Love-hate relationships – Airlines

I have a love-hate relationship with my local airline, Cathay Pacific. I used to be a big fan but my loyalty has waned. I still want to support my local airline but I don’t like how they changed the frequent flyer programme and how we are now all packed in likes sardines. As a traveller, that’s how I feel but if I were a shareholder, would my hate turn to love as the cost cutting effort start to pay off? With CX’s market cap at only a fraction that of its global peers, how much of the challenges from budget airlines, fuel costs are already factored into the price?

I have a love-hate relationship with my local airline. In the past, I was a big fan of Cathay Pacific. They were slightly more expensive but the service and amenities were much better than the competition.

But over the past few years, the relationship has changed. Firstly, they changed their loyalty programme, making it much harder to achieve any frequent flyer status unless you are a corporate traveller willing to pay full fare economy/business. Secondly, even when I have flown with them, I find that they have pared back their services so much that I wonder if they are worth it. Now, I am packed in like the sardines above and the food offering leaves a lot to be desired. It reminds me a lot of when I used to fly on US domestic flights. The flights were always full and people brought their own food on board.

But here is where the love-hate part comes in. Just because I don’t like the service, does it mean I should also dislike the stock? After all, if the airline is now cutting costs and becoming more efficient, is that not good for shareholders? It is a fine line because if consumers have other choices, then top line revenue may fall faster than cost savings.

How the greats have fallen – CX market cap

If one were to look at how far the likes of Cathay Pacific and Singapore Airlines have fallen you only have to consider their market caps. At US$6bn, Cathay Pacific’s market capitalisation is now less than a quarter that of the three big American airlines. Its market cap is also less than half of the three Chinese airlines, 30% smaller than Singapore Airlines and 25% smaller than Qantas.

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Challenges – Competition, fuel and small markets

Now, there are real challenges facing CX which help to explain why it has fallen so far behind its peers. There is the rising competition from the budget airlines. There is the fuel hedge that has gone horribly wrong and there is also the fact that it serves a much smaller market.

Fleet size and average age – CX at 9.0, SQ and CA at 6.4 yrs old

One stat where this shows up is fleet size. At the end of 2016, CX had a fleet size of 189 airplanes. SQ is slightly smaller at 178 planes but just to CX’s North, the three Chinese airlines have an average of 640 planes. The three US airlines is more than double that at 1,356 planes.

What’s interesting is the average age of the fleet. I kind of guessed that SQ’s fleet would be very young at 6.4 years old. With China’s strong growth and acquisitive nature, it was also not a surprised that their fleet was only 6.1 years old. But I was quite surprised to see that Cathay’s fleet is now 9.0 years old. By comparison, although the American airlines have much larger fleets, they are much older with an average age between 10.3 and 17.0 years.

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As consumers, we would of course prefer the newer plane. From a business perspective, although the newer planes offer better fuel efficiency, they cost money, lots of money.

Here I would suggest that one reason why the US airlines have higher market cap and higher valuation is partly due to their older fleets. First, the lower depreciation charge help to boost operating margins. Second, on a cash flow level, the more conservative replacement strategy has meant that Operating Cash Flows tended to exceeded capital expenditure. In other words, they are earning more cash than they are spending on new planes. Notably, Air China and China Southern, despite building up a very young fleet have also managed to keep Operating CF above capex.

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On the flipside, we see that SQ and CX have operating CF that are 0.64x and 0.41x that of capex. As we alluded to earlier, part of CX’s problem is due to a fuel hedge gone wrong. This cost CX approximately HK$8.5bn in 2016 and if one were to exclude this loss, CX’s operating CF to capex ratio would be around 0.98x but still below 1.0x.

What about competition from budget airlines?

Relative to the US, budget airlines have had a much shorter history in Asia. So, in order to gauge their potential impact, we look to the US to see how they may have affected revenue growth and margin.

At a glance, we can see that in 2016, the three US airlines saw revenues declining by 2.68% on average. While revenues declined, the US airlines enjoyed the highest operating margin of 14.2%. This is even higher than the Chinese airline’s average operating margin of 13.0%. So while competition from budget airlines could lead to an overall decline in top line revenue, this suggest that profitability could still be maintained with greater efficiency.

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Load factors and costs management

In order to dissect the efficiency issue further, we consider load factors. Is CX’s problem tied to too many empty seats or is it because its running costs are too high?

Load factor not the problem, CX packing them in like sardines

As the following chart shows, CX actually fills their flight as tightly as the US airlines do. In 2016, CX’s load factor (kind of like an occupancy rate) of 84.5% is only a little bit below Delta’s 84.6%. It is in fact higher than AA’s 81.7%, UA’s 82.9% and much higher than the Chinese airline’s 80.8% load factor.

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If CX’s problem is not too many empty seats, are the budget airlines causing it to sell its seats too cheaply? This might be the case. When we divide total revenues by total passengers kilometres flown, we see that CX earned an average of 9.7 US cents per kilometre. Interestingly, despite the competition from budget airlines, the US airlines commanded an average of 11.2 cents per kilometre. The Chinese airlines are clearly competing on lower price with an average charge of 8.8 cents per kilometre. But if we were to compare CX to Air China, the price differential is not that big now at 9.7 cents to 9.2 cents, so the worst may already be behind it.

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Operating costs are the key culprit

Where CX has lots of work to do is in cost cutting. If one were to look at operating expense per available seat kilometres flown, CX has got the second highest costs at 8.2 cents (SQ highest at 8.9 cents). Even if we were to exclude the HK$8.5bn fuel hedging loss in 2016, CX’s operating expense per kilometre flown would still be around 7.5 cents. This is lower than the US airlines but still much higher than the Chinese airline’s average operating costs of 6.2 cents.

You might not love it as a consumer…

Granted the Chinese airlines’ lower cost may be due to cheaper labour or landing fees but if CX is to compete against them as well as the budget airlines, they will have to continue to focus on reducing costs.

Unfortunately for the consumer, this means the cheap pastry meals are here to stay and may even be extended beyond the short haul flights. My guess is that CX will increasingly resemble an US airline. There will be more more ancilliary charges, limited inflight entertainment and older planes. Considering that the average fleet age for American, United and Delta is between 10 and 17 years old, beyond the planes currently on order, the average age for CX’s fleet appears likely to rise.

For employees, this is also bad news. Staff costs represents 21% of CX’s revenues and if the company is to try to restore profitability this is the one area that it can control. There is nothing that CX can do about its fuel hedge. Short term capex commitments are also already set. For CX to boost cash flow, it must turn to wages.

…but shareholders may hate it less

The only good news will be to shareholders. After suffering through a 50% correction in share price over the past two years, if CX is successful in restoring its profitability, its valuation gap should narrow with those of its peers.

As a CX frequent flyer, I don’t like the the changes that are coming my way. But as the saying goes, if you can’t beat them, you might as well join them.







Care to share some toilet paper?

A short funny story for a Friday afternoon. After the amusing stories about umbrella sharing, this week, I bring you toilet paper. No, toilet paper sharing is not the latest fad in China. Instead, this story is about how facial recognition is changing toilet paper usage in China. Happy Friday!

A short funny one for a Friday afternoon.

For those that have been following my blog, I have been quite amused by some of the “silly” ideas that have popped up in China’s sharing economy. I had written about “Care to share an umbrella?” and “Care to return an umbrella?”

Well, this week I bring to you toilet paper.

No, there isn’t an app for people to share toilet paper but there is a machine in China’s toilet which regulate how toilet paper is dispensed in public toilets.

How many squares is fair?

This story is from today’s HKEJ. For those of you that have visited China and had to go to the bathroom, you would have noticed that the way that toilet paper is dispensed is a bit different.

Rather than putting a roll within each stall, they have a central dispenser outside near where you wash hands. So, if you need to use the toilet, you take a few or a lot of squares and then go and do your business inside the stalls.

The problem was that some individuals took too many squares. Rather than taking what they needed, they just grab a lot, perhaps to save for later or use somewhere else.

In order to combat against wastage and improper use, someone came up with a technological solution – Facial recognition.

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Image from

In order to obtain toilet paper from the central dispenser, you need to look into the facial recognition camera. At that point, the machine will spit out a few squares for your use. However, let’s say you’ve eaten something bad and need a few more squares. In that case, you’ll have to hold it for nine minutes longer as the machine knows you have just taken some toilet paper and won’t dispense more to the same person until nine minutes have passed.

Did it work?

Yes. According to the story, the city government found that on average the number of toilet paper rolls used declined from 6-8 rolls to about 3 rolls.

Now, if someone can do a similar tally to see if the usage of hand soap has also seen a corresponding increase, that would be fun. Hope you’re not reading this as you are eating.


Happy Friday!


From 50/50 to 59/41 – Return of the animal spirits

The Hang Seng Index has risen 25% in 2017 and is now within 3.7% of the 2015 peak. The market had been strong but how much of an outlier is it? When we look at daily performance, we find the HSI had risen 59% of the time with an average gain/loss ratio of 1.29x, putting it in similar outlier territory as 2015 and 2007.

Until very recently, Hong Kong’s 2017 stock market rally had been one of the most stealthy bull market in recent memory. As of  1 August, the Hang Seng Index had risen 25% and at 27,540, the HSI is only 3.7% below the 2015 peak of 28,588 and 13.8% below the all-time high of 31,958 that was reached on 30 October 2007.

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3.7% away from 2015 peak, will the good times last?

As we approach the 2015 大時代 peak, we get the inevitable question about bubbles and whether we are due for a correction.

From a historical perspective, we can certainly appreciate where the concern is coming. In 2015, the Hang Seng Index had a blazing start, rising 21% by 28 April. Had the pace continued for the full year, it would have annualised to 63%. But the good times did not last. After peaking on April 28, the market corrected 23% the rest of the year and reversed the previous gains to a full year loss of 7.4%. Ouch.

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So, what are we to make of this year’s (2017) strong performance? Is it a repeat of 2015’s roller coaster ride or is the current rally likely to prove more sustainable?

Until today, my gut feel was that it may have more room to run. Why? First, I think the market’s animal spirits feeds on recent peaks. Until 2015’s 28,588 peak is surpassed, I suspect Mr. and Mrs Wong are still sceptical. From a behavioural perspective, others have commented that one sign of bubble is when taxi drivers start to give out stock tips and people quit their day jobs to day-trade.

I read somewhere that in the US market, the number of days that the market goes up and the times that the market goes down is roughly 50/50. Although the odds are roughly even, the reason why the markets have tended to go up is because average gains have outweigh average losses and the compound effect leads to long-term cumulative gains.

3,922 up days and 3,633 down days since 1986

I wanted to see if the same held true for the local stock market. Looking at the Hang Seng Index’s performance since 1986, although the market had risen 9.7x, the number of up days versus the number of down days is almost 50/50. Specifically, there were 3,922 up days and 3,633 down days. This is a ratio of 51.9%/48.1%. If one were to consider the average daily movements, the average up day gain was 1.09% while the average down day loss was 1.08%, so again very  close to 50/50.

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2017 has been an outlier – 59.4% Up Days and Gain/Loss ratio of 1.29

What about 2017? Well, in the 143 trading days this year, there has been 85 up days and 58 down days. This is a ratio of 59.4/40.6. Furthermore, when we consider the average daily movement, although the average gain on up days is only 0.57%, when this is compared against an average loss of 0.44% on down days, the gain/loss ratio of 1.29 is much higher the past five year’s average of 1.01.

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Current rally as much of an outlier as 2015 and 2007

Clearly, the 2017 rally had been strong but how does it compare to the previous “bubbles”. In the more recent memory, there was the 2015 大時代 rally. Through the first 78 trading days of 2015, the index rose 21%. Over those 78 trading days, there were 49 up days and only 29 down days. While 2015’s up days ratio of 63% is 4pp higher than 2017’s 59%, the average gain/loss ratio was milder at 1.19x (0.77% average gain versus -0.64% average loss).

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If one were to look further back, we saw an even more euphoric rally in 2007. Driven by hopes of a “through-train’ of China domestic investments, the Hang Seng Index had rallied by 60.7% through 30 October 2007 and reached an all-time intra-day high of 31,958. During this period, over the 204 trading days, the Hang Seng Index rose on 115 days and fell on 89 days. The Up days to Down days ratio was 56/44. Although this was milder than 2015’s 63/37 up/down days ratio, the longer duration of the cycle couple with an average gain/loss ratio of 1.20x helped to push the market up by 60%.

2017 less hot than 2005 and 2007

So if one were to consider the current market condition, we can see that 2017’s up days ratio of 59.4% is higher than 2007’s 56% but lower than 2015’s 63%. But from a daily percentage change ratio, 2017’s 1.29x ratio is higher than 2015’s 1.19x ad 2007’s 1.20x.

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In the long run, reversion to the mean is likely but timing is anyone’s guess

In the long run, a reversion to the man is probably inevitable and the up day to down day ratio should probably trend back towards 50/50. But as one can see in the table above, that up days ratio remained elevated in 2006 (59%) and 2007 (56%) and only reverted back to 47% in 2008.

Be that as it may, given the combination of higher than expect win streak and higher than normal win ratio, it might be better to simply ride the current wave than to initiate new buy positions at this stage. Caveat emptor.




Postcards from the supermarket – Which is more expensive? Buy-side Vs. Sell-side

Greetings from the produce section of your local supermarket. As I was meeting an old friend for lunch today, I came across some novelty melons. When I thought about how much they costs, the question of value came to mind. In this case, I would argue that their value could be totally different if one were to take a sell-side versus a buy-side perspective. Answer key at the bottom of the post, no peaking.

Greetings from the Produce section of your local supermarket.

Yesterday afternoon, my daughter said she was hungry. So, I made her a strawberry jam sandwich. She was still hungry, so I asked her to go to the supermarket next door to buy some fruit. She came back with a melon and said we got the most expensive one.

I freaked out!


Because I thought she got one of those Japanese musk melon that costs hundreds of dollars. What a relief it was when I found out that it only costs HK$60 (around US$7.50).

The biggest watermelon I have ever seen

That brings us to today. As I was getting ready to meet an old friend for lunch, I passed by a high end supermarket in the centre of town and I saw the biggest watermelon in my life. If you can see the label below, it was called a Japanese Jumbo Watermelon. What was even bigger was the price tag. I won’t reveal it yet, but it costs an arm and a leg.

FullSizeRender 4Given the previous day’s experience, I proceeded to check out the prices of some of the other types of melons.

Here is one of a Korean musk melon.

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Then, some Japanese varieties. Here is a Japan Shizuoka Melon.

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And here is a Japan Heart Shape Melon.

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Which one is most expensive?

This got me thinking…would my kids be able to guess which one is more expensive? If I asked you to rank them from the cheapest to the most expensive, my guess is that 95% of you would get it right. The answer is at the end of this post but try not to jump to the end just yet.

When we think about price, most of us probably approach this question from the “Buy” side perspective (i.e. the consumer perspective).

Buy side Vs. Sell side – Value can be very different

But as I wondered who would fork out such a huge sum for these novelty produce, I started to think about which one is more expensive from seller’s perspective.

I guess there’s probably the odd fellow who shells out thousands of dollars for a heart shaped melon to impress a new girlfriend but in most cases, these fruits probably just sit there. At the end, when they start to spoil and the owner or the staff probably crack the melons open and eat it themselves so it doesn’t go to waste.

So from the seller’s perspective, these novelty melons’ value is really just as a sales gimmick. From a marketing perspective, they help to draw in the crowds but in terms of their actual sales value, in most cases, it is zero (i.e they don’t sell). Conversely, although the regular fruits sells for much cheaper, their higher volume means they offer much greater value to the seller.

So if one had to rank the fruits from cheapest to most expensive, it does really depend on whose perspective you take. Now you can scroll to the bottom to reveal the actual prices of the melons. Did you get it right?

Buy side perspective – From cheapest to most expensive

Sell side perspective – From cheapest to most expensive






Answer – Actual price of the produce

  • Korean Musk Melon – HK$80 (around US$10)
  • Japan Shizuoka Melon – HK$498 (around US$64)
  • Japan Heart Shaped Melon – HK$1,388 (around US$180)
  • Japan Jumbo Watermelon – HK$2,988 (around US$385)

Mass Consumption Part 4 – Whassssup? Watching the game, having a beer

Whassup? During the summer, when it is scorching outside, there are few things better than an ice-cold beer. In Part 4 of our Mass Consumption series we review the state of the beer industry. But unlike the previous post, the Chinese beer industry outlook is not “whassup”. In fact, after peaking in 2013, Chinese beer consumption has fallen for three straight years and operating margins are less than half of global peers.



For those unfamiliar with the term, Whassup was an iconic beer commercial from the late 1990s. The commercial was so successful that for quite a while, everyone went around saying “Whassup?”. To truly appreciate the fad at the time, you have to go back and watch the commercial. (Youtube link here). It may appear silly now, but admit it, you said your fair share of “Whassup” back then.

As promised from my “Fried Chicken and Coffee” post, I was planning to do some work on the Beer industry but I did some initial reading, I I really did not feel a sense of urgency, hence the lateness of this post. To put it simply, the beer industry is not “Whassup?”

China beer production peaked in 2013

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According to data from the National Bureau of Statistics, in 2016, China’s beer production was 450.6mn hectolitres. Beer production had peaked in 2013 at 506.2mn hl and has now fallen for three straight years and are now down 11% from the peak. This is very different from the other mass consumption themes that we had been talking about (i.e. ageing population, travel and fast food).

Volumes down across most major breweries

Looking into the numbers, this is not just a China phenomenon. Across the major international breweries, Heineken was the only one to report a growth in beer sales in 2016 (up 6.3%). The largest brewery, AB InBev (owner of Budweiser, Stella Artois and Corona) saw sales volume drop by 0.4% in 2016. Carlsberg’s sales volume fell by 2.8% while Tsing Tao’s declined by 6.6%.

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Craft beers and premium-ization

With overall beer consumption flat, in order to grow revenues, breweries have turned to craft and premium beers to try to boost overall ASPs. Next time when you order a Leffe or Camden Town, you are in fact ordering a cousin of Budweiser (so to speak). Here’s a table of the family of beers.

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For instance, did you know that Budweiser, Corona, Hoegarden, Boddington’s and Pure Blond are from the same family. Similarly, the Carlsberg family of beers include Grimbergen and Brooklyn Lager. And in the Heineken family, this includes Moretti, Sol, Anchor and Tiger.

Alcohol-Free and Ciders

In addition to premium craft  beers, another focus area for the breweries is the “low and no-alcohol” beer segment. AB InBev has set a goal to have low-and-no alcohol beers represent 20% of its global beer volumes by 2025. For Carlsberg, although Craft and Non-alcoholic beer only represent 5% of its beer volume, they make up 10% of net revenues. As for Heineken, the low-and no-alcohol segment represented 12mn hectolitres in 2016.

Margins are all over the place

While the beer industry’s growth profile is very different from the other mass consumption industries that we have reviewed, there is one aspect that is similar: Low China margins.

At 29%, AB InBev has the highest EBIT margin among the breweries. Heineken and Carlsberg are at 17% and 13% respectively. By comparison, the two Chinese breweries’ operating profit margin of 6% is less than half of their international peers.

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Looking at the international breweries’ segmental results, China’s lower margin is not obvious. For AB InBev, although its Asia Pacific profit margin of 16% is well below those of Latin America, North America and EMEA, it is still more than double that of Tsingtao and CR Beer.

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Interestingly, for Heineken and Carlsberg, their Asian operating margins are actually higher than those of Europe and the America. Of the three, Heineken’s 32% operating margin in Asia is the highest among our comparison group.

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Need to diet before I have a pint

Although overall volume growth has been anaemic, the sector has not done too poorly over the past 12 months. On a blended basis, the five beer stocks above are up 27% against their 52 weeks lows. But with current price only 8% below their 52 week highs, I feel that similar to my own situation, the stocks may need to go on a diet before they become attractive again.

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Care to return an umbrella?

About a month ago, we wrote about the latest fad in China, umbrella sharing. Today, the Chinese press provided an update on how that venture has gone. I’m not making this stuff up.

About a month or so ago, I wrote about the latest fad in China’s shared economy – Sharing umbrellas (link here).

There’s been an update. According to the Hong Kong Economic Journal, one of these umbrella sharing companies started operations in April and had rolled out its sharing service in 12 cities including Beijing, Shanghai, Nanjing and Guangzhou. It invested in 300,000 umbrellas with a “no fixed-base” approach. At Rmb60 per umbrella, its initial outlay was Rmb18mn.

Under this system, the umbrellas have a lock on it and in order to use it, you have to pay a Rmb19 deposit and would be charged 50 cents for every 30 minutes of usage. Once the deposit is paid, the renter would receive a four digit code to unlock the umbrella. This is how many of the bike sharing systems are set up.

That was the theory. In the real world, what wound up happening was that after a few months, most of the umbrellas have disappeared, rendering the initial Rmb18mn a complete loss.

The real winner? The umbrella makers

Normally, one would have thought that a Rmb18mn loss would have kicked some sense into investors but in the current easy money environment where profits don’t matter, the company is doubling down. The umbrella sharing start-up is now saying that the real money is in advertising. You see, there are eight sides to an umbrella and surely someone would be willing to give them money so that they can advertise some dot-com venture on the umbrella. That’s not the end, The company’s ambition have grown, it is now targeting to buy another 30mn umbrellas (i.e. stepping up its initial investment 100x), some with night glow feature and some with a GPS so that they will at least know where the umbrellas have gone.

I imagine that the GPS will show many of the umbrellas in the closest dumpster.




Postcards from London

Greetings from London! We have just spent two weeks vacationing in London. It seems like everyone had the same idea and chose the UK for their summer holidays. According to stats from VisitBritain, in the first four months of 2017, visitor arrivals are up 11% while spending is up 14%. In addition, in this post, we share some of our new economy impressions on car services, shared accommodation and cord cutting.

Greetings from Sunny London!

For some strange reason, I’ve always been very fortunate with getting great weather whenever I visit London. During this recent trip, it only rained for one out of the 14 days that we were there. And as you can see from the various photos, we are talking about clear blue skies and the need for 50+ SPF sunscreen.

Although I have been to London many times on business before, this was our first family vacation there in like 20 years ago.

In keeping with our Postcard series (e.g. Tokyo and Causeway Bay), here are some takeaways from this trip.

  • (1) Cheaper currency really drawing in the tourists – Tourist arrivals up 11%, spending up 14%
  • (2) New economy experiences – Impressions on Uber, AirBnB and cord cutting

Cheaper currency => Tourist arrivals up 11%, spending up 14%

Chatting with family and friends, it seems like everyone is heading to London this summer. Although we didn’t ask why they were vacationing in London this year, I suspect the cheaper Sterling probably had something to do with the decision.

In order to find some data to back up this gut feel, this was what I found from the VisitBritain website. In the first four months of 2017, the number of visits is up 11% YTD and the total amount of Spending is up 14% YTD to £6.2bn. On a rolling twelve month basis (from May 2016 to Apr 2017), the number of arrivals and the total spend are up 6% and 5%. Both are at the highest levels on record.

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As to be expected, the increase in arrivals was mostly driven by higher tourist arrivals. Those travelling to Britain for holidays were up 26% in 4M 2017  while those visiting friends and relatives were also up 7%. Conversely, given the uncertainty caused by Brexit, the number of business travellers decreased by 4% in 4M 2017.

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Among the various regions, the cheaper currency appears to draw those from the furthest away. Travellers from EU countries only grew 7% in 4M17, North American visitors rose by 16% while those from the Rest of the World was up a whopping 24%.

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Since the visitor data is only released 7 weeks after the end of each month, it would be interesting to see if our impression of strong tourist arrivals is born out for the summer holiday months (June-August).

Implication – UK retailers may surprise on the upside.

New economy experiences – Impressions on Uber, AirBnB and cord cutting

One of the other key notables from this trip is our first time trying AirBnB. Although we had known about AirBnB for some time, in the past, we had always shied away from it for family vacations. I always had this recurrent worry that we would show up with kids in tow only to find accommodation cancelled at the last minute.

Well this time, we gave it a try. To a large extent, this decision was driven by costs. London hotels prices are outrageous. With AirBnB, we were able to cut our hotel bill by 50%.

Are we sold on AirBnB? I’m not sure. While the savings are substantial, every member of our family was very happy when we transited back to the hotel at the end of the first week. We are not talking about a fancy hotel like a Four Seasons but just a solid 4-star hotel. So what did we like and what did we not like about the AirBnB experience?

  • Pros – Savings. Get to see and experience a nice residential neighbourhood. Full working kitchen. Access to washing machine.
  • Cons – You have to really scrutinize the specs. Our assumption that the place will have a TV and A/C was wrong. Cleanliness – it was tidy and neat but it just did not feel as clean as a hotel. We all wished for disposable slippers. The neighbours – As the flat is being used by all sorts of people, we could feel some grumbles directed from our neighbours partly due to the previous occupiers’ behaviour.

Incidentally, during our stay, I read an article that AirBnB is readying a Premium Tier to try to attract higher paying travellers who prefer the amenities guaranteed by fancy hotels (Bloomberg article here). This point definitely resonated with us but I can’t help but wonder what is the right price point for this service. If the savings for this Premium Tier is just 25%, would it be enough to draw higher paying travellers from hotels? I’m not sure.

Ubers, car services and taxis

Relative to AirBnB, I am more sold on Uber. For one, the commitment level is much lower. If one were unfortunate enough to get a bad driver or a bad car, you just have to suffer through the car ride. Rather than being on the hook for thousands of dollars, we’re only talking about tens of dollars.

During our stay, in addition to Ubers, we also rode on taxis and/or booked a car service when possible. From a cost perspective, I was surprised that the cheapest option was actually the car service. Taxi’s were the most expensive option, especially since we usually ran into traffic and what was supposed to be a 15-20 minute ride often took twice the amount of time. Comparing the three, if it costs £20 for the cab ride, the car service would cost £11 while the Uber would be slightly more expensive at about £12. Using another example of a trip to Heathrow, the car service costs £48 whereas a taxi would have cost around £70.

In terms of ease of use, the car service’s app is very similar to that of Uber. You can also track your driver and settle all payments through the app. The only draw back is that it needs a longer lead time (around  20-45 mins) if you want your car. Whereas for Uber, you can usually find a car that is just minutes away.

Implication – If Uber and AirBnB were both to list, I think I would be more positive on Uber than AirBnB.

Cord cutting and unbundling

The last takeaway from our London vacation is “cord-cutting”. Since our AirBnB flat did not come with a television, so for one week, we did away with traditional television. Instead, since the flat had wifi, our family turned to their respective iPhones and iPads for entertainment during those early morning jet-lag hours.

The conclusion is that one really does not need the traditional cable subscription. YouTube and the other streaming service offer more than enough entertainment. Even if one were to be seriously addicted to sports or some premium TV shows, it may be more cost-effective to get a subscription to Netflix or get an NBA/NFL league pass. Rather than spending HK$580/month on a Sports/Entertainment bundle where one only watches 2-3 channels, it makes much more sense to unbundle and pay for what you want.

Implication – Cut cable TV subscription.

To finish this Postcard, I like this quote from our visit to the Harry Potter Warner Brothers Studio Tour – “No story lives unless someone wants to listen.”