MAGELLAN PREPPING FOR GROWTH
Travel Group is expected to shortly announce a hefty $10 million plus annual profit for 2015-16 which will be distributed in full to its members – the organisation’s eighth consecutive year of double digit growth. CEO Andrew Macfarlane recently sat down w
AM: I would say that in terms of the market, 2015/16 was a good, not a great year for our member agents. I expect they’ve done better than many, given their experience and expertise and many specialise in niche markets that have held up better than the mass market. Nevertheless, our leisure members too have seen the effect of France, Belgium & Turkey on demand, particularly to Europe. And we are seeing the growth in perceived safe destinations such as Canada.
Our corporate members of course are affected by things like the transitioning economies in Queensland and Western Australia, a lack of business confidence, the election and so on. But many are also winning new business and expanding and we see demand for a ‘return to service’ amongst many SME and mid-market corporate accounts that may have previously chased the bottom line only to be let down on service, which ultimately costs them more.
TB: What do you see as the key challenges for the industry at present?
AM: There are many challenges out there - direct distribution, global online players, you name it - however again, I expect our members are less affected than the massmarket retailers. One thing our members do talk about is how in the last couple of years it seems agents have to work harder for the same rewards, due to discounting of airfares, cruises & river cruises driven by over-capacity.
That’s also a factor for the whole industry, when remuneration is based on a percentage of revenue and suppliers chase relentless growth targets in dollar terms, despite dropping prices. I agree with recent commentary that suppliers should place greater value on the millions of dollars of business we already deliver and not link that to incessant, often ridiculous growth targets in a flat market.
TB: What’s happening in terms of Magellan’s size?
AM: In terms of member growth we’ve been pretty static for the last year or two, after expanding membership by 50% in 2014. We currently have 120 members. Movements between agency groups are now cyclical, with other networks locking agents away in two or three year contracts that are not easy to get out of, even if you want to. 2016/17 could be a year of more movement based on that cycle so, for us, it’s been about getting growth-ready.
We’ve made some changes at Magellan Head Office and added some experience and expertise, without changing the low central cost model, so we’re ideally positioned for the next three years. We are owned by our members so they control their own destiny, and we have no shareholders other than our members, so our sole focus is profit for our members, not from them. And because our group does not also operate a branded division there is no distraction and,
TB: How has the last year gone? ‘ We are owned by our members so they control their own destiny, and we have no shareholders other than our members, so our sole focus is profit for our members, not from them’
importantly no cross subsidisation of a massmarket brand. There are no territories, no internal competition and therefore a spirit of collaboration and co-operation.
Our niche strategy remains unchanged – premium leisure and corporate agents, own branded and independent – and we believe there are more agents out there that fit the mould and would prosper from our model, so our doors are very much open.