Flight Centre is hoping that cheap airfares and increased marketing will combine to stimulate flat demand from Australian consumers, a trend which led to the company’s first profit downgrade in four years yesterday.
Australia’s largest travel retailer is boosting its sales and marketing spend by 10% – from 1.0% of total turnover value to 1.1% of TTV – to stimulate demand, which it believes is still suffering from the Federal Budget way back in May.
“While the Australian outbound market has slowed in recent months FLT does not believe this has been caused by the Australian dollar’s recent falls given that the roots can be traced back to the decline in consumer confidence in late 2013/14 and the subsequent slowdown in in-store sales,” Mr Turner said.
He said consumer travel inquiry rates in Australia remain high but conversions are down despite FLT consultants competing aggressively on price.
“We expect stronger demand as the financial year progresses and as travellers take advantage of cheaper fares,” he said.
“We also hope to achieve accelerated profit growth during the 4th quarter (of the financial year), which was a relatively weaker trading period during 2013/14.
Flight Centre has downgraded its profit before tax for the financial year from A$395-405m to A$360m-390m.
It’s share price has fallen 20% since the beginning of November and at the time of writing was trading at A$32.49.
They were $48 in early September.