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 www.flightcentre.com.au 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 www.flightcentre.com.au 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.
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"They just won’t be able to get the yield without having a multi-channel distribution system."
- 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
Darwin InternationalAirport. NEW! Flights to commence 19th Dec 2005
Chiang Mai International Airport
Hat Yai International Airport
Phuket International Airport
Noi Bai InternationalAirport
Ho Chi Minh City
Tan Son Nhat International Airport
Mingangkabau International Airport
Diosdado Macapagal InternationalAirport
Three-Letter Code: TGW
- Four Airbus A320 aircraft, all powered by International Aero Engines (IAE) V2500 engines, a modern jet engine with proven track record of reliability and efficiency
- Tiger Airways uses a single aircraft type for operational efficiencies which lowers cost
- Tiger Airways A320 aircraft have a single-class configuration of 180 seats
- Tiger Airways aims to have one of the newest fleets among the low cost carriers
- Tiger Airways purchased 8 new A320 aircraft from Airbus and will take delivery of 2 aircraft in March 2006, 3 more aircraft in Winter 06 and 3 more aircraft in Summer 07.
- Tiger Airways has committed S$110 million for a 5-year maintenance contract with SIA Engineering
- 24 hour Fleet Technical Management and provision of maintenance, repair and overhaul (MRO) services by SIA Engineering
- Our aircraft maintenance program satisfies the safety standards required by Civil Aviation Authority of Singapore (CAAS)
- Our pilots are trained inline with industry standards and aviation regulations to ensure the highest safety standards are met
- Our cabin crew are all trained and qualified on evacuation procedures and drills, fire fighting, security, survival training, first aid, use of emergency equipment in preparation to handle any situation
- Bullet-proof cockpit doors installed across its fleet
- Security cameras installed in passenger cabin for customer and crew safety
- Savings available as a result of intelligent travel policy
- Controlled usage of one-way fares
- General level of internet bookings for leisure travel continue to increase, resulting in easy adoption of corporate booking engines
- Further savings available as a result of automating the booking and fulfilment process
- There’s no point booking direct with a hotel because I’ll always get it cheaper online through a third-party site. Once again, the saving can be in excess of A$100 for a single night, let alone a whole booking.
- Ergo, price parity – the practice of offering the same price across all channels – is generally just a smart-sounding term that means nothing for many hotels and groups when selling online. Four times out of five they will undercut themselves through other channels.
- You’ll generally get a better deal at an independent hotel, which are increasingly (and indiscriminately) using the online channel to dump capacity at cheap rates. You can get a room in a top non-aligned four-star in Singapore for around A$100 including taxes, breakfast and free broadband connection.
- Free broadband is important because some of the bigger groups are starting to charge like there’s no tomorrow – for example, S$28 for 24 hour access. In fact, it appears groups are looking to replace the revenue “stolen” by mobile phones with that generated by broadband.
- The Asian Low Cost Carriers are damn cheap – and so are most of their websites. The booking engines are generally clunky and below par, although you can’t argue with the tiny airfares on offer throughout the region.
- Apart from Zuji, there are no major regional online retail brands – and none really on the horizon (although there’s plenty of action in China). But that will all change as the market matures – and the best deals shift online.
By Yoeh Siew Hoon
Let me tell you about my Singapore.
My Singapore is a bit like everyone’s. Clean, green, safe – the three most common adjectives used to describe it by residents, visitors and those who haven’t visited but have heard about it.
But to just describe it as clean, green and safe would be like saying it’s just a sterilized, well-washed vegetable (safe, healthy but rather unexciting) and that would be doing it a big disservice.
Truth is, my Singapore is a bit like a woman on the verge of turning 40. Which she is, by the way. This August 9, the nation celebrates its 40th year of independence.
Like a woman on the threshold of turning 40, Singapore is filled with all the fears and insecurities of ageing – will people still love me when I am all wrinkly and old – yet full of promise and possibilities – look at how far I have come and I have so much further to go.
And so you find Singapore today, caught between paranoia and promise.
At 40 years old, Singapore has built up a wonderful legacy.
Its infrastructure is world class. Its airport is talked about, admired and envied by everyone. Its hotels are second to none except in average rates where they are definitely down the table – which is good news for travellers.
Its mix of cultures – Indian, Malay and Chinese – has had time to simmer and stew into a seamless brew of scents and spices that is, forgive the pun, Uniquely Singapore.
And even though some travellers may complain about the price of beer here, this is one brew they love and travel miles for.
Over the last few years, like a more confident and matured woman, Singapore has also been lifting up its skirt a little. It’s cut loose on nightlife, entertainment and the arts scene.
The bar and club scene is vibrant, dynamic and fun, even non-stop. Now Singapore parties all night while cities like Bangkok go to sleep early.
Why, it even dared to strip down to bra and panties to dance on bar tops.
It tried a few daring moves. Hip, funky hotels (Scarlet), theme bars (Eski) and beach parties appeared. It skydived, reverse bungy-jumped and raced its way into the media spotlight.
But like all women, it can be fickle, maybe a little unsure about how far she should go before she is judged by a jury of her peers. A gay party, the Nation Party, was refused a licence and thus it moved its merry way to Phuket.
But one cancellation does not a nation make. And Singapore forges ahead. She knows she’s got 40 good years behind her, and a lot more years ahead.
But she should also know that heck, at 40, a woman had better stop flirting and teasing with change and instead, embrace it firmly and desperately, and go where no woman has dared to tread.
For the official guide to Singapore, visit www.visitsingapore.com
By Martin Kelly
Man cannot live on bread alone – nor can the most modern of travel businesses survive and thrive using a single sales channel such as the Internet – even when it is delivering more than 90 per cent of business.
Virgin Blue, which generates between A$6 and A$9 million in online revenue every day, has just taken another major step in its distribution diversification program, launching its Application Protocol Interface (API).
Launch customers are online retailers travel.com.au and lastminute.com.au, powered by Arnold Travel technology, while links will be provided to Zuji and Carlson Wagonlit.
The API provides these companies with a “doorway” into Virgin Blue’s new and more flexible Navataire Skylights7 booking platform – giving them live access to most inventory.
The integration costs are significant, and borne by the agents, but Virgin Blue claimed the upside is enormous, and that long-term benefits can be found on a number of levels – notably access, speed and better customer service.
It also gives online retailers a “hands free” approach to increasing productivity and commissions through the carrier, which can reach eight per cent if sales targets are reached or exceeded.
Manager e-Commerce at Virgin Blue, Steven Greenway, said the days of Low Cost Carriers enjoying explosive growth solely through the online Business to Consumer sales channel have largely disappeared as the sector matures.
“All Low Cost carriers will use a multi-channel strategy as they grow into new more, complex markets and customer segments in order to drive revenue – the trick is to avoid overhead costs,” he said after speaking at TRAVELtech in Sydney.
“Relying on the web alone for sales growth produces a restricted framework – growth can be achieved but only in increments.”
Consequently, Virgin Blue is also expanding its GDS coverage – adding Amadeus to its existing relationships with Galileo and Sabre.
“The GDS are very efficient in terms of aggregating content and providing agents with a tool to book airfares,” Mr Greenway said.
“At the end of the day, the GDS, as much as we say we hate them, provide a service. Pricing, however, generally outstrips value.”
To overcome this, Virgin charges a A$15 premium for the GDS fares, which are usually premium rates available to corporate or government clients, or international markets it does not have access to, such as the Pacific Islands.
Therefore Virgin Blue is able to keep key corporate and agency customers happy by giving them better GDS coverage (ie: service) a necessary move if the company is to continue growing beyond its low cost base.
Other distribution options are also emerging in the Australian market. Virgin has had discussions with Bezurk, a travel search engine set to launch soon, but has not yet signed with them.
Greenway said while travel search engines can deliver online sales leads on a “cost per click” basis, the technology they use to screen scrape deals “pounds” the member websites, affecting usability for (commission free) customers going direct.
However, he said, the likes of Sidestep and Kayak are going well in the and that usually adopts American trends so the odds are that travel search engines will probably work in this market.
On the product side, Greenway said Virgin will ramp up its wholesale offering and improve Dynamic Packaging technology to better integrate a “limited number of simple products”.
So, Virgin Blue is in the process of becoming a hybrid carrier as it gets squeezed at both ends of the market by Qantas (top) and Jetsar ((bottom).
“But we are staying true to our low cost base and still believe in user pays,” said Greenway. It’s just that the times – and market – is changing.
By Martin Kelly
HOTELS have clearly emerged as the growth engine for online retail travel companies and Asia Pacific is set to play an increasing role with the likes of Expedia, which started trading as a stand-alone company last week, boosting its regional presence.
Travelocity is also experiencing extraordinary growth, reporting a 41% increase in hotel room nights during the June quarter when compared with 2004, while packaging revenue grew 81% and now comprises 30% of total revenue. By comparison, air transaction revenue grew 9%.
Over the same period, Expedia’s major accommodation brand – Hotels.com – recorded more than more than $US500 million in quarterly gross bookings for the first time in its history.
Expedia’s Regional Director of Hotels and Destination Services, Cameron Jones, said the company is experiencing double digit hotel booking growth in most Asia Pacific markets.
“Hong Kong in particular has experienced exceptional growth,” Jones said.
Jones said Expedia has added new staff in Hong Kong, Tokyo and Sydney to service and grow the existing customer base.
In other developments, Jones said the integration of the Expedia and Hotels.com technology platforms would be complete by the end of September, allowing hoteliers to manage inventory on both sites through a single extranet.
He added there has been strong regional adoption of Direct Connect, which allows Expedia to sell live inventory straight from a hotel’s Property Management System.
Meanwhile, Expedia reported that international gross bookings increased 73% during the June quarter.
“Revenue grew 14%, primarily driven by the international merchant hotel business, acquisitions and the air business,” the company said in a statement.
“Merchant hotel revenues increased 9% for the second quarter, (however) revenue per room night was flat, resulting from a 5% increase in the average daily room rates, offset by a decrease in merchant hotel raw margins.
“Air revenues increased 7% during the quarter, primarily from a 21% increase in air tickets sold, partially offset by an 11% decline in revenue per air ticket.
“Expedia, Inc.’s domestic air and merchant hotel businesses operate in a challenging competitive environment, due primarily to increased competition from third party distributors, increased promotion by suppliers of their own websites and higher overall occupancy rates and load factors.
“This environment is generally expected to continue.”
SOME of the world’s leading airlines are pushing publicly and aggressively for GDS distribution alternatives through the Bangkok-based Star Alliance.
At a press conference in Japan last week, the Star Alliance told media that it would actively support new entrants to the distribution marketplace -provided the price is right.
And in a further backhander to the incumbents, Star Alliance Chief Executive Officer Jaan Albecht says the “new entrants” – known as GNEs – may provide better service for less money.
“Our 16 member carriers currently pay a combined total of around US$2 billion in annual GDS fees and we see a definite potential to reduce these,” says Mr Albrecht.
“The GNEs will not only allow the member airlines to cut distribution costs, but also permit the carriers to explore new functionalities which the current GDS do not provide.”
He says Air Canada, Lufthansa, SAS, Singapore Airlines and United are at the forefront of this initiative on behalf of all Star Alliance members.
The aim is to draw up a single strategy for selecting GNE partners.
“It is our aim to finalise the GNE selection by the end of the year,” says Albrecht.
Star Alliance was established in 1997and claims its members represent almost 29% of world airline revenue.
Members are Air Canada, Air New Zealand, ANA, Asiana Airlines, Austrian, bmi, LOT Polish Airlines, Lufthansa, Scandinavian Airlines, Singapore Airlines, Spanair, TAP Portugal, Thai Airways International, United, US Airways and VARIG Brazilian Airlines.
South African Airways will be integrated over the next 12 months.
CONSUMER traffic to Australian travel websites is at an all-time high, according to Nielsen//NetRatings and Hitwise.
Not surprisingly, given the launch of Jetstar, the sharpest growth has occurred within the airline sites over the past two years.
However, hotels and travel agencies are not far behind.
According to Hitwise:
Commercial Airlines >> Increased 69% between December 2003 and January 2005
Travel Agencies >> Increased 40% between December 2003 and January 2005
Destinations & Accommodation >> Increased 46% between December 2003 and January 2005
Meanwhile Nielsen//NetRatings reports a similar pattern.
Senior Analyst Andrew Eckford said the trend has been particularly evident during the first three months of 2005.
“Over the past few weeks we have seen consistently more than 630,000 unique browsers a week to audited travel sites.
“This is significantly higher than seen for any week since we launched the Market Intelligence measurement for the travel industry.”
Tables Below From Nielsen//NetRatings and Hitwise:
Nielsen//NetRatings Market Intelligence, Domestic Traffic to Travel Sites by Category for February 2005
Category Unique Browsers Page Impressions
Travel Portals 1,272,537 10,659,606
Destinations 488,256 5,065,915
Hotels 203,342 1,640,914
Rental Cars 133,497 1,576,388
Hitwise – Travel – Agencies ” February 2005 ” Ranks by ‘Visits’
Name Domain Market Share
1 Flight Centre www.flightcentre.com 11.50%
2 Webjet www.webjet.com.au 6.31%
3 lastminute.com.au www.au.lastminute.com 5.96%
4 Expedia.com www.expedia.com 4.47%
5 ZUJI Australia www.zuji.com 3.91%
6 Best Flights www.bestflights.com.au 3.44%
7 Travel.com.au www.travel.com.au 3.18%
8 Octopus Travel www.octopustravel.com/au 2.50%
9 ITN.net www.itn.net 1.92%
10 ninemsn Travel www.ninemsn.com.au 1.90%
Hitwise – Travel – Destinations and Accommodation ” February 2005 ” Ranks by ‘Visits’
Name Domain Market Share
1 Wotif.com www.wotif.com 6.71%
2 HotelClub.net www.hotelclub.net 5.70%
3 RatesToGo.com www.ratestogo.com 2.93%
4 Need It Now www.needitnow.com.au 1.96%
5 TravelMate www.travelmate.com.au 1.91%
6 Trip Advisor www.tripadvisor.com 1.60%
7 Totaltravel.com www.totaltravel.com 1.37%
8 Visit Victoria www.visitvictoria.com.au 1.36%
9 Lonely Planet www.lonelyplanet.com 1.35%
10 AAA Tourism www.aaatourism.com.au 1.30%
Nielsen//NetRatings Market Intelligence, Top Destination Sites for February 2005
Unique Browsers Page Impressions
1 visitvictoria.com 161,372 1,353,450
2 ourbrisbane.com 154,053 1,235,204
3 visitnsw.com.au 60,383 559,331
4 discovertasmania.com 48,739 813,611
5 westernaustralia.com 39,281 337,420
6 southaustralia.com 21,653 319,092
Ends/ 22 March, 2005
By Martin Kelly
ONLINE travel in Australia has reached a milestone of sorts with the stockmarket capitalisation of Webjet (WEB) surging past traditional retailers – including significant share holder Harvey World Travel (HWT).
Webjet, valued at just four cents 12 months ago, raced to an all-time high of 34 cents on the Australian Stock Exchange following recent strong growth and a maiden net profit A$1.44 million.
Its price seems to have settled above 30 cents, giving it a market value north of A$75 million, compared with Harvey World’s recent average capitalization of around $65 million.
Yet HWT – which has more than 500 franchised agencies throughout Australia, New Zealand and South Africa – made more money, recording a A$2.52 million net profit for 2004/05.
This traditional and well-run travel company also pays investors a healthy annual dividend of more than five per cent.
So what gives – why are investors ascribing a greater value to Webjet than HWT?
Basically, they are betting that Webjet has much better growth prospects than traditional franchise retailers like HWT or Jetset.
And there’s definitely something to that.
The online travel market is still relatively immature and companies in this space – provided they have the technology – can operate much more effectively in a low commission environment.
It is also easier for them to expand because they are starting from a lower base and – like the Low Cost Carriers – have a fresh business model.
Of course, the stock market gets it wrong all the time and there are currently faint echoes of the dot bomb era in some valutaions.
However, the difference now is that many online companies such as Webjet are real businesses making real money.
Not that HWT Managing Director Barry Mayo would care about the differing valuations – his company’s 19 per cent Webjet holding, which cost just A$1.9 million, is now worth A$13 million.
HWT also has the option to take its Webjet stake to 35 per cent.
The Webjet share price rises come on the back of consistently strong business performance. In July and August, Webjet’s turnover exceeded A$23 million, more than three times last year’s figures.
“The increase strongly validates our business model,” said Managing Director David Clarke.
However, the Webjet results failed to detail the comany’s revenue mix and growth prospects.