years proofreading documents. But I was pretty fortunate that a good friend of mine from school, Jeremy, we had a couple of small businesses as a side hustle. He wanted to do something full-time. He really pushed me into it. I was forever indebted to Jez for having that real drive. We were 24 at the time. He quit ANZ. He was trading at ANZ and really sort of pushed me into it.

I was always the operation guy. In the early days, it was a really nice combination. Really cool partners and still is to this day. He’s still more of a high-level guy, more recently I’ve set back, but I’ve traditionally been the operations and hands-on guy. It’s been an interesting partnership. He found our initial apartment on the ANZ bulletin board, we looked at it, and we took it. It was a real combination of my slight conservatism and Jeremy’s bullishness. That’s what got us over the line.

Simon Dell: Again, you did that business for a decent length of time. You’re saying he was ex-ANZ and you were ex-law firm. Did it help that you guys had that corporate experience when you walked into what was a startup back in 2005?

Adam Schwab: It was in Jeremy’s dad’s accounting firm. That hasn’t been condemned. It’s interesting. I think corporate, certainly in law, teaches you that great precision. In the early days, probably not that helpful. The other thing that law teaches you is you don’t get bullied. If you get regular up-counter parties, you’re never going to get pushed around. I’ve got a legal matter doesn’t matter how threatening it is; takes a fair bit to scare me. So, it’s that confidence and that swagger that you can have as an ex-lawyer, especially a top-tier firm ex-lawyer. You simply can’t be bullied.

That came later. In the early days, it’s pure hustle, $70,000 between us. I’d borrow my dad’s trailer, I’d go and pick up second-hand furniture for $100. Didn’t even know how to use the trailer, so I’ve been struggling driving it, almost crashing the car. It was basic and it’s meaningless. I guess you look at all of us now with 100 people in it, it’s a pretty flash space. You couldn’t come further.

But yeah, in the early days, it was as anti-corporate you could get. It was hustle. It was, how do we get stuff cheap and how do we sell? Any entrepreneur, any founder is essentially a salesman. You’re a salesman. You’re a product manager. You’re a customer service head. You’re a finance head. You’re doing all that stuff. But if you can’t sell, you probably have a pretty shit business.

To this day, if I look at what my strengths are, one of my strengths is being able to understand what the customer wants and making the product match that, be it an IT Product  or a holiday product. That’s essentially selling. If you can’t sell, you’re probably going to struggle to run a business.

Simon Dell: It’s one of the common things through every single podcast I’ve ever done, is that successful entrepreneurs have learned how to sell. Whether that’s some of them doing their teenage years in Coles and Woolworths, standing behind a counter, talking to customers or whether that’s more advanced stuff, but that common theme about the ability to sell is, through all the successful people that I’ve spoken to. You’ve come from a background that’s law degree, law firm, paralegal. That’s not traditionally a space that you learn how to sell.

Adam Schwab: It’s actually a really interesting point you make, and I sort of reflect on that a bit. Being a lawyer, you certainly aren’t selling much, but I think any good partner selling the services of the firm… Now, when you’re a partner, you’ve got to be a good salesman. But before that, in the actual role of a lawyer or a banker, you’ve got to be able to create win-wins.

A good lawyer can always create a win-win. A bad lawyer won’t. A great lawyer can put himself in the shoes of the other party and get both parties to be at litigation, be at a corporate negotiation, get them to agree to win-win.

I’m not an old school salesman, but what I think I can do pretty well is happily create win-wins. Essentially, Luxury Escapes is a business of win-wins. It’s a business where a hotel and the customer wins and we win by sitting in the middle. It’s pretty nice being in a business where you make people happy. It’s why people like to work here. We’re not a bank, for example, who makes their money, to a large extent, ripping off customers.

Telco largely makes its money by investing in capital and squeezing their customers as best as they can, knowing it’s pretty difficult to move. We’re the opposite. It’s very easy for our customers to buy a holiday from 50 other places, be it online or offline, but we’ve got to create these win-wins that create huge value for the customer in terms of getting an amazing holiday for a really good price. But also, we need to create profitability for our hotel partners. If we don’t, they won’t give the deals we need to give our customers.

Simon Dell: You mentioned one other thing was resilience, which I think is obviously hugely important for startup business owners, anybody out there. You’ve had that, as you say, being a lawyer teaches you resilience. How do your team members, people that work for you, people that you come across, how do you teach people to be more resilient?

Adam Schwab: I think you can’t teach it, unfortunately. You can try and hire for it, but I think it’s just a natural mentality. I certainly put my mentality and whatever challenge I get, be it someone’s… And even a parking fine to a bigger challenge, my first thought is, how can I beat this? How can I win? Assuming if you get a parking fine, you’ve done the wrong thing, well, that’s that, you deserve it.

But if there is a sense of injustice, or we’ve been hard done by, or the decision of a regulator in corporate is wrong, my natural inclination is to fight and fight hard regardless of the odds. You don’t always win, but win most of the time. It’s just that undying belief that, ultimately, the right result will prevail.

Obviously, you need to know what the right result is. Like there is no point challenging things that they’re clearly wrong if that… If someone else in corporate is making a wrong decision, or a regulator making a wrong decision, or whoever’s making a wrong decision. If something’s wrong, to fight it, not to simply accept. You just try and ingrain that into your staff, but ultimately, it’s really hard.

Simon Dell: You’ve done Living Corporate Apartments. What brought that to an end?

Adam Schwab: It’s actually still going. It’s been a great survivor, 14 years now and still going. It has been buffeted by Airbnb significantly. So, whilst we use Airbnb a little bit, the Airbnb crowd is a massive platform, which essentially was a big competitor in many ways and an amazing business. That still goes.

But in 2010, when we started the precursor of Luxury Escapes, the initial plan was I’ll stay working on Living Corporate and Jeremy would work on what became Luxury Escapes. In the end, it was such an operational workload that I just switched completely to what was deals.com.au and became Luxury Escapes.

We’ve pivoted a few times. That was obviously the biggest pivot we’ve done, but we did a couple of big weeks through our careers. Fortunately, worked out well in the end, but you never know where it’s going to end up.

Simon Dell: Let’s talk about Luxury Escapes, then. Obviously, the main question for me with this is that you’re in a crowded marketplace. It’s a busy old place out there. How do you make sure you guys stand out from all the other holiday websites out there?

Adam Schwab: It’s crowded, you’re right. There’s a lot of people who sell travel, but there’s also a lot of people who take trips. I think that what we don’t have a lot of competition on is what exactly what we do. What exactly we do is provide incremental profitability for hotels, and there’s no one else really doing that globally, almost. There’s a couple of businesses like us out of Europe who do a similar thing, but our is focus on, how do we make more money for our hotel partner?

Not only to fill their empty beds, how do we allow them to get bookings early so they can yield other channels? How do we allow them to sell more F&B, sell more spa, sell more ancillary? How do we make them higher RevPARs? That’s a really key focus.

There isn’t anybody else really doing that anywhere, so that’s a really interesting advantage we have. From a customer point, there’s lots of places you can buy travel, but if you go to Flight Centre, or Booking.com, or Expedia, everybody sells it at pretty much the same price, let’s call it BAR or Best Available Rate, and the hotel website is the same.

What we do is we sell for well below BAR. It would be less money than the actual cost of the room, but we’ll also give you breakfast, and dinner, and a club room, and whatever else the deal has. We’re a much better value proposition for our customers, and that’s really allowed us to stand out and bootstrap from day one. We’re very differentiated. We invest a lot in content.

We’ll have videos of all our properties. We’ll write thousands of words on our properties. We’ll have a magazine. We’ve got a TV show. We’ve got all these content properties, and we really want to make our hotel partners and shy and give our customers a great understanding of the trip they’re booking, and not trying to put all over their eyes or mislead them, but to give a really honest appraisal of, “This is the hotel you’re booking. This is the cost, and this is why it should go.”

Simon Dell: I’m guessing the start of this business is one of those chicken and egg situations, because you’re trying to say to the hotels or the resort partners that they need to give something to you at a certain price or a very low price.

You obviously then want to get the customers in, but the customers aren’t going to come without the hotels being in there, and the hotels aren’t going to give you those prices until they can see the customers. You’re in that chicken and egg situation. In those early days, how did you convince the hotels or the resorts to give you what you needed, which was high end, high quality hotels and holidays at a price that nobody else had?

Adam Schwab: There’s two elements to that question to be answered. Every marketplace has a chicken and egg issue. Ours is probably less pronounced than Booking.com, or Seek, or RealEstate. Those guys are classic marketplaces. We’re a curated marketplace. We didn’t need every single hotel in Australia or on Earth to be part of our platform.

If you’re a traditional marketplace, if you’re a RealEstate.com or Seek, you need a critical mass of sellers before you get any buy. So, you need a significant capital investment. You need to have that great breadth of product. We didn’t need that because we just needed one deal or two deals. It’s a much more curated marketplace offering, and that allowed a slight alleviation of the chicken and egg problem.

Your question though is right, in a sense that we didn’t walk up to Ritz-Carlton day one and run a Ritz-Carlton deal. We didn’t go to Park Hyatt. We didn’t go to Sofitel. We certainly went working with the absolute premium properties probably for 3 to 5 years and gradually climbed up that luxury ladder, so to speak.

Our very first deals were for really boutique properties that didn’t have a brand at all but saw the benefit in our product. We started working with really big, family-owned boutiques like a hotel like Katatani in Phuket which is a very successful big hotel. It doesn’t have that brand. And then we started moving onto bigger brands.

Now, we’ve got agreements with almost all the big brands we work with, and have got masked agreements. We’ve gone from one extreme to the other. It’s very much a matter of getting the trust. Now, we’re working with the likes of Arman who don’t really work with anyone online yet but work with us, the most premier brands in the world Katatani, work with Hyatt, Sofitel. We work with almost everyone now, but that didn’t happen overnight. That’s an 8-year journey.

Simon Dell: I’m interested that day one, when you go, “Right. We’ve got to get a deal.” Did you guys happen to know someone in the first? Who was the first one, and did you know someone there? Did you knock on a door?

Adam Schwab: Yeah. Just to explain, the first business we had was called deals.com.au, which was not travel focused. It was local focused: it was restaurants, spas. But we did some travel as well. So, we got approached by the odd travel, more BnB style. I think the very first one approached us and said, “We do something, we did. It was a really successful result.”

We had a guy called Mark who we went to uni with who Jeremy and I are good friends with, and he was our first travel sales guy. We were really lucky, because Mark, another ex-lawyer, funnily enough, had this ability to create commercial outcomes that were favourable for the hotel and for the customer. He was just a freakish talent and was able to think differently.

Joshua was another co-founder in the early days, we bought his business. The four of us effectively developed the model as we went along. It was iterated over years, and there was a lot of trial and error. All three of those guys gradually exited the operations in time, but we all played a pretty big role in developing the product.

It gradually evolved over 9 years, and it’s still evolving. But yeah, in the early days, there was a lot of outbound. Most of our business is outbound. So, we’ll go to hotels and negotiate over a period of 6 to 12 months, sometimes. It’s not unusual content for a hotel to understand.

Simon Dell: Give us an example of something that you did wrong in those early days that you look back now and just think that you would do massively differently now.

Adam Schwab: We had this local business. Nothing wrong with the business, the Groupon-style business. Groupon’s still a very successful business and wowchers is a very successful business in the UK. They can make a lot of money, these businesses, but you need economics, need a lot of scale for it to work. If you don’t have scale, it doesn’t really work.

We tried and get scale by buying more and more businesses, and we did that relatively successfully because we were able to get some businesses really cheaply that corporates had started and largely stuffed up. We probably bought a bunch of businesses that we just shouldn’t have. We bought a business called Brands Exclusive. We probably lost $50-70 million on that acquisition just through opportunity cost and through acquisition cost.

We bought a bunch of businesses that we shouldn’t have bought. We knew at the time it wasn’t smart, but you get sucked into that deal fever and go ahead with it. Fortunately we had a really strong, underlying core business that’s papered over those mistakes. And we stopped making these mistakes about 3 years, 24 years ago. There was a 3 to 5-year period where we continually made stupid acquisitions, and certainly in hindsight shouldn’t have. That’s probably the biggest mistakes we made.

Simon Dell: I’m going to ask you more questions about Luxury Escapes, a little more nitty-gritty stuff. I get that you’ve stepped aside as the CEO, so you may not even know the answer to some of these. I want to understand where your traffic comes from from the website. What’s the most successful channel for you guys in terms of driving traffic to the site? You mentioned the TV show and the magazine. I’d like to hear more about those, but what contributes that traffic for you?

Adam Schwab: We’re an email business, largely. We still send daily email updates. A lot of our traffic and most of our traffic comes from our members, our 2 million plus members around the world who get and open emails most days. That’s a big source of traffic. I think the question you might be asking me is, “Where do your members come from?” We’re a two-stage business.

We need to get the member and then get the sales. It’s a little bit different for other businesses. In terms of where we get them from, it’s a real combination. I don’t think what we do is super unusual. Now, digital marketing plays a role, You’ve got Google to Facebook, you’ve got a million publishers re-targeting, all that stuff which everybody does now.

In the early days, what we really built our business on was newspapers. It sounds a bit weird because people don’t buy newspapers now. But certainly, in Australia, people do.  Funnily enough, the travel component of the newspaper’s been the only growth area, revenue for them over the last decade. It’s been a significant growth area.

The travel part of the papers on weekends probably tripled in size since we started the segment and started marketing. It was Mark’s idea originally, and we got on board pretty quick. In the early days, to be able to put an ad in the newspaper, it might cost you $10,000 and you’d make $20,000. Certainly, it doesn’t happen anymore, but back then, you could have the arbitrage and you sort of find that silver bullet and we sort of found it by accident.

We really grew our business out of bootstrapped to $350 million turnover. We started newspapers first, and looked a bit more into a lot more digital. Now, we’ve got a range of different marketing tools. You mentioned TV and magazine being really interesting ones.

But we’re able to do that because of the nature of the travel business. It’s really not only viral, but it’s beautiful images and it’s really impulsive. It drives the right behaviours in viewers. So, it lends itself to content really well. We’re in part almost as much as a content business as we are an e-commerce business. How do we maximize that content which drives engagement, drives sales?

Simon Dell: That’s a fantastic point to make that you just said there, that you’re as much a content business as you are a holiday business. A lot of people need to get their head around that publishing content is such an important part of their business. I made a little startup on Monday and she does ceramics. She got 4,500 people on Instagram, that’s where all of her business comes from.

She still, to this day, can’t get around how it’s so easy to make something beautiful, take a beautiful photo of it, share it on Instagram, and she makes sales from it. It’s a great opportunity. Give me something that doesn’t work for you. Is there a channel that you guys will spend money on or tried that doesn’t work?

Adam Schwab: I think when you say it doesn’t work, you get different ROIs in different channels.

Simon Dell: Yeah, poor return on investment.

Adam Schwab: I think TVs were a mixed bag. I’m not talking about TVCs rather than TV shows. TVCs, we probably haven’t really cracked that riddle. One of Secret escapes, which is a business that is comparable to us based out of the UK, they’ve built their business on TV. They had a great result on TV, whereas we built our business on newspapers and digital.

We’re taking a different approach to it. It’s possible we never really nailed our creative, whereas Secret Escapes has amazing creatives. That could be the reason. Maybe Australians view TV differently to Europeans. We still do a bit of TV, but it hasn’t been the success that even Trivago’s had here with TV or Booking.com had for the last few years.

There have been travel businesses that have really exploited TV very well. I wouldn’t say we’re one of them. We’ve got a radio show on 2GB with Steve Price, which is a content-based show which we love. Other than that, we haven’t had massive success on radio either. Some of those above the line. It is also really hard with TV. When you’re a digital business, you have a great bias to strong attribution because you can’t attribute at a home or radio TV.

We tend to be a bit more renaissant. We’ve got a really good marketing team now that have come from big brands that probably understand it better. Our people have more success than I have when I was running all that marketing piece.

Simon Dell: I think Booking.com, I would probably argue, its successes come out of its creative. It’s had a couple of good years of really, really good creative ideas, like that Booking.com, Booking.yeah type of thing. I think that’s triggered almost an expression in people’s vocabulary that that’s become something that people might actually say to each other, which is the big thing you want to crack in advertising.

The other thing I was  going to ask you then is, you’re at 2 million emails, you’re an email-led business. What are you using, software-wise, to drive that part of the business?

Adam Schwab: We moved to a Salesforce marketing plan relatively recently, over the last 6 months. We’ve been using sales cloud forever, service cloud for a number of years, and marketing cloud was the one we hadn’t gone through, we used a different service called sales through which just become a bit inappropriate for us and also by far our biggest Australian client.

So, it just didn’t work. Salesforce certainly from an email perspective have been really good. From a journey and automation perspective, we’re still going through that journey part upon ourselves. We’re not quite where we need to be, but ultimately, our goal is to have a fully-personalized email journey every day, to have fully customized customer journeys across a whole gambit of different environments, which is where one of our big areas of growth have come from.

How do we match our user experience with what people really want, rather than being a dumb email blaster? If you like skiing holidays and hate beach holidays, how do I make sure that you see our ski holidays? It’s becoming even and more relevant now. We’ve got a lot more content on the site. We’ve got more partnerships across the world. We’re getting better. We’ve got lots of tours. We’ve got lots of hotels. We want to make sure that you actually see property that is most interest to you, and that’s based on your behaviour for the journey.

Simon Dell: I still can’t get my head around how some big brands in Australia fail to do that customization particularly well. I was talking about Dymocks the other day. And of all the businesses and all the industries that ought to get their shit together, it’s bookstores.

I’ve bought multiple books from them, and they have my membership card on file. They know what I’ve bought, but yet, I still get emails that look like just blanketed emails that go out to everybody with 12 book recommendations. I have absolutely no interest in reading any of them.

Adam Schwab: I think most businesses haven’t got it right. I think I can count on one hand businesses that have done it really well. And even the US it’s done poorly, so it’s hard. There’s also a risk in getting it wrong. What you don’t want to do is to serve the complete wrong thing. At the moment, we send out emails based on hero strengths. So, how good is this package? Is this the most amazing holiday package in the world, or is it a Thailand package where you have a Thailand package last week, or a Sydney package, or a budget Sydney?

We’ve always done it purely by how profitable a deal will be for us, but what we need to get to is how appropriate the content is for each single person. That will roughly give us a quantum leap in terms of engagement and hopefully revenue as well.

Simon Dell: You don’t have to answer this because it might scare people, but how much data do you have and collect about those people that are visiting your websites in Salesforce? Are you looking at how frequently they’re visiting? Are you looking at preferences in terms of pages and hotels that they’re looking at?

Adam Schwab: We’re just going through this journey now. It’s probably a little bit early. Obviously, we don’t use third-party data. It’s all our own. The point of it isn’t to invade people’s privacy, it’s to give the customer a much more relevant and useful experience to not waste your time. We don’t use third-party.

If you’ve spent an hour looking at a Maldives deal, and call us and spoken about this Maldives over dinner for whatever reason, that tells us you want to see more about these deals. We want to make sure you don’t miss one. By contrast, if you hate skiing and have never, ever booked on ski deals giving you three Japanese ski deals this week. We make sure we serve people. We don’t sell away people’s time. If you do click on an email or click on the site, let’s customize that experience to you as best as we can.

It might mean we only show 10 products instead of 60, because we see you don’t look at 60. You just want to look at a couple of things that’s really relevant to you. The question for us is how do we make the experience more enjoyable.

Simon Dell: The last question I have for Luxury Escapes: The call to action on your website, the refer a friend seems to be quite prominent. Can you talk me through what sort of success you have with that? Is that a key resource in terms of collecting new email addresses? Does it work?

Adam Schwab: I’m glad you asked. We have a very strong refer a friend in our early days of the business; 10% of whatever the friend purchased in credits, and it could be thousands of dollars in credit, but it wasn’t justifiable. For a number of years, we actually didn’t have a refer a friend, and there’s just a, we went through a whole journey where we built our platform, and it just became something that we push back and push back.

And literally, over the last couple of weeks, we put it back on just because of the consumer demand. People were referring anyway. It was just a great chance for us to push that referral and reward that referral because they’re doing the right thing by us, we should be rewarding you. So, we finally put it back on. We’ve seen a lot of referrals in the last two weeks, well into the hundreds, but our business really grew on the back of not so much referrals.

Grew on the back of newspaper ads being successful, but one of the big issues we have as a business is because our pricing is so much lower than everyone else, the most common thing we hear is, “I would’ve bought from you but you just sound too good to be true.” And then you’re layer in the back because we are selling a holiday to Thailand, or Bali, or Maldives, or US. It’s not the kind of thing you want to get wrong because you’re in a foreign country, it’s far away.

That trust factor is our biggest challenge, our biggest barrier conversion. But a referral, someone who’s actually been on Luxury Escapes, if you ask 90% of our customers, they love us with NPS at 75%, CSUP about 95%. They’re our best customer. They’re our best sales team. They’re the people going out and telling 10 friends, “You’ve got to go on Luxury Escapes. It’s the best holiday I’ve ever had.” It’s just a great chance to refer people who have been doing the right thing by us for a number of years.

Simon Dell: I’ve got a couple of other questions about a couple of your other projects before we finish up. The ones that jumped out to me, number one, Bluethumb. I’ve actually bizarrely been on Bluethumb and I’ve had a look through it. I get an email from an American brand that does street art every day. I can’t remember what it is.

Adam Schwab: The biggest one in the US is probably Searchyard but I don’t know how much street art they do. 1stdibs is another one, but it’s more high end.

Simon Dell: I’m actually just strolling through my emails right at this moment to work out who it is. Annoyingly, I have bought stuff from them. But on the back of having gone through and seen theirs, I had found Bluethumb. Just give everyone a quick overview about what Bluethumb does.

Adam Schwab: Blue Thumb was one of the first seed investments Jeremy and myself did. We had a small chunk of menulog that was the first investment we made. It’s actually an online marketplace for art, really, local Australian artists and probably the biggest collection of regional art by sheer number that you can buy.

I haven’t been a big art guy largely because I knew nothing about it and I was just too nervous or embarrassed to walk through an art gallery and be scorned by the gallerist. Why I really liked it is it really democratized a section of commerce that had been highly elitist. Most galleries still charge 50% to their artist. You get some great galleries as well who have amazing selections.

But for a layman to jump into that category, it’s really hard to buy art. You’ve got to go to IKEA or something like that. We want to be that middle ground between the really cheap prints and where you start getting $10,000+. Bluethumb’s sweet spot is probably that $1,000 to $750,000 artworks where they’re really nice art works if you’re not an expert collector, if you want something on your walls.

There’s probably no better place to look. And the beauty is there’s no middleman. It’s an artist putting their private works directly on Bluethumb. Your artists get far more money than they’d get anywhere else. And some artists, they make upwards of a million dollars a year selling on Bluethumb and Sarchy, just US a bit more. It’s mainly artists win, win. So artists win. Customers win by paying a great price and getting the art directly, and Bluethumb just sits in the middle.

Simon Dell: I found it whilst you were talking there. It’s called One Times Run but it’s 1xrun, so it’s www.1xrun.com. It’s basically a lot of street artists or what I would consider fairly underground artists, but also some photographers as well. The point is, I think the products there for sale, they’re singular runs. So, you either buy them and then they’re gone. Some of them have two or three and some of them have 30, but whatever. That’s how I found you guys, because I was looking for a localized version of that.

It’s interesting that you say that art people, and I completely agree. I don’t really know what I’m looking at, but interestingly, I’ve bought things off 1xrun just because I like them. I didn’t know whether they were particularly worth much. I think that marketplace is a fantastic opportunity for artists to get out there and reach more people. The other one that I’m really interesting in, again, because I’ve had a big of interest in the background of previous clients, and this is BookWell.com.au.

It’s marketplace-defined, beauty, health, wellness appointments across Australia. You’re a non-exec director there. I’m assuming you’re an investor. Where’s BookWell actually based?

Adam Schwab: I’ve actually become exec chair recently. So since my times opened up with Lux so we have sort of come in and we’re doing a Series A round for the business now. It’s a really exciting business in a similar sense, that win-win. It’s just another classic win-win. The team behind Eat now, which joined forces with menulog, so Matt Tyre and Nathan Airey are two of the really operating superstars behind that business.

They went to Just Eat after the sale of Menulog to Just Eat for almost a billion dollars. These guys were good operators anyone could really come across. They wanted to have another guy, after the great success of Menulog, they wanted to do the same for beauty essentially, even though menulog was a food product. This is a beauty booking business. If you want to purchase or book a haircut, a massage, or a beauty trip, wax or nails, mani-pedi, or tanning, you can do it on the site.

We’ve got $1,200 hair salons on there. In a similar sense, it’s the ultimate convenience for customers. 42% of our bookings are happening outside business hours. People want to book outside business hours, but no one is actually on the phone. It’s a great way for salons to capture lost bookings, and customers to book much more easily.

But a really great part of that business is it’s market relation platform for venues. If you’re a hair or massage venue, it’s almost impossible to market. If you think, how do you market? You’re not going to go above the lines. It’s never going to return for you. Digital doesn’t really work either because Google probably doesn’t work, it’s too competitive, and Facebook’s a branding play which doesn’t work.

You’ve got very few options. Your only limited option is hoping people walk past or maybe some referral tactic. What we do is we created a marketing platform for these guys where they can contact their customers. They get new customers. They pay a tiny fee for existing customers and a slightly bigger commission for new customers, but are still making money because ultimately, if you’re a massage salon, your main costs is your rents and your wages, which happen regardless, and your utilization is 50%.

We’re really able to, same as Luxury Escapes, we can sell empty rooms. We’re selling empty spots for these venues. We know we make our customers a huge amount of money, and we just clip the ticket on the way through to a small degree and giving our customers a much more convenient way to book and get reminders. So when you need another haircut in two weeks, here’s some available time. It’s a much better user experience for our customers.

Simon Dell: The challenge I was going to say with this, having had some experience working with a customer in that beauty space, is that some of them are very tech-unsophisticated. How do you bridge that gap in the marketplace?

When you’re an artist and you’re selling art, you’ve got a bit of a handle on the online side of things. You might be using Etsy, or Pinterest, or Facebook, or building your own website. The beauty industry tends to be very unsophisticated in the tech space. How do you bridge that gap between those businesses that don’t understand all this kind of stuff and you guys that realize that this is a good opportunity for them?

Adam Schwab: That’s one of the real core strengths of the business. That’s what we do. We provide a platform. A big chunk of beauty businesses are using pen and paper for their bookings. You’re giving a haircut, you’re putting the phone to your ear, craning your neck you’re writing it down, there’s double bookings everywhere, it’s tight.

We give our salons a platform for free. If you want to pay for it, it can be upwards of a grand a year. We give that for free, and our platform is, in some ways, better than these platforms. You can set your roster in, you can do all, set your reminders, all this kind of stuff. If you’re doing a four-hour color, you can schedule someone at the middle. There’s lots of really strong, great tools.

This will keep growing and keep getting better, but at the moment we’re a market-leading platform. We’re taking these businesses that haven’t used technology and making it really simple for them to use it. We’ll guide them through the process. We’ve got account management guide them through the process. We then want to set up their marketing automation which is their reminders, their bookings. We’ll help them set it up. There’s really a template.

One of the really cool things that business does is, if you haven’t had a massage for a year, what we’ll do is we’ll send an automated reminder with a discount. So, we’ll say, “We’ve missed you. We haven’t seen you for 12 months.” And the vendor chooses what to send the discount out. Someone set it at 20% or 25%, or $20.

We’re getting a really great conversion rate, upwards of 5-10% on these lost customers who just come back. So, they’re getting these customers back for free through using a really simple platform.  What it really is about is, how do we help these salons make money? How do we help these salons who probably aren’t great with technology use technology in a really productive way?

Simon Dell: Last couple of questions. I normally ask people about their favourite brands, but given your background, I’m going to ask you: If you were on your website, if you were on Luxury Escapes, if you can choose anywhere, where would your next holiday be?

Adam Schwab: I’ve got two very young kids. We’re somewhat restricted. They’re two and four. They’ve been to a few places, but it does limit you a little bit.

Simon Dell: Mate, I’ve got a 6-month-old and a 3-year-old, so I feel your pain. I feel it. I’m not having a luxury holiday for the next 10 years, mate.

Adam Schwab: Funnily enough, we actually do some stuff that is pretty good for kids. You just got to look for it. Most of our product is really 40+, as in kids aren’t so dependent or if you haven’t had kids yet, that’s what we’re really good for. There’s definitely a cohort of families who love using us and we’ll connect rooms and villas. You just got to know what to look for. You’ve got to filter by family.

Simon Dell: Assuming you can get a babysitter then for a week, where would you take the wife?

Adam Schwab: We just came back from Maldives and that was an unbelievable experience. I’d potentially go back there. There’s just so many fantastic places. We went to a tour of Jordan, so Wadi Rum and Petra, and that was through Luxury Escapes, exclusive to a provider which is unbelievable. There’s no shortage of places. I love Asia. I think Asia is still probably one of my really go-to places. The value is unbelievable. The service is phenomenal. The weather is great and the food is fantastic. I love going to Asia. There’s so many places to go.

I think part of Luxury Escapes is about discovery. We just love telling our customers about places they wouldn’t otherwise go into. A key step that really underlies our business for both customer and for hotel is 91% of our customers weren’t planning on going to the hotel they went to until we told them about it. It’s a genuine platform of discovery and impulse that you really can’t get anywhere else.

Simon Dell: Last two questions. What’s new for you? What have you got planned for the rest of the year? We’re coming to the halfway point. Something exciting that you guys have got happening this year?

Adam Schwab: With Luxury Escapes, there’s lots happening. We built our platform last year, so it’s now we’re really able to start building product on top of that. We’re in the final throes of beta testing our flight system, which has sort of been 5 years in the making, and super exciting. It’s probably the first time ever our tech team has now cutting-edge technology. We’ve got an unbelievable tech team led by a guy called Tim Shire in Sydney, and these guys are superstars. We built a flycation platform that nobody on Earth has.

If you’re used to probably buy flights in Skyscanner or Expedia, you put your dates in and it searches in 10 seconds, and then give you back a day of flights. Our system will give you 365 days of flight costs without any search. It’s all paged. It’s an unbelievable user experience. It’s the best user experience in the world at the moment.

Simon Dell: I tell you what, there’s a guy on Twitter called Tom Goodwin. He’s quite famous for a famous quote which I won’t go into right now. But he always talked about why nobody’s ever built a platform that just says, that when the user says, “I don’t actually care when I go. I just want the cheapest option to go at any point throughout the year.” That sounds like a massive, massive game changer in terms of the marketplace.

Adam Schwab: Hopefully, Tom looks at Luxury Escapes because he’ll have those problems solved. You can check by month and see what month is the cheapest. You click on the month and it’s showed by day. We think its, so our GDS said no one’s done this before. JetStar said nobody has done this before. We’ve worked with their case] directly, so it’s really exciting to be able to have a product. We’ve got about 20,000 people beta testing it now, and it should launch to everyone in about 3 weeks’ time. The guys have done a stupendous job getting these out on time, on budget, and exceeding all our expectations.

That’s a big one. We’ve launched experiences, so like Airbnb, you can now buy extra massages for all-inclusive, for board, club, whatever the hotels want to offer, get you your sailing trips, your food tours, whatever ancillary products we could offer. We have, we’ve got insurance in the flow now. There’s lots of core basket size improvements where we are implementing and obviously, personalization is a really big one that we’re launching. There’s some really good stuff happening on the site that hopefully our customers love.

Simon Dell: Perfect. Last question, then. If anybody wants to get a hold of you, if they’ve got a question, a burning question about travel, startups, all those kind of bits and pieces, what’s the best way to get a hold of you?

Adam Schwab: Probably LinkedIn. I usually answer questions on LinkedIn that come through, and I’m pretty easy to find on there. It’s probably the easiest way to get to me.

Simon Dell: Awesome. We’ll put your link in the show notes as well for everybody to see that. Mate, look, thank you very much for your time today. It’s been really informative. I am not going to tell my wife about Luxury Escapes just yet, because otherwise, I’m going to be getting…

Adam Schwab: Hopefully, she listens to the podcasts.

Simon Dell: Mate, she’s never listened to a single one of them, so I don’t have to worry about that. If she signs up to your website, I’ll be getting emails forwarded to me from her pretty much every day.

Adam Schwab: Sounds like a smart lady. Hopefully, she does that.

Simon Dell: But mate, thank you very much for your time today. It’s been great.

Adam Schwab: Thanks, Simon. Pleasure. Appreciate it.

Simon Dell: Welcome to the show, Adam Schwab. You’re down in Melbourne. How is Melbourne today?

Adam Schwab: Stunning down here, as it usually is.

Simon Dell: That’s a lie, Adam. It’s never stunning. Don’t sell that lie to people, mate. It’ll be snowing by this afternoon.

Adam Schwab: Blue skies and 20 degrees, so certainly.

Simon Dell: Are you the CEO or just the co-founder of Luxury Escapes?

Adam Schwab: I’m now just the co-founder. So we have very luckily got someone to do the CEO duties as of a couple months ago. Co-founder is my official title.

Simon Dell: Explain to us watch Luxury Escapes is. I don’t think it’s hard for us to understand, but just give us an overview as to what you guys do and your mission behind the company.

Adam Schwab: We do two things. Like any marketplace, we help buyers and sellers. Our buyers are our customers, so those people looking for holidays. What we do for people wanting to travel, is we curate the most amazing hotels, and tours, and cruises on Earth and offer them for a significant discount to what everybody else sells them for. This can be 20-50% off. For the customers, we not only help them discover, but we also give an amazing price.

For our supply side, our hotel owners and brand partners, we actually make money. We’re a marketing channel for our hotel partners. We essentially, in really simple terms, fill beds, and rooms that otherwise would’ve been empty. There’s a lot more to that as well.

Simon Dell: I’d imagine there’s more to it than that. That’s pretty clear. And for those of you that get a chance, LuxuryEscapes.com, you just scroll down the front page and you just go, “Yep, I want to go there.” It’s the real top-end places, isn’t it?

Adam Schwab: Luxury is different to different people. We’ve had hotels like Arman, like Ritz-Carlton, top-end, Park Hyatt. We’ve definitely had most of the top-end brands on the site and have them, but the luxury can also be a four-star hotel in Australia. Sometimes, $200 a night, it can be luxury. We don’t intend to be serving the 1% of the 1%. We want to serve as many people around the world as we can.

Simon Dell: I want to talk about Luxury Escapes in a bit of detail, and how you go to market. I want to take a step back, because like me, you are somebody who went to university and did law. What you’re doing now is a significant step away from getting a degree in law, but what made you want to choose law in the first place when you went to university?

Adam Schwab: That’s a good question. I think there’s an element when you finish your final year at school and if you get a good enough mark, there’s a pretty general pressure to use it, in a way. That’s medicine. That’s law. It could be commerce, engineering. I did want to be a lawyer, as well, not really knowing exactly what that involved, but you watch enough TV shows and read enough books to get a glamorous picture of what it is.

The actual job as a lawyer is incredibly boring and hard to imagine anybody liking it, having worked there for four to five years. But you do learn some incredible skills as a lawyer, precision and not getting things wrong, especially the top tier firms. You’re amongst generally really intelligent people and really hard working people. You learn unbelievable discipline that you probably don’t get outside a high level professional services firm, be it law firm, investment bank, top tier accounting firm, and consulting firms.

Simon Dell: Post that law career, you’ve gone into roles that have much more of an entrepreneurial slant to them. Is that something that you’ve had growing up? Did you feel that you were destined for some sort of entrepreneurial kind of career, or were you quite happy to be one of those cogs in the wheel, in terms of that corporate kind of person?

Adam Schwab: I was growing up, I finished school in ’97, uni in 2002. Back then, being an entrepreneur wasn’t that cool. Being an entrepreneur, people talk about the Skase and Bond and all those kind of guys. Entrepreneurialism was almost analogous to bankruptcy and criminality.

Now, when you’ve got your Zuckerbergs and Musks, entrepreneurship is cool and everybody wants to be an entrepreneur. When I finished uni, everyone wanted to be an investment banker, and a lawyer, and a consultant. I probably envisioned myself going to banking, I suspect. Ultimately, I took a different route. I was pretty grateful about it.

But when I left Freehills in ’05, I took a leave of absence initially but never went back. People looked at us, certainly looked at me as being insane. Like, why would you leave a blue chip law firm to start what was essentially a backpacker apartments business with no money? And it worked out in my favour, god knows if I went back what it would have been.

Simon Dell: What was going through your head at that time? You’ve made the decision that being a lawyer… And you’ve done that for nearly 5 years, but you made the decision that being a lawyer probably wasn’t for you, and you’re going into a backpacker’s business. Was that a light bulb moment one night? Was that something that evolved over a couple of years?

Adam Schwab: I was a lawyer for 2 1/2 years. And apparently, over 2 1/2 years. I lasted 5 years proofreading documents. But I was pretty fortunate that a good friend of mine from school, Jeremy, we had a couple of small businesses as a side hustle. He wanted to do something full-time. He really pushed me into it. I was forever indebted to Jez for having that real drive. We were 24 at the time. He quit ANZ. He was trading at ANZ and really sort of pushed me into it.

I was always the operation guy. In the early days, it was a really nice combination. Really cool partners and still is to this day. He’s still more of a high-level guy, more recently I’ve set back, but I’ve traditionally been the operations and hands-on guy. It’s been an interesting partnership. He found our initial apartment on the ANZ bulletin board, we looked at it, and we took it. It was a real combination of my slight conservatism and Jeremy’s bullishness. That’s what got us over the line.

Simon Dell: Again, you did that business for a decent length of time. You’re saying he was ex-ANZ and you were ex-law firm. Did it help that you guys had that corporate experience when you walked into what was a startup back in 2005?

Adam Schwab: It was in Jeremy’s dad’s accounting firm. That hasn’t been condemned. It’s interesting. I think corporate, certainly in law, teaches you that great precision. In the early days, probably not that helpful. The other thing that law teaches you is you don’t get bullied. If you get regular up-counter parties, you’re never going to get pushed around. I’ve got a legal matter doesn’t matter how threatening it is; takes a fair bit to scare me. So, it’s that confidence and that swagger that you can have as an ex-lawyer, especially a top-tier firm ex-lawyer. You simply can’t be bullied.

That came later. In the early days, it’s pure hustle, $70,000 between us. I’d borrow my dad’s trailer, I’d go and pick up second-hand furniture for $100. Didn’t even know how to use the trailer, so I’ve been struggling driving it, almost crashing the car. It was basic and it’s meaningless. I guess you look at all of us now with 100 people in it, it’s a pretty flash space. You couldn’t come further.

But yeah, in the early days, it was as anti-corporate you could get. It was hustle. It was, how do we get stuff cheap and how do we sell? Any entrepreneur, any founder is essentially a salesman. You’re a salesman. You’re a product manager. You’re a customer service head. You’re a finance head. You’re doing all that stuff. But if you can’t sell, you probably have a pretty shit business.

To this day, if I look at what my strengths are, one of my strengths is being able to understand what the customer wants and making the product match that, be it an IT Product  or a holiday product. That’s essentially selling. If you can’t sell, you’re probably going to struggle to run a business.

Simon Dell: It’s one of the common things through every single podcast I’ve ever done, is that successful entrepreneurs have learned how to sell. Whether that’s some of them doing their teenage years in Coles and Woolworths, standing behind a counter, talking to customers or whether that’s more advanced stuff, but that common theme about the ability to sell is, through all the successful people that I’ve spoken to. You’ve come from a background that’s law degree, law firm, paralegal. That’s not traditionally a space that you learn how to sell.

Adam Schwab: It’s actually a really interesting point you make, and I sort of reflect on that a bit. Being a lawyer, you certainly aren’t selling much, but I think any good partner selling the services of the firm… Now, when you’re a partner, you’ve got to be a good salesman. But before that, in the actual role of a lawyer or a banker, you’ve got to be able to create win-wins.

A good lawyer can always create a win-win. A bad lawyer won’t. A great lawyer can put himself in the shoes of the other party and get both parties to be at litigation, be at a corporate negotiation, get them to agree to win-win.

I’m not an old school salesman, but what I think I can do pretty well is happily create win-wins. Essentially, Luxury Escapes is a business of win-wins. It’s a business where a hotel and the customer wins and we win by sitting in the middle. It’s pretty nice being in a business where you make people happy. It’s why people like to work here. We’re not a bank, for example, who makes their money, to a large extent, ripping off customers.

Telco largely makes its money by investing in capital and squeezing their customers as best as they can, knowing it’s pretty difficult to move. We’re the opposite. It’s very easy for our customers to buy a holiday from 50 other places, be it online or offline, but we’ve got to create these win-wins that create huge value for the customer in terms of getting an amazing holiday for a really good price. But also, we need to create profitability for our hotel partners. If we don’t, they won’t give the deals we need to give our customers.

Simon Dell: You mentioned one other thing was resilience, which I think is obviously hugely important for startup business owners, anybody out there. You’ve had that, as you say, being a lawyer teaches you resilience. How do your team members, people that work for you, people that you come across, how do you teach people to be more resilient?

Adam Schwab: I think you can’t teach it, unfortunately. You can try and hire for it, but I think it’s just a natural mentality. I certainly put my mentality and whatever challenge I get, be it someone’s… And even a parking fine to a bigger challenge, my first thought is, how can I beat this? How can I win? Assuming if you get a parking fine, you’ve done the wrong thing, well, that’s that, you deserve it.

But if there is a sense of injustice, or we’ve been hard done by, or the decision of a regulator in corporate is wrong, my natural inclination is to fight and fight hard regardless of the odds. You don’t always win, but win most of the time. It’s just that undying belief that, ultimately, the right result will prevail.

Obviously, you need to know what the right result is. Like there is no point challenging things that they’re clearly wrong if that… If someone else in corporate is making a wrong decision, or a regulator making a wrong decision, or whoever’s making a wrong decision. If something’s wrong, to fight it, not to simply accept. You just try and ingrain that into your staff, but ultimately, it’s really hard.

Simon Dell: You’ve done Living Corporate Apartments. What brought that to an end?

Adam Schwab: It’s actually still going. It’s been a great survivor, 14 years now and still going. It has been buffeted by Airbnb significantly. So, whilst we use Airbnb a little bit, the Airbnb crowd is a massive platform, which essentially was a big competitor in many ways and an amazing business. That still goes.

But in 2010, when we started the precursor of Luxury Escapes, the initial plan was I’ll stay working on Living Corporate and Jeremy would work on what became Luxury Escapes. In the end, it was such an operational workload that I just switched completely to what was deals.com.au and became Luxury Escapes.

We’ve pivoted a few times. That was obviously the biggest pivot we’ve done, but we did a couple of big weeks through our careers. Fortunately, worked out well in the end, but you never know where it’s going to end up.

Simon Dell: Let’s talk about Luxury Escapes, then. Obviously, the main question for me with this is that you’re in a crowded marketplace. It’s a busy old place out there. How do you make sure you guys stand out from all the other holiday websites out there?

Adam Schwab: It’s crowded, you’re right. There’s a lot of people who sell travel, but there’s also a lot of people who take trips. I think that what we don’t have a lot of competition on is what exactly what we do. What exactly we do is provide incremental profitability for hotels, and there’s no one else really doing that globally, almost. There’s a couple of businesses like us out of Europe who do a similar thing, but our is focus on, how do we make more money for our hotel partner?

Not only to fill their empty beds, how do we allow them to get bookings early so they can yield other channels? How do we allow them to sell more F&B, sell more spa, sell more ancillary? How do we make them higher RevPARs? That’s a really key focus.

There isn’t anybody else really doing that anywhere, so that’s a really interesting advantage we have. From a customer point, there’s lots of places you can buy travel, but if you go to Flight Centre, or Booking.com, or Expedia, everybody sells it at pretty much the same price, let’s call it BAR or Best Available Rate, and the hotel website is the same.

What we do is we sell for well below BAR. It would be less money than the actual cost of the room, but we’ll also give you breakfast, and dinner, and a club room, and whatever else the deal has. We’re a much better value proposition for our customers, and that’s really allowed us to stand out and bootstrap from day one. We’re very differentiated. We invest a lot in content.

We’ll have videos of all our properties. We’ll write thousands of words on our properties. We’ll have a magazine. We’ve got a TV show. We’ve got all these content properties, and we really want to make our hotel partners and shy and give our customers a great understanding of the trip they’re booking, and not trying to put all over their eyes or mislead them, but to give a really honest appraisal of, “This is the hotel you’re booking. This is the cost, and this is why it should go.”

Simon Dell: I’m guessing the start of this business is one of those chicken and egg situations, because you’re trying to say to the hotels or the resort partners that they need to give something to you at a certain price or a very low price.

You obviously then want to get the customers in, but the customers aren’t going to come without the hotels being in there, and the hotels aren’t going to give you those prices until they can see the customers. You’re in that chicken and egg situation. In those early days, how did you convince the hotels or the resorts to give you what you needed, which was high end, high quality hotels and holidays at a price that nobody else had?

Adam Schwab: There’s two elements to that question to be answered. Every marketplace has a chicken and egg issue. Ours is probably less pronounced than Booking.com, or Seek, or RealEstate. Those guys are classic marketplaces. We’re a curated marketplace. We didn’t need every single hotel in Australia or on Earth to be part of our platform.

If you’re a traditional marketplace, if you’re a RealEstate.com or Seek, you need a critical mass of sellers before you get any buy. So, you need a significant capital investment. You need to have that great breadth of product. We didn’t need that because we just needed one deal or two deals. It’s a much more curated marketplace offering, and that allowed a slight alleviation of the chicken and egg problem.

Your question though is right, in a sense that we didn’t walk up to Ritz-Carlton day one and run a Ritz-Carlton deal. We didn’t go to Park Hyatt. We didn’t go to Sofitel. We certainly went working with the absolute premium properties probably for 3 to 5 years and gradually climbed up that luxury ladder, so to speak.

Our very first deals were for really boutique properties that didn’t have a brand at all but saw the benefit in our product. We started working with really big, family-owned boutiques like a hotel like Katatani in Phuket which is a very successful big hotel. It doesn’t have that brand. And then we started moving onto bigger brands.

Now, we’ve got agreements with almost all the big brands we work with, and have got masked agreements. We’ve gone from one extreme to the other. It’s very much a matter of getting the trust. Now, we’re working with the likes of Arman who don’t really work with anyone online yet but work with us, the most premier brands in the world Katatani, work with Hyatt, Sofitel. We work with almost everyone now, but that didn’t happen overnight. That’s an 8-year journey.

Simon Dell: I’m interested that day one, when you go, “Right. We’ve got to get a deal.” Did you guys happen to know someone in the first? Who was the first one, and did you know someone there? Did you knock on a door?

Adam Schwab: Yeah. Just to explain, the first business we had was called deals.com.au, which was not travel focused. It was local focused: it was restaurants, spas. But we did some travel as well. So, we got approached by the odd travel, more BnB style. I think the very first one approached us and said, “We do something, we did. It was a really successful result.”

We had a guy called Mark who we went to uni with who Jeremy and I are good friends with, and he was our first travel sales guy. We were really lucky, because Mark, another ex-lawyer, funnily enough, had this ability to create commercial outcomes that were favourable for the hotel and for the customer. He was just a freakish talent and was able to think differently.

Joshua was another co-founder in the early days, we bought his business. The four of us effectively developed the model as we went along. It was iterated over years, and there was a lot of trial and error. All three of those guys gradually exited the operations in time, but we all played a pretty big role in developing the product.

It gradually evolved over 9 years, and it’s still evolving. But yeah, in the early days, there was a lot of outbound. Most of our business is outbound. So, we’ll go to hotels and negotiate over a period of 6 to 12 months, sometimes. It’s not unusual content for a hotel to understand.

Simon Dell: Give us an example of something that you did wrong in those early days that you look back now and just think that you would do massively differently now.

Adam Schwab: We had this local business. Nothing wrong with the business, the Groupon-style business. Groupon’s still a very successful business and wowchers is a very successful business in the UK. They can make a lot of money, these businesses, but you need economics, need a lot of scale for it to work. If you don’t have scale, it doesn’t really work.

We tried and get scale by buying more and more businesses, and we did that relatively successfully because we were able to get some businesses really cheaply that corporates had started and largely stuffed up. We probably bought a bunch of businesses that we just shouldn’t have. We bought a business called Brands Exclusive. We probably lost $50-70 million on that acquisition just through opportunity cost and through acquisition cost.

We bought a bunch of businesses that we shouldn’t have bought. We knew at the time it wasn’t smart, but you get sucked into that deal fever and go ahead with it. Fortunately we had a really strong, underlying core business that’s papered over those mistakes. And we stopped making these mistakes about 3 years, 24 years ago. There was a 3 to 5-year period where we continually made stupid acquisitions, and certainly in hindsight shouldn’t have. That’s probably the biggest mistakes we made.

Simon Dell: I’m going to ask you more questions about Luxury Escapes, a little more nitty-gritty stuff. I get that you’ve stepped aside as the CEO, so you may not even know the answer to some of these. I want to understand where your traffic comes from from the website. What’s the most successful channel for you guys in terms of driving traffic to the site? You mentioned the TV show and the magazine. I’d like to hear more about those, but what contributes that traffic for you?

Adam Schwab: We’re an email business, largely. We still send daily email updates. A lot of our traffic and most of our traffic comes from our members, our 2 million plus members around the world who get and open emails most days. That’s a big source of traffic. I think the question you might be asking me is, “Where do your members come from?” We’re a two-stage business.

We need to get the member and then get the sales. It’s a little bit different for other businesses. In terms of where we get them from, it’s a real combination. I don’t think what we do is super unusual. Now, digital marketing plays a role, You’ve got Google to Facebook, you’ve got a million publishers re-targeting, all that stuff which everybody does now.

In the early days, what we really built our business on was newspapers. It sounds a bit weird because people don’t buy newspapers now. But certainly, in Australia, people do.  Funnily enough, the travel component of the newspaper’s been the only growth area, revenue for them over the last decade. It’s been a significant growth area.

The travel part of the papers on weekends probably tripled in size since we started the segment and started marketing. It was Mark’s idea originally, and we got on board pretty quick. In the early days, to be able to put an ad in the newspaper, it might cost you $10,000 and you’d make $20,000. Certainly, it doesn’t happen anymore, but back then, you could have the arbitrage and you sort of find that silver bullet and we sort of found it by accident.

We really grew our business out of bootstrapped to $350 million turnover. We started newspapers first, and looked a bit more into a lot more digital. Now, we’ve got a range of different marketing tools. You mentioned TV and magazine being really interesting ones.

But we’re able to do that because of the nature of the travel business. It’s really not only viral, but it’s beautiful images and it’s really impulsive. It drives the right behaviours in viewers. So, it lends itself to content really well. We’re in part almost as much as a content business as we are an e-commerce business. How do we maximize that content which drives engagement, drives sales?

Simon Dell: That’s a fantastic point to make that you just said there, that you’re as much a content business as you are a holiday business. A lot of people need to get their head around that publishing content is such an important part of their business. I made a little startup on Monday and she does ceramics. She got 4,500 people on Instagram, that’s where all of her business comes from.

She still, to this day, can’t get around how it’s so easy to make something beautiful, take a beautiful photo of it, share it on Instagram, and she makes sales from it. It’s a great opportunity. Give me something that doesn’t work for you. Is there a channel that you guys will spend money on or tried that doesn’t work?

Adam Schwab: I think when you say it doesn’t work, you get different ROIs in different channels.

Simon Dell: Yeah, poor return on investment.

Adam Schwab: I think TVs were a mixed bag. I’m not talking about TVCs rather than TV shows. TVCs, we probably haven’t really cracked that riddle. One of Secret escapes, which is a business that is comparable to us based out of the UK, they’ve built their business on TV. They had a great result on TV, whereas we built our business on newspapers and digital.

We’re taking a different approach to it. It’s possible we never really nailed our creative, whereas Secret Escapes has amazing creatives. That could be the reason. Maybe Australians view TV differently to Europeans. We still do a bit of TV, but it hasn’t been the success that even Trivago’s had here with TV or Booking.com had for the last few years.

There have been travel businesses that have really exploited TV very well. I wouldn’t say we’re one of them. We’ve got a radio show on 2GB with Steve Price, which is a content-based show which we love. Other than that, we haven’t had massive success on radio either. Some of those above the line. It is also really hard with TV. When you’re a digital business, you have a great bias to strong attribution because you can’t attribute at a home or radio TV.

We tend to be a bit more renaissant. We’ve got a really good marketing team now that have come from big brands that probably understand it better. Our people have more success than I have when I was running all that marketing piece.

Simon Dell: I think Booking.com, I would probably argue, its successes come out of its creative. It’s had a couple of good years of really, really good creative ideas, like that Booking.com, Booking.yeah type of thing. I think that’s triggered almost an expression in people’s vocabulary that that’s become something that people might actually say to each other, which is the big thing you want to crack in advertising.

The other thing I was  going to ask you then is, you’re at 2 million emails, you’re an email-led business. What are you using, software-wise, to drive that part of the business?

Adam Schwab: We moved to a Salesforce marketing plan relatively recently, over the last 6 months. We’ve been using sales cloud forever, service cloud for a number of years, and marketing cloud was the one we hadn’t gone through, we used a different service called sales through which just become a bit inappropriate for us and also by far our biggest Australian client.

So, it just didn’t work. Salesforce certainly from an email perspective have been really good. From a journey and automation perspective, we’re still going through that journey part upon ourselves. We’re not quite where we need to be, but ultimately, our goal is to have a fully-personalized email journey every day, to have fully customized customer journeys across a whole gambit of different environments, which is where one of our big areas of growth have come from.

How do we match our user experience with what people really want, rather than being a dumb email blaster? If you like skiing holidays and hate beach holidays, how do I make sure that you see our ski holidays? It’s becoming even and more relevant now. We’ve got a lot more content on the site. We’ve got more partnerships across the world. We’re getting better. We’ve got lots of tours. We’ve got lots of hotels. We want to make sure that you actually see property that is most interest to you, and that’s based on your behaviour for the journey.

Simon Dell: I still can’t get my head around how some big brands in Australia fail to do that customization particularly well. I was talking about Dymocks the other day. And of all the businesses and all the industries that ought to get their shit together, it’s bookstores.

I’ve bought multiple books from them, and they have my membership card on file. They know what I’ve bought, but yet, I still get emails that look like just blanketed emails that go out to everybody with 12 book recommendations. I have absolutely no interest in reading any of them.

Adam Schwab: I think most businesses haven’t got it right. I think I can count on one hand businesses that have done it really well. And even the US it’s done poorly, so it’s hard. There’s also a risk in getting it wrong. What you don’t want to do is to serve the complete wrong thing. At the moment, we send out emails based on hero strengths. So, how good is this package? Is this the most amazing holiday package in the world, or is it a Thailand package where you have a Thailand package last week, or a Sydney package, or a budget Sydney?

We’ve always done it purely by how profitable a deal will be for us, but what we need to get to is how appropriate the content is for each single person. That will roughly give us a quantum leap in terms of engagement and hopefully revenue as well.

Simon Dell: You don’t have to answer this because it might scare people, but how much data do you have and collect about those people that are visiting your websites in Salesforce? Are you looking at how frequently they’re visiting? Are you looking at preferences in terms of pages and hotels that they’re looking at?

Adam Schwab: We’re just going through this journey now. It’s probably a little bit early. Obviously, we don’t use third-party data. It’s all our own. The point of it isn’t to invade people’s privacy, it’s to give the customer a much more relevant and useful experience to not waste your time. We don’t use third-party.

If you’ve spent an hour looking at a Maldives deal, and call us and spoken about this Maldives over dinner for whatever reason, that tells us you want to see more about these deals. We want to make sure you don’t miss one. By contrast, if you hate skiing and have never, ever booked on ski deals giving you three Japanese ski deals this week. We make sure we serve people. We don’t sell away people’s time. If you do click on an email or click on the site, let’s customize that experience to you as best as we can.

It might mean we only show 10 products instead of 60, because we see you don’t look at 60. You just want to look at a couple of things that’s really relevant to you. The question for us is how do we make the experience more enjoyable.

Simon Dell: The last question I have for Luxury Escapes: The call to action on your website, the refer a friend seems to be quite prominent. Can you talk me through what sort of success you have with that? Is that a key resource in terms of collecting new email addresses? Does it work?

Adam Schwab: I’m glad you asked. We have a very strong refer a friend in our early days of the business; 10% of whatever the friend purchased in credits, and it could be thousands of dollars in credit, but it wasn’t justifiable. For a number of years, we actually didn’t have a refer a friend, and there’s just a, we went through a whole journey where we built our platform, and it just became something that we push back and push back.

And literally, over the last couple of weeks, we put it back on just because of the consumer demand. People were referring anyway. It was just a great chance for us to push that referral and reward that referral because they’re doing the right thing by us, we should be rewarding you. So, we finally put it back on. We’ve seen a lot of referrals in the last two weeks, well into the hundreds, but our business really grew on the back of not so much referrals.

Grew on the back of newspaper ads being successful, but one of the big issues we have as a business is because our pricing is so much lower than everyone else, the most common thing we hear is, “I would’ve bought from you but you just sound too good to be true.” And then you’re layer in the back because we are selling a holiday to Thailand, or Bali, or Maldives, or US. It’s not the kind of thing you want to get wrong because you’re in a foreign country, it’s far away.

That trust factor is our biggest challenge, our biggest barrier conversion. But a referral, someone who’s actually been on Luxury Escapes, if you ask 90% of our customers, they love us with NPS at 75%, CSUP about 95%. They’re our best customer. They’re our best sales team. They’re the people going out and telling 10 friends, “You’ve got to go on Luxury Escapes. It’s the best holiday I’ve ever had.” It’s just a great chance to refer people who have been doing the right thing by us for a number of years.

Simon Dell: I’ve got a couple of other questions about a couple of your other projects before we finish up. The ones that jumped out to me, number one, Bluethumb. I’ve actually bizarrely been on Bluethumb and I’ve had a look through it. I get an email from an American brand that does street art every day. I can’t remember what it is.

Adam Schwab: The biggest one in the US is probably Searchyard but I don’t know how much street art they do. 1stdibs is another one, but it’s more high end.

Simon Dell: I’m actually just strolling through my emails right at this moment to work out who it is. Annoyingly, I have bought stuff from them. But on the back of having gone through and seen theirs, I had found Bluethumb. Just give everyone a quick overview about what Bluethumb does.

Adam Schwab: Blue Thumb was one of the first seed investments Jeremy and myself did. We had a small chunk of menulog that was the first investment we made. It’s actually an online marketplace for art, really, local Australian artists and probably the biggest collection of regional art by sheer number that you can buy.

I haven’t been a big art guy largely because I knew nothing about it and I was just too nervous or embarrassed to walk through an art gallery and be scorned by the gallerist. Why I really liked it is it really democratized a section of commerce that had been highly elitist. Most galleries still charge 50% to their artist. You get some great galleries as well who have amazing selections.

But for a layman to jump into that category, it’s really hard to buy art. You’ve got to go to IKEA or something like that. We want to be that middle ground between the really cheap prints and where you start getting $10,000+. Bluethumb’s sweet spot is probably that $1,000 to $750,000 artworks where they’re really nice art works if you’re not an expert collector, if you want something on your walls.

There’s probably no better place to look. And the beauty is there’s no middleman. It’s an artist putting their private works directly on Bluethumb. Your artists get far more money than they’d get anywhere else. And some artists, they make upwards of a million dollars a year selling on Bluethumb and Sarchy, just US a bit more. It’s mainly artists win, win. So artists win. Customers win by paying a great price and getting the art directly, and Bluethumb just sits in the middle.

Simon Dell: I found it whilst you were talking there. It’s called One Times Run but it’s 1xrun, so it’s www.1xrun.com. It’s basically a lot of street artists or what I would consider fairly underground artists, but also some photographers as well. The point is, I think the products there for sale, they’re singular runs. So, you either buy them and then they’re gone. Some of them have two or three and some of them have 30, but whatever. That’s how I found you guys, because I was looking for a localized version of that.

It’s interesting that you say that art people, and I completely agree. I don’t really know what I’m looking at, but interestingly, I’ve bought things off 1xrun just because I like them. I didn’t know whether they were particularly worth much. I think that marketplace is a fantastic opportunity for artists to get out there and reach more people. The other one that I’m really interesting in, again, because I’ve had a big of interest in the background of previous clients, and this is BookWell.com.au.

It’s marketplace-defined, beauty, health, wellness appointments across Australia. You’re a non-exec director there. I’m assuming you’re an investor. Where’s BookWell actually based?

Adam Schwab: I’ve actually become exec chair recently. So since my times opened up with Lux so we have sort of come in and we’re doing a Series A round for the business now. It’s a really exciting business in a similar sense, that win-win. It’s just another classic win-win. The team behind Eat now, which joined forces with menulog, so Matt Tyre and Nathan Airey are two of the really operating superstars behind that business.

They went to Just Eat after the sale of Menulog to Just Eat for almost a billion dollars. These guys were good operators anyone could really come across. They wanted to have another guy, after the great success of Menulog, they wanted to do the same for beauty essentially, even though menulog was a food product. This is a beauty booking business. If you want to purchase or book a haircut, a massage, or a beauty trip, wax or nails, mani-pedi, or tanning, you can do it on the site.

We’ve got $1,200 hair salons on there. In a similar sense, it’s the ultimate convenience for customers. 42% of our bookings are happening outside business hours. People want to book outside business hours, but no one is actually on the phone. It’s a great way for salons to capture lost bookings, and customers to book much more easily.

But a really great part of that business is it’s market relation platform for venues. If you’re a hair or massage venue, it’s almost impossible to market. If you think, how do you market? You’re not going to go above the lines. It’s never going to return for you. Digital doesn’t really work either because Google probably doesn’t work, it’s too competitive, and Facebook’s a branding play which doesn’t work.

You’ve got very few options. Your only limited option is hoping people walk past or maybe some referral tactic. What we do is we created a marketing platform for these guys where they can contact their customers. They get new customers. They pay a tiny fee for existing customers and a slightly bigger commission for new customers, but are still making money because ultimately, if you’re a massage salon, your main costs is your rents and your wages, which happen regardless, and your utilization is 50%.

We’re really able to, same as Luxury Escapes, we can sell empty rooms. We’re selling empty spots for these venues. We know we make our customers a huge amount of money, and we just clip the ticket on the way through to a small degree and giving our customers a much more convenient way to book and get reminders. So when you need another haircut in two weeks, here’s some available time. It’s a much better user experience for our customers.

Simon Dell: The challenge I was going to say with this, having had some experience working with a customer in that beauty space, is that some of them are very tech-unsophisticated. How do you bridge that gap in the marketplace?

When you’re an artist and you’re selling art, you’ve got a bit of a handle on the online side of things. You might be using Etsy, or Pinterest, or Facebook, or building your own website. The beauty industry tends to be very unsophisticated in the tech space. How do you bridge that gap between those businesses that don’t understand all this kind of stuff and you guys that realize that this is a good opportunity for them?

Adam Schwab: That’s one of the real core strengths of the business. That’s what we do. We provide a platform. A big chunk of beauty businesses are using pen and paper for their bookings. You’re giving a haircut, you’re putting the phone to your ear, craning your neck you’re writing it down, there’s double bookings everywhere, it’s tight.

We give our salons a platform for free. If you want to pay for it, it can be upwards of a grand a year. We give that for free, and our platform is, in some ways, better than these platforms. You can set your roster in, you can do all, set your reminders, all this kind of stuff. If you’re doing a four-hour color, you can schedule someone at the middle. There’s lots of really strong, great tools.

This will keep growing and keep getting better, but at the moment we’re a market-leading platform. We’re taking these businesses that haven’t used technology and making it really simple for them to use it. We’ll guide them through the process. We’ve got account management guide them through the process. We then want to set up their marketing automation which is their reminders, their bookings. We’ll help them set it up. There’s really a template.

One of the really cool things that business does is, if you haven’t had a massage for a year, what we’ll do is we’ll send an automated reminder with a discount. So, we’ll say, “We’ve missed you. We haven’t seen you for 12 months.” And the vendor chooses what to send the discount out. Someone set it at 20% or 25%, or $20.

We’re getting a really great conversion rate, upwards of 5-10% on these lost customers who just come back. So, they’re getting these customers back for free through using a really simple platform.  What it really is about is, how do we help these salons make money? How do we help these salons who probably aren’t great with technology use technology in a really productive way?

Simon Dell: Last couple of questions. I normally ask people about their favourite brands, but given your background, I’m going to ask you: If you were on your website, if you were on Luxury Escapes, if you can choose anywhere, where would your next holiday be?

Adam Schwab: I’ve got two very young kids. We’re somewhat restricted. They’re two and four. They’ve been to a few places, but it does limit you a little bit.

Simon Dell: Mate, I’ve got a 6-month-old and a 3-year-old, so I feel your pain. I feel it. I’m not having a luxury holiday for the next 10 years, mate.

Adam Schwab: Funnily enough, we actually do some stuff that is pretty good for kids. You just got to look for it. Most of our product is really 40+, as in kids aren’t so dependent or if you haven’t had kids yet, that’s what we’re really good for. There’s definitely a cohort of families who love using us and we’ll connect rooms and villas. You just got to know what to look for. You’ve got to filter by family.

Simon Dell: Assuming you can get a babysitter then for a week, where would you take the wife?

Adam Schwab: We just came back from Maldives and that was an unbelievable experience. I’d potentially go back there. There’s just so many fantastic places. We went to a tour of Jordan, so Wadi Rum and Petra, and that was through Luxury Escapes, exclusive to a provider which is unbelievable. There’s no shortage of places. I love Asia. I think Asia is still probably one of my really go-to places. The value is unbelievable. The service is phenomenal. The weather is great and the food is fantastic. I love going to Asia. There’s so many places to go.

I think part of Luxury Escapes is about discovery. We just love telling our customers about places they wouldn’t otherwise go into. A key step that really underlies our business for both customer and for hotel is 91% of our customers weren’t planning on going to the hotel they went to until we told them about it. It’s a genuine platform of discovery and impulse that you really can’t get anywhere else.

Simon Dell: Last two questions. What’s new for you? What have you got planned for the rest of the year? We’re coming to the halfway point. Something exciting that you guys have got happening this year?

Adam Schwab: With Luxury Escapes, there’s lots happening. We built our platform last year, so it’s now we’re really able to start building product on top of that. We’re in the final throes of beta testing our flight system, which has sort of been 5 years in the making, and super exciting. It’s probably the first time ever our tech team has now cutting-edge technology. We’ve got an unbelievable tech team led by a guy called Tim Shire in Sydney, and these guys are superstars. We built a flycation platform that nobody on Earth has.

If you’re used to probably buy flights in Skyscanner or Expedia, you put your dates in and it searches in 10 seconds, and then give you back a day of flights. Our system will give you 365 days of flight costs without any search. It’s all paged. It’s an unbelievable user experience. It’s the best user experience in the world at the moment.

Simon Dell: I tell you what, there’s a guy on Twitter called Tom Goodwin. He’s quite famous for a famous quote which I won’t go into right now. But he always talked about why nobody’s ever built a platform that just says, that when the user says, “I don’t actually care when I go. I just want the cheapest option to go at any point throughout the year.” That sounds like a massive, massive game changer in terms of the marketplace.

Adam Schwab: Hopefully, Tom looks at Luxury Escapes because he’ll have those problems solved. You can check by month and see what month is the cheapest. You click on the month and it’s showed by day. We think its, so our GDS said no one’s done this before. JetStar said nobody has done this before. We’ve worked with their case] directly, so it’s really exciting to be able to have a product. We’ve got about 20,000 people beta testing it now, and it should launch to everyone in about 3 weeks’ time. The guys have done a stupendous job getting these out on time, on budget, and exceeding all our expectations.

That’s a big one. We’ve launched experiences, so like Airbnb, you can now buy extra massages for all-inclusive, for board, club, whatever the hotels want to offer, get you your sailing trips, your food tours, whatever ancillary products we could offer. We have, we’ve got insurance in the flow now. There’s lots of core basket size improvements where we are implementing and obviously, personalization is a really big one that we’re launching. There’s some really good stuff happening on the site that hopefully our customers love.

Simon Dell: Perfect. Last question, then. If anybody wants to get a hold of you, if they’ve got a question, a burning question about travel, startups, all those kind of bits and pieces, what’s the best way to get a hold of you?

Adam Schwab: Probably LinkedIn. I usually answer questions on LinkedIn that come through, and I’m pretty easy to find on there. It’s probably the easiest way to get to me.

Simon Dell: Awesome. We’ll put your link in the show notes as well for everybody to see that. Mate, look, thank you very much for your time today. It’s been really informative. I am not going to tell my wife about Luxury Escapes just yet, because otherwise, I’m going to be getting…

Adam Schwab: Hopefully, she listens to the podcasts.

Simon Dell: Mate, she’s never listened to a single one of them, so I don’t have to worry about that. If she signs up to your website, I’ll be getting emails forwarded to me from her pretty much every day.

Adam Schwab: Sounds like a smart lady. Hopefully, she does that.

Simon Dell: But mate, thank you very much for your time today. It’s been great.

Adam Schwab: Thanks, Simon. Pleasure. Appreciate it.