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Australian-headquartered global travel giant Flight Centre will rebrand almost a quarter of its retail outlets in its home market as it rationalizes its leisure offerings.
“This is about moving from what was six leisure brands to three – to achieve scale and enable us to achieve marketshare,” Chief Operating Officer Melanie Waters-Ryan said during an analysts’ briefing. “Shops will be rebranded and consultants will be redeployed … so that we can retain that specialization in things like tailor-made holidays and cruises.” She said there will be no job losses.
The plan segments the leisure market into a mass market (Flight Centre), a youth segment (Student Flights) and a premium offering (Travel Associates).
A similar brand purge will be conducted on a smaller scale in New Zealand.
Flight Centre, which exceeded $7.82 billion (A$10 billion) in total ticket value for the first time in its fiscal first half of 2018 results, has been fine-tuning its operations through consolidation and “embedding new revenue streams,” the company said.
Waters-Ryan said the focus on loss-making businesses has seen closures or downsizing of some operations in Asia and United Arab Emirates, a move which has seen those markets rebound to produce record profits. Student Flights was one of the casualties in New Zealand and in South Africa, as part of a move on underperforming business lines.
Nips and tucks in the United States market also saw the leisure business return to profit for the six months, with total ticket value exceeding $1.56 billion (A$2 billion)
“Canada’s leisure will return to profit this year after many years of losses,” she added. The Flight Centre first half year results highlight the company’s increasing diversity and a bid to halt reliance on the Australian leisure business as its key growth engine.
Flight Centre continues to diversify
Founder and CEO Graham “Skroo” Turner provided detail on the company’s growing Travel Experience Network, a diverse range of businesses which generated bookings worth $62.6 million (A$80 million) in the period.
Activities in this operation range from tours to destination management services, including the Asia-based Buffalo Tours destination management company acquired in January and Olympus Tours, a leading Mexico-based destination management company, which provides transfers, excursions and day-trips for meetings and incentive groups, and land arrangements for cruises and other tour groups.
Another acquisition, Bespoke Hospitality Management Asia, a fast-growing Asia-based hotel management company, added another string to the bow.
“While currently small compared to (the group’s) global leisure and corporate networks, these businesses have been identified as key future earnings drivers and earmarked for further growth,” said Turner, who flagged “more modest acquisitions in some of these areas.”
The group is also gaining traction with some of its emerging brands, including Travel Money, which turned over $524 million (A$670 million) in the fiscal first half of 2018 – up 18 percent from the same time last year. It is now the group’s fourth-largest brand.
Flight Centre’s aircraft charter business also saw total ticket value up 40 percent with growth in ad-hoc charters and a significant new deal with the Queensland State Government.
Strong corporate travel growth
Flight Centre continues to make strides toward its ambition of becoming “a truly global TMC (Travel Management Company),” the company said, thanks to continued growth and acquisitions.
The group’s corporate brands generated 37 percent of first half 2018 total ticket value, a jump from just more than a third this time last year.
Turner said the group is developing a global footprint as it integrates its recent acquisitions, including agencies in the Netherlands, Sweden, Finland, Norway, Denmark and Germany, and a stake in an agency in France.
“FCm Germany was launched recently and has already won accounts,” he noted.
Other corporate acquisitions include Quebec-based Les Voyages Laurier du Vallon and New Zealand’s Executive Travel Group.
Besides a focus on the big end of town, the corporate division aims to grow its share of the small to medium-sized enterprise market with enhancements to its Corporate Traveller brand, which is currently being relaunched in several regions.
Buoyed by a 27.7 percent rise in before-tax profit to $109 million (A$139.4 million) on revenue of $1.07 billion (A$1.37 billion. Flight Centre remains upbeat about the year ahead. The group anticipates a pre-tax profit of $281.6 million (A$360 million) to $301.17 million (A$385) million for the full year.
The company expects the first-half trends to continue, with overseas businesses, particularly its large North American and Europe, Middle East and Africa operations, likely to drive profit growth.
It also expects to see results from the restructuring of its core Australian leisure market, although Turner conceded that there may be some temporary downside to the removal of leisure brands.