Shrinking Margins, Increasing Costs = Lower Profits

The latest results from US travel industry giants Expedia and Sabre Holdings do not make pretty reading for either investors or the online travel industry.
In short, sales are up but profits are down thanks to rapidly shrinking margins and increasing costs. 
Expedia’s profit of US$23 million for the first quarter was 51% less than a year before.
Sabre Holdings – which apart from the GDS, owns Travelocity (Zuji) – did slightly better. Its first quarter profit of US$32 million was only 34% under the weather.
Both stocks have been hammered as a result. Expedia shares fell around 30% in a day. Sabre’s share price has been on a slow descent, shedding around 25% of their value since January.
Headlines from the Expedia results include:
  • Bookings value up 14%, but revenue margin down by around 10%
  • Airline margins down 9%
  • Hotel margins down 7% (on a revenue per room basis)
  • Less Americans, in particular, are buying its holiday packages
  • Costs increased more than 10%, particularly in marketing
At Sabre:
  • Operating costs grew 26.5%
  • The operating margin fell more than 30% (to 9.2%)
  • Travelocity hotel room night sales were up 54% (probably due to recent acquisition
  • Total packaging revenue grew 38% (see above)
  • GDS revenue increased 7%
Interesting reading, don’t you think?
So what’s the take-out, takeaway, whatever?
Become a supplier and sell direct (ha, just kidding).

Online Booking Fees: How High Can They Go?

BOOKING and service fees are emerging as a crucial source of income for Australian online retail sites with Webjet reporting that fee income now accounts for more than 50% of its gross profit.
In fact, Webjet appears to be setting the global benchmark for online fees, charging a A$14.95 processing fee on all bookings, land or air, in addition to an extra A$3.45 per person per sector ‘Seat Price Guarantee’ 
This means airline passengers pay A$21.85 to book a return flight through Webjet – up to five times higher than its local rivals, which charge as little as A$4.40 per booking.
In the United States, online airfare booking fees have settled at $US5 after a fierce price war, similar to rates in major European markets such as the United Kingdom.
Webjet Managing Director David Clarke said his customers have no problem with paying such comparatively high fees and that rivals are crazy for not cashing in.
In the past 12 months Webjet has increased its processing fee by 115% and its Seat Price Guarantee has risen 345% from $1 to $3.45 without suffering customer backlash.
“What I don’t understand is why our competition don’t charge higher fees,” Clarke said.
For online airfare bookings, ZUJI charges $8 and Flight Centre is at $6.95. and charge $4.40 (domestic) or $9.90 (international) – a situation that may change soon.
Managing Director of Adam Johnson commented: “I really feel at the moment that we are probably a little bit under the market rate.”
Clarke said “however extraordinary it may sound” many Webjet customers don’t care one way or the other about service fees.
“In fact, greater than 50% consider fees a reason for doing business with us, and we believe that this is a result of an absence of bias (through its airfare booking matrix).”
However, this is a service most other leading sites now offer.
So the multi-million dollar question is: why should people stay with higher-cost online retailers?
But no-one has the answer right now, and it is in nobody’s interests to ignite a price war.
Right now it’s a waiting game.
As for the future, Clarke believes that service fees are not only here to say, but that everyone will soon be charging them.
“I think the simple fee structure that now exists may become more more complicated and equate back to product value.”
“And I’d be really surprised if the major online airlines don’t start charging internet fees.”

Record Online Ad Spend

AUSTRALIA’S online advertising spend could hit a record $1 billion for 2006.
The Audit Bureau of Verification Services reports that the online advertising market grew 65.3% in the first quarter compared with the same period last year.
Online advertisers spent $195 million in the three months to March 31, 2006.
Most of it was outlaid in the booming Search and Directories area which had a 38.7% market share ($75 million) – 80% up over 2005.
Classifieds consumed 31.8% ($62 million), followed by general advertising with a 29.5% share ($57.5 million).
Interactive Advertising Bureau spokesperson Patty Keegan said: “We’re extremely pleased with the continuing growth in this sector which again, compares very favourably with traditional advertising categories as spending habits continue to shift.

"Of more importance is the fact that Q1 is traditionally the weakest quarter of the year and we’re therefore expecting this trend to continue.

"Growth of this magnitude throughout the year could lead to 2006 online expenditure approaching the $1 billion mark."


Online Bookings Surge For Distribution Giants

STRONG online booking growth is a feature of results reported by distribution giants Amadeus and Cendant TDS.
Amadeus has reported that online bookings “from all providers grew” by 34.1% during 2005 and now accounts for 12% of total bookings, which in turn increased 4% to 473 million.
The company claimed global GDS leadership with 29.24% market share at the end of the year, up 0.44% year-on-year.
“Total revenue grew by 17.6% to EUR 2,418.3m, with an increasing proportion coming from IT services,” the company said.
Meanwhile, Cendant TDS reported that its online travel business bookings grew by almost 30% in the three months to March 31 – a period when revenue was up but profits were down.
Cendant’s online properties include Orbitz,, Octopus Travel, Rates To Go and Hotel Club.
“On an organic basis, our online travel businesses grew worldwide gross bookings by 27% and achieved higher margins,” Cendant said in a results statement.
“In addition, revenue from GDS (Galileo) and supplier services increased 5%, driven principally by a 7% increase in worldwide air booking fees, partially offset by decreased subscriber fee income.”
Despite overall revenue increasing 17%, Cendant TDS profit fell by 19% during the quarter to $US105 million.  
The company said relatively new acquisitions Gullivers and ebookers “contributed a total of US$66 million to revenue but reduced Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) by US$13 million.
“In addition, EBITA was negatively impacted by higher expenses at Galileo, including infrastructure improvements to support growth, higher technology costs in our online businesses and US$7 million of separation costs.”

Cendant Considers Sale Options, Signs Up Virgin

CENDANT has announced it is now considering selling its Travel Distribution Services division as an alternative to a shareholder spin-off.
Chairman Henry Silverman said Cendant has “decided to further explore other strategic alternatives” after receiving a number of unsolicited offers for the TDS business, which is being renamed Travelport ahead of the sale process.
The news follows the appointment of a new TDS senior management team – Gordon Bethune, Chairman, (formerly Chairman and CEO of Continental Airlines) and Jeff Clarke, CEO and President (formerly Chief Operating Officer of CA).
“The announcement that TDS will be re-named Travelport further identifies our company as the destination for travel bookings, with a strong and unifying identity for the distinct travel businesses that comprise TDS," Mr Bethune said.
Mr. Clarke added: "TDS, with its leading brands such as Orbitz, Galileo and Gullivers Travel Associates, is well positioned to experience considerable growth.”
In a statement, Cendant reiterated its plan to spin-off Realogy Corporation and Wyndham Worldwide to shareholders as previously announced, which would result in three separate public companies, including Avis Budget Group, Inc., if TDS is sold.
Meanwhile, Cendant TDS) announced that Virgin Blue has signed a multi-year agreement to use aiRES, its “next-generation Passenger Services System (PSS)”.
Cendant said aiRES is built from the ground up on open systems technology and is designed to replace “less flexible, more expensive legacy systems now common in the industry”.

Windfall For Founders as Goes Public has announced details of its much-anticipated listing on the Australian Stock Exchange, revealing that it will float 42% of the company, reaping a $160 million windfall for foundation investors, who will retain control with 58% of the company.
The money will largely be raised from major institutions paying up to A$2.00 a share, effectively locking out retail investors, until the shares start trading on the ASX in early June.
Founder and CEO Graeme Wood, who owns 35% of the accommodation website he started just six years ago, could reap A$140 million from the IPO.
He will receive A$42 million cash for selling down 10% of the company’s shares into the offer, while his retained 25% will be worth $102 million based on a A$2.00 issue price that will value the company at around A$400 million.
All proceeds after expenses will go the founding shareholders.
The prospectus – now available through, reveals than is a very profitable company, operating with enviable margins.
The company is forecasting net profit after tax of A$15.7 million on revenues of A$45.3 million this financial year, and is expecting after tax profit of A$19.1 million next financial year on revenues of A$55.8 million.
“ anticipates a fully franked final dividend of 1 cent per share for FY2006 and 8.4 cents per share for FY2007,” the company said in a statement., which has international expansion aspirations, claims to be the Australasian market leader in the online accommodation industry “processing approximately 36% of all online accommodation sales in Australia and 18% in New Zealand."
The joint lead managers for the offer are Macquarie Equity Capital Markets Limited and ABN AMRO Morgans Corporate Limited. These companies will make more than A$7 million from the float.

TVL Soars On Brand Association

WHAT’S in a name? Money, that’s what. (TVL) shares have soared to a 3.5 year high with news that a News Corp investment vehicle – netus, headed by former ecorp boss Daniel Petre – is taking a 19.9% stake.
Just a few weeks ago TVL failed to raise A$1.6 million from investors in a rights issue with its underwriter absorbing the shortfall.
That now looks like a great investment with the TVL share value increasing 50% immediately after news broke. TVL is now trading in the 28 cent range.
Netus is building its stake through the acquisition 8.6 million shares from Amadeus (subject to Amadeus board approval), and the issue of another 10.6 million shares at 17 cents by TVL.
The placement will raise A$1.8 million.
Amadeus has been with TVL since the company listed in 1999. At one stage the shares were selling for A$2.80.
Petre will take a seat on the board, replacing Bill Lawler from Amadeus, pending final approval of the deal.
TVL says the extra money will be used to build and promote its two brands – and
The latter hit new highs in March, with Total Transaction Value up 40% year-on-year.

Online Travellers Use Maps More

Consumers are flocking to online map sites. 
Hitwise reports that "visits to the Travel – Maps category by Australian Internet users grew by 43.9% in the year to April 8.
The beta launch of ninemsn’s MyLocal service and the expected launch of integrated maps and local search offerings from other major players in Australia signal a highly competitive market ahead.

" (, owned by Sensis, holds the dominant market share in the Travel – Maps category, with 40.9% of online visits for the week ending April 8, 2006.

"Much of the recent category growth has been driven by the launch of Google Maps ( and Google Earth ( which ranked 2nd and 4th respectively for the same week.

"In the Business and Finance – Business Directories category, Sensis web properties again dominate. WhitePages (, YellowPages ( and Sensis ( were the top three ranking websites, accounting for a combined 73.6% market share for the week ending April 8, 2006.

"The nearest competitor was a new entrant owned by News Ltd.,, which maintained 3.6% market share.

"The applications of mapping technology online have a wide scope, where a number of Google mashups, or websites using the Google API for novel content areas, are popping up.

"An example includes social networking website, Frappr ( which allows users to find friends’ locations by their post code.
"Frappr ranked at 7th position in the Travel – Maps category, holding 2.6% market share for the week ending April 8, 2006.

"The opportunity exists here to extend net community functionality into business directories to improve the relevancy of the service to consumers.

"Indeed, the possibilities of combining various content formats appear endless, where there will be more start-ups offering ancillary services to the major players.

"Hitwise Search Intelligence data show that there were 249,531 search terms that drove traffic to the Maps and Business Directories categories combined, over a 12 week period ending April 8, 2006.

"The search term, ‘post codes’ drove a significant amount of traffic to both categories, with 602 variations on this term. Australia Post received the majority of this traffic (66.8%), where local search providers have the opportunity to improve website visits on these variations."


TRAVELtech and Wired Return For 2006

Got any ideas? Great, then send them through… Work is well under way on both the TRAVELtech and Wired: Asia Travel Matrix conferences. TRAVELtech has an Australian focus and is on at Dockside in Sydney on August 22, while Wired is all about the Asian industry. It will be happening a couple of months later in Singapore on October 26 & 27. They are both great events, attracting more than 250 delegates, and if you’d like to have an input or are interested in sponsorship, please email Martin Kelly.

News In Brief

Check-in: Hotels will continue to enjoy strong sales growth from Global Distribution Systems and the Internet through 2006, according to TravelCLICK. The company said revenue from the GDS and web was up by almost 11% in the last quarter of 2005. According to leading industry consultant PhoCusWright, 2006 will be the year that supplier or brand sites overtake third party sites in terms of percentage of online hotel bookings.
Viral: You all know that Tourism Australia’s ‘Where The Bloody Hell Are You Campaign’ has gone ballistic – but have you seen the spoof? Check out where a couple of different versions can be downloaded but you’ll need Quicktime to play.
Shooting Star: The international online bookings of the Qantas Group are set to surge with the announcement that Low Cost Carrier Jetstar will fly to six destinations in Asia and the Pacific – Bangkok, Phuket, Osaka, Ho Chi Minh City, Bali and Honolulu. Jetstar will “ultimately provide more services to Asia and the Pacific before expanding with second stage flying to Europe,” Qantas CEO Geoff Dixon said. Meanwhile, the Australian Airlines brand will be retired for the second time.  
Money Talks: Martin Symes, for many year Executive Director, Commercial, at Zuji, has joined travel search engine Bezurk as CEO. “He will also make a financial investment in the company and become a significant shareholder,” the company said in an announcement.

Yahoo!7 & Link

INDUSTRY survivor has stitched up an agreement with Yahoo!7 to supply content for its main site – The deal covers air, hotel and car – boosting the profile and potential revenue for, which has yet to post a profit. Investors are adopting a wait and see attitude with the company – a recent rights issue fell well short of the A$1.6 million target, forcing the under-writer to pick up the slack. Staff are optimistic, however. There has been some recent offline advertising in the weekend press, while the local Lastminute website – which runs – is performing strongly.

Accommodation To Make Cents For Sensis – Travel Next?

TELCO giant Telstra has moved into travel, emerging as a major industry force with the launch of GoStay by Sensis, its directories and online search division.
GoStay ( is an accommodation listings and booking business Sensis has created in conjunction with Australian Online Travel, part of the AOT Group.
The move heralds a major strategic shift and follows rumours that Sensis tried but failed to buy online accommodation market leader,
Go Stay is effectively two products: a website and accommodation guidebook.
The website features 2000 properties supplied by AOT, while the guidebook features 5000 properties sourced by the Sensis sales team.
AOT, which owns the and wesbites, is providing fulfillment for both products through the website and a 1300 number.
Sensis has also signalled it wants to expand into other areas of travel, including air and car.
“Anything is possible,” said Jane Blackley, Group Marketing Manager, Verticals, at Sensis.
She said Sensis is looking at sectors that work across the online, print, voice and mobile platforms.
Meanwhile the company has unleashed a massive marketing campaign to support GoStay.
The campaign includes a record-breaking letterbox drop to 3 million Aussie households – almost half the Australian population.
“It’s the biggest distribution of a guide like this ever done in Australia,” Ms Blackley said.
GoStay marks the first time Sensis, which makes virtually all its revenue from advertising, has moved into retailing – a sign of things to come.
Parent company Telstra has been hit by consumers transitioning from fixed line phones to mobiles, and is looking at Sensis to drive extra revenue.
The Sensis sites – which include White Pages, Yellow Pages, Trading Post, City Search and many others – have around 2.5% of the Australian online market.
Microsoft (many sites) and Google (single site) lord it over everyone with around 20% total market share, according to the latest Hitwise stats on the market share of parent companies.
Yahoo! is on 9% followed by eBay (6.36%) News Corporation (2.97%) and Telstra (2.46%).
At present there are no pure travel companies in the Top 20.
Hitwise says ‘Destinations and Accommodation’ is one of the most popular internet categories with about 1% of total traffic.
The ‘Travel’ category comes in at 2.3%.

Quenten Smith Goes Bezurk

TRAVEL Search Engine, Bezurk, has appointed Quenten Smith Sales Director, Asia Pacific. Quenten joins Bezurk from Yahoo! South East Asia, where he has been in charge of travel industry partner development.

Travel Wired: Opinion

By Martin Kelly

STICKS and stones may break my bones but words can never hurt me. Or as Eric Idle from Monty Python said: “Sticks and stones may break my bones but words will make me go into a corner and cry by myself for hours.”

In retrospect, that should have been the approach from Webjet boss David Clarke, who took offence at the semantics of a Flight Centre press release, igniting a war of words that may yet end up in the courts.

Clarke was offended by the assertion from Flight Centre that is the “entrenched” Number One travel agency website based on Hitwise statistics for the six months to December 31.

He also didn’t like Flight Centre claiming that “no online travel retailer in the Australian market currently generates significant profit.”

Irked, Clarke fired off a riposte that challenged Flight Centre to start talking online financials before making such claims on the basis that Webjet needs to reassure its shareholders that online travel retail is profitable.

Webjet made $924,524 after tax profit for the period in question, roughly half of it from service fees, a proportion which is now closer to 60 per cent. Flight Centre does not reveal its online results.

And that should have been the end of it – until a report emerged that Webjet had complained to the Australian Competition and Consumer Commission about the claim.

It now appears that the story was wrong – Webjet has made so such complaint – but Flight Centre boss Graham Turner reacted with another press release.

“The simple fact is that has now won the 2004 and 2005 awards based on research from independent web monitor Hitwise,” he said.

“Webjet’s criticism is particularly puzzling when you consider that it continues to promote its own success in the Hitwise rankings for the June quarter last year.”

Turner also took a swipe at Webjet’s accounting.

“On the issue of profitability in the online travel agency sector, Flight Centre is fundamentally opposed to the practice of aggressively issuing shares and options in return for products and services – which would usually be considered basic operating expenses – received from third parties.

“Webjet seems to minimise expenses in this manner. Flight Centre believes this is undesirable and potentially misleading to investors as it can cloud the true underlying profitability of the company doing it.”

Not surprisingly, Clarke took great offence, called his lawyers and fired off a confidential letter to Flight Centre, which it was considering as this story went to press.

“We view the Flight Centre comments with the utmost seriousness. It impugns the integrity of Webjet and its directors … and is demonstrable nonsense.”

As is this whole fracas, all over a word that now seems to sum up the whole bizarre situation, created out of nothing – entrenched.


Mate, It’s A Bloody Ripper Ad

By Yeoh Siew Hoon
Warning: Yeoh Siew Hoon’s article is rated PG. Profane language is used liberally throughout, so reader discretion is advised.
When my friends in Australia first sent me an email titled, “So where the bloody hell are you?”, I thought, “Bloody typical. So rude, so direct, so upfront. Just like Australians.”
I was going to shoot back a reply saying “None of your f……. bloody business” (just to prove that we Asians can swear as well as them) when I realised they were writing to tell me about the brand new A$180 million advertising campaign launched by the Minister for Tourism Fran Bailey.
“So Where the Bloody Hell Are You?” is a campaign designed to make tourists sit up and take notice, and book their trip right away. “It is a distinctively Australian invite that says, come to our place now,” the minister said.
Well, the minister is right in one sense. It did make me sit up and take notice, and then I laughed my bloody head off.
I laughed because I want the job of the advertising agency that came up with that bloody tagline – imagine, being paid that kind of money to swear at your customers.
I tell you, it’s a bloody dream job.
Now I don’t have the same kind of job as you that requires me to deal with bloody customers (ie people like me) every day but if I did, I swear I’d want to swear at me all the time. I don’t do it because I know I could get badly punched, not bloody paid.
So I’d like to thank the Australians for liberating us from that bloody silly notion – whoever wrote that management book that said we shouldn’t swear at our customers should be bloody hanged. They are to blame for our f……. stress levels. Swearing is not hazardous to your health, unlike smoking.
I have to confess though that I am bloody confused as I am sure some Australians are as well. Just two years ago, the Australians wanted us to see them “in a different light” – a softer, gentler, more emotional side – with their new branding “Australia: A Different Light”.
Now they want us to see them as they are – direct, upfront, open, friendly folks. The TV commercials which show frames of real Australians saying, “We’ve bought you a beer”, “We’ve got the sharks out of the pool” and “We’ve turned on the lights” are really a way of saying, “This is who we bloody are, this is what we bloody have, so what the hell are you doing over there, get your butt over here now.”
Fran Bailey calls it “unashamedly Australian”.
Now some of my Australian friends told me they cringed when they heard the tagline but I’d like to reassure them that really it will not cast Australia in a different light from that first different light.
We have always enjoyed the humour and honesty of Australia. It’s just that we may have to get used to being sworn at when what you really want is our money.
Bloody hell.

World Catches Aussie Disease

TOURISM Australia will roll out further viral elements to its new So Where The Bloody Hell Are You campaign over the next few weeks, building on the outstanding success of the initial online push.
More than 100,000 people from 150 countries have already downloaded the new TV ad, which spearheads a fresh A$180 million three-year marketing drive from Tourism Australia.
Featured on and, the somewhat provocative advertisement is delivered on a platform provided by Vividas that enables it to be easily emailed and viewed.
This “viral” element has already been used very effectively by marketers in other sectors (check out and saw Where The Bloody Hell Are You make its way around the world in less than 24 hours.
Those numbers are set to climb higher as the campaign – the aim of which is to make Australia less of a “one day I’ll go there” kind of place, to a “go right now destination” – is rolled out around the world over the next few months.
Manager Consumer Communications Paul Davies said Tourism Australia the campaign is aimed at “experience seekers” from key markets such as North America, the United Kingdom and Europe.
Davies said “experience seekers” come from all countries and age groups, and tend be very high digital users.
“So introducing a viral element to the campaign was one of the more obvious ways of targeting this audience.”
He added: “They are the kind of people who ask ‘what shall we do?’ rather than ‘where shall we go?’ ”
And now they have the answer.

Online Majority For Flying Kangaroo Within Year

QANTAS wants to have 60% of its domestic flight bookings transacted online within 12 months.
The airline group aims to save A$80 million in distribution costs over the next year “in tandem with a program to accelerate the Group’s (total) domestic online bookings from 44% to 60%.”
CEO Geoff Dixon said Qantas has already driven its distribution costs down by 25% over the past three years, largely by cutting travel agents commissions and going direct to consumers.
Its most recent commission cuts on July 1, when it slashed domestic commission from 5% to 1%, bore immediate fruit with A$50 million saved in the six months to the end of 2005.
Meanwhile, online bookings across all Qantas Group airlines, which includes Low Cost Carrier Jetstar, have increased 500% over the past four years.
But it was not all good news from the Internet with disintermediation hitting the profit of Australia’s largest wholesaler, Qantas Holidays.
“In both the domestic and outbound markets the effect of unbundling due to the increased use of online bookings has seen air land revenues fall 20 per cent.”
Dixon said Jetstar, which already does more than 90% of its bookings online and increased its pre-tax half year profit 45.6% to A$27.7 million, will play an ever-growing role.
“The Jetstar strategy involves expanding the domestic network, launching international operations and bringing the (loss-making) Jetstar Asia operation closer to the Jetstar Group,” Dixon said.
“New Jetstar joint ventures are also planned for other parts of the world.
“This will mean considerable growth for both brands, especially Jetstar internationally in the next three years, Qantas in new international markets, and the movement of Australian Airlines into the Qantas Airlines structure.”
Total Qantas Group international market share fell by 1.2% to 31.3%, reflecting the assault on Australian skies by “predominantly government owned” carriers from the Middle East.
Its domestic market share was 66.1%, according to the latest statistics.
Overall Qantas reported a 3.4% decline in pre-tax profit to A$483.5 million for the half year, thanks largely to fuel and restructuring costs.

ebookers Writedown Sours Cendant Results

Cendant has written down a massive US$425 million on its ebookers business, according to the 2005 annual results. 
Just recently, Cendant forecast an "impairment" (writedown) charge for ebookers, a European travel e-business, of “between US$200 million to US$300 million”.
Meanwhile, product pricing has also emerged as a significant issue for Cendant with its GDS and car hire business recording higher transaction volumes but lower revenue.
Revenue from GDS and supplier services (Galileo) fell two per cent during 2005 – contrasting with a six per cent increase in global GDS segment volume “offset by decreased subscriber fee income.”
Once again volumes were way up for Avis and Budget – 18 per cent – but pre-tax earnings slumped 10 per cent because of increased vehicle costs and fleet expansion to support demand.
To arrest this trend, Cendant has “initiated domestic price increases to mitigate the impact of higher fleet cost and has achieved modest year-on-year increases in pricing thus far in 2006.”
In other news, the company will persist with its plan to separate Cendant into four independent, publicly traded, pure play companies later this year.
President Ronald Nelson said: “We remain on track to complete the spin-offs of Real Estate Services and Hospitality in the second and third quarters of 2006, respectively, and the separation of Travel Distribution from Vehicle Services in October.”

People Come, People Go

Zuji has appointed former Octopus Travel Australia boss Peter Smith to head up its local operations. He replaces Jo O’Brien, who left the company to take up the CEO role at Tramada Systems.
Meanwhile, Zuji is interviewing for – Head, Hotel Business – a new role created following the departure of Regional Manager Hotel Business, Travelocity, Sue Graham.
Ms Graham recently started as Director of Sales and Marketing at CiEvents, a division of Flight Centre.
In other news, Peter Crowe, Head of Search at Yahoo! Australia and NZ, will leave the company at the end of this week to pursue private business interests.

Rock & Roll At Joi de Vivre But No Overnight Success

By Martin Kelly
Chip Conley saw the pool at the Pheonix Hotel and thought : “What a great place to have a party.”
It was 1987 and he set about turning it from a faded “no-tell motel” in the seedy Tenderloin district of San Francisco into the most talked about hotel in town.
“The first year it was not clear if we were going to succeed or not,” Mr Conley said. “The second year was better and by the third year we were in People magazine.”
The key was concept, commitment- and rock and roll. “We deliberately targeted the rock and roll industry from the start,” Mr Conley said.
“I knew the (legendary) rock promoter Bill Graham and he started sending customers our way. He said there were no other hotels for bands to stay in San Francisco – they were all boring and expensive.”
So the rock stars headed for the Pheonix Hotel and its great party pool, giving the new hotel instant celebrity and endless free PR. But strip away the glamour and it was all business.
Almost 20 years later, the dumpy motel on the wrong side of town is still going strong – the foundation of what is now Joie de Vivre Hospitality, one of the best two or three boutique hotel operators in the world.
JDV now has 37 hotels (up from 24 in 2004) – all either in or near San Francisco.
Along the way, Mr Conley, the founder and CEO, has learned a few things about the fast-growing boutique hotel industry, which is attracting a lot of attention – and people fresh to hospitality – in Asia-Pacific.
“Check your ego at the door, otherwise you’ll spend a fortune to lose a fortune,” he said.
“Make sure you are very clear about what your primary niche market is, and make sure it is large enough to keep your hotel full 365 days a year.
“That’s the problem Ian Schrager had at the Clift (374 rooms). If it was a 200 room hotel it would be fine,” Mr Conley said, revealing how competitive – and important – personalities can be at this end of the market.
Ian Schrager, founder of Studio 54, is probably the world’s most famous boutique hotel operator. Apart from the Philippe Starck designed Clift, his properties include the Dealno in Miami, the Mondrian in Los Angeles, and Morgans in New York.
It hasn’t all been plain sailing for Joie de Vivre. The early 2000s were particularly tough, highlighting the downside of its reliance on the fortunes of San Francisco, the IT and tourism industries.
“Room revenue dropped over 40 per cent in San Francisco. There was the tech wreck, 9/11, SARS, and the convention centre was size-constrained. We were vulnerable to failure but hung in there.”
Not without pain. The company took stern measures, cut costs and retrenched up to five per cent of its staff. Mr Conley, who owns a number of the properties, didn’t take a CEO salary for three years.
It also went on the front foot. “We total revamped the website. One of our greatest strengths was also a weakness – we had too much choice. So we created the Hotel Matchmaker, and by doing that were able to take the emphasis away from price.”
The Hotel Matchmaker, a cartoon brunette known as Yvette, asks guests five questions such as: “What kind of people do you connect with – fun loving/energetic, serene/soulful, charming/urbane, adventurous/active, gentle/quiet, professional/tailored?”
“Yvette” then recommends a hotel based on the response. It could be the cinema-inspired Hotel Bijou, the arts and literary infused Hotel Rex or the Hotel Del Sol, a “boutique motel” – each of which has been created in the image of a niche-oriented magazine.
“We focus on the psychographics versus the demographics of our guests,” Mr Conley said.
In addition to the Hotel Matchmaker, a better booking engine and online incentives, JDV also ramped up its internet distribution through web retailers,, Hotwire, Orbitz and Travelocity.
As a result of these actions, online distribution trebled within a year. Growth may have slowed but in 2005 online sales still grew 35 per cent.
Mr Conley said he believes that operators should take all the distribution they can get – but online allocations must subject to strict yield management.
For example, each JDV property is yield-managed individually.
“It’s like when the first supermarkets opened – the way people bought things changed,” he said.
“That’s what are doing for the hotel business. We have to accept that they are not going away and we have no choice but to distribute through these sites. But it is important to regulate how much inventory we give them.”
Overall JDV pricing is competitive – offering a best price guarantee – and the company takes a pragmatic approach.
“When I first started, I liked to charge guests 10 per cent less than guests thought it should cost. But I learned over the years to charge as much as I can,” he said.
“Because running hotels is a cyclical business you need to sock some money away to see you through the bad times.”
However, it is difficult for boutique operators to price higher than the premium chain hotels.
“I don’t think it is sustainable to price above the chains unless you have something that is absolutely unique,” Mr Conley said.
After coming through some tough times, Mr Conley is confident about the prospects for niche operators.
But to survive and prosper, Mr Conley warned, a hotel must offer guests three things: amazing service, a great bed and a high-speed internet connection.
Another tip is to use an existing shell to create a boutique hotel.
“It’s really hard to create a soulful hotel from scratch – and expensive, too.”
He concluded: “The future is still very bright for boutique hotels because people are looking for personalized service on all levels.”

Travel Wired: Opinion

By Martin Kelly
I should be excited, but I’m not. Expedia and Travelocity have finally landed in the Asia Pacific retail space, and it feels very much like just another news story in a fast-moving world.
Which is not to say they won’t succeed, they probably will. Both companies already have successful regional hotel operations, and have simply expanded into retail, albeit via different routes.
Expedia has opened an Australian website, while Travelocity now owns 100 per cent of Zuji, recently upping its stake from around 13 per cent.
Their arrival is something the industry has been talking about for years, anticipating it as a catalyst for massive change.
Expedia alone spends more than $100 million each year on technology and pretty much defines Dynamic Packaging, while Travelocity, part of the Sabre empire, is hell-bent on global growth.
They are genuine global giants, boasting business models purpose-built for the 21st Century.
Yet now these marquee players are here, it feels to me like an anti-climax.
For a start, it’s been a long time coming and Asia is merely the latest in a long list of web outposts for each company.
For example, Travelocity already has a site in Denmark, that well known economic powerhouse, while Expedia has been operating for some time in Holland.
Both countries have less people than some Asian cities, and they are here now because the region has enormous growth prospects.
For Expedia, Australia is an easy first step with a common language, strong economy, political bonds, and a web-savvy population who aren’t afraid of spending money (even they don’t have it) and trying something new.
They also have an eye on Japan, and own a large chunk of eLong in China.
Travelocity has come through the back door through buying the remaining 87.3 per cent of Zuji (which operates in six regional markets) for US$34 million, which seems high but isn’t.
Australia’s Webjet is capitalized at twice that – US$70 million on the ASX, while last year Travelocity forked out a humungous $US1 billion for in Europe.
There’s a lack of hype – as usual each company is voluble without giving anything away, every message an exercise in corporate communications.
Travelocity boss Michelle Peluso has made no comment beyond a joint press release with Zuji, so no sizzle or excitement there, while Expedia is still in soft-launch mode with offering just hotels.
Another reason for the flat feeling may be that anticipation often exceeds the reality, and also a sense that the online travel world has moved on.
This is especially true in Australia, where online uptake has been particularly strong.
Airline sites remain dominant but online retailers are gaining market share.
One analyst suggests that online agencies could have a 25% of airline ticketing by the end of this year.
Australian consumers also appear to have made their mind up about where they are getting these fares – and that is from Flight Centre and Webjet.
These companies have broken from the pack and now dominate the online travel retail market with a market share of around 14% each, according to recent Hitwise figures.
It is no coincidence they have great booking engines that allow consumers to check prices across all carriers and solid, integrated marketing that works across different platforms.
No-one else is close in the Australian market.
Third-placed has 5.54% market share, while a handful of other companies garner between 1.5% and 3% of online travel eyeballs.
Zuji is among this group and hardly setting the world on fire with just 2.67% for has 1.99% and 1.21%.
Obviously they have a long, long way to go. So I’m not getting that pumped – yet. But only a fool would bet against them having long-term success, anti-climax or not.
Maybe then I’ll get excited.

Aussie Balance to Shift By 2010

MORE than half of all Australian travel purchases will be made online by 2010, according to researcher Frost & Sullivan.
It says Australian online travel sales will have a compound annual growth rate of 27 per cent over the next five years.
This sharp growth curve will lift online travel revenues from A$1.4 billion or 18 per cent of the overall travel market in 2005, to A$4.6 billion (54 per cent) by the end of this decade.
These findings form part of Frost & Sullivan’s Australian Household e-Commerce Market Report.
In a general sense, it found that the convenience of online booking engines has grown in direct correlation to suppliers improving their websites and consumer uptake of broadband.
“In terms of suppliers, the market in Australia is likely to consolidate hugely over the next one to three years,” the report said.
“Sophisticated online booking engines are leaving the rest for dead, and the usability demands on them are only going to increase.”
The report also slammed the lack of top-quality content.
“Relevant content in general but for accommodation sites in particular is mostly poor.
“This is the next major battleground for online travel players – up to date, highly detailed and entertaining content (short videos, virtual tours etc) about holiday services and destinations will become a significant conversion tool.”
It concluded: “More needs to be made of customer communities (travel experience reviews, video diaries etc) – travel sites generally are high on convenience but low on loyalty.”

All The Big Names at Search Engine Room 2006

Search Engine Room, Australia’s leading search engine marketing and SEO conference, is happening in Sydney on March 14. It’s a fast-paced, info-packed event featuring local and international speakers from Yahoo!, Google, News Interactive, Hitwise, Frost & Sullivan, dgm, Sensis Interactive, IP Australia, 24/7 Real Media and many more. There’s also great networking, an eight-booth exhibition and drinks at the end of the day for delegates. What more could you want? Visit for details and bookings.

Talking Up The Internet – At Last

By Martin Kelly
It’s taken forever, but Flight Centre, the biggest travel retailer in the Asia-Pacific, is finally getting enthusiastic about the Internet.
Graham Turner, Executive Chairman and Managing Director of Flight Centre, now even sounds positive about the online world.
The famously blunt Turner, known for outrageous statements, has been talking up the group’s Search Compare Book’ advertising campaign, on which it has spent a fortune in the Australian market.
“We expect further strong growth,” Turner said, after earlier forecasting that will sell between A$150 million to A$200 million worth of travel product over the next year.
Let’s hope he is right, because Turner – the driving force behind Flight Centre’s astonishing growth – it has more than 1000 outlets in several countries – has been wrong on just about everything else over the past 18 months.
For a start, he thought that Low Cost Carriers such as Jetstar in Australia could not survive without paying commissions to travel agents.
"I think that you’ll find that its losses will be large, and not just on numbers and loadings," Turner told the ABC’s Inside Business program.

"They just won’t be able to get the yield without having a multi-channel distribution system."

Yet in a reflection of changing travel industry dynamics, Jetstar made $44 million before tax for the 04/05 financial year.
Turner added: "We aren’t selling much of it, and if I was (Jetstar CEO) Alan Joyce I’d be quite worried.”
Instead it’s Turner who should be worried because the Flight Centre business is floundering with steadily declining profits at a time when many other (albeit smaller) travel agent businesses are doing well.
Jetset Travelworld, for example, declared a record profit of $5.7 million for 2004/05 – 42.5 per cent up on the previous financial year.
Chairman Brian Wild said cost containment was major factor and he also cited the new National Ticket Centre as a tactically valuable initiative that clearly demonstrates the group’s value as a sales channel to airlines.
By contrast, Flight Centre’s profit over the same period fell 17% to $67.9 million – despite surging sales and earlier assertions by Turner that it would increase by around 15 per cent. 
The major reasons appear to be an inability to contain costs combined with falling margins and the challenges of running a large company across different markets, something Jetset does not have to worry about.
Things have only got worse since the full year result.
During the September quarter, Flight Centres sales increased 14.2 per cent to $1.9 billion but pre-tax profit slumped 21 per cent to $23 million. Margins fell to a new low of 12.7 per cent (13.6 per cent a year ago).
So much for Turner’s earlier assertion that Flight Centre did not expect to be affected in any way by the Qantas travel agency commission cuts.
What else is there – apart from poor leadership on service fees, badly-negotiated airline agreements and the ‘Full Throttle’ restructure, which so far has had no impact on the bottom line?
Well, there is the issue of Turner’s increasing control over the company, despite losing his golden touch.
Numerous key executives have left over the past six months, including former Chairman Norm Fussell, who stepped aside in July, handing that mantle to Turner.
Chief Executive Officer Shane Flynn left a few weeks later.
Neither has been replaced on the board, now reduced to just three people – Turner, and the two non-executive directors – Peter Barrow and Howard Stack, who have both been there since 1995.
Time for an injection of new blood, you’d think, but the company has yet to make good on its July 29 pledge to appoint two non-executive directors “in due course”, although a company spokesman said the hunt is on.
Meanwhile, Flight Centre’s share price has slumped to around $10 – half its 12 month high of around $20.
So, scratching around for good news, Turner has emerged with the internet. At least it’s looking up. As for the rest of the formerly bullet-proof Flight Centre business, only time will tell. Clearly, many challenges remain.

Expedia Launches in Asia-Pacific

US giant Expedia has opened its first branded site in the Asia-Pacific region with the launch of in Australia.
The site only offers hotel and attractions at this stage but Managing Director Arthur Hoffman said car hire and flight sales would follow “sooner rather than later”.
Japan, the world’s second largest tourism market, is also on the Expedia radar.
“We are actively looking at Japan,” said Hoffman, although the company has yet to decide its entry strategy, which could take one of three forms: organic, joint venture or acquisition.
Expedia also has a presence in China through its 52% shareholding in elong, the second largest online travel retailer in that market.
“Australia is a little easier to enter into under our own brand and leverage our global platform,” Hoffman said.
The Australian online travel market is very competitive and relatively mature by regional standards.
However, the online travel marketplace tends to be dominated by the major domestic airlines – Jetstar, Qantas and Virgin Blue – and hotel sites like and Hotel Club.
At this stage, while online retail brands such as Webjet and are popular, no single company dominates in terms of traffic or brand recognition.
A confident Hoffman believes that Expedia will rapidly make inroads and that consumers will warm to its cutting-edge technology.
“Every year Expedia invests more than US$100 million in technology,” he said.
Meanwhile, after a rocky start following its August stock market spin-off from InterActiveCorp, Expedia shares are now trading at US$26.10 – well up on the US$18.49 of late October.
Expedia operates branded sites in the United States, Canada, United Kingdom., German, France, Italy, Netherlands and now Australia.

Katz Buys One-Way Ticket To Oblivion With eboookers

THE mastermind behind Cendant’s aggressive expansion of its Travel Distribution Business, Sam Katz, has fallen on his sword after a review of the eBookers business – which he bought for US$350 million in February – revealed huge losses.
In a convoluted release, Cendant Chairman Henry Silverman said TDS business would be hit with a $US200 million to US$300 million “impairment charge due largely to reduced return expectations at ebookers” in the 2005 accounts.
Which begs the question – how much did ebookers actually lose and why did Cendant pay so much for it?
It also throws the spotlight on other big Katz buys – such as Orbitz for US$1.2 billion – plus the acquisition by American rival, Travelocity, of another European loss-maker,, for US$1 billion.
The US giants have been on a buying spree as they chase growth outside the slowing North American market. However, it is now clear that some valuations are questionable, at best.
But Katz, who has been with Cendant for 10 years and in charge of TDS since 2001, won’t be around to provide insight, slipping out the back door with no official comment.
Chairman Silverman spun the announcement hard, looking forward not back, hyping the 2006 forecast rather than dwelling on 2005.
“TDS has clearly fallen short of its 2005 targets due principally to our international online business, particularly ebookers,” Silverman said.
“We face company-specific issues that we have identified and are addressing, not with quick fixes but with significant new investments, including the development of a single, global online platform.
“While with hindsight our past projections were too high, the fact is TDS is a strong business that we expect will achieve approximately 11% EBITDA growth next year.”
Cendant has now delayed the planned stock exchange spin-off of its TDS business until at least October while it hunts for a new leader and attempts to put its house in order before going public as a so-called “pure play”.
Ebookers operates 14 sites across Europe. It is an amalgam of numerous smaller companies operating across different channels and platforms that was cobbled together in the years before Cendant took an interest.




Gadgetry Over Getting Out There

By Martin Kelly
THE brilliant premise of Total Recall – a movie inspired by the Philip K. Dick short story We Can Remember It For You Wholesale – was that holiday memories could be implanted.
So rather than heading to the airport to check-in, you’d go to the travel agent, leaf through some brochures, consider the choices, and request – as did star Arnold Schwarzenegger – a holiday in Mars or somewhere else out of this world.
Then you’d sit in a big chair, receive some medication, get the implant, and wake up to a brand new day – refreshed, invigorated and with enough holiday memories to last a lifetime.
Imagine that, having a holiday without actually taking one (although as Schwarzenegger discovered, they can still go horribly wrong).
Funny thing is, that’s what may be happening in the struggling Australian domestic tourism market, with consumers enjoying home life and consumer items over travel experiences.
A new study from the Bureau of Tourism Research reveals that domestic tourism cis in long-term decline, while outbound travel from Australian markets continues to increase from its 2001 low.
The study also shows that domestic tourism is becoming a two-tier industry, with tourism and accommodation businesses located near low-cost carrier hubs doing well, while those without air access struggle.
There was an eight per cent drop in overall domestic trips between 1998 and 2004, despite booming air travel (+12 per cent) and a correlated spike in the use of hotels, resorts or motels (+10 per cent) over the past three years.
Key domestic tourism trends between 2001 and 2004 include:
  • People taking fewer and shorter trips while spending less
  • Strong growth in VFR at the expense of holidays
  • Some domestic leakage to outbound travel for holidays
  • Domestic travel spend slipping as a budget priority
Suffering most are the short trips, either day or overnights, hurting operators who work at the margins of the travel distribution chain.
Meanwhile, young people are turning off domestic travel en masse.
The sharpest decline in domestic nights has been among young singles living at home (-22 per cent), while the trend also applies to working singles (-6 per cent) and young couples (-9 per cent).
One theory is that the growing dependence on – and fascination with – technology may be partly to blame.
It seems that an increasing number of people, loaded with debt and a beautiful new wide-screen TV, are taking what amount to virtual holidays in their living room or home theatre.
“The abundance of television travel shows may be providing at least some viewers with a ‘virtual’ experience of destinations profiled rather than encouraging people to visit these places,” the report says.
The report also cites: “A rapid advancement in communications (including mobile phones, DVDs, digital cameras, pay television, personal computers and the Internet) and dramatic growth in community willingness to embrace this technology.”
Can you believe it? Some people would rather watch Catriona Roundtree (Getaway) or Ernie Dingo (The Great Outdoors) rather than doing it themselves.
Then they can sit around and play with the latest electronic gadget, sending texts and photographs of the family sitting on the couch watching a really good travel show.
Maybe that’s what people want. Consumer spending on toys has gone through the roof, while the travel spend is either static (international) or going backwards (domestic).
“The contribution of all leisure travel (day, overnight and overseas travel combined) to total household consumption declined steadily from 12% to 10% between June 2001 and December 2004,” the report says.
“This is despite strong growth in consumer spending outpacing the increase in the Consumer Price Index of 9% over the same period.”
The biggest drop has been travel by the residents of Australia’s capital cities, where house prices are largest and mortgages biggest, in particular Sydney and Melbourne, the largest source markets for domestic overnight leisure travel.
While international travel has been a bright spot, its share of total household consumption barely increased from 2.5% to 2.7% between 1998 and 2004.
What can the industry do to ensure travel remains a priority among Australians? Don’t ask me, Getaway starts in a few minutes and my wife is keeping a space warm on the couch.

Japanese, Aussies lead Asian Online

By Martin Kelly
JAPAN, Australia and New Zealand are the clear leaders of the Asia Pacific online travel industry pack.
According to researcher PhoCusWright, Japan is out in front with a 38 per cent market share by dollar value, while Australia and New Zealand have 30 per cent.
However, it is worth noting that Japan has a population of 127 million, compared with just 24 million for Australia and New Zealand.
The next biggest Asian markets by dollar value, says PhoCusWright, are South Korea (eight per cent), Singapore (seven per cent), China (six per cent), and Hong Kong (three per cent).
Then come Taiwan, Malaysia, and India, all on two per cent. The rest of Asia – and there’s still a few countries to go – comprise just three per cent of the total Asia Pacific online marketplace.
PhoCusWright doesn’t see the Asian status quo shifting that much over the next three years, forecasting steady growth.
By the end of this year analyst Ram Badrinathan estimates that online leisure/unmanaged business travel industry in Asia Pacific will grow 31 per cent to US$15.9 billion.
That figure is set to reach US$25.6 billion by 2007 – or 61 per cent growth over two years.
However, “payment systems remain a key obstacle. The pure e-commerce model, where purchase and fulfillment are completed seamlessly through the Web, is not a reality in most markets except Australia.
“Suppliers and travel service providers that have developed innovative work-arounds to deal with market issues will be most successful.”
He adds: “Most online agencies in APAC are seizing the lodging opportunity.
“In a region where less than 10 per cent of the room supply is managed by chains, online agencies see explosive growth in hotel aggregation and automation.
“These businesses, while widely needed, are slow to develop. Online travel agencies will still be roughly half the size of the supplier-direct channel –which includes the booming low-cost carrier segment – in 2007.”

'Celebrating the Business of Travel'
- Sydney, October 24, 2018 -

Travel IQ is a new one-day conference that celebrates the business of travel with the people who live it every day.

- Entrepreneurs
- Owners
- Directors
- Investors
- Managers
- Foot soldiers

Travel is a business, and Travel IQ will treat it like one.

You’ll learn how to improve your business, list a company, source finance, scale-up, connect with the right people, capitalise on fresh opportunities.

The program will be packed with industry innovators, creators, accumulators, doers, legends and pioneers.

See the travel industry through their eyes and leave with a better understanding of where you’d like to take your business.

Travel IQ is being held in the small but perfectly formed ballroom at the delightful Langham Hotel in The Rocks, Sydney, on October 24.

Numbers are strictly limited.

There are just 135 seats, ensuring everyone who comes receives maximum value and can properly engage with fellow attendees.

Catering will be of the highest standard with ample networking opportunities in comfortable surroundings.

Please register your interest here and we’ll be in touch when bookings open.

Travel IQ is being produced by Martin Kelly, who created the TRAVELtech and No Vacancy conferences, now owned by National Media.


Who’s Who in The ANZ Travel Zoo

People, Companies, Research, Data.

Travel IQ is an industry-first initiative dedicated to providing definitive data on the ANZ travel industry’s leading companies and people.

-Register for Updates

It fills a yawning gap in the local travel industry – so much going on, so little meaningful information on the people and companies who make it tick.

Research is well advanced, and the first iteration is due for release by June 1.

Travel IQ will feature:

- Top 150 travel businesses in Australia and NZ, local focus

- Detailed profiles, expert industry analysis, exclusive insights

- Information on hundreds of ANZ industry leaders

- Major industry investors, deals and transactions listed

- Key sector overviews and analysis

- Financial information where possible

- Interviews with industry entrepreneurs and innovators

- Member access to 3000+ unique stories on

Travel IQ is being researched and written by publisher Martin Kelly.

It will cover the leading companies and people in retail, inbound, cruise, shipping, attractions, operators, aviation, tours & activities, media, technology, shipping, car rental and accommodation.

There’s an initial focus on locally-owned companies and industry dynamics.

Due to nature of travel, private companies dominate the research though every publicly-listed company (there are now more than 30) with exposure to travel will be covered.

Travel IQ will also feature key New Zealand companies and investors, while select international companies with substantial local infrastructure and holdings will come under the microscope.

The aim is for Travel IQ to be the indispensable, insiders guide to the local travel industry.

It will evolve over time and more details will be revealed in the coming weeks.

If you'd like to register your interest in the project, please sign up for updates.

Alternatively you can contact Martin Kelly on 61-414-774-978 if you believe your company should be included.

- 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