It was tough times that spurred Darrell Wade to change the strategy of Intrepid Travel. The result? $120 million growth in a decade. He tells AMANDA GOME how he did it, plus reveals bold new plans.
By Amanda Gome
It was tough times that spurred Darrell Wade to change the strategy of Intrepid Travel. The result? $120 million growth in a decade. He tells how he did it, plus reveals bold new plans.
Darrell Wade, 47 (left of picture), cooked up the idea for Intrepid Travel with Geoff Manchester (right) after a bottle of wine around a camp fire in 1989.
The two, who met doing commerce at university, wanted to provide adventure tourism for a middle class that was sick of boring, predictable holidays.
Eighteen years on, with turnover of $130 million, they have 800 employees across 23 companies in the Intrepid Group and operate in 96 countries.
Much of that growth has occurred in the last 10 years. The spur? The company was badly affected by the SARS virus, the Bali bombing and September 11.
So how did the larrikin Wade, who still takes three months holidays a year and never wears a suit, take the company from $10 million to $130 million in a decade?
Amanda Gome caught up with Wade and heard his tips and future plans. He is happy to answer your questions. Email [email protected]
Amanda Gome: You started Intrepid almost 20 years ago to service a niche market providing adventure tourism to essentially middle class backpackers, bored with the mainstream. Has the niche changed?
Darrell Wade: No. But the market has got a lot bigger, and we helped to grow it. There are now niches emerging like the trend towards volunteering; paying to go and work in a small community.
After steady growth you suffered a major setback in 2001. What did you do?
We had been growing steadily at 30% to 50%. Then September 11, Bali and SARS hit.
It was very difficult to manage. We had clients cancelling left right and centre, and cash pouring out the door. But we didn’t want to let staff go so we hung on and hoped it would soon be over and that the cash reserves would hold up – which they did.
We were affected for the next two years and realised that we were too exposed only having operations in Asia. We decided to diversify, expand the brand and began working with other companies to do so.
So the idea was to gain more clients and be able to swing resources between Europe and Asia and Australasia. What happened?
We wished we had moved into other countries like Europe earlier. We began to look for partners. We approached GAP Adventures, a Canadian company, that had represented us for years – they sold our Asia product but they didn’t want to (take it to Europe).
Then we ended up acquiring a British company Guerba that gave us immediate entry into new destinations, including in Africa. That was the first acquisition we did.
But GAP was extremely unhappy and they dropped us like a hot potato. So we had a brochure out in three months and became a competitor in South America.
What was the next major step?
Joint ventures. Four years ago we talked to staff in Vietnam and a very smart person said to us ‘you take 7000 people to Vietnam, if that is growing at 40% in 15 years time you will be taking 30,000 yet you are running everything from Australia’.
It was very compelling. So we did a joint venture. We found it much easier to own vehicles and land and set up contracts to have the level of legality we didn’t have previously. There were cost savings using local infrastructure and we realised within months that the benefits were so obvious we should have done this a long time ago.
Where do you have joint ventures?
Cambodia, India, China, Thailand and just done the same in Nepal.
Not only does it give you the ability to scale up at low cost, but says to other players we have the capacity to tailor specific products for you outside of the Intrepid brand.
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What does it cost to set up a joint venture?
About $500,000 to $600,000 to get it up and running. You have HR, legal, hiring staff costs, and some countries are easier than others. India was very straight forward but China was very difficult, and the legal bills have been significant.
Did you ever use agents to sell?
Yes. We went into Britain in 2001. We had a general sales agent in Britain but it didn’t work, so we got our own people in who were dedicated to the cause and got the business.
We also set up in the US in 2003 and have now done a major upgrade of that office going from three to 20. We are opening in office in Canada in July.
How have you funded your growth?
We have a small facility with St George, which we use at times, but mainly through retained earnings. We have a high level of profitability and the numbers are starting to get significant.
So you haven’t taken in any private equity?
No. Geoff and I own it 50/50.
You are planning to float in a few years. Is that to de-risk? Get some return after all these years?
Yes. It is to get some chips off the table. But also to improve the cash box capability so we can look at more mergers and acquisitions. We have done seven or eight.
What is your preferred model? Do you buy businesses outright?
Our preferred model is to go with a minority stake, get to know the business – there is usually lots to know – and then go to a majority stake. We might buy 40%, which helps our cash flow and is good for them.
There is competition; there are other acquirers in the market. The German company TUI merged with UK’s First Choice, and they have been very active, doing 42 acquisitions in five years including Australian company Peregrine Adventures. They are reasonably active in Australia.
So what size companies are you looking to acquire?
We operate at a lower level. We want to acquire companies that are smaller. We can never compete because of multiples. TUI is listed in Britain and can offer 10 or 11 times on an acquisition.
What have you learnt doing acquisitions?
You learn how unsophisticated this industry is. We are not that clever and we have done very well. All we do is try and give people the best time we can. We give them the wow factor, and if we can do it better than others, we succeed. It’s just not that complicated.
How do you know what wow factor they want?
We track the hell out of our clients. We ask them so many questions, which is crucial to product development; what was good what was bad… are we hitting all your buttons?
Your online strategy?
Online has been static for three years, which is surprising. We thought with global connectivity it would soar, but only 20% of bookings come from online and that hasn’t grown.
Apart from acquisitions and joint ventures, a key plank in your success has been setting up retail shops. You got the idea after walking into an Apple concept store in Los Angeles. Many people predicted they wouldn’t work.
We opened a few stores and they were very successful. Now we have six and we plan to open 15 more in the next 18 months.
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Are they profitable?
They tend to take 15 to 18 months.
Did they cause a rise in bookings?
It depends. In Britain they have never heard of Intrepid, so they walk in off the street and it’s very successful.
Do you do a lot of search engine marketing?
We have two people on web marketing. We do Google campaigns with 35,000 words – it costs maybe a couple of thousand a week.
How do you figure out what will work strategically?
We don’t. The penny drops. We do it once, do it again and think that’s the way to go.
How do you plan?
We work on five year plans that focus on destinations, products and marketing strategies.
Because of that planning we have our goals in place and know the resources, people and IT we need to achieve them.
What has helped you lead?
Early on we didn’t have much foresight. We started The Executive Connection (TEC) when we probably had turnover of $10 million, which was probably too small, but it really stretched you and gave you new ideas. In TEC we spent one day a month with the group and then half a day with our coach/mentor. It was extraordinarily valuable. When we finished we were towards the larger size of companies.
Two and a half years ago we came across Mark Rehn, who was a director of IBM. He was also a speaker at TEC. He works a lot on processes and takes a very structured approach, mapping your processes.
We mapped everything and documented it. It was big, grunty stuff and was part of the scaling that has helped the business go forward.
What does your management group look like?
There are seven people. I am CEO and more focused on product development and strategy. Geoff used to be a floating director and look at areas in real depth and put more structure in and move on. Now he focuses on transport and logistics.
We have a CFO and a large finance department because the global structure is very complex and there are lots of local tax liabilities.
We have a GM in IT and GM in business operations. Six years ago we brought in a GM of HR after recognising that when it all boils down, we don’t make anything – we have no IP, we are only as good as our people. We also have a global sales and marketing manager and an international business manager.
We meet for a full day every month and I have a one-on-one with each of them every month.
What do you do then?
(Laughs) I dunno. Probably strategy. I look forward to where the business is going. I am also spending time with the CFO strategising and getting prepared for a listed environment.
I also get involved at the early stage of acquisitions, particularly meeting the key people so I can get a handle on the opportunities.
What keeps you awake?
There are so many opportunities. Every now and then I think of something and get out the note pad and laptop to flesh it out. I am easily bored.
Do your staff get sick of you?
They don’t like me taking holidays because I come back with too many ideas.
Are you concerned about the downturn?
No. Over the next five years we are looking at substantial numbers. If we had another shock, like health or terrorism, well you can’t do anything about that. But this is a good time not to have any debt.
You have always had three months holiday. Can you do that running such a large company?
Yes. I had six weeks over Christmas; that was a decent slab of time. I went to Cuba. It was great!