Is Travel.com.au worth 55 million big ones?

By Martin Kelly, Editor, Travel Trends

What will Wotif get for the A$55m or so it has agreed to pay shareholders for Travel.com.au?

The answer is a company that has accumulated losses of more than A$33m over the past eight years and never made a profit, though different sets of management over the years have continually hinted that it would. But something always comes along to drag it into the red… 

At one point it looked like 06/07 could be the year, however once again it was not to be. In a recent interview with Travel Trends, outgoing CEO Adam Johnson said TVL, which owns the lastminute.com.au and travel.com.au brands, has been performing strongly through 2007.
 
“This year we have continued the trend towards profitability,” he said. “Our net margin on revenue is 13% to 14% and all things considered we will be booking our first profit at the end of 07/08.”

“We are now at the tipping point with LMA … LMA is all about scale… Hotels are still a fabulous business and there is still growth ahead.”

Johnson said LMA – which in the past has sold a bit of everything, from theatre tickets to skydiving – now has a greater focus on accommodation.

LMA contracts its own hotels in Australia and NZ – generally charging a flat 10% commission – and gets international product through a variety of suppliers, including Travelocity, which owns the LMA international brand.

TVL this year bought the LMA brand outright in the Australian and NZ markets. “The board felt acquiring LMA created better long-term value for the company – it was an absolute coup as far as we were concerned.”

He said that Travel.com.au primarily remains an airline booking engine and that “accommodation is not a significant part of that business”. But that may change, he said, although who knows what’s happening now.

Both sites also have a significant email databases – more than 500,000 – that regularly receive newsletters. Site visits and sales conversions are also up, while the sites are undoubtedly looking and performing better.

So that’s what A$55m buys you these days? Maybe now is the time to sell if you own decent web travel business – one that is actually making money.

Travel Trends: October 16, 2007

Viator Changes, APN Buys Into Roamfree, New Qantas CIO, Qantas and Amadeus Seal New Deal

Rod Cuthbert has moved into a new role at as Executive Chairman at Viator, the company he founded in 1995. Cuthbert, 50, will focus on corporate strategy and growth, organically and through acquisitions. Europe is a major priority. Barrie Seidenberg, President of Viator since 2005, will also take on Cuthbert’s old role of CEO. Viator recently added a series of Web 2.0 features to its popular site, which has doubled sales in the past year.

Stop the presses – the world was turned upside down recently when Roamfree made an announcement which didn’t involve it buying an online company. In fact, the reverse occurred. APN News and Media has agreed to acquire up to 20% of Roamfree for A$20 million payable over five years. It will also take a seat on the Roamfree board. APN News & Media is the largest operator of regional newspapers, radio broadcasting and outdoor advertising in Australasia.

Normal transmission was restored in short order when Roamfree announced it had bought Travel Online for A$5 million.

Jamila Gordon has been appointed the new Chief Information Officer of Qantas. “Gordon has extensive experience in senior executive roles with IBM and has spent the past six years in Europe, where she managed some of the world’s largest strategic outsourcing initiatives in France and the Netherlands,” the company said. Current CIO John Willett leaves Qantas at the end of this month.

Meanwhile, Qantas and travel technology provider, Amadeus, have extended their existing agreements to 2017.  The new arrangement ensures Qantas will continue using the Amadeus Altéa customer management system while adopting Amadeus Ticket Changer and Amadeus Service Fee Manager. Amadeus will also set up a Competency Centre for Qantas at the Amadeus Product and Development hub in Nice to support e-commerce operations for the airline and complement an existing IT development centre in Sydney.

Travel Trends: October 3, 2007

Forever Young – NZ Keeps Message and Media Fresh

Tourism New Zealand will increasingly shift its international marketing from television and print to new media.

Chief executive George Hickton said Tourism New Zealand will increasingly pump its message through social sites, blogs and podcasts.

"One of the main changes will be to embrace new technology and to provide content to people when they want it, where they want it, how they want it," says Mr Hickton said.

As a first step in this direction it has launched its new “Forever Young” advert on a dedicated YouTube channel.

So far it’s received more than 650,000 views and a three star rating. See it here: http://www.youtube.com/profile?user=PureNewZealand

PS: After a mild public uproar, Hickton was forced to defend the use of ‘Forever Young’ a song by Australian band Youth Group because, well, they are an Australian band.

Travel Trends: October 3, 2007

Online Focus For Lonely Planet after BBC Sale

By Martin Kelly, Editor, Travel Trends

REALISING the online potential of Lonely Planet is the first priority of new owners BBC Worldwide, which bought a 75% controlling share in the iconic brand for anywhere between A$100m and A$200, depending on which newspaper you read.

Maureen Wheeler, who started the company with her husband Tony, told the Australian: “"We were looking for someone who would help us not just with funds but with skills, someone who’d shown they could make their way in the online digital world because we felt that’s what we were lacking."
 
Ian Watson, International Director of BBC Worldwide, was eager to oblige. "What we hope to be able to do very quickly is enrich, particularly in the online space, and increase the amount of video and audio content available to inspire travellers," he said.

Watson also promised readers of smh.com.au that there was “absolutely no intention” of introducing advertising in to Lonely Planet, which he described as "the most important brand to travellers around the world".

So how will BBC Worldwide monetize the content-based Lonely Planet site at a time when the world’s foremost media player, Rupert Murdoch, says he can no longer justify charging subscriptions for the Wall Street Journal online because the site would make more money from advertising if it was free and attracted more visitors?

Clearly, now is not the moment time to ask such questions, though in the fullness of time perhaps the new partners will follow the lead of actor Sean Connery, who swore off the James Bond franchise after a few wildly successful films. He made a comeback, however. It was called: “Never Say Never Again”.

Travel Trends: October 3, 2007

Game Over? Not by A Long Shot As AOT Group and Wotif Spark Bidding War for Travel.com.au

By Martin Kelly, Editor, Travel Trends 

A WILD card in the shape of the AOT Group has emerged as a dark horse in what may now be a three-way fight to buy travel.com.au. AOT yesterday revealed it has accumulated a 7.74% stake in TVL, buying into the company at up to 63 cents a share – an extremely bullish price and way more than either of the two “official” contenders – Wotif.com and Webjet – have offered shareholders for control of the company.

AOT, one of Australia’s largest privately-owned travel companies with online brands that include needitnow.com.au, has made no comment on its intentions, but one thing is for sure – it will have a huge say in determining the future of what has become Australia’s most sought-after travel company – owner of the travel.com.au and lastminute.com.au sites. TVLS’s value has increased from A$33m to $55m in less than a month.

And to think that just three week ago Webjet looked home and hosed at 42 cents a share. A day or two after making that offer, ever-modest Webjet boss David Clarke considered the deal a fait accompli, outlining a future where online retail rivals wouldn’t stand a chance, telling Travel Today that “the combined entity will open up a large lead over Flight Centre and a ‘huge gap’ over the rest”.

“It will be game over”, Clarke said.

Clarke should have known better – the game is far from over. That first become obvious on Friday when TVL said it had been approached by an unnamed suitor, which turned out to be online accommodation powerhouse Wotif.com.

Wotif, the true giant of Australian online travel retailing with a 06/07 full year after tax profit of A$26m, is now offering TVL shareholders 55 cents cash per share or the equivalent in Wotif shares. Webjet’s current bid is at around 52.5 cents (22 cents, rest in shares).

The TVL board, which initially recommended the Webjet bid, has told its shareholders to sit tight and do nothing.

The Wotif bid is an interesting move and could be interpreted a number of different ways. It provides diversification, takes a potential competitive threat (lastminute.com.au) out of the picture, and opens up further distribution channels for its accommodation product.

It also allows the company to gain a better understanding of the entire travel industry, while giving it the opportunity to start selling air via the TVL-owned Arnold booking engine on its own site.

For now, Wotif COO Robbie Cooke is saying: “We are excited about the opportunities that will arise from combining both companies – we will be able to significantly enhance TVL’s accommodation offering and be able to explore avenues to leverage off TVL’s other products.”

One thing Cooke isn’t saying is: “Game over”.

Travel Trends: October 3, 2007

Big Challenges Ahead But FNQ Industry Upbeat

By Martin Kelly

THE Far North Queensland tourism market faces major challenges in sustaining its international business base due to falling Japanese visitor numbers and increased competition from other destinations.

But the FNQ industry leaders – veterans of a famously cyclical market – have seen it all before and remain optimistic about the future, pointing to steady domestic growth and increased visitation from new markets like Korea.

The number of Japanese visiting FNQ dropped 10% in the year to June, according to the latest Tourism Research Australia figures, while overall international visitations fell 3.2%.

Meanwhile, international arrivals through Cairns Airport have slumped 15% since 2005 – a trend set to continue with the Qantas Group cutting capacity by 5% on the key western Japan routes through Osaka and Nagoya.

As result the Cairns accommodation market has been hit with room occupancies dropping 4.5% to 62% through the traditionally slow March quarter, while the June quarter was also quieter than usual.

Chairman of Tourism Tropical North Queensland, Stephen Olle, says: “Japan has been the major reason, while there’s also been a softening in the domestic market compared with the year before when (the aftermath of) Cyclone Larry caused a spike in the visitor numbers.”

The famous storm slammed into the coast south of Cairns last March, destroying a number of towns and resorts.

“Cyclones are a double-edged sword – that one benefited Cairns but if had been 50km north it would have been a very different story.”

Cyclone Larry strongly boosted visitor numbers as Cairns become the hub of the rebuilding effort. Hotels and car hire companies in particular did well.

“The feeling around town at the moment is that it’s a little bit soft compared with what it should be – some hotels are up, some are down –  however there’s not a great deal of concern.”

Olle, who is also CEO of the Village Property Group, which owns the All Seasons Cairns Gateway Resort, says the traditionally stronger September and December quarters are “looking ok”.

“Port Douglas also appears to be quite busy at the moment,” he says.

General Manager at the Hilton Cairns, Guy Hutchinson, is another optimist and claims his property has been running stronger occupancies than the official industry average.

“The destination is still strong and still successful but there’s no question the downturn from the Japanese market has affected growth rates,” Hutchinson says, adding that the Cairns industry has always been resilient.

A crucial element of this has been the local industry’s determination to get out and market the destination.

“Far North Queensland has always been a very dynamic destination in terms of promoting itself and there’s now an increased focus on emerging markets like Korea, Japan and India,” he says.

Marketing is also top of mind for Brett Claxton, Chairman of Backpacking Queensland and owner for the past 11 years of Calypso Inn Backpackers Resort.

Claxton says the Cairns backpacker market fell slightly last financial year with occupancies at Calypso dropping by two per cent.

“I’d say that’s reflective of the general market,” Claxton says.

Yet he remains extremely upbeat – “we’re on the up and up and going from strength to strength” – although he says Cairns must work harder to promote the destination.

Domestic tourism is one area he believes offers great potential and is working hard through a couple of industry associations to boost the number of travel agent familiarisation programs.

Over at the Hilton, Hutchinson is also pushing the local line, an approach which has resulted in domestic business more than doubling from 11 per cent to 25 per cent of the total.

But at the end of the day, international tourism will remain the core focus for Cairns and Far North Queensland.

“International still has the biggest potential to grow,” says Olle from TTNQ.

And, while the local industry looks toward new and exciting source markets, it is still the Japanese that hold the greatest allure.

Some concern still lingers over the introduction of Low Cost Carrier Jetstar to a market that has been used to Qantas, both in terms of service and brand knowledge.

Jetstar is a completely new proposition for the Japanese, a market where on longer-haul routes airline seats are largely controlled by tour operators.

As a result Jetstar has had to alter its direct-to-the-public approach used so successfully in Australia.

Corporate Communications Manager, Simon Pregellio, says 80 per cent of Jetstar’s Japanese business is coming through wholesalers, while 20 per cent of customers are booking direct, more than originally forecast.

She says the airline has also staffed up and is working hard on relationships to drive volume, which has started slowly but is now picking with good loads forecast from next month.

Olle from TTNQ says the industry is strongly backing Jetstar and working hard to familiarise local operators with the new product.
     
“Our aim is to keep the Japanese market viable and be ready for when they come back – and we think they will come back,” says Olle.

“Can we get back the numbers we once had? That’s a hard question to answer but we certainly need to work .harder to stimulate demand.”

In the meantime, TTNQ, the Cairns Port Authority (which owns the airport) and the State Government is doing everything it can to attract new airlines to the what is a far-flung destination.

“We are working very hard to get a couple of carriers across the line in the next 12 to 18 months,” Olle says.

Travel Trends: September 24, 2007

TRAVELtech 2007 – A different perspective

By Tim Hughes, The Boot

TRAVELtech continues. Rod Cuthbert the CEO of Viator gave a great presentation earlier this morning. He have very few slides, instead relying on pictures of destinations and activities to tell his story.

A number of these photographs showed the tough side of consumer travel from the extremes of pictures of terrorism and panic to images of the drudgery of never ending lines at airports filled with despondent people wishing they were on holiday rather than going on holiday. From this he talked about how hard it is becoming for a consumer to travel. The uncertainty of arrival times, the challenges of travel in economy class, the need to varying degree to limit what you can carry on board etc.

When travel becomes hard, he argues, people start to look at their discretionary spend and think of alternatives outside of travel such as LCD screens, new generation games consoles and home cinema sound systems. Have no data to back this up but I agree with him. Travel used to look only to other forms of travel for competition (international versus domestic, retailer vs retailer, supplier vs supplier). Not sure what the solution is or how we open up our marketing to fight the Harvey Norman, Best Buy or Dixons of the world but it reinforces the need to keep the purchase and consumption process simple for consumers.
TRAVELtech: Hotelscombined – bringing meta-search and affiliate marketing together

Posted: 28 Aug 2007 12:20 AM CDT

TRAVELtech continued. Yury Shar gave a little more insight into meta-search and his company Hotelscombined. My earlier profile of them is here.

The interesting point from his speech today is not that he is generating good traffic – though he is with 450,000 visits per month. The interesting story is that his number one source of traffic is affiliate program. He shared that 38% of traffic is coming from a network of 1,500 affiliate. Search is still critical with SEM ranking number two at 34% and SEO third at 20%.

I was working on the assumption that paid search and to a lesser extent SEO would dominate the traffic feed for meta-search. With no data backing it up was assuming that these would be responsible for 80% of traffic for a meta-search provider, not the less than 65% that Hotelscombined generates. Congrats to Yury of building this great affiliate network.

Yury also passed on this four tips for search engine optimisation marketing efforts:

Give yourself time – it takes 18-24 months for a start up to "prove" itself to Google as a legitimate content provider;

Design the site – design the site for both consumers and search engines. The site needs to be specifically designed to be shopped and indexed by Google. As he puts it – it is easy to design a site with great content that Google cannot be "seen" by Google;

Register and open a Google Webmaster account; and

Design a long term link strategy – Does not mean building fake links or becoming a hard core "black hatter" but working on links and traffic generation through content optimisation has to be part of marketing plans. For example making sharing of and imbedding of links by customers and easy thing to do.
 
TRAVELtech: Interview with Travel.com.au CEO Adam Johnson

Posted: 28 Aug 2007 12:05 AM CDT

TRAVELtech continued. Interview on stage with Adam Johnson the CEO of Travel.com.au the operator of both Travel.com.au and now the sole owner of Lastminute.com.au.

Couple of interesting metrics and number from the interview:

They are now profitable (measured on monthly numbers). Recent full year financial results showed a loss but now profitable on a monthly basis;

Expecting 30-35% topline and bottom line growth for FY08 – TTV of $130-140mm;
Marketing spend will stay around 2.5% of TTV. All of this online, 80% of it likely to be on SEM;

15,000 hotel bookings per month; and

500k subscribers to newsletters on both brands.

He is very conscious that the area they need to work on is less around brand and traffic but conversion. Would not share numbers but admitted to be behind competitors on converting traffic into booking. As he says "need to focus on utility" around pricing, functionality and product.

Travel.com.au are celebrating their 10th year this year. They were one of the first in the world to do international flights online. Not that this is much to brag about. As Adam joked, "In the early days we had 100% of the online international fares market. All two of the bookings made were made with us."

TRAVELtech: the forth phase of online travel – "too much information"

Posted: 27 Aug 2007 11:32 PM CDT

More from TRAVELtech. I talked some months back about my theory about how the short history of online travel can be broken up into three phases. For a quick recap here is what I said

Phase 1 (1995-2003) – I know where I want to go, find me the cheapest price.

Consumers treated online as a price based flight business. They knew exactly where they wanted to go from and to. All they wanted help on from an OTA was price. Not information, not help, not recommendations, just price.

Phase (2000-2006) – I want to find a deal on where to stay, can you help me with rates, availability and advice.

Consumers gain in confidence and cheap hotel deals flood the Internet. Consumers now begin asking OTAs for limited advice on finding and booking of accommodation.

Phase 3 (2005 – now) – what do I do next, where should I go next.

For the first time ever the consumer starts to ask an open ended question of the Internet. Instead of the specific questions of phases one and two where the consumer knew most of what they wanted to know – consumers gained the confidence, tools and networks to ask for advice from OTAs, "the crowd" and the Internet at large. "What do I do next?" Content started to drive traffic and sales like never before. Best available rates and set pricing from suppliers made it harder for the OTA to offer deal advantages.

In my presentation today at TRAVELtech I talked about my thoughts on the future of online travel – phase 4 going by my timeline. Here is what I said.

Phase 4 (2009 and beyond) – Too much information

Consumers begin to feel overwhelmed. They are searching sites with 50k, 100k and maybe 200k hotels (though a comment here says that the sites like HRS claiming 200k hotels are exaggerating a little). There are review sites with 20 million or more reviews. Social networks are producing hundreds of friends with thousands of recommendations. Emails, RSS feeds, SMS suggestions and more are flooding into consumer inboxes. Too much information!!

The challenge as we head into this phase is to take all this information and build a coherent story for consumers. My expectation (and hope) is that this will produce a return to the need for customer loyalty. For online retailers making a connection with customers that they keep through the development of loyalty programs – be they actual rewards, good deals, community building and other marketing and product activities.

The reason to care about this history is that it helps us in planning our products and marketing plans for the future. One of the downsides of a maturing industry is that growth in the traditional markets (US and EU) takes more work and greater innovation. One of the upsides is that we now have a history to look to in preparing of the next trend.

TRAVELtech: The true cost of booking an airline ticket

Posted: 27 Aug 2007 11:21 PM CDT

First of my posts from the conference TRAVELtech. Have been listening to Tim Russell (MD of Amadeus Australia).

Tim made a very good point when looking at the costs of booking an airline ticket online. He presented research indicating that at a dollar charging level the cheapest place to book a flight is usually the airline’s own website where there is normally only a small credit card fee but no booking fee. Call it $0-$15 per booking. In the middle of the cost spectrum there is the online and offline agent where there are fees and charges ranging from $10-$30 per ticket. Finally At the end of the spectrum there is the full service Travel Management Company (TMC – corporate travel agent). These providers can charge upwards of $50-$60 per ticket.

On the crude measure of dollars per ticket, the airline direct site is the cheapest. However, Tim brings in the great point that when assessing the cost of booking we should really also be considering the time cost is searching and completing the transaction. When this is taken into account the cost spectrum is turned on its head. The TMC booking takes the least amount of time – say 15 minutes, the time it takes to make a phone call to a dedicated agent. Next comes the online agent who can display multiple carriers in one place making searching faster. Finally the airlines direct site takes the longest – more than an hour because of the need to search more than one supplier before taking a booking.

Including these measures it becomes a neck and neck race between the cost of TMCs and online agents with airlines coming third.

If you are booking a leisure flight for the family and have all the time you need then time does not come into account but certainly in the corporate area there is a huge time difference between the different travel booking channels. Goes part of the way to explain the success of Webjet in Australia despite the huge fees they are charging.

ends.

Roamfree Buys Tourism Technology for $16.8m

Roamfree.com yesterday bought 90% of Tourism Technology, the developer and owner of the market-leading Calypso Wholesale Travel Management System, for $16.8m. It’s by far the most significant acquisition for Roamfree.com, which has been stitching up deals faster than a three-armed seamstress.

Tourism Technology has a heavyweight client list including Qantas Holidays, British Airways Holidays, Singapore Airlines Holidays, United Vacations, Creative Holidays, Gullivers NZ and Tasmania’s Temptations Holidays. It is also implementing the technology for Flight Centre’s wholesale division, Infinity Holidays.

Founder and Managing Director, Graeme Hunter, retains 10% of Tourism Technology and will continue to lead the business along with General Manager Michael Dundon and the existing senior management team. Meanwhile, TT has developed its own Dynamic Packaging product which is now being used on Travel Corporation’s ineedaholiday.com.au website.

Managing Director Graeme Hunter says it took six months to develop and all the work was done by company’s team of 22 software developers.

He says the system can package and price up to four product types – accommodation, flights, transfers and car rental – depending on wholesaler inventory. “It’s just been released and I would expect that all of our customers will get involved,” Hunter says.

Travel Trends: August 16, 2007

Roamfree.com Gets On Bike For Tour de France

ROAMFREE.COM boss Tony Smith has once again put his money where his mouth is by pledging $20m in sponsorship towards the first Australia’s first Tour de France cycling team. Smith made the decision after meeting champion cyclist Robbie McEwen at a BBQ. “He told me there wasn’t an Australian team,” Smith told the Daily Telegraph. “If someone wants it to happen, like me, you have to put up the money.”

The sponsorship is over four years. Starting a team in the 2009 Tour de France the initial goal and, while $20m is anything but small change, more money is still needed to make this dream a reality as it costs $15m a year to run a top-class team.

Travel Trends: August 15, 2007

More Dynamic Behaviour – Tourism Technology This Time…

Tourism Technology, owner of the Calypso Wholesale Travel Management System, has developed its own Dynamic Packaging product which is now being used on Travel Corporation’s ineedaholiday.com.au website. Managing Director Graeme Hunter says it took six months to develop and all the work was done by company’s team of 22 software developers.

He says the system can package and price up to four product types – accommodation, flights, transfers and car rental – depending on wholesaler inventory. Calypso is used by most of Australia’s wholesalers, including Creative Holidays, Qantas Holidays, AAT Kings, Gullivers, Adventure World, Harvey’s Choice, Explore Holidays and the Pinpoint Travel Group.

“It’s just been released and I would expect that all of our customers will get involved,” Hunter says.

Travel Trends: August 14, 2007

Qantas Holidays Launches Dynamic Packaging

By Martin Kelly

QANTAS has quietly launched Dynamic Packaging on its main website, giving the booking option a much-coveted flash advertisement on its home page.

It’s a significant strategic move for the aviation giant which has enormous success in selling airline tickets online but has been unable to boost hotel and package holiday sales through its hugely popular website.

In fact, Qantas Holidays revenue – which to a large extent depends on accommodation – has slipped over the past two years due to changing consumer travel spending patterns.

But the new Manager of IT Strategy at Qantas Holidays, Grant Swinbourne, who has moved across from Jetstar, says the launch of Dynamic Packaging marks a change in approach.

“Its visibility signals that we are going to be increasingly focussed on things like Dynamic Packaging at Qantas,” Swinbourne says.

“It’s not seen as the be-all and end-all but part of a broader picture at the company.”

Swinbourne says he is happy with the launch, although it’s still early days.

“We didn’t want to go out with a big bang and have a problem with it,” he says.
 
“All in all, the product is working quite nicely and the bookings are coming through.”

The system was developed by TravelBox and accesses inventory though the Calypso Wholesale Travel Management System.

Swinbourne says Qantas is still using the Ready Rooms system to sell accommodation on its site. Sales through Ready Rooms increased by 60% in the 12 months June 30, 2007.

Meanwhile, Qantas Holidays profit before tax increased $2m over last financial year to $47m. However, this is still well under the 04/05 result of $64m.

"The continued trend of consumers to unbundle domestic and point to point international travel resulted in lower volumes, although these have been offset by a recovery in key outbound destinations including Thailand and Hong Kong, stronger inbound and a growth in reseller volumes," Qantas said in its annual results announcement.

Travel Trends: August 16, 2007

Online Overhaul At Stella Travel Services

By Martin Kelly

Stella Travel Services boss Keith Stanley has promised a dramatic overhaul of the travel giant’s retail web strategy.

It will start with the relaunch of the Harvey World Travel website over the next few days, followed by a new Travelscene site soon after.

“You will see dramatic changes over the next six months,” says Stanley, who will elaborate on the Stella strategy at the TRAVELtech conference in Sydney on August 28.

Stanley says that in addition to the new Harvey World and Travelscene brand portals, each Stella agency franchisee will have individual websites.

He says they’ll be able to customise these sites within brand guidelines and, in an ideal world, create their own niche or speciality markets, whether location or skills based.

These sub-sites will also feature consumer booking tools using technology developed by Stella’s online outfit, Best Flights, enabling them to sell everything from air and accommodation through to cruises.

Stanley says these initiatives will arm its franchisees with the ammunition they need to compete online, while giving agents a “vested interest” in developing their own web-based businesses.

There are still a number of issues being worked through, including online product inventory and distribution, where there are significant discrepancies between some of the Stella brands, especially in accommodation.

For example, the Harvey World site uses Octopus Travel, while Best Flights accesses inventory from a range of suppliers including Need It Now and World Hotels.

This is an obvious consequence of the rapid acquisition-led growth of Stella, which controls 1400 retail and corporate outlets across three main brands – Harvey World Travel, Travelscene and Gullivers – plus numerous other businesses.

• To find out more on Stella, you can attend TRAVELtech, where Keith Stanley will be interviewed by TravelTrends.biz Director Martin Kelly.

Travel Trends: August 14, 2007

Private Equity Makes Big Changes At Travelport

Ever wondered how those private equity companies we’re hearing so much about make their money? Here’s a great story by Ianthe Jeanne Dugan on the repercussions of the Travelport/Blackstone acquisition and breakup which recently appeared in the Wall St Journal Online:
 
Not long after the Blackstone Group bought Travelport Ltd. last August, workers at the company’s office campus began feeling the squeeze.

Two months after the deal closed, scores of employees were lugging boxes of personal belongings to their cars, having lost their jobs. Under Blackstone’s ownership, the travel-reservations conglomerate has laid off 841 people, about 10% of its work force. Blackstone, a private-equity firm, has already recouped all of the money it invested in Travelport.

Similar scenes have been unfolding at companies around the nation, a human toll of the corporate-buyout boom. Private-equity firms, which say they bring sorely needed financial discipline to poorly run companies, have been slashing costs and extracting profits at warp speed. As the cycle of buying and selling companies has intensified, life in the trenches can be unstable and traumatic.

By the end of 2007, Travelport expects to slash costs by $150 million. Last week, it brought public its online reservations unit, Orbitz Worldwide Inc., using the proceeds to pay off debt. Its Galileo unit, which feeds airline information to travel agents, is the focus of much of the overhaul. Many of the job cuts have occurred at the company’s data-operations center outside Denver, where some jobs have been outmoded by shifts in technology and in the way people buy airline tickets and rent cars, executives say.

John Kliegel, 41 years old, a computer-systems analyst, and his twin, Russell, a technical writer, were both laid off. They’re selling the house they share because they can no longer afford it. Don Kleppinger, a 46-year-old software engineer with five sons, lost his job, leaving him without health insurance for several months. Grace Covyeau, 63, who lost her job as a teleco engineer, took a part-time job last month making sandwiches and coffee at King Soopers grocery store.

"It came as a shock," says Michael Berson, 49, who lost his job as a data engineer in October, three years after receiving a "Super Star" award for saving the company $1.2 million on telecommunications costs. Mr. Berson has moved to Tulsa, where he is looking for a new job.

In addition to the 841 layoffs, 1,500 Travelport workers have left voluntarily since the buyout. The company says it has hired 1,582 new workers during that period, and has invested heavily in new technology.

Travelport Chief Executive Jeff Clarke describes the Centennial operation as the "factory" through which thousands of transactions pass every second. "We need to shift into new technologies," he says. "Some require productivity improvements and often will lead to layoffs."

To complete their $4.3 billion Travelport purchase, Blackstone and Technology Crossover Ventures, a Palo Alto, Calif., venture-capital firm that now owns 11%, invested $1 billion and borrowed the rest. That debt landed on Travelport’s balance sheet. In March, Travelport borrowed an additional $1.1 billion and paid it out as a dividend to the two firms, returning all their money in just seven months.

"This is likely one of the quickest returns of invested capital for a private-equity deal of its size," Travelport’s new chief financial officer, Michael Rescoe, said in a May conference call with analysts.

The buyout boom has been lucrative for Blackstone partners and investors, which include large institutions such as pension funds. Last year, Blackstone managed assets valued at about $88 billion and earned $2.27 billion, according to a prospectus for its own initial public offering in June. Its chief executive, Stephen Schwarzman, who resides in a 35-room Manhattan apartment, made more than $650 million on the offering and retained a 24% stake now worth more than $5 billion.

Such riches raise hackles among laid-off workers. "These investments are helping the fat cats by hurting the little guys," says Ms. Covyeau. "It’ll make you sick."

Over the past five years, private-equity firms have bought more than 10,000 companies. This year, through June, 1,399 deals worth $582 billion have been announced, according to data provider Dealogic.

In order to recoup their investments quickly, buyout firms are speeding up everything — closing deals more swiftly, cutting jobs and restructuring companies faster, and taking them public sooner. They’ve also been taking big cash payments out of the companies they buy, as Blackstone did with Travelport. These payments, known as "dividend recapitalizations," reached a record $25 billion in 2006, and are on pace to exceed that amount this year, according to Standard & Poor’s Corp. In 2001, they amounted to just $1 billion. The payments increase pressure to cut costs.

"None of us wants a single job to be cut," says Paul "Chip" Schorr IV, the Blackstone senior managing director who orchestrated the purchase of Travelport and now serves as its chairman. Mr. Schorr, 40, joined Blackstone in 2005 from the venture-capital arm of Citigroup Inc.

The layoffs at Travelport were one of many steps taken to revamp the company. All told, Travelport has reduced operating costs by 6%, the company says.

Before Blackstone bought it, Travelport was operating as the Travel Distribution Systems unit of Cendant Corp., a travel and real-estate conglomerate based in Parsippany, N.J. Cendant’s founder and chief executive, Henry Silverman, a former Blackstone partner, had cobbled together Cendant’s travel unit through a series of acquisitions.

Galileo, which Cendant bought in 2001, gets paid by airlines to feed information about airline schedules, pricing and inventory to travel agents. In addition, it runs the reservations system for United Airlines. Galileo is the largest contributor of Travelport revenue, which totaled $2.6 billion last year.

That business has been suffering. The Sept. 11 attacks curtailed airline travel, as did the outbreak of severe acute respiratory syndrome, or SARS. In 2003, struggling airlines reduced the fees they paid to middlemen such as Galileo.

Cendant also had gotten into the online travel-agency business by buying Orbitz, which competes with Travelocity, Expedia and others. Each time consumers use the site to book reservations for flights, rental cars and hotels, Orbitz collects a fee. As more consumers turned to the Internet for travel planning, the business grew.

But as airlines and hotels began handling reservations through their own Web sites, the middlemen lost business. In 2001, systems such as Galileo had handled 70% of airline reservations, according to Forrester Research, a market-research firm. These days, such systems handle just 50%. Cendant began laying off employees, and in 2005, it decided to split itself into four parts.

Mr. Schorr believed that Cendant hadn’t fully integrated the systems behind the travel businesses it had acquired. "It was like having a house with eight kitchens," he says. If it eliminated overlapping systems, he believed, the business could become more efficient. He also saw growing opportunities in foreign markets such as the Middle East and Asia.

On Aug. 23, the day Blackstone took over, Mr. Clarke wrote to employees on an internal blog: "For most of us, our jobs won’t change." Mr. Clarke, who had become chief executive a few months earlier, previously held senior positions at Computer Associates and at Compaq Computer Corp.

Some employees believed Blackstone’s arrival would ease the belt-tightening and stress that had begun under Cendant. "A lot of us thought these layoffs would stop," says Gina Fugazzi, 51, who oversaw the company’s voice systems in the U.S. "There was no more to cut."

Others had heard enough about how private-equity firms operate to be concerned about their jobs. Ms. Covyeau, the telecommunications manager, says many employees were "aware that the pattern at private-equity firms was streamlining work forces." Anxiety, she says, began rising.

In the blog, Mr. Clarke noted to employees that Travelport intended to re-engineer operations to reduce overlap and to eliminate "activities that are not contributing to our success."

The company decided to overhaul the telecommunications center housed in Centennial. "We are automating work that was done manually," explains Mr. Clarke.

Within weeks of the buyout, at a meeting with employees in Centennial, some managers warned that more cuts were coming. Ms. Covyeau says she began packing her boxes and told a manager: "Please, just give me a severance package and let me out of here."

One morning in October, managers in Centennial sent emails instructing employees to report to various conference rooms and cafeterias. Ms. Fugazzi says her heart sank when she walked into her designated room and found only about 20 people. "I suddenly realized I was in a group getting laid off," she says. A colleague, she recalls, spotted a tray of bagels and coffee and chortled: "Looks like this is our last supper."

A manager told them their jobs were being cut for economic reasons, according to several people who were there. Some employees burst into tears; others stared stoically. "I was devastated," recalls Ms. Fugazzi, who says she had planned to retire in four years. "I had the mentality that if you worked hard, you could keep your job forever."

When they got back to their desks, their email had been disabled. Guards lingered while employees filled boxes with belongings. The company declined to provide written references. In the confusion, some employees say, they were inadvertently given a wrong number to call about benefits — it was a sex line. A company spokesman says only eight employees received the incorrect number, and the company corrected the mistake right away.

All told, Travelport laid off about 500 people that month, including veterans in their 50s and 60s who say they had good performance reviews and relatively high salaries of about $100,000.

Most of the layoffs occurred at Galileo. Gordon Wilson, Galileo’s London-based chief executive, said in a written statement that many of the jobs had been outmoded by technology. For example, travel agents used to connect to Galileo’s system by phone. Now, many of them access it via the Internet.

The company offered laid-off employees two weeks severance for every year they worked, according to several employees. Mr. Wilson declined to provide details about the severance packages, which he called "generous."

In December, Travelport announced the acquisition of Worldspan, one of Galileo’s chief competitors, for $1.4 billion. At a Christmas party at the Denver Museum of Nature and Science, a Travelport executive assured remaining employees that 2007 would be more stable, according to people who were there.

In January, Mr. Clarke, the chief executive, reorganized Travelport into three brands — Orbitz, Galileo and Gullivers Travel Associates, a wholesaler of hotel rooms and group tours. The company continued to cut jobs.

Galileo’s Mr. Wilson says he has warned employees of "further changes" as the company completes the Worldspan acquisition. The deal could produce about $100 million in cost savings through the consolidation of sales staffs, data centers, and other operations, Mr. Clarke says.

In this year’s first quarter, Travelport’s profits were up 36% over the year-earlier period, to $157 million. Half of the profit improvement was because of revenue growth, the company says, 25% was because of vendor-related cost reductions and 25% was from productivity improvements, including reductions in the work force.

Mr. Wilson says Travelport’s debt load has made it more urgent to generate cash. "If we can accelerate the reduction of our debt and therefore lessen our interest payments," he says, "no one would expect management to do otherwise."

With the Worldspan merger looming, employees at both companies say they are worried about their jobs. "We are all on pins and needles," says one employee. "Everybody here feels it’s only a matter of time." Travel Trends: August 2007

Aussie Hotel Room Rates To Hit Record Highs

By Martin Kelly

HOTEL room rates may increase by up to 45 per cent in key Australian markets over the next three years as the industry enters a golden period of prosperity characterised by high demand and low supply.

Yet analysts say the imminent revenue bonanza – sparked by occupancy rates regularly topping 80 per cent – may not be enough to trigger the next hotel development cycle.

That’s because construction costs are rising just as quickly, thanks to high land prices and increasingly expensive materials, setting the scene for a remarkable era of stability in a historically volatile industry.

One operator told staff in an internal briefing: “All economic indicators suggest that the hotel sector will continue its positive performance for the rest of the decade.

“The era of over-supply that plagued the industry has now balanced out … (and there is) a more realistic attitude towards new supply, with the emphasis more on upgrading existing product than building new hotels.”

As a result, there seems no end in sight to recent sharp room rate increases.

During the March quarter average room rates rose strongly for the third consecutive quarter. Perth increased 16 per cent to $127, Canberra 12.8 per cent to $129, Brisbane 9.8 per cent to $137 and Sydney 8 per cent to $182.

Operators say this momentum has continued, athough they warn that the poor performance of inbound Japanese tourism will hurt softer markets such as Cairns.

Elsewhere, the situation could not be more different with Robert McIntosh, Director Asia-Pacific for CBRE Hotels, forecasting that rates in key markets will rise by between 10 per cent and 15 per cent per annum, barring any unexpected economic shocks, for the foreseeable future.

McIntosh says the average national room rates may reach historic highs within the next 12 months, and is particularly positive on the major business markets of Sydney, Melbourne, Perth and Brisbane.

Significantly, he says the traditional pattern of room rates lagging occupancy by around 18 months may soon be shattered given the continuing friction between demand and supply.

“Our view is that the glass ceiling on rates is likely to be broken in this cycle,” McIntosh says.

Karen Wales, Vice President of Research at Jones Lang LaSalle Hotels, also see further significant price increases in Sydney, “while obviously Brisbane has been very strong and there’s no reason to suggest this is going to change.”

Simon McGrath, Vice President – Australia, Accor Asia-Pacific, says his company is seeing strong demand around the country.

“In the past 12 months hotels have generally been getting double digit room rate growth across all markets – now people are confident about asking for $200 or $300 rates or greater,” he says.

A major trend, according to McGrath, has been the shift to dynamic room pricing away from contracted rates and significant allotments to big wholesale or corporate clients.

As a result, rather than being set months in advance, rates are flexible depending on demand, which hoteliers are better able to forecast thanks to sophisticated yield management technology.

He says hotels are also looking more critically at their contracted base business, which in the past could account for up to 50 per cent of occupancy, to free up rooms for higher-rate business.

The nature of contracted business is also changing. “The key in many markets at the moment is inventory – what are people prepared to pay for access to inventory?” McGrath says.

He believes that rates will keep rising strongly, leading to a situation “sooner rather than later” where new hotel development can be justified in certain key markets.

However, the hotel development community, such as it is, remains cautious.

Dean Dransfield, industry analyst and Director of Dransfield Hotels and Resorts, does not believe there will be a rash of new accommodation development any time soon thanks to rising construction costs.

“Every day it gets further away not closer,” Dransfield says, adding while the property development and investment community is closely monitoring the situation, the numbers never seem to add up.

“They are aware of the potential opportunities, the future of occupancies and room rates, but are very realistic about construction costs … the dollars are going everywhere but hotels.”

He says the hotel investment and development market has changed dramatically since the last construction cycle.

“You look at the players who did things in the past and they don’t exist any more. It’s all fund mangers or bankers now, there are not many entrepreneurs left. Conversely, though, there are lots of people looking to invest.”

This demand is likely to drive the yield on which hotels are sold down from already historic lows of between seven per cent and eight per cent, according to McIntosh.

“But at the moment hotels still look like pretty good value,” he says, adding that five and four star hotels in Sydney are particularly attractive.

Travel Trends: August , 2007 

Defining Year Ahead For Webjet

Opinion By Martin Kelly

WILL the Webjet share price finally take off after a couple of years in limbo? That’s the question shareholders are asking after a couple of brokers put a ‘buy’ recommendation on the stock, which has been static for the past couple of years while the likes of Wotif have gone through the roof.

The recommendations come on the back of Webjet’s recent profit announcement and forecasts, which include a steadily rising dividend stream. It’s a welcome boost for a company which has failed to deliver on its early promise to investors despite dominating Australia’s online retail sector, in terms of both visitor numbers and profits.

The reality is, after an initial surge through to mid-2005, investors have never warmed to the Webjet story as told by Managing DIrector David Clarke in the same way they have taken to other internet stocks such as Wotif, Seek and Realestate.com, which are trading on aggressive Price to Earnings multiples of around 44, indicating strong optimism about future prospects and market position.

Webjet by contrast is now trading at a PE of just 28 – pedestrian for a profitable Internet company. 

Its share performance over the past two years has also been vastly inferior to the ‘old-school’ travel companies such as Jetset, Flight Centre and MFS, all of which have been very strong.

Even the share price of online retail rival Travel.com.au has done better in recent times, although this company is still trading at a fraction of its listing price and has yet to make a profit (but the signs are it will go into the black for the first time in 2006/07).

The obvious question is why have investors avoided Webjet?

Well, there’s no easy answer. Broker Ord Minnett commented that Webjet has a history of mismanaging expectations, something it has recently sought to correct, while the online retail environment is much more volatile than hotels, on which signficant commissions can still be earned.

In fact, if you look at the recent Expedia results in the US, all its growth is coming from the sale of accommodation rather than airfares, which is Webjet’s main business.  

Anyway, to the latest result. Webjet has been trumpeting big increases in turnover and net profit, which clocked in at A$4m up from A$2.4m.

But I think it’s also worth looking at earnings before interest, tax, depreciation and amortisation. They were up just 9% year on year – from A$3.4m to A$3.7m  – thanks to largely to a big increase in marketing costs (from A$2.7m to $4.9m).

Consequently the net result was inflated by the additon of A$1.6m in interest income.

Clarke says this was all planned, the strategy being to increase turnover, up 45% to $250m, through aggressive marketing to provide a significant platform for longer-term growth.

In terms of Webjet’s revenue, it appears to be primarily service fees on commission-free domestic airfares, although the proportion of international business has increased to 30% of total turnover.

It’s new "Experience The Wonder" campaign is designed to boost that further.

As for the A$1.6m interest, Webjet earned that on its significant cash reserve, which has been well above A$25m at times and is now around A$20m following an A$8.4m share buyback.

What’s Webjet going to do with the A$20m?

Clarke, whose income increased 20% from A$370,000 to A$450,000 over the past year, said “strategic acquisitions appropriate to the business model remain under intensive investigation”.

That’s a line the company has been using for more than a year, so don’t hold your breath.

Webjet clearly has a particular set of criteria that few other online companies meet.

So the chances of it buying and running a separate brand in a more lucrative market niche appear slim, while there don’t seem to be many retail or wholesale companies out there that could easily be absorbed into the Webjet culture, though you never know.

Therefore it’s likely Webjet will still have plenty in the bank this time next year, although the company has promised to start returning more cash to share holders – 60% to 70% of after-tax profit, starting with a 2c dividend this year, and may buy back up to 5% of capital.

Looking ahead, Webjet is forecasting an increased net profit for 07/08 of A$5.2m, up from A$4m, but there are challenges.

On the plus side management has demonstrated a capacity to grow turnover and make money from the Webjet brand, though its fee-based income structure makes the company somewhat vulnerable until it can develop greater diversification. Webjet will counter that its new PLANITONEARTH customer trip management technology will induce customer loyalty.

The real test will be for a rigidly conservative board and management to finally show an ability to develop new income streams, outside of service fees, or invest in complimentary travel businesses. It’s somewhat strange that a small company such as Webjet seems to be less agile than an industry giant like Qantas, which is continually able to react to market forces and reinvent itself.

That said, Webjet is profitable, its forecasts optimistic and investors may be starting to buy the vision.

Travel Trends: August 8, 2007

*Disclosure – The author owns Webjet shares

Disappearing Up Each Other’s Google

By Alan Kohler, The Eureka Report

IF YOU google the phrase "Alan Kohler", the top link in the main, unpaid search results is one of my articles on smh.com.au. Next is Eureka Report. But above that, against a beige background, there are two other links – one is to Eureka Report and the other is a link to Australian Stock Report, one of our competitors.

Australian Stock Report has bought the Google phrase "Alan Kohler". Eureka Report’s link only sits above it in the section headed "sponsored links" because we have paid more for it (to Google) in the auction system known as search engine marketing (SEM).

Over to the right, in another sponsored links section for the search on the phrase "Alan Kohler", there’s a link to www.stockresource.com.au – another competitor – and under that are a couple of book sites trying to flog my books (booktopia and ebay). Ebay buys millions of keywords, and among other things competes to buy just about every author’s name.

We have also bought the phrase "Eureka Report", of course, but if you google that then six competitors’ links appear in the sponsored links section of the results. They have all bought the phrase "Eureka Report", but once again we have paid the most so we can be at the top.

I hasten to add that we are also playing this rather brutal little game: we have bought, among things, the phrases "Rivkin Report" (another newsletter) as well as "Australian Stock Report". Each of those newsletters ensures that its link is at the top of the Google sponsored links by paying the highest price.

But Australian Stock Report’s search result, for example, is crowded with 10 competitors that have also bought its name.

Thus do all of the financial newsletters compete with each other to throw money at Google.
Another way to put this is that, when it comes to subscriptions obtained via Google marketing, the newsletters probably only make a profit from renewals in the second year – in the first year virtually the whole price of a new subscription goes to the Google machine.

This is the essence of the Australian Competition and Consumer Commission’s case against Google for misleading and deceptive conduct, which caused a flurry of feather fluffing and squawking in the global internet henhouse last week.

The case began with Trading Post’s purchase of the keyword "Stickybeek", which is the name of a small Newcastle-based used car website. Search that word on Google now and there are no sponsored links at all, which means Stickybeek is getting its search engine position for free, because it’s at the top of the free results.

That’s because Trading Post gave up quietly once it was pinged. The other case cited by the ACCC in its court documents is instructive: it’s the fact that if you google the phrase "Harvey World Travel" you get a sponsored link to one of its competitors, STA Travel, and a lot of people surveyed by the ACCC did not realise that these businesses were not connected – were competitors, in fact. The ACCC, it seems, is outraged about this.

Actually this outrage is based on a misunderstanding of how search engines work. STA has not bought the phrase "Harvey World Travel" – it has bought the word "travel", which is perfectly OK. Its link appears because "travel" appears in Harvey World Travel’s name and search engines look for links to each word in a phrase as well as the whole phrase itself.

You can tell this because if you put quote marks around "Harvey World Travel" when searching it, which turns the whole phrase into a single word, no sponsored links appear at all – no sign of STA.

So the highly competitive newsletter business is definitely a better example of what the ACCC is on about.

In essence the ACCC claims two things: a business’s competitors should not be allowed to "buy" its name and muscle into its search results page; and the "sponsored links" are not sufficiently distinguished from the main, unpaid, results in the middle of the page.

The ACCC is not saying this, but I think it would accept a settlement based on the latter point, and not press on the first. In other words, Google could probably end the case with more prominent signage on its sponsored links.

But Google denies there is a problem at all, and it is supported in this by Peter Coroneos of the Internet Industry Association and just about every other geek in the country.

It says the paid ads are clearly marked "sponsored links" and the one across the top has a beige background, which further distinguishes it.

On the question of competitors buying each other’s names, Google says it does not monitor this and given the billions of searches going on every day it would be impossible to do so.

Google then shoots its own argument down by referring to its "AdWords Trademarks Complaint Procedure", which allows a business to apply to have its trademark protected from competitors buying it. Obviously if it were impossible to monitor these things, then this procedure would not work either.

In any case, the complaint procedure is only available on google.com, not google.com.au. And it’s buried deep under "about Google", then "contact us" – there are no signposts how to get there. It’s fair to say no one would find this unless they were told where it was.

And who can blame Google? Competitors bidding against each other at auction to buy their own names as well as each other’s names is no doubt a big part of the company’s revenue. Yes, but is it fair and reasonable?

The system of sponsored links is based on a 2002 ruling by the US Federal Trade Commission that basically approved it. Now the Australian regulator has asked The Hon James Leslie Allsop, judge of the Federal Court of Australia, to update this US ruling. Should be fascinating.

Alan Kohler publishes Eureka Report, an investment newsletter financially backed by Carnegie Wylie & Co. The views expressed here are Kohler’s alone.ak@eurekareport.com.au

Travel Trends: July 20, 2007

Travel Watches As ACCC Goes After Google, Trading Post

THE travel industry – among the biggest users of search engine marketing – will be closely watching legal action the Australian Competition and Consumer Commission is taking against Google and Trading Post.

The ACCC alleges the companies engaged in "misleading and deceptive conduct" during a paid search campaign designed to direct take business from websites competing with Trading Post.

It alleges that Trading Post contravened the Trade Practices Act in 2005 when the business names "Kloster Ford" and "Charlestown Toyota" appeared in the title of Google sponsored links to Trading Post’s website.

By allowing this to happen, Google has also been accused of breaching the act, while the ACCC also claims the search giant, by failing to adequately distinguish sponsored links from "organic" search results, has engaged and continues to engage in misleading and deceptive conduct.

The ACCC is seeking:

• Declarations that Trading Post contravened sections 52 and 53(d) of the Act
• Declarations that Google contravened section 52 of the Act
• Injunctions restraining Trading Post from representing through sponsored links an association, sponsorship or affiliation with another business where one does not exist
• Injunctions restraining Google from publishing sponsored links of advertisers representing an association, sponsorship or affiliation where one does not exist
• Injunctions restraining Google from publishing search results that do not expressly distinguish advertisements from organic search results
• Orders that Trading Post and Google implement trade practices compliance programs
• An order that Google pay costs

The matter has been listed for a directions hearing in the Federal Court, Sydney, on 21 August 2007 before Justice Allsop.

This is the first action of its type globally. Whilst Google has faced court action overseas, particularly in the United States, France and Belgium, this generally has been in relation to trademark use.

Although the US anti-trust authority the Federal Trade Commission has examined similar issues, the ACCC understands that it is the first regulatory body to seek legal clarification of Google’s conduct from a trade practices perspective.

Travel Trends: July 20, 2007

Oodles.com Stirs The Pot On Launch

Steve Sherlock, Managing Director of new online car hire company, Oodles.com, has slammed the vehicle renter broker model as unsustainable. “I’m afraid a broker model with 25-30% margins is just not going to cut it in this day and age,” he said.

“Everyone knows brokers have been screwing suppliers for lower and lower rates for years. I used to be one of them. But now that supplier direct bookings are getting more traction, I believe the game up for brokers.”

He claimed online car hire rates are much cheaper than those through brokers and that consumers will vote with their wallet. Oodles has just launched after securing funding from several investors including Mario Salvo, who founded Europcar in Australia.

Oodles, which features a slick price comparison matrix, enters a competitive though fragmented market niche with no dominant player. Sherlock claims there is a great opportunity to build brand awareness in this space.  Oodles marks up its supplier rates with a flat 10% commission.

Car hire will be a major topic at this year’s TRAVELtech – watch for further details… TravelTrends.biz: July 20, 2007

Technology Major Ammo In Lido Defence Win

THE importance of having a strong technology development culture – rather than just using other off the shelf solutions – has been vividly demonstrated with The Lido Group winning the massive Defence Department accommodation account, worth between $20 million and $30 million a year.

Lido, Australia’s biggest accommodation broker, has developed a strong suite of inhouse technology products, including its own specialist booking technology and distribution system, known as E-GAPP, which General Manager Matt Tyler said was a major factor in the account win.

Tyler added that Lido made the decision five years ago to develop its own technology rather than relying on suppliers such as the GDS, a move that is now paying off as the company moves increasingly into product distribution. Having an inhouse technology capability also allows Lido to develop customised interfaces with partner companies (including the GDS).

In related news, Tyler said Lido is interested in signing up new properties interested in Defence Department business to E-GAPP. "This means that even the smaller operators in country locations can be part of the program,” he said.

At last count, 50,000 Defence staff had travel cards – making it the largest acommodation account in the country. Qantas Business Travel will continue handling other elements of the Department’s travel program, such as air and car (with Hertz the preferred supplier).

Travel Trends: July 19, 2007

Drive Destinations Running Out of Petrol As People Fly Or Opt for Gadgets Over Experience

By Martin Kelly, TravelTrends.biz

IT was the best of times, it was the worst of times… a famous line from Dickens and one which applies to the Australian domestic tourism industry over the next decade.

That’s the inescapable conclusion from the latest Tourism Forecasting Committee report, which paints a positive picture for outbound and inbound travel, while outlining a much more complicated domestic scenario.

In simple terms, it looks like traditional drive destinations will get screwed at the expense of those served by Low Cost Carriers – in Australia and abroad – as travel habits morph at breakneck speed.

Yet the future may not be that black and white.

That’s because the amount of time Australians spend holidaying in their own country is actually forecast to fall – from 289 million visitor nights in 2007 to 282 million visitor nights in 2016.

In other words, more trips, less time travelling.
 
So undoubtedly there’ll be challenges right across the board for Australia’s domestic tourism industry, including those served by LCCs.

Meanwhile, some of the strongest competition will come from outside the industry as consumers spend increasing amounts of money (and time) on the latest gadgets…

For evidence look no further than the annual results from retailer Harvey Norman, up 16% thanks to the insatiable consumer appetite for new technology.

Anyway, the report predicts that the contribution of tourism to the Australian economy will increase from $84 billion in 2006 to just over $100 billion in 2016 in real terms, underpinned mainly by growth in inbound tourism.

Chairman of the Tourism Forecasting Committee, Bernard Salt, said the value of inbound tourism is forecast to increase at an average rate of 4.9% a year from $22 billion in 2006 to $35 billion in 2016 in real terms.

This longer term growth rate has been revised up from 4.3% a year mainly due to larger than previously assumed increases in aviation capacity serving Australia.

“After a solid start to the year, arrivals are forecast to rise 3% to 5.7 million in 2007,” Mr Salt said.

“In 2008 and beyond arrivals are forecast to grow more strongly with increases in international aviation capacity and weakening of the Australian dollar improving the competitiveness of travel to Australia.

“Turning to the outlook for domestic tourism, aviation developments will also shape this sector of the industry,” Mr Salt said.

“The amount of aviation capacity serving the domestic market is set to expand significantly in late 2007 and through 2008. This is expected to support an increase in tourism trips at the expense of lowering average nights per trip as some travellers switch from ground to air transport.”

“As a result after rising by 1% to 289 million in 2007, domestic visitor nights are forecast to decline by 2% in 2008 and by a further 3% to reach 274 million in 2009,” he said.

“Beyond 2009 domestic visitor nights are forecast to rise moderately to reach 282 million in 2016.

“This growth will support an increase in the economic contribution of the domestic tourism industry from $62 billion in 2006 to $65 billion in 2016 in real terms.

“Throughout the projection period domestic tourism will be under pressure as rival goods and services including overseas travel destinations compete for consumers’ time and money.

“Outbound tourism is forecast to continue growing at a stronger rate than domestic tourism given the increasing desire of Australian’s to travel overseas, the expansion of low cost air capacity to outbound markets and the overall expansion in international aviation capacity servicing Australia from late 2009.

“As a result outbound departures are forecast to grow at an average annual rate of over 5% between 2006 and 2016 to reach 8.2 million,” Mr Salt said.

The TFC’s membership draws on the combined expertise of the private and public sectors in the tourism and finance industries. Its forecasts are available from: http://www.tra.australia.com/

Travel Trends: July 19, 2007

 

TripAdvisor Passes 10 Million Reviews

Anyone doubting the power of travel communities should have any cynicism blown away by the announcement from market leader TripAdvisor that its site now features 10 million user reviews – double the amount it had just 12 months ago. TripAdvisor also claims 20 million monthly visitors and six million members. Meanwhile the site has launched a traveller networking tool that allows members to plan, write and share itineraries and thoughts. The website’s VP of Marketing, Christine Petersen, boasted: "We think we’ve created a category killer.” Time will tell.

Travel Trends: July 5, 2007

Peak Season But Snow Search Left In Cold

SEARCH marketing appears to have been largely left out in the cold by Australasian snow tourism businesses during a key booking period bolstered by good early season snow falls, especially in Oz.

However this opens up significant, cost-effective opportunities for those that are willing to have a go and look beyond high-demand terms such as ‘snow accommodation’ – 18 ads on Google (three on Yahoo!7).  Other popular search terms such as the resort names elicits a sparse paid search response.

For example the following responses were logged on Google: Perisher (1 Google ad), Perisher Valley (4 ads), Thredbo (2 ads), Mt Hotham (3 ads, including resort), Mt Buller (2 ads), Falls Creek (3 ads) etc.

There are even less ads running next to the NZ resorts – generally one or two. In each instance, the service towns are much more popular – Jindabyne (8 ads), Bright (8 ads), Wanaka (6 ads), Queenstown (5 ads).

No doubt this is a reflection supply and demand, but if businesses looked further up the hill, they’d gain great reach at potentially less cost while still maintaining consumer relevance.

Travel Trends,
July 5, 2007

Travel.com.au Buys 100% of Lastminute in Oz and NZ

The share price of online travel agent Travel.com.au (TVL) slumped 12.5% following news that it was buying outright control of the Lastminute brand in Australia and NZ for A$4.75 million. TVL bought the 25% it didn’t already own in this market from Travelocity “subject to maintaining certain brand values”. Travelocity will continue selling its products through the Aussie and NZ sites for the time being. There was an expectation among some investors that the reverse would occur with Travelocity buying out TVL, resulting in a cash windfall for the ASX-listed company. TVL is aiming for total revenue growth of 30% to 35% over the next year.

Travel Trends: July 4, 2007

Bookings Now Open For TRAVELtech 2007

BOOKINGS are now open for the TRAVELtech conference in Sydney on August 28, which features a strong, issues-based program that looks beyond the obvious into the far reaches of the Australian travel web.

The theme is Destination Online and it covers all the hot topics – from Maps, Mashups and Web 2.0 through to Gen Y and the dreaded Long Tail – plus the usual detailed industry analysis.

There are lots of new speakers with a special focus on online travel entrepreneurs and the sites they have built. In addition the program will examine a couple of niches that have so far flown under the radar.

There’ll also be an exclusive interview with Stella Travel Services boss Keith Stanley, who controls Australia’s largest travel group.

Potential Identity Crisis Looms For Virgin Blue

By Martin Kelly, TravelTrends.biz

NEWS that Virgin Blue is seriously considering launching a new Low Cost Carrier to combat the arrival in Australia of Tiger Airways etc presents an intriguing marketing challenge. After all Virgin unequivocally entered the Australian market as an LCC and it’s won plenty of regional aviation awards in this category over the past few years.

But if the company goes ahead with a new LCC launch, where does this leave the positioning of “ex-LCC” Virgin Blue? Between a rock and a hard place, some would suggest. Statements in the past by CEO Brett Godfrey indicate Virgin is gently repositioning itself as a “New World Carrier”, combining the best of the old and new, while the website says it is a “low fare airline that is big on service and low on price.”  Stand by for some more spin in the weeks ahead.

TravelTrends.biz
June 22, 2007

Travel.com.au May Record First Profit

ONLINE retailer travel.com.au, which also operates lastminute.com.au in the Australian market, may post its first profit since being listed on the Australian Stock Exchange in 1999. Around that time its shares, now worth around 33 cents, traded as high as A$2.80. Fast forward to the present and the company estimates its 06/07 earnings before interest, tax and depreciation will range between A$400,000 and A$500,000, a forecast that excludes extraordinary items such as A$250,000 in costs related to lastminute.com.au.

Over the first five months of 2007, the company reports that “online Total Turnover Value (TTV) and revenues for travel.com.au increased by 70% and 76%, with total revenues increasing by 40%. For lastminute.com.au, hotel booking numbers for the period increased by 27% over the previous year, while TTV and revenues for the brand increased by 30% and 34% respectively. Group TTV and revenues for the five months increased by 33% and 36% … online revenues increased by 44% (and) now represent around 80% of total revenues.”

In other news, TVL has deferred the release of its new travel.com.au website until the end of this year and said “there are signs that competition in the online travel sector is now intensifying” and that “it is too early to determine the sustainability or likely rate of future growth”. TVL Managing Director Adam Johnson will be speaking at TRAVELtech in Sydney on August 28.

Traveltrends.biz
June 22, 2007

It Seemed Like A Good Idea At The Time…

By Yeoh Siew Hoon, The Transit Cafe

The telephone call came late Thursday afternoon. “Have you heard?” asked a hotelier friend. My journalist’s ears perked up.

He then sent me the link to the breaking news from London. “Hotel chief quits after lying on his CV,” said the headline.

My first response was shock. Then sadness. A young man with a promising career. A husband and a father of two small children. The cover boy of the hotel world in Asia.

A career in disarray. A reputation in ruins. A family in crisis. His team in shock, and grieving for the sudden loss of their leader.

The first email I received asked, “Why did he do it?” Asking that question is a bit like trying to close the gate after the horse has bolted.

No one but Patrick Imbardelli will know the answer to that question and even now, perhaps he too is grappling with that.

Another reaction was “how could he be so dumb”? He too is probably trying to answer that as well.

Living by the belief that you should never judge a man till you’ve walked a mile in his shoes, let me speculate.

We live in a world where corporations demand paper qualifications of those they employ. I was looking at an advertisement from the Singapore Tourism Board recently and every job level – junior or senior – required university degrees.

There are companies that will not promote you beyond a certain level if you do not have the right paperwork, even if you have worked for them for several years.

So imagine you’re a young, driven executive determined to get the trophy job. You know you are good, and confident enough to do it. So you tell a little white lie – okay, you didn’t graduate but you did attend classes.

Suddenly your career takes off. And you’re caught in a bind – even if you wanted to tell the truth now, could you? So you continue to work hard, and your career takes off even faster. There’s no turning back now.

The higher you rise, the harder the fall so you can but only hope for the best. After all, you think, who’s going to find out?

Well, they did, and they have. And now Imbardelli and his family are paying the price. He took a shortcut and his career has been shortcuited. If there’s anything to take away from this, it’s “there is no shortcut in life”.

The company he worked for, for the last seven years, and who hailed him a rising star is determined to move on. They have shown him the door and they have wished him well. He is a talented man and he will move on, they say.

Easier said than done, I’m sure.

There are some who think the company was overly harsh. But in today’s world of political correctness and corporate governance and where everyone has to be seen to be squeaky clean, it probably had no choice, “shareholders’ interests” being the magic word.

So who’s to blame? In truth, no one and everyone.

Could it be perhaps the system – the rules of the corporate jungle – that creates individuals like Patrick and situations like the one he got himself into?

I am not saying that as individuals, we shouldn’t be responsible for our actions especially if they could harm others but if the corporate world sets such high standards for its leaders, can everyone ever make the mark, without fudging a little thing or two?

It’s like our politicians – we want them to rule the world wisely like God but god forbid if he turns out to be a mere mortal.

It reminds me of the Tour de France performance-enhancing drug scandal when one former champion said something to this effect,“do people really expect us to be riding over such hills and distances without taking anything? Honestly …”

What Patrick is going through right now cannot be imagined. Let’s wish him well.

Traveltrends.biz

June 22, 2007

Shoulda Been There - Back in 2019

You should have been there. The first sold-out edition of Travel IQ was a fantastic day.

Make sure you don't miss out in 2019 - register your interest here to get the latest updates.

Travel IQ is a one-day conference that celebrates the business of travel.

It's designed for entrepreneurs, key executives, business owners, directors, analysts, investors and managers across all verticals.

The aim is to get people thinking – and also inspired - with case studies from some of Australia’s most renowned travel entrepreneurs and innovators.

This unique format resonated with the attendees at the first event, which was staged at the Langham, Sydney, on October 24.

As one high-profile speaker commented: "I met with many great people and the overwhelming comment was how much they got out of Travel IQ.

"Personally, I also enjoyed the event very much.

"It is always great getting the heads of companies in the same room, inspiring. So well done!"

Another said: "Excellent first up business event - great base to build on."

Travel IQ 2018 featured an outstanding program packed with industry leaders including:

Anthea Hammon, Managing Director, Scenic World; Director, Hammons Holdings 

- Anthony Hayes, Chief Operating Officer, Sealink Travel Group (SLK)

- Anthony Moulder, Head of Transport & Infrastructure Research, CLSA Australia

- Bob East, Chairman Tourism Australia/ Chair Experience Co (EXP)

- Brett Mitchell, Regional Director APAC, Intrepid Group

- Darrin Grafton, Co-Founder, Serko (SKO)

David Hammon, CEO & Director Hammons Holdings, (Scenic World/Sydney Harbour Bridge Tourism Experience)

- Dax Eddy, Executive Director, Jamberoo Action Park

- Jamie Pherous, Managing Director, Corporate Travel Management (CTD)

- Jeff Lewis, Vice President Technology & Strategic Initiatives, TripAdvisor

- Josh Oakes, Director, The Sunshine Tribe

- Kathryn Valk, Director of Marketing, Royal Carribean Cruises Ltd

- Les Szekely, Managing Director, Grand Prix Capital, early investor in SiteMinder and Rezdy

- Nigel Benton, Publisher, Australian Leisure Media

Quirin Schwaighofer, co-Founder and COO, MadeComfy

- Rachel Wiseman, Chief Investment Officer, The NRMA

- Robert Halfpenny, Managing Director, Aurora Expeditions

- Rod Cuthbert, Founder Viator, Former Chairman Rome2rio

- Rob Smith, Divisional Director, Australia/New Zealand, Merlin Entertainments (LON: MERL)

- Sue Badyari, Chief Executive Officer, World Expeditions

- Simon Lenoir, Co-Founder, Rezdy

- Tammy Marshall, CEO, The B Hive

- Vasso Zographou/Michael Simpson, Savills Hotels

Travel IQ will be back in 2019, date and venue to be advised.

Travel IQ is produced by Martin Kelly, publisher of TravelTrends.biz and creator of several respected industry events.

More information on Travel IQ

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./././.

- It's All About The Information - 

TravelTrends founder Martin Kelly has diversified and now also runs Bluewater Press, a communications and thought leadership consultancy with a particular expertise in travel. Services include:

- Strategic Communications
- Media Releases & Distribution
- Crisis Management
- Thought Leadership
- Industry Advocacy
- Positioning, Messaging
- Marketing Plans & Execution
- Engaging Content

Martin is a communications, public relations and media professional with extensive high-level experience across the travel, internet, property and banking industries, both in-house and as a consultant.

For further information please email martin@traveltrends.biz

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