The economics of the Michelin Guide

Michelin stresses though that when taken together, the maps, guides and digital businesses are profitable. But the losses incurred by the red books have become such a concern that Michelin has turned to outside consultants. Accenture looked last year at three different scenarios for the red books, including outright closure.

The nuclear option was quickly rejected, partly in recognition of the undoubted brand value of the guide but also because of the political impossibility in France of such drastic action. However, Accenture warned that to carry on with things as they are today would mean yearly losses at the guide hitting €19m by 2015, representing a cumulative loss of €70m over the next four years.

The thinking seems to be that Michelin would do well to seek a share of the good fortune that its awards bestow on restaurants, possibly by creating a “red book” website that provides paid-for links for those establishments with Michelin stars and allows users to make online reservations.

Here is more.


How about licensing the Michelin Guide branding to a third party (e.g., Google, Yahoo, Expedia, Bloomberg, Zagat, etc.) who could be the exclusive on-line provider for web and app access to this data. I think that would be a compelling brand positioning move to differentiate a digital travel offering.

They would be crazy to mess around with the Michelin Guide formula, despite what the article says, the guide really is the gold standard. Why don't they just look at the cost of the guide as advertising costs and not as a profit centre in itself? For a consumer company the size of Michelin the sums talked about must be a rounding error on their worldwide advertising budget. They should be making more of their ownership of the guide in my view, many people are not aware of the connection or only vaguely. Something as simple as holding a press conference in their tire factory when a new edition comes out would do it.

Off topic but interesting:

According to current Intrade odds, Ron Paul 90% likely to be President if nominated:

pretty sure that's heavy overbetting by paul supporters in a market where the payoff is so small by betting the obama side that people dont want to have their money in escrow for a year and a half since he's a 97.8/2.2 favorite. best case scenario, where obama wins 100% of the time against paul, betting on obama is like a 2% return on your money. you're better off with a savings account. (and that's not even taking into account that the bet only actually exists 2% of the time and 98% of the time, you had the funds sitting completely idle with zero return for the period until the republican convention)

the market will stay inefficient if taking advantage of the obvious mispricing makes you less than it costs you in time value of money.

also it has absolutely nothing to do with this post.

Your argument that people are refraining from betting on Obama further because 2% return is too low is nonsensical.

2% is much higher than is being offered by most savings accounts right now.

And your point about "the funds sitting completely idle with zero return for the period until the republican convention" is wrong too. The convention is a year from now. So that's a 2% APR for betting against Paul on that particular Intrade bet. Most savings accounts are offering much lower APRs right now.

What do you think "off topic" means?

Bizarrely off topic. You beat even E Barandarian at this. Soon Aaron will be talking about clowns.

He did say Paul would beat one.

2% is much higher than is being offered by most savings accounts right now.

Is that where the InTrade money is coming from? People who would otherwise leave money they have no immediate need for in savings accounts for a year or longer?

If you bet on Obama now, how much profit can you take if you need to sell early? What's the chance you can break even?

Get your own blog please, its free and easy. Just saying "off topic" doesn't make it OK to hijack a comment thread.

Make a Chinese version. Oh yes, there will be cash flow.

Why can't they charge restaurants to apply for an evaluation? That way they can still remain incognito and independent but get an additional revenue source.

Good point.

Certification and rating agencies do this. Flat fee to be rated.

I think, though, that they should create new products because they have the brand. iPad walking tours, reservation services, personal trip home page linked to providers created from their guides, etc.

Come to think of it, I never remember seeing a Michelin Guide for sale. Do Borders or Barnes and Noble etc. stock them? Airport bookstands?

You get your own blog please, its free and easy. Then you can have your own place to aggressively police comment threads.

Also. Use the threading feature provided. It is there for a reason.

By coincidence, I was buying 4 replacement tires today. Only two models were in stock, a Michelin model and a Bridgestone model priced slightly lower with a lower mileage warranty (not that these warranties are either worth much or a reliable guide to quality).

I bought the Michelins, in part because I remember so fondly wandering through France with a Michelin guide -- a thought that I sustained through the Costco waiting room. Never been to Japan.

Comments for this post are closed