‘Tech focused’ Luxury Escapes opens bricks and mortar store

Having survived Covid, Adam Schwab’s business is thriving again amid a travel boom. Luxury Escapes will soon build ChatGPT into its website but it has also opened a huge retail shop.

Luxury Escapes co-founder Adam Schwab has built the business online but says ‘people associate bricks and mortar with more brand trust and quality’. Picture: Aaron Francis

Adam Schwab wants to transform his “technology-driven travel company” into a $5bn and then $10bn business with some old-fashioned bricks and mortar.

The Luxury Escapes co-founder and chief executive is riding a travel boom, with pent-up demand from tourists flocking to Bali, the Maldives and Europe, making up for time lost during Covid-19 lockdowns.

Luxury Escapes is a business that has been built online – and Schwab is planning to soon incorporate ChatGPT into its website – but it has also just opened what the 43-year-old entrepreneur claims is the biggest travel store in the world in Melbourne’s giant Chadstone Shopping Centre.

“Rightly or wrongly, people associate bricks and mortar with more brand trust and quality, and it’s an investment. If you’re spending a million dollars to fit it out, it means you’ve got a genuine balance sheet,” Schwab says.

“And while we have a huge amount of people who buy online, there’s definitely a cohort of people, maybe 10 to 15 per cent, who want to buy in person (and) our average in-store order value is four times that of online.”

Which is why Luxury Escapes has fitted out a 400sq m shop at Chadstone – Schwab says the average travel store is probably 80-100sq m – with room for up to 30 customers at one time to sit in booths booking travel packages while sipping champagne or drinking coffee.

“Online you’re looking at an average spend per package of about $2000, on the phone about $3500 and in-store you’re looking at $8000,” Schwab says.

After a slower-than-expected start to the financial year, Luxury Escape is now on track to book about $1bn worth of travel packages (its revenue is the commission from the bookings) for customers over the course of 12 months, with Thailand, Bali and the Maldives popular destinations.

“One of every two Australians who go to the Maldives go through us. And I think it is the best destination in the world. It is genuinely even better than it looks like,” Schwab says.

While booking levels are stronger than ever, with July a record month and local Australian destinations proving increasingly popular, Schwab says there is still plenty of room for growth.

Luxury Escapes CEO Adam Schwab: ‘Rightly or wrongly, people associate bricks and mortar with more brand trust and quality, and it’s an investment.’ Picture: Aaron Francis

Luxury Escapes’ parent company is profitable – its last financial accounts lodged with the corporate regulator show it made a $928,000 net profit from $70m revenue in 2022 – the business and the travel industry is still recovering from the best part of three years of Covid disruption. (It lost $32m in 2021.)

Schwab says while customers are flocking back, the number of travellers on international flights out of Australia is still 15 per cent less than pre-Covid. The ones that are travelling are spending more, partly due to more expensive flights and hotel packages, but also because they’re able to splurge after not travelling since the start of 2020.

“Cost-of-living pressures are absolutely true for a big cohort of the population, but there is another cohort who are Luxury Escapes customers who have no mortgage or a small mortgage and might have a million bucks in the bank. They’re getting interest on that so they’re saying, ‘We’re going to spend that 50 grand on going to Europe or Bali’.”

Schwab’s goal is to build the international side of his business, where customers overseas use Luxury Escapes to book their travel packages, into a bigger source of revenue than Australian customers in the next two years.

“We’re going to be a $1bn-$2bn (travel package booking) Australian business, and we’re not far off that. But we want to be a $5bn and then $10bn business and to do that we need to be international, not just Australia,” he says.

“If we can do in the US and the UK what we have done in Australia, then we can be a $10bn business. Our brand penetration in Australia is pretty significant, we’re strong in pockets of the US and UK, and we just have to take that bigger leap.”

For now at least, about 80 per cent of Luxury Escapes’ revenue is derived from Australian customers. But Schwab says the business is scouring the market for bolt-on acquisitions in the US and UK to build its operations and customer base, as well as broadening its technology and offerings for customers online.

Luxury Escapes was started a decade ago as a deals website in what was then a wider group including a slew of other online retail businesses, but its online marketplace, where hotel offers and other packages remain live on an indefinite basis, now account for 35 per cent of revenue.

“We used to have 100 products on the site, now we have 20,000 plus,” Schwab says. “We used to have one cruise, now we have 4000. We had 10 tours, now we have 1000. They are all hand-picked though, and curated by a team of about 10 people.”

The offerings include deals such as free breakfasts or room upgrades and various other sweeteners, but the next push includes launching a rewards program and incorporating ChatGPT artificial intelligence into the Luxury Escapes trip-planning tool.

“You can build your own trip now, but what we haven’t had is AI-generated trips, which we will have in a month,” Schwab says. “It will include hotels, the experiences that we will offer, who you want to fly with and so on.”

Luxury Escapes has about 600 staff globally, including 140 software developers and engineers, which Schwab claims is one of the biggest tech teams for an Australian-owned travel firm.

Schwab and co-founder Jeremy Same are still owners, along with Catch Group co-founders Gabby and Hezi Leibovich, and ASX-listed asset management firm Auctus, which has overseen $120m in capital raisings for the business this year and in 2022.

Schwab says the ownership group has a “three to five-year horizon” for when it will consider an ASX float or full or partial sale.

He admits to having had approaches with prospective buyers, including private equity, “because we’re open to speaking to everyone all the time with a message that we’re not looking at anything right now”. In the meantime, Schwab wants to focus on what might be an even bigger retail rollout should its Chadstone store prove a financial success.

“If this goes well, we’d love to launch in Brisbane, Sydney, Perth and Adelaide. And then if that goes well we’d love to do it in London, New York and Singapore.

“It is baby steps but we think we can make the store profitable, so the customer is having a great experience and it’s also great for business.”

Originally published as ‘Tech focused’ Luxury Escapes opens bricks and mortar store