Wholesale Changes? Not Likely

By Martin Kelly

WHOLESALING sounds like something that should only happen at a fruit and vegetable market. Yet the middleman is an intrinsic part of the travel industry, and has been since ancient times.

The question now is whether the wholesaling sector is headed for rocky times unless the traditional single-channel business model – selling through travel agents – changes.

Senior industry executives privately say that wholesaling is vulnerable, lagging as air and hotels have moved forward, using the Internet to bypass traditional distribution channels and sell direct to consumers.

At first glance, this argument makes sense, at least for small wholesalers.

They simply don’t have the capital to invest in new technology, or the time to develop fresh strategies, while the complicated nature of international holiday packages demands personal service.

But what about the big boys, who can pretty much do what they want – why haven’t they changed?

The answer, according to the likes of Qantas Holidays and Creative Holidays, is that the agency distribution system works, Internet or not, especially for international travel.

For smarter wholesalers with good product and service, the traditional agency channel is working overtime

Head of Qantas Holidays, Simon Bernardi, says the direct/travel agency split has remained static: at 10% direct and 90% through travel agents.

“The Internet has been good at selling air and capital city hotels, but certainly land is still being booked through traditional means,” says Bernardi.

“People prefer to make a phone call or get a brochure – that hasn’t changed.”

He says there’s been some disintermediation with many people now buying land and air separately.

Bernardi also adds that the Internet offers no real price on holiday packages,  which can be bought cheaper through the big wholesalers.

Creative Holidays Managing Director Justin Montgomery claims there is a big opportunity for wholesalers selling exclusively through travel agencies in the low-cost low-commission airfare environment.

On July 1 standard Australian domestic airline commissions fall from 5% to 1%; while  in many cases international rates have already fallen from 9% to 7%.

“Travel Corporation has taken the strategy of staying with the trade and not going direct because every other competitor seems to be doing that, and at some time there’s going to be a breaking point,” Montgomery says

Montgomery believes agents will become more selective about who they deal with, and ignore wholesalers selling direct.

“We are now at watershed period, and I think agents are saying we can make money (in the new environment but) if a supplier is selling direct, why would we support them?”

Peregrine and Gecko’s takes a similar position, although from a slightly different perspective, as it has always sold direct and marketed its brands heavily through consumer media.

“The vast majority of Gecko’s sales come through travel agents in Australia and the proportion is very stable,” Gecko’s Brand Manager Steve Wroe says.

He adds that a web presence is essential because “it’s what consumers want” but Peregrine and Gecko’s believe there is no need to fiddle with the standard approach – even when entering new, web-savvy markets such as the UK.

Why? Because if it ain’t broke, don’t fix it.


Hungry Octopus

Australian travel agent sales have passed the A$10 million mark at OctopusTravel.com.

GM Peter Smith says while OctopusTravel.com is best known for its accommodation listings, “we’ve seen a significant increase in transfer and sightseeing bookings over the past year.”

He says that the local Octopus sales team has been boosted to drive continued growth. Octopus.com now has 22 offices around the world and was recently named the UK’s fastest-growing travel company.

May 13, 2005


Black Friday Changes Nothing in Long-Running Soap Opera

By Martin Kelly

Black Friday, July 1, has come and gone and nothing has really changed.

For those of you living under a rock, this is the date Qantas cut its standard domestic commission to Australian travel agents from five per cent to one per cent.

Meanwhile, generic international commissions are down around seven per cent and will certainly fall further over the next few years.

Therefore the days of making an easy buck by selling an airline ticket are gone, while the era of travel agents charging a service fee is here.

Which is not so bad – service fees have brought prosperity to agents from New Zealand to Ireland, and other sectors of the industry are still offering significant commission rewards.

Certainly, the industry’s major technology providers see it as a business opportunity and have launched a plethora of linked product.

Yet such developments continue to be coloured by sporadic outbursts over airline behaviour – perhaps because it is basic human nature to resist change.

Once again, the airlines – Qantas in particular – are the Bad Guys, an essential character for every long-running melodrama or soap opera.

And that’s what this is.

Just like Days of Our Lives, a lot of things appear to be happening short-term but leave the country for a year or two and you will have missed nothing.

Similar story lines, same major players, a few bit actors killed off and a couple of new stars to get the juices flowing.

In this case, the baddies have done what they always do – looked after themselves first and everyone else second.

But it is important to note that the airlines are still rewarding productive travel agents and chains with higher commission levels.

Some even say that Jetstar, which has proudly declared itself a no-commission airline, is being written into Qantas sales agreements.

Yet selling direct to the public and cutting out the agent remains very much a priority for all carriers.
Of course, technology is at the heart of what they are doing. The internet makes selling direct as simple as saying World Wide Web.

Perhaps travel agents could let bygones be bygones and learn a trick or two from the Bad Guys in this saga and apply them to their own business.

Lesson One: cut costs, create greater efficiencies, improved productivity and increased profits.

For airlines, that generally means sacking staff and outsourcing to cheaper locations.

Now that won’t be feasible for already stretched travel agents, so they can look to some of the new back office and travel management products the GDS are now marketing to save time with all the messy procedural stuff.

All these products also link with service fee software.

Lesson Two: marketing. The airlines are all over the internet using the latest digital marketing techniques.

Now while that might not be suitable for many agents, technology can really help market smaller businesses such as travel agents.

In particular, database management and email marketing offer enormous opportunities if handled with sensitivity and integrity.

The advantages are many - no mailing costs, and the chance to immediately pitch offers to those with a declared interest.

And there are many other opportunities.

Lesson Three: keep a close eye on what the baddies are doing to learn how best to look after number one.

After all, airlines are the masters at that game.


Travel Distribution Strong But Net Income Down 44% At Cendant

By Martin Kelly

EVER thought about creating a global travel content and distribution empire? The people at Cendant Corporation, based out of New York, certainly have.

And what’s more, they have done something about it. Over the past couple of years, Cendant has bought up big, with travel and real estate the major focus.

Over the past 12 months alone it has acquired Orbitz, ebookers and Gullivers Travel Associates.

Other travel brands it owns include Galileo, Avis, CheapTickets.com,  Budget, Ramada International, Howard Johnson etc.

I’m sure you get the idea; they are big – but how big?

Well, to give you an idea of scale, Cendant is capitalised at more than US$22 billion on the New York Stock Exchange, while Sabre Corporation (which apart from the GDS also owns Travelocity) is worth around US$2.5 billion.

But no-one said running a company of this size was going to be easy, as an analysis of its recent second quarter results reveals.

On the plus side, Cendant’s Travel Distribution Services division went well and is expected to continue its strong performance, driven largely by recent acquisitions and solid gains from established internet businesses, albeit from a low base.

“We expect growth to accelerate,” Cendant’s President and Chief Financial Officer, Ronald L. Nelson.

However, the Cendant accounts reveal that total net income for the company slumped 44% to US$387 million despite booming real estate and travel markets.

The reasons for this are a little hazy, although it’s safe to assume financial indigestion flowing from the challenges of integration are a significant factor.  

Meanwhile, as part a bid to focus on core activities, Cendant will sell its Marketing Services Division for US$1.83 billion and embark on a US$2 billion share buy back over the next 18 months.

See, not easy, a fact recognized by the stock market with Cendant’s share price going nowhere over the past year.

The second quarter result was undeniably patchy. It revealed steady demand for Global Distribution Services (Galileo) but issues in its Vehicle Rental and Hospitality Services divisions.

Highlights from Travel Distribution Services (excluding contributions from Orbitz, Gullivers and ebookers) include:

  • A 48% increase in revenue and 21% growth in pre-tax profit to US$143 million.
  • Organic growth of 47% in online gross bookings at Cendant’s travel agency businesses (or US$14 million increase in revenue). 
  • Strong growth and higher margins from CheapTickets.com, which has now migrated to the Orbitz technology platform. 
  • Steady result from GDS cash cow Galileo which generated 3% revenue growth – from US$396 million to US$410 million.
  • Global air traffic up 6% by GDS segment but US domestic air yields down.

Nelson claimed the recent acquisitions would really start to kick in during the second half of 2005 and through 2006.

However, analysis of the company’s overall forecasts reveal that total “income from continuing operations” will probably be down between 5% and 10% for the full year.

Once again, the strongest growth will come out of travel distribution, where Cendant is forecasting an increase in pre-tax earnings of up to 43%.

However, vehicle rental remains troublesome with decent revenue growth undermined by discounting combined with increased vehicle and depreciation costs.

“In order to offset these increased vehicle costs, we recently raised pricing at both Avis and Budget. To date, these price increases appear to have been successful,” said Nelson.

On face value, Cendant’s accommodation brands booked a solid quarter, with RevPAR increasing 10%, while revenue grew 12% to US$130 million.

Yet pre-tax profit was down 17% over the previous year due to marketing and other expenses.

Oh well, when running a global travel giant, you’ve got to be philosophical. You know, win some, lose some.


Flight Centre Acquires Online Market Share

FLIGHT Centre has aggressively entered the online affiliate marketing space, with some competitors claiming it is paying up to A$40,000 a month to sell travel through several major websites.

Over the past three months, Flight Centre has done deals in rapid succession with high-traffic sites www.ninemsn.com.au, www.smh.com.au and www.getaway.com.au.

It is primarily selling domestic airfares and its hotel inventory through these sites, while also heavily advertising the new ‘Search Compare Book’ online campaign.

Further website signings are likely, intensifying competition and forcing up pricing in a sector previously dominated by the likes of Flairview Travel, Octopus Travel and the Online Travel Corporation (which is now part of the UK Lastminute).

Global Head of Marketing at Flight Centre, Colin Bowman, says the giant retailer – which some analysts feel has previously ignored the Internet to its detriment – is now fully committed to an online, multi-channel distribution strategy.

 ”In the last three months we have increased our emphasis on this medium and moving forward it’s going to be a bigger part of what we’ll do as part of our multi-channel push,” Mr Bowman says.

 ”We are really looking at the online space with consumers trending more to the web, either to purchase or for research.”

Bowman says Flight Centre has been looking at a number of new sites but scoffed at suggestions his company has been paying over the odds for an online presence, while declining to comment on specific figures.

“We’re not about to sit back and are always looking at new Internet opportunities, which we continually assess on a Return On Investment basis before making a business call.”

He says that Flight Centre has to be competitive in this area even though it may be taking revenue away from consultants.

“At the end of the day it’s all about promoting our product to the customer – we’ll deal with revenue issues internally,” Bowman says.

May 12, 2005

Promiscuity Disrupts Marriage of Convenience

By Martin Kelly

AIRLINES and the GDS. Hardly a marriage made in heaven, more like a union of convenience, but one which has reaped significant benefits for both parties over many years.

Yet now one of the partners is getting restless, and it’s not the GDS. The airlines are pushing for change, throwing money at younger, sexier companies who reckon they can do it – distribute airfares to travel agents, that is – for much less.

And while most of the preliminary skirmishes have been fought overseas, the show came to Sydney last week, when Star Alliance CEO Jaan Albrecht declared: “We want to bring new players into the market.”

In a wide-ranging speech packed with Darwinian analogies – only the fittest will survive etc – Albrecht told the National Aviation Press Club that the Star Alliance is working with the new players to come up with web-based GDS alternatives.

Broadly speaking, these entrant companies offer airline inventory direct to travel agents through internet portals at a fraction of the distribution cost charged by GDS.

For example, ITA Software has claimed it will charge airlines just 50 cents per segment. Compare this with Star Alliance estimates that the average GDS charge per ticket is more than $16.

“By exploring the potential of so-called new entrants, Star Alliance member carriers will be able to break the dominance, cost structure and poor flexibility of the Amadeuses, Galileos and Sabres,” Albrecht said.

“Welcome, good old GDS, to the world of competition. It seems to be time for you, to evolve as well.”

The response of local Galileo boss, John Guscic, was equally Darwinian.

“It took an asteroid to wipe out the dinosaurs, but it will take more than gum flapping to undermine the value that the GDS brings to travel agents,” Guscic said.

Managing Director of Amadeus, Tim Russell, said there would be room for both players, something Albrecht agreed with.

“In a nutshell, we have a healthy respect for them and Amadeus is looking at how we can serve that market,” Russell said.

By “that market”, Russell said he means simple point to point travel.

His comments also highlights the inevitability of the GDS getting involved in web-based distribution alternatives, either developing their own or buying into one of the new players like G2 SwitchWorks, ITA Software and FareLogix.

All this debate follows moves in the United States, where seven of the largest carriers have signed with G2 SwitchWorks “as a provider of choice for alternative-GDS distribution services between them and key agency clients”.

Five of the carriers – American Airlines, America West Airlines, Continental Airlines, Delta Air Lines and Northwest Airlines have also agreed to pre-pay distribution fees, of up to eight million tickets, in exchange for transaction discounts and the opportunity to acquire a minority stake in G2 Switchworks.

So, as you can see, it is more than just posturing by the so-called Legacy Carriers, fired and challenged by the success of Low Cost Carriers distributing direct to consumers through the Internet.

They have clearly targeted distribution costs as a manageable expense – unlike oil prices – and are doing everything they can to bring them down.

However, come what may, you can be sure of one thing – while the boundaries within the marriage of convenience between the airlines and GDS might shift, the relationship will most certainly endure.

Better the devil you know, right?


Internet Roars In Lion City But Traditional Retail Stable

INTERNET bookings in mature Asian markets such as Singapore have already reached 15%, online operator Zuji believes.

However, the National Association of Travel Agents Singapore is more circumspect, estimating that the internet and direct bookings now account for around 10% of the Singapore travel market.

NATAS Chief Executive Officer Robert Khoo says traditional travel agencies are holding their own in the Lion City, generally regarded as the most net-savvy of all South-East Asian markets.

Mr Khoo says demand for traditional agents is increasing with a 15% boost in local agency numbers over the past five years.

Both NATAS and Zuji agree that booking trends are changing due to the emergence of Singapore as the primary regional hub for Low Cost Carriers (LLC), which in 2004 accounted for 7% of all flights from Changi Airport.

Freshly fluid consumer travel patterns are also having an impact, with the General Manager of SA Tours, Alicia Seah, saying business is strong for her company, one of Singapore’s largest travel agencies.

“The main difference now is that there perhaps is less emphasis on booking flights and more on-the-ground (product) such as organised tours, cars, restaurants and cruises.”

Singaporeans are also travelling more often, says Khoo. “Previously, many Singaporeans saved, sometimes for years, to go on one long international vacation,” he says.

“Now, many have the money but not the time to take long vacations so the trend is to take several short trips on a free and easy basis.”

Zuji says internet booking is getting especially strong strong support from the small to medium business sector in relatively mature Asian market such as Singapore and also Hong Kong.

It says yearly growth (end 2003 to end 2004) was in triple digits in all markets – Australia, Singapore, Hong Kong, Taiwan, Korea.

Director of Corporate Affairs Kim Stockham says hotel sales are particularly strong, growing at around 300% a year.

She adds that much of Zuji forward growth will come from hotel sales following a renewed corporate and marketing focus.


China’s Independent Travel Market Takes Off

By Martin Kelly

Excellent sales growth from China’s leading online retailer Ctrip once again exceeded market expectations and set a cracking pace in the world’s most exciting travel market.

Results from rival China travel retailer eLong told a different story – that of a company still establishing itself … strong sales were counter balanced by increased spending on acquisitions and marketing.

Consequently a clear split has emerged between China’s two big independent travel brands in the eyes of regional travel industry analysts.

That is, Ctrip, which is already making money, will remain dominant for the foreseeable future, while eLong focuses on building for the longer-term.

Analyst William Bao Bean from Deutsche Bank commented: "In light of eLong’s focus on customer acquisition rather than profitability, transaction metrics are the key to measuring success.

"eLong is getting traction as its relationships with portals are driving much higher traffic – but it is now up to the company to convert traffic into customers."

He said other players such as CYTS and Cendant (via their www.aoyou.com joint venture) are not yet having impact on the independent travel marketplace.

eLong’s net sales for the second quarter were RMB52 million ($US6.42 million) driven mostly by hotels, although the growth in airline ticket sales exceeded expectations.

Ultimately, though, eLong lost RMB11 million ($US1.35 million) for the quarter.

Ctrip powered on, recording net sales for the second quarter of RMB129 million ($US16 million), up 60% year on year. Net income was RMB56.5 ($US6.8 million), an 80% increase on last year’s result.

President and Chief Financial Officer of Ctrip, Neil Shen, who is leaving the company, said the results "highlighted our strength in strong organic and balanced growth.

"We have a healthy business model that we believe will continue to enable us to take full advantage of the vibrant travel industry in China."

Analyst Bean said: "Ctrip hit the ball out of the park again in the second quarter and is gradually cementing its position as a category leader in the China market based on its execution, high barriers and strong growth.

"While risks remain, including the economy and execution, we believe the outlook for Ctrip in the near and long term is good as it leads the small but fast growing independent travel market. "

Revenue at Ctrip is dominated by hotels at a ratio of around 2.5 for every airline dollar. Hotel bookings are also growing marginally quicker, although the most spectacular growth is coming from package tours, albeit from a very low base.

Online transactions are steady at 30%, compared with 20% for eLong.



Online Product Flies For Air NZ

Air New Zealand says customers have embraced the introduction of accommodation and car hire – either bundled or dynamically packaged with airfares – on its website.

Global Direct Sales General Manager, Chris Hunter, says: “It’s progressing well and we are happy with the way things are going so far – we’ve had a pretty good uptake.”

He says the product initiative was driven by regular users of its web site.

“Our customer base clearly demanded we sell more than just air tickets on the site,” he says.

“So we went through a significant number of business before deciding to add these components.”

Mr Hunter says consumers are happy to book relatively expensive holidays online.

“We are finding that the decision to travel is driven by the discounted (and bundled) ‘Hot Deals’ but then consumers are upselling themselves.

“Certainly many people are not afraid of parting with significant amounts of money on the credit card.

“I think our strong branding helps with that; we are seen as very trustworthy.”

Mr Hunter says Air New Zealand is continually reviewing the site.

“The brand life online is much sorter than offline,” he said, adding that a major focus of the site is converting the inbound market.



Search Engine Pricing Blowout For Travel And Hotel Websites

By Martin Kelly

Paid Search Engine Marketing costs in the travel sector have blown out dramatically over the past 12 months with sales conversion rates for Australian accommodation sites in particular reaching unsustainable levels.

Industry experts such as Frank Grasso from e-Channel say sales conversion rates have rocketed to almost US$90 per customer for some new players in competitive categories, while a study by researcher Frost & Sullivan confirmed it is a major concern for the industry.

“The increasing pricing problem is worse for new entrants into the market because they get hit twice: they have to pay a higher cost per click and due to their lack of brand presence they have a lower conversion rate,” says Grasso.

This is clearly making the first sale per customer uneconomic and forcing a strategic reassessment with websites justifying the high SEM cost by attempting to generate repeat business.

Grasso says the average cost per click for top position with popular terms such as ‘Sydney Hotels’, ‘Singapore Hotels’ and ‘Bangkok Hotels’ for an established company range between US$2 and US$2.95 on Google.

“A year or so ago we would have been able to get the top position for much less,” he says.

Managing Director of Amplify, Richard Noon, says: “What we are seeing is people moving more to a lifetime acquisition mode because they can’t justify paid search on a single sale basis.

“However, the jury is still out on whether this is the right approach, but clearly some players are prepared to play that game.”

Meanwhile, a report from Frost & Sullivan has revealed that rising prices and increasing competition for top ranking keywords are the top two concerns for Australian travel search engine marketers.

But Research Director, Technology, Foad Fadaghi, predicts paid search in the travel and accommodation category will still grow by at least 30% over the next 12 months.

He says the strongest growth will come from companies marketing destination activities.

Fadaghi estimates that travel is the dominant force within the Australian search engine marketing industry with 17% of total spend, closely followed by financial services on 14%.

Grasso says the rising costs are forcing many travel and accommodation companies to reassess their search marketing spend.

“The answer to this dilemma is to get smarter when devising a search engine marketing strategy,” says Grasso.

“Companies should allocate some of their budget towards PR and Branding, while using search as an acquisition tool. 

“Advertisers also need to become more aware of what the lifetime value their customers is and work out how much they are willing to pay to acquire a new customer. 

“The most successful search engine campaigns are the ones that follow a strict Cost Per Acquisition benchmark.”

Noon says the cost blowout throws the spotlight back on the importance of organic search and other marketing tools.

Both Frank Grasso and Foad Fadaghi will be speaking at TRAVELtech in Sydney on August 30. 



Suppliers Gain Market Share From Online Retailers

ONLINE travel agencies are losing customers to suppliers in the world’s biggest travel market – a finding that has strong implications for online Asia Pacific businesses.

According to the latest report from PhoCusWright, 40% of online travel shoppers in the United States price check on web agency sites before booking direct with the supplier.

Airlines have been the big winners with “nearly half of online travel shoppers” booking air (either through the call centre or web site) after cruising retail sites.

“This compares to three out of 10 who have shopped online travel agencies but ultimately purchased direct from a hotel or car rental company,” PhocusWright says.

“Low price guarantees, loyalty points and improved website navigation and services have impacted this shift.”

Service is also a factor. “More than twice as many online travellers (36%) believe the supplier-direct channel provides the best customer service compared with 15% who choose the online travel agency channel.”

Even traditional agencies fared badly with just 33% of respondents claiming they provided the best service.

Meanwhile, nearly four out of 10 (38%) of online travellers believe suppliers offer the lowest prices, up from just 14% in 2002 – a 24-point gain in two years.

Online shoppers also believe that suppliers offer the lowest fees (44% vs. 29%), most bonus miles/loyalty reward points (51% vs. 14%), and an easier change/cancellation policy (39% vs. 17%) compared to online travel agencies.

“Online agencies have lost their footing with leisure travelers in 2004 as a result of aggressive supplier efforts to better manage inventory and win business through online and offline direct channels,” according to Susan Steinbrink, PhoCusWright analyst and author of the report.

“The key to their long-term, Internet survival will be in successfully upselling the customer with valued multiple travel components.”

A total of 500 interviews were conducted via telephone from International Communications Research/ICR’s centralized telephone center between Oct. 6 and Oct. 16, 2004, for the survey.


The News Is All Good, Or All Bad – It’s A Matter Of Perspective









By Martin Kelly

OMIGOD – the world has changed. Things are different now. Those crazy kids aren’t reading newspapers, all they do is talk and text on mobiles; they’re always online and you can’t even talk to them any more.

I mean, even Rupert Murdoch reckons the internet is the way to go!

Recent reports, many of which were read online, carried the shocking news that media baron Rupert Murdoch believes newspaper editors must embrace the internet, saying print news executives “sat by and watched” as a generation of digital consumers turned away from print.

He could be talking about travel.

The omnipotent CEO of News Corp cited a recent report by the Carnegie Corp in the United States showing that 44 per cent of respondents between 18 and 34 years old said they use websites at least once a day for news.

In Australia, figures from Nielsen//NetRatings reveal that 13.2 million, or 84%, of people aged 16+ have access to the internet, 50% of users have broadband, most spend 30 minutes a day online, and that travel (like news) is one of the most popular categories with 36% “reach” among users. The vast majority of users are aged between 25 and 54.

Murdoch said that newspapers face a dire future unless the way they gather and deliver news changes dramatically. Otherwise, he said, the steady migration of readers and advertisers to web will continue unabated.

“The trends are against us,” Murdoch told the annual meeting of the American Society of Newspaper Editors. “We’ve been slow to react. We’ve sat by and watched. Unless we awaken to these changes, which are quite different than those five or six years ago, we will, as an industry, be relegated to the status of also-rans.”

So why am I telling you this? Well, replace ‘news’ with ‘traditional travel businesses’ and see what you come up with. Murdoch’s words should resonate with us all because he is simply talking about consumers wanting their product delivered in a different format more suited to the times.

Also, remember, it’s Rupert Murdoch, one of the world’s smartest businessmen, who is saying this. And, while he may be well north of 70, the so-called ‘Dirty Digger’ knows a good thing when he sees it, and it is not too proud to see the error of his ways.

The same applies Kerry Packer who, like his former compatriot, did not become insanely rich by ignoring the bleeding obvious and is set to make another large fortune with the upcoming listing of Seek, the market-leading internet job site.

Murdoch concluded that the future is strong, provided the newspaper industry – like traditional travel businesses – finds the correct balance of product delivery to satisfy a new generation of customers.

“I’m still confident of our future, both in print and via electronic delivery platforms. The data may show that young people aren’t reading newspapers as much as their predecessors, but it doesn’t show they don’t want news. In fact, they want a lot of news, just faster news of a different kind and delivered in a different way.

“And we are uniquely positioned to deliver that news. We have the experience, the brands, the resources, and the know-how to get it done. We have unique content to differentiate ourselves in a world where news is becoming increasingly commoditized. And most importantly, we have a great new partner to help us reach this new consumer — the Internet.

“The challenge, however, is to deliver that news in ways consumers want to receive it. Before we can apply our competitive advantages, we have to free our minds of our prejudices and predispositions, and start thinking like our newest consumers. In short, we have to answer this fundamental question: What do we – a bunch of digital immigrants — need to do to be relevant to the digital natives?”

Ends/ 20 April, 2005.


Cendant to Launch New Regional Vendor Platform

DISTRIBUTION market leader Cendant TDS is launching an integrated online product platform through Galileo that will – for the first time – see the company distributing packaged wholesale products through its agency network.

The Regional Vendor Platform (RVP) – due the final quarter of this year – will also aggregate and distribute air, hotels car hire, cruise, destination activities, insurance and foreign exchange through traditional and online agencies.

Utilising the Travel Service Aggregator (TSA) technology Galileo developed with Webjet and Microsoft, RVP will allow agents to directly access and book the live inventory of contracted suppliers via a web interface.

Cendant TDS Managing Director John Guscic says RVP will feature “all types” of online and offline product, although suppliers must have a robust technological capacity to ensure seamless integration with the web-based application.

“It will be used as a booking front-end for agents or agency.com sites to provide the most robust and integrated content platform available in the market,” Guscic says.

“I think it’s a great opportunity for suppliers and wholesalers to expand their product reach.”

Guscic says that work is already well advanced on the technical aspects of RVP, which will be integrated into GDS desktops.

“The TSA technology is so robust; it integrates into the mid and back office, enabling touchless transactions.

“This product is a great success story for the Australian travel industry and has already been rolled out globally.

“It is being used by UK consolidator and wholesaler Travel 2/Travel 4, while Harvey World Travel is using the TSA platform in a B2B environment.”

Planning for the product accrual strategy is now underway with Cendant set to appoint a dedicated partnership and relationship manager.

Director, Product Management and Marketing, Kurt Knackstedt, is currently scouting product from all sectors.

“We want everything,” he jokes.

Guscic adds: “We want all the content we can get then let agency customers make the decision on what they want to buy.”

In terms of marketing, Guscic claims RVP will give Galileo a major advantage over its competitors, although TIAS also offers agents an aggregrated database – albeit without air – through Traveltools.

“No-one else will have the suppliers, the technology or the distribution reach, while agents will be able to get all content through the same booking engine rather than visiting separate websites or making lots of phone calls.”

Guscic claims that Galileo’s share of the Australian Global Distribution Systems market has grown 10% over the past year and now sits at around 50%.

Its agency partners include Harvey World Travel, Flight Centre, American Express, and BTI.

May 13, 2005

Webjet Diversifies as Sales Grow

ONLINE retailer Webjet is starting to diversify income by placing its airline booking engine – which already generates most of the company’s revenue – on three new websites within the next two months.

Managing Director David Clarke said the booking engine will soon feature on the Travelmate and Need It Now consumer sites, in addition to the Creative Holidays trade site.

The booking engine is part of the Travel Service Aggregator technology platform Webjet developed in conjunction with Galileo and Microsoft.

It can process up to 1000 transactions a minute and has been a key reason for the recent strong business performance of Webjet, which recently announced a net profit for the six months to December 31, 2004, of A$254,484.

Further profit announcements are expected with sales continuing to surge.

February, with just 28 days, was a record month with A$8.1 million in sales (11% up on January) driven by 22,000 bookings covering 30,000 passengers.

“Just wait until you see March,” Clarke said.

He added that TSA, which is able to aggregate and display product from disparate suppliers, has allowed Webjet to increase sales while controlling staffing costs.

“Most of the incremental growth goes straight to the bottom line,” he said.

“At Webjet we have 16 full-time staff,” he said. “The throughput of the best run traditional travel agencies is around $1 million a year per staff member – we can do A$6 million per person.”

Clarke said Webjet operates on a gross margin of 7% before costs – 6% is fixed while the remaining 1% goes to marketing, generally evenly split between online and offline.

“I believe you’ve got to be a visible presence in the real world – it’s no good just being a cyber space identity.”

While Clarke was reluctant to forecast because of ASX rules, he said “if the model holds true I believe our net margin can fall within the 1.5% to 2% range by the end of the year based on current trends.”

Current rampant growth rates will be difficult to maintain, he said, although the company is aiming to double existing (low-commission) airline traffic, which currently dominates income at 60%.

Another 20% comes from car, hotels, and insurance, while the remaining 20% comprises services fees.

Webjet charges a A$6.95 service fee for every transaction, no matter what volume or amount.

“It’s been in place for more than a year and we have had absolutely no resistance,” he said.

Meanwhile, whatever resistance there was to investing in Webjet has evaporated.

Over the past seven months Webjet shares have increased from three cents to a high of 22 cents (check) and are currently trading at around 16 cents.

Daily trading volumes regularly exceed one million shares, resulting in major paper profits for some of the biggest names in Australian travel.

Significant investors who bought in or struck options deals when the stock was scraping the bottom of its range include Harvey World Travel (19%), Cendant (9%) and Australian Outback Travel (3.5%), which owns Need It Now and Travelmate.

Both Cendant (GDS, hotels and car – Avis, Budget) and Australian Outback Travel (Australia and NZ hotels) are also using Webjet to distribute its products, while the HWT alliance provides it with buying power.

The frenetic stock activity has inevitably led to speculation and rumour.

But Clarke said there has been little or no recent change in the Top 20 shareholders.

“We are not sitting here trying to organise a buyout or takeover,” Mr Clarke said.

“If someone makes an offer, we’ll consider it but it’s not in the business plan or strategy.”

Ends/ 22 March, 2005


My name is Martin Kelly and I run Travel Trends, a content, marketing, research and strategy consultancy for travel businesses.

I help travel companies improve their positioning,  communications, stakeholder engagement and public relations through content-led strategic initiatives.

Typically I develop a multi-tier approach including stories/blog posts, newsletters, media releases, white papers, reports and  events - all designed to better connect business with their customers.

Often, my clients have neglected their marketing communications so I work with them to create credible positioning and messaging to ensure a solid, relevant platform before embarking on outreach.

I am also a respected travel  industry analyst, contributing to Phocuswright's regional research reports while representing them as a speaker at events in Australia and overseas.

In terms of background, I started the Travel Trends website to support the No Vacancy and TRAVELtech conferences, which I founded and ran for many years before selling in 2016.

I've kept the site going as an example of my work and still file the occasional story. 

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