In an elegant row of white Georgian townhouses, one building stands out. A lurid orange band around its balcony and the backpackers on its...
LONDON — In an elegant row of white Georgian townhouses, one building stands out. A lurid orange band around its balcony and the backpackers on its doorstep break the stately harmony of the rest of the crescent.
Behind its doors, Stelios Haji-Ioannou chats with patrons of the easyHotel, a venture that replicates the model of his outstandingly successful easyJet airline by offering basic accommodation over the Internet at prices dependent on demand.
One guest complains about the lack of a pay phone. Haji-Ioannou politely explains that most people these days have mobile phones and, as an aside, a phone in the narrow hall — there is no lobby — wouldn’t make enough money to return the investment.
That’s a key concern for Haji-Ioannou, who has made serious money investing in no-frills services that allow travelers on a budget to stay in London’s upscale Kensington district, fly to Madrid for the weekend or take a Caribbean cruise.
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“He’s marketing himself as the consumer champion, a bit of a Robin Hood figure who steals from the rich to give to the poor,” said Nirmalya Kumar, a marketing expert at the London Business School. “It’s seen as a fun brand, with a reputation for making a difference.”
EasyJet, which has added scores of routes and its 100th plane this year, was one of Europe’s big success stories of the 1990s. But there is some unease at the extent and speed at which Haji-Ioannou is rolling out new businesses.
The easyGroup brand now has 16 brands — ranging from watches to car rental — with the greatest hopes pinned on the easyHotel and easyCruise offerings. It plans to expand the cruise brand to the U.S. market this year.
“The brand is well understood for the airline, but obviously every time you apply it to something different, the challenge is multiplied,” the Greek-born multimillionaire said.
The model for the easyGroup businesses has largely stayed the same, with Haji-Ioannou choosing businesses where he can practice yield management. The consumer who books early and online pays less and gets a further discount when demand is low.
But consumers must also be willing to trade convenience — and sometimes comfort — for price.
Patrons on the cruise ship don’t get a traditional cruise so much as a large boat that takes them from place to place. The rooms don’t have portholes, and activities are limited to a hot tub on deck and a bar.
Visitors to the easyHotel, which recently opened a branch in Switzerland and plans more across Europe, will find that $45 merits them a cubicle just large enough to accommodate a bed, a shower pod and a plasma TV that costs $9 a day to watch.
Nigel Massey, a London-based hotel consultant, sees a difference between offering customers a nonreclining seat on a short-haul flight and a windowless room for a night or two. “Hotels are less forgiving … because you are in them longer,” Massey said. “Especially if they are orange and claustrophobic.”
Haji-Ioannou acknowledges that expanding the easyGroup, which he plans to eventually list on the London Stock Exchange, can be risky.
The group’s Internet-cafe chain, started as easyEverything and later rebranded as easyInternetcafe, provided a salutary lesson.
When the first cafe opened in central London in 1999 to lines around the block, Haji-Ioannou thought he’d found his next easyJet. As the business started to sputter, Haji-Ioannou had to inject more money. He said the business is now breaking even.
Haji-Ioannou declined to put a figure on the worth of the overall group, but easyJet, the only public business among the 16, reported a 27 percent rise in profit last year to $76.4 million on revenues of $2.03 billion.
He expects easyCruise to break even in three to five years. Among the other brands, easyCar broke even last year and easyMoney is making a profit while easyHotel, easyBus, easyMobile, easyWatch and easyCinema are all still in the startup phase.
As for criticism that he’s applying the brand methodology too indiscriminately, Haji-Ioannou says all the products are needed to find the winners.
“I think there is an argument that says we are doing too much, but I haven’t found a solution to the problem,” he said. “I don’t know which one is going to do well in advance. Every time I’ve tried to guess, I’ve got it wrong. Like any good venture capitalist, you just spread them out.”