The swagger is back at Flight Centre. Today the global travel retailer called itself a “sales and marketing machine” tapping into a “golden era of travel” driven by free-spending baby boomers who don’t give a damn about crashing stock markets and the economic challenges of China.
Hard to believe this is the same company that issued a profit downgrade a couple of months ago. But it’s not what you say it’s how you say it. By pre-managing the disappointment Flight Centre was able to focus on the good news – and there was plenty of it.
All 10 countries in which Flight Centre operates achieved record turnover in the year to June 30 while combined international earnings before tax exceeded $100 million for the first time. Net profit after tax was up 24% to $256m although underlying profit before tax fell by more than 3%.
Meanwhile, it’s forecasting good times ahead with projected growth of 6%-8% creating an extra 1000 jobs. There’s plenty of money being spent on new shops and fit-outs, with news of new “mega-stores” and “hyper-stores” though you’d have to work at Flight Centre to understand the difference.
MD Graham Turner was determined to be upbeat – reprising the “golden era of travel” line he first trotted out at last year’s record result announcement.
His arguments that there is a magnificent 20 years ahead for the industry hold weight but notably there was no mention of the dark skies currently clouding the tourism outlook.
Which is strange because it’s big news. For one, there’s no question that Asia’s travel industry has gone negative, spooked by the economic ructions roiling through the Chinese economy while the Bangkok bombing has also had an impact. One story today even mentioned the “R” word…
Also missing was any reference to this week’s stock plunges across the world’s key financial markets which (although many have bounced somewhat) will have undoubtedly hurt the confidence of Baby Boomers locked into a superannuation system heavily dependent on shares.
However it is a theme that’s been the subject of some interesting comments from Phil Hoffman, probably Australia’s best known independent travel agent. Hoffman has several stores in Adelaide but has national consumer visibility through Cruiseco consortium.
Hoffman recently told travelBulletin that: “The government has attacked superannuation for baby boomers, our main market, and put people on the conservative side of spending.
“While lower interest rates has helped one part of the market, baby boomers are realising they will not earn as much as they did in the past and think they can’t afford holidays.
“It’s creating nervous travellers and effecting people’s thinking.
“It’s hard to push people over the line at the moment but we’ve seen this before. We just need perceptions to change.”
Perceptions are often reality however and the falling Aussie dollar hasn’t helped with government stats showing the phenomenal growth in Australians travelling overseas has levelled right off.
Hardly any outbound growth at all in fact and, off a much bigger base, there’s little chance of rates getting back to anywhere the previous +7% to 8% annual levels.
Hoffman believes that the travel industry will respond the way it always has to any kind of downturn – and that’s by discounting to the bone. With all the extra capacity, watch out for cruising to lead the way on that front.
So the situation is not as simple as Flight Centre makes out. But the company has a 20-year track record of making things happen, which is what they’re doing now. Lots of irons in the fire while a few bets are starting to come good.