2016 THE GOOD THE BAD AND THE UGLY

Travel Bulletin - - NEWS -

Travel agents

The good: Hel­loworld’s merger with AOT, which was fi­nalised in Fe­bru­ary, has cer­tainly brought big changes to Aus­tralia’s se­cond big­gest travel agency group. Af­ter the tra­vails of the previous years, mem­bers have wel­comed the sta­bil­ity brought by An­drew and Cinzia Burnes – along with ex­ec­u­tive salary cuts and more re­cently a share give­away and an of­fer to pur­chase stakes of up to 25% of fran­chisees. Sup­pli­ers have also wel­comed a stronger Hel­loworld as a coun­ter­point to the dom­i­nance of Flight Cen­tre. While there’s still a way to go, there’s no doubt the or­gan­i­sa­tion has ben­e­fited from strong lead­er­ship and ini­tial grudg­ing ac­cep­tance of the Burnes’ vi­sion has turned into wide­spread ac­cla­ma­tion both in­ter­nally and ex­ter­nally. The share­hold­ers are very happy too, with the HLO share price more than dou­bling since the be­gin­ning of the year. The bad: How­ever there’s no doubt it’s been a tough year for the sec­tor, with even Flight Cen­tre not im­mune to market con­di­tions. A profit sneeze is­sued by FLT last month saw the whole in­dus­try catch cold, with the com­pany warn­ing of a “chal­leng­ing trad­ing cli­mate glob­ally”. De­spite vol­umes and TTV up, Flight Cen­tre said profit-wise it had ex­pe­ri­enced a “sub­dued first half” with a re­sult about $20 mil­lion lower than the prior cor­re­spond­ing pe­riod. Fac­tors that in­flu­enced the drop in­cluded slow UK trad­ing af­ter the Brexit cur­rency slump, lower than ex­pected prof­its in its tour­ing division and of course record low air fares. It should be noted, how­ever, that de­spite the warn­ing Flight Cen­tre still ex­pects to achieve a record $20 bil­lion in TTV this year and its fore­cast ful­lyear un­der­ly­ing re­sult of up to $355 mil­lion means the com­pany is still mak­ing al­most $1 mil­lion in profit each and ev­ery day. The ugly: De­spite the doom­say­ers, a num­ber of agency col­lapses ear­lier in the year hasn’t re­sulted in the whole­sale den­i­gra­tion of travel agents. How­ever there’s no doubt the shonks have seen neg­a­tive pub­lic­ity, with the fail­ure of Value World Travel – and its sub­se­quent abortive phoenix-like rise as Yupp Travel – a no­table ex­am­ple. As a side note, the same se­rial of­fender looks to have emerged from the ashes yet again, this time in the liquor in­dus­try, trad­ing as Value Cel­lars.

Air­lines

The good: On the air­line side the big suc­cess story this year has been the Qan­tas trans­for­ma­tion. Af­ter sev­eral dif­fi­cult years Qan­tas has emerged into the sun­shine of prof­itabil­ity. It hasn’t come with­out pain, but the re­sult is im­pres­sive – an 80% in­crease in the car­rier’s pre-tax profit to $1.42 bil­lion. Ev­ery part of the busi­ness con­trib­uted to the record fig­ure, in­clud­ing Qan­tas In­ter­na­tional which is no longer a drag on the other di­vi­sions. The re­sult was good news for Qan­tas staff too, who re­ceived a to­tal of $75 mil­lion in bonuses, or about $3,000 each. It’s also put the air­line in good stead for fu­ture in­vest­ment in prod­ucts and ser­vices such as new air­craft and routes as well as in-flight wifi which is ex­pected to start ap­pear­ing next year. The bad: The avi­a­tion sec­tor over­all was im­pacted by heavy over­ca­pac­ity as global car­ri­ers turned their sights on the rel­a­tively strong Aus­tralian market. Fares have dived to his­toric lows, which is great news for con­sumers and hope­fully will drive de­mand. How­ever it also means ev­ery­one in the in­dus­try is do­ing more work for less re­turn. Some car­ri­ers have re­acted by slash­ing fares and yields to lev­els many in the in­dus­try have called ir­ra­tional, which has made the trad­ing en­vi­ron­ment – par­tic­u­larly to Europe – very dif­fi­cult in­deed. The ugly: Re­la­tions be­tween Vir­gin Aus­tralia and Air New Zealand reached a low point ear­lier this year af­ter what was be­lieved to be a failed board­room coup saw NZ ceo Christo­pher Luxon abruptly re­sign and an­nounce the sale of the air­line’s 25% stake in Vir­gin. While both par­ties are all smiles when it comes to their trans-tas­man al­liance, the same def­i­nitely can’t be said for long haul oper­a­tions where Air NZ’S new state-based strat­egy tar­get­ing travel to North and South Amer­ica sees it com­pet­ing head to head for Vir­gin Aus­tralia’s US pas­sen­gers.

Ho­tels

The good: The US$13 bil­lion merger be­tween Mar­riott and Star­wood this year has cre­ated the world’s big­gest hote­lier with al­most 1.1 mil­lion rooms on of­fer ev­ery night, as well as a fur­ther 420,000 in the de­vel­op­ment pipeline. The pow­er­house com­prises 5,700 prop­er­ties in 110 coun­tries, leapfrog­ging Hil­ton World­wide which has about 4,700 ho­tels across the globe. The bad: Tra­di­tional travel agents and whole­salers have been col­lat­eral dam­age in an on­go­ing bat­tle be­tween hote­liers and On­line Travel Agents. The Ex­pe­dia-price­line du­op­oly has given the OTAS ex­cep­tional power to charge high com­mis­sions, and ho­tels have been push­ing back ag­gres­sively, par­tic­u­larly tar­get­ing di­rect book­ings. This has shown it­self in value-adds such as free wi-fi for loy­alty club mem­bers who book di­rect, with ho­tels ac­tively cul­ti­vat­ing di­rect re­la­tion­ships with fre­quent trav­ellers. The ugly: Dis­rup­tion is a fact of life th­ese days, but the rise of Airbnb has seen pre­dictable squeals from the ac­com­mo­da­tion in­dus­try at ev­ery turn. There was a re­fresh­ing new per­spec­tive from Mantra ceo Bob East last month, who noted at the com­pany’s an­nual gen­eral meet­ing that he had not seen an im­pact from Airbnb and sug­gested any ex­pan­sion of the vis­i­tor econ­omy should be wel­comed rather than be­moaned.

Tech­nol­ogy and OT As

The good: One of the worst kept se­crets in the travel in­dus­try this year has been the sta­tus of the mas­sive Flight Cen­tre GDS con­tract. Long the jewel in the crown for Trav­el­port, Flight Cen­tre put the deal up for grabs and it’s un­der­stood that in al­most all cases FLT di­vi­sions have opted for al­ter­na­tive providers. While no­body is able to com­ment for­mally, and the of­fi­cial state­ment from Trav­el­port is sim­ply that “we con­tinue to have a multi-year agree­ment with Flight Cen­tre,” the big win­ner ap­pears to be Sabre which is be­lieved to be set to switch over Flight Cen­tre in Aus­tralia and New Zealand in 2017. Amadeus is also un­der­stood to have won the Flight Cen­tre busi­ness in Europe. Trav­el­port’s re­luc­tance to con­firm what’s go­ing on seems cu­ri­ous, given that the loss of such a huge

The past 12 months have seen some big changes in the Aus­tralian travel in­dus­try, with old play­ers and new jock­ey­ing for po­si­tion in all seg­ments. The Chi­nese curse “may you live in in­ter­est­ing times” has cer­tainly rung true for travel agents, air­lines and other sup­pli­ers dur­ing 2016. Bruce Piper delves into some of the highs and lows of the year that was.

cus­tomer – es­ti­mated to be more than 24 mil­lion seg­ments an­nu­ally – is surely a ma­te­rial is­sue that should be dis­closed by a pub­lic com­pany. The bad: Flight Cen­tre and Hel­loworld both con­tinue to dab­ble in the on­line space but nei­ther seem par­tic­u­larly se­ri­ous about it. Hel­loworld ter­mi­nated its multi-year agree­ment with Or­b­itz World­wide and at this stage does not ap­pear to have re-in­tro­duced on­line book­ing ca­pa­bil­ity for flights on hel­loworld.com.au (de­spite promis­ing a new site would roll out by 31 Au­gust). And Flight Cen­tre’s Sean Suther­land ad­mit­ted in Oc­to­ber that the com­pany’s un­for­tu­nately named Aunt Betty on­line ven­ture was very much a “work in progress” at this stage. Both could be miss­ing out on rev­enue from the grow­ing on­line seg­ment as a re­sult. The ugly: We­b­jet’s TV ad­ver­tis­ing cam­paign, which took a cheap shot at tra­di­tional travel agents by in­cor­rectly im­ply­ing the OTA had ac­cess to a wider and more cur­rent range of fares, pro­voked an ex­tremely strong re­ac­tion from the trade. The mat­ter es­ca­lated, with AFTA lodg­ing a for­mal com­plaint with the ACCC about the ad­ver­tis­ing, as well as claims in the We­b­jet Ex­clu­sives pack­age of­fers that in­valid price com­par­isons were be­ing used.

Cruis­ing

The good: Cruise con­tin­ued its re­lent­less growth this year, with global cruise lines now well and truly fo­cused on the lo­cal market which has shown stun­ning re­silience and po­ten­tial. The highly an­tic­i­pated ar­rival of Royal Caribbean’s Ova­tion of the Seas is set to boost pub­lic aware­ness of cruis­ing even more, and the ship’s ad­vanced fea­tures are likely to con­tinue to change per­cep­tions of what it means to take a cruise holiday. The open­ing of new lo­cal of­fices for Nor­we­gian Cruise Line, Ocea­nia, Re­gent Seven Seas and Crys­tal Cruises is also fur­ther recog­ni­tion of the Aus­tralian cruise market – and the key role travel agents con­tinue to play in this sec­tor. The bad: De­spite the growth of cruise in Aus­tralia, Cruise Lines In­ter­na­tional As­so­ci­a­tion glob­ally does not seem to have recog­nised the vi­tal role river cruis­ing has in the lo­cal market. Key river op­er­a­tors such as APT, Scenic, Avalon Water­ways, Uni­world, Aqua, Croisieu­rope and more are all mem­bers of CLIA and yet the in­dus­try score­card is­sued by the or­gan­i­sa­tion this year for the first time omit­ted any river cruis­ing statis­tics. There was a sug­ges­tion th­ese would be com­piled in a sep­a­rate re­port but it is now De­cem­ber and noth­ing has been forth­com­ing – surely a bone of con­tention given the fees paid by the lo­cal river cruise op­er­a­tors to the or­gan­i­sa­tion.

The ugly: There also ap­pears to be sig­nif­i­cant angst within CLIA about the rise of Cruise Down Un­der – now known as the Aus­tralian Cruise As­so­ci­a­tion – which counts many cruise lines as mem­bers along with ports, des­ti­na­tions, ground op­er­a­tors and sup­pli­ers. The ACA con­fer­ence took place just a week be­fore CLIA’S Cruise360 event – and fea­tured Crys­tal Cruises ceo Edie Ro­driguez as a key­note speaker. Both or­gan­i­sa­tions com­pile al­most iden­ti­cal re­ports about the eco­nomic con­tri­bu­tion of cruise to the lo­cal econ­omy – surely there is a way for to re­duce this du­pli­ca­tion of ef­fort and com­bine re­sources.

Land prod­uct

The good: This year for the first time saw the launch of fly free of­fers in con­junc­tion with tour­ing prod­uct, which by all ac­counts has been a ma­jor suc­cess. The Travel Cor­po­ra­tion ini­tia­tive was rolled out across all of its guided holiday brands, start­ing with In­sight but then fol­lowed by Trafal­gar and even Con­tiki. Oth­ers, such as the Globus fam­ily, were late to the party but re­sponded strongly, with air credit of­fers very well re­ceived by agents. With fly free deals in previous years hav­ing been a strong driver of river cruise book­ings, the land op­er­a­tors will be hop­ing the ini­tia­tive could see a re­ju­ve­na­tion of the coach sec­tor which is still a huge part of the global travel in­dus­try - and a key rev­enue source for travel agents. The bad: Re­peated ter­ror­ist at­tacks in Europe slammed de­mand, mak­ing 2016 very chal­leng­ing for the leisure sec­tor. It’s now just over 12 months since the first as­sault in Paris, which was fol­lowed by the bomb­ing at Brus­sels Air­port in April and then the hor­rific at­tack in Nice dur­ing July – not to men­tion the tragic sit­u­a­tion in Turkey and with Syr­ian refugees across Europe. The re­silience of the Aus­tralian trav­eller has cer­tainly been tested, with agents and op­er­a­tors hav­ing their fin­gers and toes crossed for a quick re­cov­ery in 2017. The ugly: The Globus Fam­ily of Brands raised eye­brows ear­lier this year when the com­pany re­vealed it had made a “busi­ness de­ci­sion” not to be part of the ATAS ac­cred­i­ta­tion pro­gram. That of course had a domino ef­fect mean­ing it could also no longer be an AFTA mem­ber, nor a mem­ber of the Coun­cil of Aus­tralian Travel Agents – and the oper­a­tor’s staff were also in­el­i­gi­ble to en­ter the Na­tional Travel In­dus­try Awards. While no for­mal an­nounce­ment has been made, it’s un­der­stood that the de­ci­sion has now been re­versed, with Globus back in the AFTA/ATAS/ CATO/NTIA fold.

Reg­u­la­tion

The good: The on­go­ing suc­cess and pro­fes­sion­al­ism of the AFTA Travel Ac­cred­i­ta­tion Scheme should be ap­plauded, with the in­dus­try as a whole em­brac­ing the pro­gram which con­tin­ues to gain trac­tion and ex­po­sure via AFTA’S var­i­ous mar­ket­ing cam­paigns. AFTA ceo Jayson West­bury has high­lighted the grow­ing aware­ness of the scheme at the var­i­ous re­cent travel agency group con­fer­ences, telling del­e­gates “who would have ever thought AFTA would be run­ning TV cam­paigns pro­mot­ing the value of travel agents”. The bad: The gov­ern­ment’s con­tro­ver­sial $5 in­crease to the Pas­sen­ger Move­ment Charge has at­tracted strong op­po­si­tion from the in­dus­try. While some have ques­tioned the re­ac­tion to such a small hike – about the price of a cup of cof­fee – it’s true that the gov­ern­ment clearly sees tourism and travel as a cash cow and AFTA and the TTF have been united in say­ing “enough is enough”. The ugly: This year saw the long-awaited fi­nal re­port from the Travel Com­pen­sa­tion Fund, which re­vealed that about $19 mil­lion in TCF mon­eys – orig­i­nally con­trib­uted by travel agents – had been re­turned to the states. Tas­ma­nia stands alone at this stage in di­rect­ing th­ese pro­ceeds to mar­ket­ing travel agents, and it’s un­der­stood that other ju­ris­dic­tions are be­ing lob­bied to make sim­i­lar moves. How­ever some states are be­lieved to be see­ing the money as com­pen­sa­tion for bail­ing out trav­ellers af­ter the Ansett col­lapse in 2002.

Rep­re­sen­ta­tion

The good: Delta Air Lines shifted its lo­cal rep­re­sen­ta­tion from World Avi­a­tion Sys­tems to The Wal­she Group this year – buck­ing the trend by on­line car­ri­ers of set­ting up their own self-han­dling of­fices. Clearly Delta sees the economies of out­sourc­ing its of­fice here as a GSA, and the win by Wal­she was a very wel­come ad­di­tion to its premium port­fo­lio. The bad: The des­ti­na­tion rep­re­sen­ta­tion sec­tor con­tin­ues to grow – par­tic­u­larly from North Amer­ica where now in­di­vid­ual cities and even at­trac­tions are sign­ing up rep­re­sen­ta­tion along­side states and re­gions. While the at­ten­tion to the Aus­tralian market is wel­come, it can also be very con­fus­ing for agents and sup­pli­ers. A case in point is the di­chotomy be­tween Brand USA, the of­fi­cial mar­ket­ing or­gan­i­sa­tion for Amer­ica – and Visit USA, a com­mit­tee of sup­pli­ers who band to­gether to pro­mote the USA to­gether. This con­fu­sion some­times gets in the way of a more co­he­sive mes­sage. The ugly: Hel­loworld’s rep­re­sen­ta­tion division still ex­ists – just – in the form of World Avi­a­tion Sys­tems and Global Avi­a­tion Ser­vices. How­ever the busi­ness, which was no­tably ab­sent from a graphic de­pict­ing the Hel­loworld brands in the com­pany’s an­nual re­port, has lost sev­eral key con­tracts this year. 2016 also saw the de­par­tures of se­nior WAS/GAS ex­ec­u­tives – al­legedly amid le­gal ac­tion – a sad foot­note to this once flour­ish­ing rep­re­sen­ta­tion or­gan­i­sa­tion.

We­b­jet’s TV ad­ver­tis­ing cam­paign took a cheap shot at tra­di­tional travel agents by im­ply­ing the OTA had ac­cess to a wider and more cur­rent range fares...’ of

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