Travel operators are confident of a buoyant year ahead as they see the worst of the GFC as having passed. Russell Quinn reports.
WHEN Western Australia’s travel industry players discuss their businesses, common trends emerge concerning the industry’s impressive adaptability in responding to unprecedented economic challenges.
Chief among those challenges has been the global financial crisis, which severely hampered the state’s travel agents and buyer groups during the past 18 months.
But in line with the global recovery, especially in buoyant WA, some industry players suggest the benchmark highs of the 2008 financial year may return sooner than expected.
Almost every travel agent in WA Business News’ Book of Lists (see page 20) admits to being affected by the GFC, indicating leisure and corporate activity dropped around 25 per cent in 2009.
However, one travel agent bucked the trend.
STA Travel regional sales manager WA/SA, Glen Ranger, says his 10 WA offices servicing leisure travellers weren’t really affected by the downturn.
“Last year was really good, we ended being up about 70 per cent in profit,” Mr Ranger told Business Class.
“Our city branch booked a lot of world trips with people who had been made redundant.
“Clients tend to be younger, adventurous travellers, so sales are still really good. Currently, we’re probably about 20 per cent up on last year.”
Boutique agent Motive Travel has maintained its $20 million annual turnover despite difficulties in maintaining yields due, in part, to airlines servicing customers directly via the internet – an ongoing issue facing traditional service-oriented travel agents.
“Business has turned around very strongly, which has been very welcome after a major dip with the GFC,” Motive Travel owner George Michalczyk says.
“From my point of view, big (leisure) spenders and big company owners who travel at least once a year, all of them stayed home in 2009. Now they’ve got through the difficult period and now they’re spending, and spending big.”
So positive are the current levels of expenditure that most agents are predicting growth of between 10 and 15 per cent this year.
With the state on the cusp of another resources-fuelled boom, Australia’s biggest travel agent, Flight Centre, its dual corporate arms FCm Travel Solutions and Corporate Traveller, leisure-focused Harvey World Travel, and Nedlands-based Globetrotter Corporate Travel (with 80 per cent of revenue derived from its corporate clients) all believe the industry is optimistic about the future.
FCm Travel Solutions and Corporate Traveller state manager, Stephan van Arnhem, says his company, which rebranded the two businesses individually in February, has noticed many clients going out to tender seeking better deals.
“We reckon this is going to be a fantastic year,” Mr van Arnhem says.
“Everyone is looking forward to the boom.”
At the end of May, public-listed Flight Centre upgraded its profit guidance for the 2010 financial year from about $180 million to an anticipated $190-$200 million, which managing director Graham Turner says would be the company’s second strongest full-year result and 90 per cent growth on the $99.8 million normalised 2008-09 pre-tax result.
Globetrotter Corporate Travel managing director Fiona Prosser says corporates are definitely travelling while monitoring or amending their policies.
Harvey World Travel national franchise manager Chris Thistlethwaite says leisure travellers’ slowly returning confidence and spending improved once they realised the nation’s economy was in good shape.
“The strongest was the third quarter from January to March,” he says.
Carlson Wagonlit Travel, a global business travel management company with sales volume for wholly owned operations and joint ventures totaling $US21.4 billion last year, expects to increase its 55 staff locally as the market lifts this year and next.
CWT managing director Australia, David Greenland, says the company’s exposure to the oil and gas sector softened the impact of the GFC.
Most agents suggest that growing staff numbers and investment in reservation systems and other technologies is important to seize upon sales opportunities, as agents and buyer groups implement strategies to enhance their business.
East Perth-based Travellers Choice, which represents about 170 independent travel agent members nationally, is the only national retail travel group or buying group to be headquartered in WA. Managing director Gary Allomes says his leisure-focused company will now also target the corporate market to grow sales, membership and a broadened preferred supplier list.
A new partnership with Worldwide Independent Travel Network, a global buying group with 6,000 international members, will also be leveraged.
Total group sales (combined turnover of all members) fell from $450 million in FY08 to $420 million FY09 as the GFC bit, with expectations of a similar return this financial year.
Mr Allomes highlights a growing trend indicating the impact of online operations (such as wotif.com, lastminute.com and individual airline’s transaction-based websites) on traditional travel agent operations has fallen recently as consumers return to agency services after “being burned” online.
“There’s been a push back from consumers who have tried the internet, usually below a $3,000 price point, and have now returned to agents,” he says.
Mr Michalczyk says people who booked online, only to be left stranded when Europe’s airways were closed after Iceland’s Eyjafjallajokull volcano erupted in April, epitomises why consumers are returning to agents.
“Like Motive’s catchphrase: without a travel agent you’re on your own,” he says.
Some agents established online tools themselves in reaction to the popularity of internet-based services, but most suggest that while their domestic airline sales have taken a hit, customers prefer to conduct research online and then come in for personal service, especially for international bookings.
However, operators of some recent online additions such as wotflight.com, traveleyes.com.au, ubid4rooms.com and takeabreak.com.au are hoping the opposite occurs.
But agents are adamant that the most popular growth area before, during and after the GFC, has been the cruising industry.
JetSet Travelworld general manager network, Warwick Blacker, is about to launch the company’s national cruise centre – a B2B booking system sourced in Miami – at a significant cost. Meanwhile, RAC Travel Services introduced its cruise club for members and a cruise training program to assist staff with knowledgeable cruising clients, while Harvey World Travel will host a dedicated cruise expo in Perth on July 25.
“Cruising, even during the GFC, didn’t suffer ... and it’s certainly at full steam ahead now, pardon the pun,” Harvey World Travel’s Chris Thistlethwaite says.
RAC travel and tourism executive manager Michael Leary says fine tuning of the group’s travel services business model during the GFC meant staffing levels halved during the past 12 months, when it withdrew travel services from four regional branches after closing its internal wholesale division.