travelBulletin

Ian McMahon's Perspective: Anything can happen in retail

At the Magellan national conference in Melbourne, the group’s chief executive Andrew Macfarlane was asked to forecast future developments within Australia’s retail travel chains, writes Ian McMahon.

by Ian McMahon

AT the Magellan national conference in Melbourne, the group’s chief executive Andrew Macfarlane was asked to forecast future developments within Australia’s retail travel chains. Questioned specifically about implications for industry stability and the likelihood of mass movements of agents, he said: “Anything could happen.” (travelBulletin, October).

It was a typically adroit answer. It avoided making any predictions, but did not rule out the possibility of significant switching of loyalties in coming months. It is doubtful, however, that Macfarlane, even in his wildest imaginings, intended to leave open the possibility of the sort of mass movement of agents that occurred on the other side of the Tasman just weeks after his “anything could happen” prognostication.

Faced with Helloworld’s decision to launch Australia’s Helloworld business model in NZ, more than two in three members of Helloworld-affiliated United Travel voted with their feet and quit the chain.

Now that’s a truly “mass movement”. Australia’s and NZ’s relative population sizes suggest a multiple of five could be in order. On that basis, the 36 agents who resigned from United would be the equivalent of about 180 Australian agents walking out of Helloworld’s Australian chains.

In a statement to the Australian Stock Exchange, Helloworld has assured shareholders that the defection of these agents “is not material to the financial results at a Group level”.

This may well be so. Also impinging on the financials is the related purchase of up to 10 former Air New Zealand retail outlets – a move into owned stores which will surely pique the interest of franchisees on both sides of the Tasman.

But no matter how the United story is spun, it is not exactly a resounding vote of confidence in the Helloworld business model – especially as the NZ agents have the benefit of seeing the results of two years of that model in Australia.

Here, there have certainly been defections from Helloworld but it has been more of a steady drip feed than a mass movement. However I believe many Helloworld agents signed two year contracts rather than the initially stipulated three years. It will be interesting to see what happens as these contracts expire in 2016.

One sector that Helloworld can be expected to defend grimly will be its strong coterie of corporate agents who write the business so important to securing airline overrides. No doubt some will benefit from what Helloworld terms “enhanced agent incentives” and others more bluntly label “pay to stay”.

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