2018’s four seasons of the travel industry

SEASONS come and seasons go, but the world keeps on turning. The last year has seen plenty of highs and lows in travel, and in this month’s travelBulletin cover story Bruce Piper takes a seasonal look at some of the major industry developments.

To everything (turn, turn, turn)

There is a season (turn, turn, turn)

And a time to every purpose under heaven…

The lyrics of the famous Sixties song by The Byrds (hey millennials, check it out on Google or Spotify if you want to hear some really good music) are timeless — and with good reason, because they actually come from Ecclesiastes, the Biblical book of wisdom. And their eternal applications certainly apply to the Australian travel sector, as developments over the last 12 months reflect the winter, spring, summer and autumn of different parts of the industry.

Spring

Spring is all about rebirth, new growth, green shoots and renewal — and there’s plenty of that going on in the industry at the moment as companies reshape themselves and adapt to the new technological environment. In the last 12 months there has been a significant renewal of leadership among a number of organisations, including the Globus Family of Brands, where former Hawaiian Airlines country manager Gai Tyrrell has taken over as managing director. She took the long-vacant role previously held by Stewart Williams, who left earlier in the year and was recently appointed to represent Greek cruise operator Celestyal Cruises in Australia. Tyrrell’s role at Hawaiian was in turn taken by Fiji Airways commercial chief Andrew Stanbury.

Other major appointments this year have included Rachel Harding who departed The Travel Corporation where she had been long-time national sales manager for Trafalgar, taking up a new position as general manager — Pacific for Club Med. Her appointment is likely to see a significantly stronger focus on the travel trade for the iconic resort operator, reflecting the importance of agent distribution for Club Med locally. Also departing The Travel Corporation after a mammoth 27 years was the respected David Gendle, who became the new global sales general manager for Topdeck Travel and Back-Roads Touring Co. He replaced Dennis Basham, who moved onto On The Go Tours in an appointment also expected to capitalise on a major capital injection by the UK-based tour operator’s new private equity investors.

Another notable new role was that of Adam Armstrong, appointed to head up Silversea locally after a long career with Royal Caribbean. Ironically not long after his position was announced, Royal Caribbean also announced its acquisition of a majority stake in Silversea, putting Armstrong, at least indirectly, right back where he came from. Former Silversea MD Amber Wilson in turn moved on to Rocky Mountaineer to head up sales in Australasia, replacing Greg McCallum who became sales and marketing director for Entire Travel Group. And most recently Helloworld Business Travel’s sales manager Kate Cameron announced her departure from HLO after more than a decade to take up a new position as general manager of Travel Partners — the home-based agency group acquired by Flight Centre last year from founder Jeff Hakim.

The Whitsundays region off the coast of Queensland is also expected to spring into action in the coming year, with a number of major projects under way with major potential. After weathering some major tropical storms in recent years, both Hayman Island and Daydream Island will emerge from significant investment and upgrade projects which are likely to drive strong demand — good news for the whole region, particularly including the owners of Hamilton Island which is the airport gateway to the Whitsundays. The re-emergence of the Whitsundays is also likely to drive strong increases in flight capacity with a corresponding roll-on benefit for all involved.

Flight Centre has also been planting the seeds for a strong 2019, after enduring a significant brand restructure earlier this year which saw the demise of the Cruiseabout and Escape Travel brands. The company took a hit from the gutsy decision, as well as its shift to the Sabre platform which saw a hiring freeze to allow for staff training. Having driven through the strategy, Flight Centre is once again strongly in growth mode, and as the outcomes begin to appear in the coming months the benefits are expected to boost the company’s bottom line.

The development of the AFTA Chargeback Scheme (ACS) over the last year has set the stage for a new paradigm within the industry, protecting travel agents in the event of supplier failure. Having laid the foundation, AFTA is hoping 2019 will see ACS widely adopted, with payouts after recent collapses clearly proving the benefit of the scheme which would otherwise have left agents out of pocket as affected passengers invoke chargebacks for travel not taken.

Summer

Summer is about long hot days in the sunshine — and that’s exactly the type of image that Tourism Australia is hoping to portray about our country. You’d have to say that Aussie tourism is currently basking in the glow, as inbound figures continue to grow from across the globe. The 2018 Superbowl campaign was one example of a stunningly successful initiative by our national tourism marketing agency, with millions of Americans duped into thinking that a new Crocodile Dundee movie was in the making. A masterful social media campaign of misinformation leading up to the Superbowl in Minneapolis last February culminated in Tourism Australia’s new advertisement which revealed that all the excitement was simply about a TV commercial. The overall campaign saw more than 1 billion people exposed to the idea of taking a holiday in Australia — and even sparked a petition from fans wanting to turn the idea into a real movie.

The cruising sector also continued to enjoy its place in the sun this year. Despite capacity constraints which have put a hiccup into cruising’s stellar growth rates, the industry continues to be a very bright sector, not just in Australia but globally. Not a week goes by without a cruise line announcing a new ship build, and the strength of the local market continues to be reinforced by ever-more capacity deployment in local waters. The big three — Carnival Corporation, Royal Caribbean and Norwegian Cruise Line Holdings — are among the biggest spenders on media in the Australian market, and while Australia leads the world with a 5%-plus cruise penetration rate, CLIA chairman Sture Myrmell from Carnival Australia noted “that means 95% of the population still haven’t cruised,” creating plenty of potential.

There is also still plenty of heat in the proliferation of “deals” providers such as TripADeal, Luxury Escapes, Ignite Holidays and Webjet Exclusives. The business model, which evolved from the rise of such organisations as Groupon and Catch of the Day, has provided an exciting new way for suppliers to utilise inventory, particularly at off-peak parts of the year. The sector continues to surge, building a strong direct clientele but intriguingly with some operators such as TripADeal and Luxury Escapes engaging strongly with the travel trade. Travellers Choice, Express Travel Group’s italktravel and TravelManagers all have confirmed agreements in place, while Flight Centre’s 49% stake in Ignite Travel Group has also seen FCTG offices feature their own in-house luxury deals. By all accounts the alliances are providing significant business for travel agents in these groups, who are able to embrace the burgeoning sector, rather than having to react by slashing yields to offer price matches. There are also significant up-sell opportunities as clientele seek flights, transfers, pre/post arrangements and insurance.

And overall 2018 could be seen as a year of summer for much of the Australian travel industry. Certainly the results of our listed companies such as Helloworld, Flight Centre, Corporate Travel Management and Webjet indicated an exceptional performance, with records toppling left, right and centre in terms of TTV and profitability.

Autumn

As the calendar turns, so does the travel industry, with some previously hot initiatives inevitably beginning to cool. One example that springs to mind is the former rock-solid alliance between Qantas and Emirates. While in no way being phased out, its most recent renewal has seen a significant renegotiation of the terms, and most notably saw Qantas stop flying on its previous flagship Australia-Dubai-London routes. The ties between Qantas and Emirates still run extremely deep, with a wide ranging codeshare agreement and reciprocal frequent flyer schemes — but the Qantas launch of direct flights to London from Perth will have certainly put a strain on the relationship.

The new landscape has seen Qantas once again reach out to European carriers, who were previously shunned under the Emirates alliance. In the last year this has seen the renewal of a wide-ranging codeshare agreement with Air France and sister carrier KLM, with the QF code once again placed on direct flights from Asia into Paris and Amsterdam. Qantas has also been steadily deepening ties with other carriers including Finnair, Cathay Pacific, LATAM Airlines and Fiji Airways, with QF head of international, Alison Webster, saying the Qantas strategy was seeing it focus on “flying to key global hubs and providing customers with access to an expanded network through airline partners based in those ports”.

The ructions around Helloworld’s acquisition of Magellan earlier this year have also led some to believe that Magellan’s best days are behind it. The formerly fiercely independent group is now Helloworld’s sixth retail network, and despite all of the members receiving a generous payout as part of the controversial deal, at least two of them have since ceased trading. Helloworld has kept every promise made to members during the fiery acquisition period, and the recent Magellan Travel Group conference was a typically convivial affair. However there are still some indications of unease, with a number of areas such as differing preferred partnerships between Magellan and Helloworld proving to be a source of contention.

Autumn also appears to be sweeping over the traditional wholesale sector. Make no mistake, there is still a vital role for travel wholesalers, but these companies are having to work hard to remake their business models in the current environment. There is also significant generational change, as longstanding destination specialists grow older and are looking to exit their businesses which in turn is creating lots of opportunity for consolidation. One innovative example is the Entire Travel Group, which started out as a France specialist and has now embraced a wide range of destinations — each under its own brand — such as Spain, Portugal, New Caledonia, Tahiti, Canada & Alaska, the Maldives and also now Italy under a merger with the Newsom family’s CIT Holidays. Observers expect this trend to continue, with larger groups also able to bring the power of technology and economies of scale to the consolidated operations.

IATA membership is another area which is certainly no longer in the sunshine in Australia. The implementation last month of NewGenISS is believed to have continued the trend to less and less travel agents pursuing IATA accreditation, with the vibrant local ticket consolidation operations providing an easy alternative for both agents and airlines. Consolidators such as Air Tickets, Consolidated Travel, Express Ticketing and CVFR have become the new intermediary, significantly reducing risks for airlines while also providing a simple alternative for agents and at the same time making IATA accreditation less and less relevant.

Winter

As the Game of Thrones tag-line goes, “winter is coming,” and 2018 has seen several Australian travel businesses weather some pretty heavy storms. Probably the most notable has been Corporate Travel Management, which was recently targeted when short-selling hedge fund VGI Partners released a comprehensive report attacking some of CTM’s accounting methodologies and claiming the company had lied about its global office network. The company was forced to twice suspend trading in its shares which had enjoyed a strong rise in recent years, with the hatchet job seeing the price plummet more than 35% at one stage. CTM managing director Jamie Pherous came out strongly in response, noting that while some of the company’s international offices were very small, this gave it a presence in various jurisdictions providing major benefits for clients in terms of taxation and the ability to purchase tickets through local BSP in each country. CTM also engaged accounting firm EY to address some of the issues raised, with the company’s share price eventually stabilising at a significantly lower level than before the attack. Pherous also responded by purchasing several million dollars worth of CTM shares at the reduced price. It’s an ill wind that blows nobody any good, as they say, and he stands to benefit significantly if the price recovers to its previous levels.

Flight Centre was also hit by another attack, this time in the form of an ABC TV report which claimed the company was underpaying staff and using questionable selling tactics. While the actual segment on the 7.30 show was not particularly convincing and displayed some fairly shoddy journalism (in the form of interviews with staff who had been at Flight Centre for only a month or two some years ago), the fallout was spectacular and saw a major hit to the company’s previously high-flying share price. There’s speculation the story was timed around the negotiation of a new Enterprise Bargaining Agreement, with the EBA now finalised and hopefully seeing the end of such media onslaughts. Interestingly, the travelBulletin industry salary survey earlier this year found wages paid to retail consultants were uniform across the board regardless of which brand they worked for, with Flight Centre’s overall remuneration in line with the rest of the industry on average.

Seasons come and seasons go

The annual cycle of birth, growth, ageing, decline and rebirth is a reminder to all of us that we live in a cyclical world. All indications are that 2019 will be another great year for the Australian travel industry, and in the end providing opportunities for everyone — no matter where you are on the seasonal merry-go-round.

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