Perspectives

Corporate View: Honnus Cheung, Travelzoo

Published: Mar 2013

Honnus Cheung

Chief Financial Officer, Asia Pacific

With more than 20 years of finance experience in the high-tech and interactive media industry, Honnus Cheung is currently Chief Financial Officer (CFO) for Travelzoo Asia Pacific. Prior to joining Travelzoo in 2007, Cheung worked for Yahoo! Asia Pacific for nine years as Regional Finance Director. During this time, she was heavily involved in setting up the company’s Asia office and gained much M&A including strategic investment in Alibaba Group, acquisition of Kimo Taiwan and integration experience. Cheung has also worked for American Standard Group and PricewaterhouseCoopers. Cheung is a full member of CPA Australia and HKICPA and holds an MBA from Northwestern University (Kellogg School of Management and Hong Kong University of Science and Technology) and a Bachelor’s degree in Commerce from the University of Queensland, Australia.

Travelzoo Asia Pacific is an independently owned licensee of Travelzoo Inc. (NASDAQ: TZOO), a global Internet media company and a trusted publisher of travel and entertainment deals. With more than 25m subscribers in Asia Pacific, North America and Europe, and 25 offices worldwide, Travelzoo® publishes deals from more than 2,000 travel and entertainment companies. Travelzoo Deal Experts review offers to find the best deals and confirm their true value.

When Travelzoo expanded to Asia in 2007, the company recognised the growth in the region and this inspired and motivated its CFO for the Asia Pacific landscape, Honnus Cheung, to set up operations rapidly – a task she had already undertaken as Finance Director for Asia at Yahoo. Within a 12 month period, Cheung and her Travelzoo team had established seven offices in cities across the Asia Pacific region: Hong Kong, Beijing, Shanghai, Taipei, Tokyo, Singapore and Sydney. In order to serve this broad landscape effectively, some degree of local flavour was required, according to Cheung. “We have different versions of our product for each location we serve in Asia Pacific. Each location has its own production team and its own editorial team in place in order to bring relevant deals to the local market.”

Travelzoo’s revenue stream is divided into two parts: the first is the company’s media business, which consists of the weekly Top 20 publication and Newsflash for which there are weekly revenue statistics. The second is the ‘Local Deals’ business, which provides voucher transaction opportunities for the online company’s 25m subscribers globally and 3.5m in Asia Pacific alone. In launching this group buying product in 2011, Travelzoo joined Groupon in working with merchants to offer discounted deals over the Internet in the region. But while e-deals providers such as Groupon focus on product and price on a daily basis, Travelzoo focuses on the experience and quality, insists Cheung.

Originally starting out as a travel media company, Travelzoo slowly but steadily established a subscriber base of mainly white collar workers and business executives. When this elite audience was in place, however, the company realised that they could expand their offerings. “Two to three years ago, when we had our subscriber base established, we realised that when we sell a high value product such as a travel package worth $500-3000, our subscribers are likely to participate perhaps three or four times a year. So we decided to offer more deals, using the same stringent selection process as before but introducing experiences at spas and restaurants that can be frequented more regularly,” she says.

On a weekly basis, Cheung and her team now discuss and negotiate with the various travel agencies, airlines, hotels, restaurants and spas to create deals that they feel match the expectations of their subscribers. The company distributes the Top 20 email newsletter to their subscribers every Wednesday morning and Local Deals throughout the month.

A financial union

For any company embarking on expansion to a new region, one of the first things that they will have to consider is starting the RFP (request for proposal) process. In Cheung’s case, she was acutely aware that in order to successfully set up operations in five countries over a very short space of time, she needed to choose a bank that had an existing bank structure and presence in Asia Pacific. Says Cheung: “HSBC and Citi are two banks that would come to mind straight away as useful in this scenario, but I had actually used HSBC before and knew their capabilities well so it helped to sway my decision.”

An important attribute of any banking partner’s offering is the quality of their e-banking platform. For a CFO of an e-commerce firm looking for control and visibility across their treasury activities for the regional headquarters, this facet is imperative. HSBC’s e-banking platform HSBCnet has proved both stable and robust enough for Travelzoo’s financial requirements, according to Cheung, with a mobile banking application that allows her to effectively monitor finances while on the road. Yet, despite the widespread presence HSBC has across the Asia Pacific region, there are still countries that tend to rely more heavily on their domestic banks – most notably Japan. This has not fazed Cheung. “We still have the capability to connect with those countries that prefer to deal with their local banks – that is all part of our service. This is why it is important to lean on local banks in some regions, especially for the collections side of the business,” she says. On a daily basis, Cheung’s finance team sends an MT940 message (through SWIFT) to connect to each local bank concerned and then route this information back to the company’s HSBCnet system.

Right sourcing rather than outsourcing

But banking services is not the only area in which the local landscape can be useful. When the company encounters intricate issues such as tax where each country will have different rules and regulations, Travelzoo has found it very beneficial to draw on the local outsource expertise. Not always an appealing option for corporates – especially in the case of well-established companies where the initial steps would be costly and cumbersome – Cheung agrees that outsourcing needs to be considered only under the right circumstances. “For any company considering outsourcing, the process needs to be already managed to a sufficient standard. If a process is standardised, it is a lot easier for a provider to manage your process as you both know where the benchmarks stand. If an outsourcing provider can match this standard then I am happy to let them do it.” Setting this ‘range’ of standards also assists Cheung and her team when it comes to deciding which activities are required to remain in-house – some may need more of a margin of human judgement. While payables and accounting are examples of functions that are relatively easy to outsource, it’s almost impossible to outsource the entire treasury function as it is unlikely that one company would have the magnitude of knowledge required for the regions covered by Travelzoo, says Cheung. “For example, if I receive Thai Baht (THB); whether I should exchange the currency today, tomorrow or at some date in the future is not going to be known by an outsourcing provider,” she says, adding, “core decisions of the company such as these need to be made in-house where the business needs are best acknowledged. This is why it may not be easy to outsource the financial planning and analysis (FP&A) processes either.”

Recruitment reality

A healthy attitude to outsourcing naturally has some impact on the human resources retained by Travelzoo, a relatively lean ship compared to perhaps a longer established company. When setting up operations in Asia Pacific with Yahoo!, Cheung oversaw 80 finance team members and did not utilise the service of outsource providers to a large extent, she believes that this decision essentially depends on the amount of product lines that the company has. “For Travelzoo, we currently only have two or three product lines so it is relatively easy to shape the process and establish standard operating procedures,” she says.

Yet fishing in the talent pool is necessary at times, especially in such a vibrant industry with such high potential for growth, but Cheung warns that the e-commerce industry is a demanding one, requiring quick learners who will understand the dynamic business model and the pace of product development. The training process in Travelzoo involves consistent ‘on the job’ training and formal quarterly training, including soft skills training, team building and regional functional meetings. The company also accommodate inter-country talent exchange as part of their programme; this includes sending high-potential staff to the UK for training. Yet the recruitment market can be challenging across the Asia Pacific landscape, according to Cheung. “In China, the talent landscape is very competitive – as long as you want to hire someone with a good accounting background that can speak English. Hong Kong is a little less competitive than China but still fairly competitive in comparison to Japan and Australia.”

In order to make a specific job or industry more attractive to potential choice employees, Cheung recommends that competing multinationals need to be prepared to gear their vacancies – or at least certain features of the roles – towards these young professionals, such as creating an open and fun organisational culture in the workplace and outlining a clear guideline of what promotional opportunities can be expected. Says Cheung: “Graduates are not only interested in the monetary gain, they are also researching the career opportunities they have with a company; they are seeking an exciting vibrant firm that allows them to grow and develop their skillset for the future.” E-vision.

That said, Cheung believes that a good thing about e-commerce is that there is no generation gap issue – the main focus of the team is to be innovative and visionary, regardless of age. Coming from a manufacturing background (American Standard), Cheung has respect for the brick and mortar industry and acknowledges it’s criticality across the globe, but thrives on the unpredictability of the on-line trade. “The product development in e-commerce is so quick; you never know what is going to happen next. I like this uncertainty, this challenge and flexibility,” she says.

But of course there are dangers in this fast moving environment: a need to keep abreast of market trends (the global explosion of the iPhone, Android) and awareness of events on almost a daily basis. With manufacturing, a company will be able to plan what it will be producing five years down the road to a certain extent, but the ambiguity of future ideas/products is actually the main challenge for finance people in Travelzoo, says Cheung. “You need to establish what the treasury process will be and what the finance risk will be when you launch this product. But everything is happening so rapidly on the web and the internet can bring with it its own issues such as internet fraud and the need for optimum online security,” she says.

Flexible planning

In the current volatile economic environment, many CFOs are, on the one hand, still using an annual budget to come up with a framework for three or five year plans but more rely on monthly or quarterly rolling forecasts in the light of an uncertain future. Cheung believes that having certain benchmarks and goals are healthy for a company to aspire towards in their FP&A. Taking the bottom up and top down approach (assessing account market involvement and settlement, and the competitor landscape) on a yearly basis gives Cheung and her finance team a more accurate financial planning as they actively reach out in order to understand more about the market and products before they conclude the budget with the operation management. “Based on these criteria, in addition to the GDP rate (affecting top line), CPI rate, and the interest rate (affecting costs) etc, we will ask the local team on the ground to discuss with their own finance team and submit the budget from their side,” says Cheung. Based on these reports, and after several rounds of negotiations, presentations, the regional finance team will then come up with a realistic budget for the following year. At this point, regional HQ will also have some indication of potential milestones planned for the coming year (or three or five years). But Cheung is also aware that there are many unexpected events ie Japan’s tsunami that may affect this well-planned calculation and force the company to resort to a rolling forecast. “We need to be flexible enough to re-evaluate our finances in the event of the unplanned as well as assessing the evolving competitor landscape at regular points in time. We need to be dynamic in our FP&A processes as we are in the internet account business – this year a product may work but it may not next year.”

This means also being aware of the subscriber audience media. While one year, Travelzoo’s subscribers may use more desktop hardware, next year they may rely more on social networking sites on a mobile – like Japan and China are doing. “We look at this from two sides,” says Cheung, “one side is whether our product development can cope with the change of the flavour of the consumer; another facet is whether our budget processes can be changed quickly enough to reflect the reality of the latest landscape. Nonetheless, we need to adhere to the milestone budget – and stay as close to it as possible. It’s a kind of indicator that we need to try to meet in order to optimise the business.”

A global view

The dynamics of the global powers have witnessed a subtle but significant shift of power to the East as the volatile environment in the Western world – including the ongoing European sovereign debt crisis – continues to worsen. Travelzoo’s subscribers still have confidence about the growth and stability of the Asia Pacific region, according to Cheung. Their audience is still very much willing to spend and the segment profile that the company targets also ensures the ongoing profitability of the e-commerce business. “One of the sectors that have been really affected by the global financial crisis has been investment bankers – such as layoffs and forced temporary leave – and this is the kind of market segment that we target. For the most part though, these executives will have accumulated a certain amount of funds over the years and may actually be taking this opportunity to go on an extended holiday, for example, as long as they feel confident that after a few months they will find another job.” In this respect, Cheung feels that it has been beneficial to be in the travel/entertainment industry serving the more highbrow consumer as Travelzoo has enjoyed a small but steady growth in the wake of the crisis. Not only do her wealthy consumers suddenly have more time on their hands, but they are also more aware of the cost of their fine dining and quality living. Working on a reduced salary, the voucher model now comes into its own, said Cheung.

Yet proving her worth in such a vigorous and esteemed role, Cheung had not been content to rest on the profit laurels of the business and remains vigilant apropos the risk management and control of the company accounts. “Leveraging on the existing banking platform for the treasury function, I have centralised pooling of all my funding in one bank for real-time visibility, she said, adding, “I am currently looking into centralising the many different kinds of currency we use in Asia Pacific – thinking of ways that will assist the management of the various currency fluctuations and allow my team to optimise the idle cash for investment.”

Despite the demands of the role, however, Cheung does get some opportunity to enjoy quality living herself, and believes that the best thing about availing of a Travelzoo deal is the all-round value for money. “Recently I tried a Travelzoo deal that I bought for the equivalent of $600. For this, I stayed three nights in beautiful quarters in the renowned Banyan Tree hotel where extras included high tea, free drinks and 30% off spa facilities. The service I received far exceeded the price I paid – this is a concrete example of what Travelzoo has to offer.”

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