Lonely Planet and Globalization

Burma Postcard 



All the Lonely People

Globalization helped grow Lonely Planet Publications.

Now globalization helps it ship local jobs overseas.

BY KARA PLATONI

Workers must hit the road.



For years, the Oakland-based staff of Lonely Planet Publications cranked out much-beloved guides that help travelers figure out how ferry service works in Alaska or where to buy soccer tickets in Costa Rica. And for years, things were good. Buoyed by the rising tide of global commerce, international boundaries blurred, worldwide travel boomed, and people hankered to get farther and farther off the beaten path. Lonely Planet grew by making the planet a bit less lonely.



By growing more than twenty percent a year for a decade, the privately held company was becoming the world's largest independent travel publisher, with more than 650 titles in print. At its peak, Lonely Planet employed about 550 people worldwide, a quarter of whom were the designers, cartographers, editors, and new media staff based in Oakland.



As the company grew, so did its ambitions. Once fondly regarded as a producer of backpackers' bibles, Lonely Planet began aiming for a wider audience. The company spun off a host of products including videos, language tapes, road atlases, coffee-table books, and digital travel guides. It made plans to produce television broadcasts under the moniker "LPTV." It also ventured into multimedia, launching a Web site, an Internet bulletin board, and a phone-card service. Along the way, it developed a reputation for being the nice guy of travel publishing, a company that donated some of its profits to charity and urged trekkers to be respectful of the environment and culture of the places they visited.



But now the global business tide that once lifted Lonely Planet's fortunes is washing back out. Last month, for the first time in the company's nearly thirty-year history, Lonely Planet announced that it would lay off fifteen percent of its global workforce and move all book production back to its original base in Australia, where the Australian dollar is worth about half its US counterpart. The vast majority of those cuts will come from the Oakland office -- about seventy people -- and be staggered from March through July.



Despite early news coverage that blamed Lonely Planet's layoffs on the post-9/11 travel slump, company executives have made it clear that slowing revenues, the need to pay off bank loans, and pressure for the company to develop its first-ever long-term financial plan made changes necessary well before September.



Some laid-off Oakland workers put it more bluntly, blaming the money crunch on bad management, too-rapid expansion, and the company's willingness to throw money at unproven projects. How ironic, they say, that by moving jobs across the border, Lonely Planet has joined the global trend of companies chasing the bottom line. How ironic that a company that made its fortune on its reputation for being progressive and iconoclastic is now behaving more like the corporations to which it was supposedly an alternative. How ironic that, in a community where so many are outraged by the movement of shoe factories and auto assembly lines over the border in search of cheap unskilled labor, Lonely Planet would take the lead in exporting something new -- white-collar jobs.



In 1973, newlyweds Tony and Maureen Wheeler set out from London to Australia by way of Asia. Upon their arrival, they were so besieged with questions about their trip that they sat down at their kitchen table and banged out a hand-assembled guide entitled Across Asia on the Cheap. It was so successful that they followed it up with another one. And so began Lonely Planet.



The company's first overseas office opened in Oakland in 1984; in the early '90s, smaller offices in London and Paris followed. Despite the company's rapid growth, the way was not always smooth. During the latter half of the '90s, Oakland staffers say the company had a cash-flow crisis roughly every other year. Until last year, these crises were generally handled by temporary belt-tightening measures, but did not lead to major changes in the company's business plan.



In fact, employees say Lonely Planet was famously unencumbered by long-term plans, market research, or even uniformity among its four offices. In particular, the Oakland and Melbourne offices were seldom on the same page. Cartographers didn't use the same map-drawing technology, billing wasn't consolidated until a few years ago, and disparate costs of living and exchange rates made the financial situations of these offices and their employees very different.



To finance its expanding product line, in the late '90s Lonely Planet took out increasingly large bank loans. With the larger loans came more stringent bank demands for accountability and profitability. The soft travel economy certainly didn't help either. US sales were down twenty percent in the last half of 2001, according to a March e-mail sent to staffers by Eric Kettunen, the company's general manager of US operations. According to notes from a January managers' meeting, Chief Executive Officer Steve Hibbard said that the company was "severely behind" its business forecast, causing it to run afoul of some banking covenants.



Last October, to save $1 million (Australian), executives asked employees to voluntarily work shorter days or weeks for reduced pay, or take extended leaves at fifteen percent of their pay. Oakland staffers say the offer was accepted with enthusiasm. "A lot of people were stoked to go travel, being that it's a travel company and most people are young and don't have responsibilities like mortgages or kids, so they're able to get up and go for a month or two," says production staffer Nancy McNeil, who agreed to speak only if identified by a pseudonym, like all the production staff and cartographers quoted in this story. "But I believe they expected to have their jobs when they came back, and many of them won't."



Local staffers said they were led to believe that the voluntary leaves had staved off the need for layoffs. In November, CEO Hibbard wrote that the staff's enthusiastic embrace of the plan had impressed its bank and auditors. Shortly thereafter, Wheeler responded via e-mail to questions about whether the program had worked. "You bet it has," he crowed, adding that the company had beat its savings goal. And following the publication of a San Francisco Chronicle column quoting Kettunen as saying that downsizing might be necessary if the travel industry didn't soon perk up, Kettunen wrote the staff that the company would be "in a solid financial position" -- even if sales stayed flat until the end of the financial year in June 2002. Publicity Manager Cindy Cohen says the company expected the leave program to resolve its cash crunch.



Sales didn't stay flat; they climbed by eight percent in the first two months of 2002, according to a letter from Global Publisher Simon Westcott to the company's freelance contributors. But management's assurances turned out to be over-optimistic. Senior managers were meeting behind closed doors, and rumors put the rank and file on edge. "The month to three weeks before the layoff were probably the worst weeks I've ever experienced in a job-place," says McNeil. Finally on March 19 the news arrived: management had adopted a three-year restructuring plan that would cut jobs and centralize book production in Melbourne. "It's sad to lose people, but I think it was also really well-intentioned and thought out and planned," Cohen says. "It's one of those paradoxes in life: it's tough and it's the right thing."



Although the travel slump hurt the company, staffers argue that Lonely Planet was primarily a victim of its own ambition. "They basically just boomed and busted and they're kind of pawning it off on the downturn in the economy, but it started before that," says laid-off production staffer Julie Anderson. "As they got bigger and bigger they extended themselves more and more, and this time they just did it too far."



Lonely Planet lost money by straying too far from its bread-and-butter travel guides, employees say. The company launched nine distinct new series in 1999 -- among them Out to Eat, Watching Wildlife, Healthy Travel, and a series of cycling guides. Having already documented the entire world, Lonely Planet had to write about new activities instead of new places if it wanted to keep expanding. It sank money into new media, redesigning its Web site and launching a phone-card service called Ekno.



The company also realized that in an online world hungry for content, it already had a wealth of maps, reviews, and photographs. In 2000, in collaboration with Palm, it launched CitySync, which allowed users to download Lonely Planet content onto their handheld. "If people stopped traveling with books and started to travel with Palm Pilots or whatever, they wanted to be the first ones out there," says laid-off cartographer Chris Jones. Lonely Planet planned to gain additional revenue by licensing its content to Web sites and travel portals.



At the same time, Lonely Planet started funneling its content into databases, one each for maps, text, and photographs. To take advantage of the photo database, the company introduced a new agency, Lonely Planet Images (LPI), which would act as a middleman. Instead of selling photos directly to guidebooks, photographers now had to license them through the photo agency, which retained the original film for at least five years and also took a cut of slightly over fifty percent off the sales. In return, Lonely Planet would market the photos to other publications.



But to date, the image bank's main client remains its parent company, and, combined with a drop in payment rates, some photographers now collect only twenty percent of what they would have made before the agency's creation. "There's nothing wrong with the idea itself, but they haven't made the progress they expected to," says one such photographer. "There are a lot of photographers who are saying, 'I'm getting a lot of thirty-dollar sales, but it was my understanding that those were going to be just a fraction of the action."



Although Wheeler, Kettunen, and Hibbard did not respond to interview requests, internal e-mails make it clear that many of these projects were money-losers. "We cannot continue for the next three years as we have for the past three," Hibbard wrote the staff in February. "The impressive sales growth that we enjoyed for so many years provided a very forgiving environment. There are a number of ways in which we used this period of growth to expand our capabilities and improve our products, but we also became too relaxed about margins, costs, and investment planning during that growth period."



Shortly after the layoffs, founder Tony Wheeler sent the staff an e-mail explaining that the company currently owes about $30 million (Australian) in bank loans. Wheeler singled out a few culprits. "We have looked cold and hard at some of the titles we've produced, and some of the expenditures we've made (on New Media, on databasing, on LPI) and decided that what we've got at the end of the day is not worth the amount of money we spent for it."



Other products also seem to have lost money; one of the first coffee-table books, Chasing Rickshaws, is out of print, and the Out to Eat and cycling guides are on indefinite hiatus. Notes from the January managers' meeting indicate that the New Media unit is $1 million (Australian) behind its forecasted budget. Wheeler maintains that the losses were not due to bad management. "If you don't take risks, even if they sometimes backfire, you don't get anywhere," he wrote the staff. "I don't regret anything we've done, any project we've taken on."



What next for Lonely Planet? The Oakland office will retain a small publishing team of about seventeen people, but will serve primarily as an outpost for sales and marketing. Lonely Planet has hired outplacement counselors, and its severance package has been universally described as generous. "We're not in danger of closing any time, not the Oakland office nor Lonely Planet in general," Cohen says. "There's absolutely not a chance. January, February, and March sales are all back up where they were last year at this time, and given what has happened in the travel industry in the last six months, if we can match last year I think we're doing good."



But the company will be slashing its payroll expenses by moving south. According to its staff, the average wage in the Oakland office was $35,000 annually, which translates to about $65,000 (Australian). In Australia, where the cost of living is much lower, the average staff wage is about $35,000 (Australian), or $18,800 in US money. Printing costs won't be affected by the move; that's already done in Hong Kong.



Some staffers are heartbroken that even a "progressive" business would flee the East Bay for somewhere with lower costs of doing business. Laid-off staffer Anderson remembers confronting Wheeler about the company's pursuit of a favorable exchange rate, accusing him of joining the tide of corporations moving production jobs to countries with cheaper labor. She says he responded by saying "No one in the First World wants to make shoes."



"But I liked making books," Anderson says she replied. "And my job just left for exactly the same reasons."



Lonely Planet and Globalization