Showing posts with label flight centre. Show all posts
Showing posts with label flight centre. Show all posts

Monday, October 19, 2009

3 + 3 recommendations on how offline travel can save itself

I remain stunned how often I still read announcements from large off-line travel agents (in Australia, Asia and elsewhere) saying that they don't need to worry about competition from online players.

Just recently in separate reports leaders of two of the largest in the Pacific region reaffirmed their online travel disinterest.

Peter Lacaze is the CEO of Stella Travel. One of the Pacific's largest network of offline franchise travel agents, corporate travel and wholesale/consolidators. Lacaze is confronted with a lot of challenges. Today he announced plans to cut franchise fees and other measures to retain stores/members. Despite the challenges to his business, he does not believe online is the answer. In fact he has gone beyond just ignoring online to being positively negative on it. In a recent TravelTrends post he said “not in my lifetime” in response to a question about the internet taking over half the market in Australia. I am not sure what market or stats he is looking at. The online domestic air business is already above 50% and online hotels are in the 30% range. PhoCusWright (in their recent APAC report) say that 26% of leisure and unmanaged business travel spend is online in Australia (2008) set to rise to 41% in 2011. At this sort of pacing more than half of the spend will be online before the end of the next decade (as it already is in the US)

Graham Turner (Lacaze's rival over at Flight Centre) continued the "denier" talk during the presentation of his FY09 annual results (see TravelToday pdf here). Telling the audience and media how little he was worried about online travel companies and that they were not a threat to his business.

How to get serious about online

I regularly write stories on this continued denial by the off-line players. In response I am often asked by email and at conference either "how would you know if the online companies 'got it' and started a real push into online?" or "what would you tell an off-line CEO that he/she needs to do to be serious about online?" The answer to both questions is the same. There are three things that players like Stella and Flight Centre need to do right now to take online seriously:
  1. Hire a new person and restructure: Appoint a senior exec to be the boss of online. Critically they need to report direct to the CEO and be free of any "cannulisation hand-cuffs". That can buy, invest and drive online without fear of the sales taken away from the store-front;
  2. Set a specific Target: Make a company aim and shareholder commitment of a number of transactions (or dollars) that will come in from online bookings by a certain date; and
  3. Embrace Technology: Accept the fact that technology is critical to selling travel well. Hire a team of developers (or do a deal with a technology company) devoted to online only activities, reporting to the new online boss.
How to revitalise off-line

To be fair, I do not expect a 100% off-line company to become a 100% online company. Therefore I am going to add three more recommendations on how off-line players should use technology to protect their existing business and stay relevant to consumers looking to fulfil their more complicated itineraries off-line and therefore protect their revenues from complex itineraries. They are:
  1. Destination Experts/Complex Product Methodology: Brochures and Famil trips are not enough to provide off-line agents with the level of information they need to sell complex itineraries to consumers better than the web. To effectively compete with the scale of information online, off-line agents need to be able to add their skills to a deep content library of destination information and a discovery and recommendation system to help sort through all that is available;
  2. Massive CRM investment: Off-line agents get to see their customers, online don't. This means that off-line agents can make decisions about purchase intention and consumer activity that online can't. Also means they can ask more detailed and targeted questions about consumers than off-line. This improved access to information on consumers is currently wasted by the major off-line agents because they either don't collect it, or if they do, they don't know what to do with it. I recommend a massive investment in a CRM systems tied to the desktop sales tools and to the incentive plans for staff; and
  3. Rewrite store experience (copy the supermarkets): The travel agency store layout has not changed in my lifetime. The rows of brochures in no particular order with deal led window displays look the same today as they did in the 70s, 80s and 90s. Meanwhile other retail organisations (especially supermarkets) have invested heavily in consumer retail pattern research and store layout. The location of items, stores and promotional spaces has become a science. All designed towards bringing the customer to the store, keeping them inside the store and directing their purchasing behaviour. Travel companies have to do the same. They need to rewrite the consumer experience to make more of the merchandising opportunities offered by access to customers walking around with their wallets in the pockets.
The other view is that it is too late to save the offline players. What do you think? Too late? Answers in comments

thanks to salinadarling at flickr for the great photo

Thursday, April 16, 2009

Cheapflights.com.au launches in Australia - but this is not meta-search as it should be

It is supposed to be interesting when an international online travel company launches in the land of the barbecuing shrimp. So here I am on staycation leave quietly reading my newsfeed and blog email address when I spot care of m-travel and an email from Steve Sherlock of Oodles that "Cheapflights have launched an Australian and New Zealand version of their site". I should be excited by an international launch in Australia but Cheapflights is not exciting for two reasons.

Firstly, as I said back in July 07 when the rumours first started of Cheapflights coming to town (where 2008 was the planned launch date), this market (online air in Australia) is already too crowded for a domestic market with 2/3 carriers. OTAs like Webjet, Travel.com.au (owned by Wotif), Flight Centre, Expedia, Zuji (Travelocity) and Bestflights and regional meta-search player Wego (part owned by News Corp) are fighting for scraps left over by the online air dominance of the major airline websites (Virgin-Blue, Qantas and the Qantas owned Jetsar). Granted those scraps are getting bigger and bigger but still this is not an easy market to enter. Secondly, the Cheapflights product is simply not good enough to be of value to the consumer.

For those that don't know, Cheapflights is a quasi meta-search company started in the UK way back in 1996. Even describing them as "quasi" is generous because to me the hallmark of a meta-search business is an integrated display of up to date results in one place. The UK version of Cheapflights has the integrated display but the results are not up to date. Have a look at this extract from a London to Paris search

Notice where it says "updated 9 minutes ago" next to the BA quote and "updated 2 days ago" for ebookers. Also have a look at the URL for the page

It is a static landing page - http://www.cheapflights.co.uk/flights/Paris/London/ - rather than a dynamically generated page based on the timings of my specific search. The results are not timely or up-to-date. I clicked on a few of the links and they ended up on either dead search pages or some other destination page where the results did not match the search terms. In short the UK version Cheapflights - the oldest and most established version - does not work on a stand alone basis nor meet the minimum criteria for a meta-search player.

The Australia version of Cheapflights is even worse. It may be just early days for the product but the AU version is many steps behind the UK product which itself is steps behind competitors Kayak and TripAdvisor.

To give them some due, meta-search in Australia is not easy. As I discussed here in a Webjet vs Wego post (another Steve Sherlock tip) it is has proven very difficult to facilitae multi-carrier domestic meta-search in Australia. Wego has tried a work around (again go back to this post for more) but Cheapflights are not even trying. Have a look at this shot below of Cheapflights.com.au


This is the results of a search of Sydney to Melbourne. Rather than being presented with a set of even un-integrated (or disintegrated if you prefer) results I am given four options, four different websites that I can click on. Each click generates a new pop up with search results from the named party. If I want to do what meta-search is supposed to be for - comparing multiple sites - I have to open all four sites and looked at the results one by one. In other words do exactly what we used to do before meta-search came along. In some other words, it adds no value to the standard surfing practices of a regular internet consumer. In some more blunt words, next to useless.

In truth I don't think even Cheapflights think of themselves internally as a meta-search company. They target more of their effort and energies in their Travelzoo style Hot Travel Deals newsletter. Am undecided if there is value here,

Either way I am not predicting success for this product. The product in its current form adds little to the market and the competitors have more money to spend on marketing.

Told you I would get tough again? Am I being too tough?

Monday, January 05, 2009

The BOOT is back for 2009 with 5 predictions for the online travel industry

The BOOT is back for 2009. Tanned (a little burnt), rested (though could do with another big sleep in) and ready for action (kind of). Inspired by the Travolution article "Predictions for 2009" I am going to open up the 2009 edition of the BOOT with my predictions for the travel industry. Here are my five predictions for 2009:

  1. There are more airlines to go bust. In fact before the end of 2009 a big carrier will go bust or be taken over as a saving measure. Alitalia is a gimme so I wont count the impending Alitalia failure/restructure as a successful prediction. Another big carrier (or two) will fail or be bought in 2009. Update - if you want a list of all of the 21 airlines that died in 2008 check out this post over at cranky flyer;
  2. Domestic travel growth will surprise us all. I am a noted optimist when it comes to the travel industry surviving shocks and set backs. People will still travel in 2009 - they will just go short. Consumers will look for domestic deals and shorter trips to enable them to enjoy the travel and breaks they want without the long-haul price tag;
  3. Consolidation is not yet finished: In 2008 TripAdvisor bought everything in sight, Venere first bought Worldby then joined the extended TripAdvisor family by being acquired by Expedia, Microsoft bought Farecast, Priceline bought Agoda, Wotif bought AsiaWebDirect and Travel.com.au and more. The consolidation in the online travel industry will continue through 2009. There are too many bargains out there;
  4. 2009 will not be the year of mobile for the travel industry: Every year since 2000 we have been talking about the mobile revolution in online travel. This year I rejoined that chorus of mobile revolution fan boys while at PhoCusWright in LA. With the Global Financial Crisis (I am told there is even an acronym for this - GFC) in full swing I think the larger players will pull back from their mobile plans and focus on core products, costs control and customer loyalty. Mobile will have to wait until 2010; and
  5. The dinosaurs will screw up and come out of the GFC even weaker: The big offline players have been screwing up online for a long time now. The good ones have managed to avoid destruction due to the booming economy and the sale of complementary products (land, car, package and especially cruise). The boom is over and the pain is hitting. Just recently Flight Centre announced a likely 33% drop in profits for 2009. In the past I have given advice on how you would know that offline players like Flight Centre "get it" and are ready to execute online. The GFC actually provides a fantastic opportunity to "get it" and join the online travel revolution. Expectations for performance are low during a bust giving offline players time to shift focus and make investments in areas they have previously ignored online. But I think the offline players will miss this chance. Instead of emerging from the GFC with a stronger online focus they will dig even deeper into the offline hole and emerge even further behind the online industry leaders. As evidence of this see the recent interview from new Stella Travel (Australia's number 2 offline player) CEO Peter Lacaze where he confessed to being an online sceptic. [Disclosure - in the past I have consulted to Stella on their online strategy].
UPDATE - Prediction number 6 - the last minute model will come back. I called the last minute model as being on hiatus in May 2008. It will come back as hotels start to hurt during the GFC.

Stay tuned to see what I get wrong and right here. The BOOT is back for 2009.

thanks to Tokyo Boy on flickr for the photo

Sunday, October 07, 2007

401 not out

Time for my "not out series" - a regular summary of the last 100 posts that I first started with 101 not out and continued with 201 and 301.

Without a doubt this recent period of posts on the BOOT have been dominated by consolidation and deals:
In other general news
and in quirky news
I hope you're enjoying reading because I am enjoying writing.

Tuesday, July 31, 2007

Flight Centre and PEP: This time it is really over

First Australasian private equity giant Pacific Equity Parnters (PEP) wanted to buy all of Flight Centre. But shareholder Lazard said "No".

Then, PEP and the Flight Centre founders came back fighting with a new proposal to give PEP control of 33% of the business - a proposal that did not need shareholder approval.

Now the word on the street (or stock exchange in this case via e-travel blackboard) is that this deal is also dead. This time the deal died not at the hands of an errant shareholder but at the hands of the founders. Seems the founders commissioned an expert's report from Ernst & Young that valued the company at more than was being offered by PEP. In business stock exchange announcement double speak the Chairman Bruce Brown is quoted as saying
“While the creation of a leveraged joint venture had the potential to deliver significant benefits to FLT and its shareholders, it was also a highly complex and costly transaction, and the value proposition has become considerably less attractive for shareholders as a clearer picture of the costs of the transaction has emerged,”
No idea what that means. This one sentence has those great "stock" phrases "creation of a leveraged joint venture" and "value proposition". Wouldn't we all love it one day to see a Chairman say "the financial terms were crap and we think we can do it better alone".

Regardless of the way they phrased it, I do not believe that Flight Centre can do it alone. As I said before this highly successful business needs a business model rewrite. It needs a clear and unambiguous refocus on Internet distribution. I was asked once how a shareholder would be able to tell that the Flight Centre management was taking the Internet seriously. My answer was a quick and simple one - you will know that Flight Centre "gets it" online when the Chairman announces:
  1. That a new Head of Online has been appointed, reporting directly to the CEO with direct control over all brands online, free reign on how to market and promote those brands and with a fund of money to invest in large acquisitions;
  2. That a target for online sales has been set at [some big number like 20%] of turnover by 2009 (maybe 2010); and
  3. That Flight Centre is embracing the need to be a technology company. Setting up a team of developers (or buying a development shop) devoted to online only activities, reporting to the new Head of Online.
That is - separate online from offline, make online growth the number one target of the business and embrace the geeks needed to make it happen.

If history is a guide this is not the type of announcement we could expect out of Flight Centre under the current management or structure. They will need another private equity deal or other structural shake-up to provide the drive for this change.

UPDATE - News reports are that the PEP is very unhappy with this decision (no surprises). The amazing part from the report is after PEP and Flight Centre working on this deal for what must be more than a year, the SMH is reporting that PEP and its advisers found out that the deal was dead with only 20 minutes notice before Flight Centre send the obituary to the stockmarket.

UPDATE 2 - Am trying to understand the Flight Centre Board machinations that led to this deal being killed by Flight Centre. Specifically - who on the Board was pro the PEP deal and who was against it. From my original post it seemed that the Board was behind Chairman Bruce Brown when he said the deal was a dud. But he update with news reports indicating that PEP has almost no warning of the deal being pulled indicated that there were some senior execs/Board members that were as surprised as PEP was.

A quote from CEO Graham Turner (in August 24 2007 Travel Today quoting an AFR.com report) confuses things even more. He says
"The shareholders have been the big losers in this [the failed bid]...I suspect Iwill be proved right in two or three years when shareholders could have got a serious dividend or buyback as well as retained significant equity in the company."
This indicates that Skroo is unhappy with the failure of the bid and means that Flight Centre's top boss and largest shareholder does not agree with the structure of the company. Weird.

Monday, May 14, 2007

Flight Centre and PEP: Time to have a Rupert Murdoch moment

The Flight Centre deal with PEP is definitely back in action. I raised the potential of a new deal a few weeks ago. As you may recall - PEP made an all or nothing bid for the whole company which (like the Qantas buy out) seemed like a dead certainty until a particular shareholder (in this case Lazard) held out. Now the deal is back with a structure that does not require shareholder approval but gives PEP a big say in the running and gives current big Flight Centre shareholders a big dividend.

My views on Flight Centre are clear. They need to have a Rupert Murdoch like wake up. This is where the CEO of a large corporation turns to the senior execs and says "we missed the early signs of the internet but I am going to focus everything I do from now on to catching up". In Murdoch's case they caught up by buying MySpace, Photobucket, Rotten Tomotoes, IGN and more. Graham Turner, PEP and gang need to accept that they are late to the internet as a channel, accept that the internet is more than a side bar activity and take immediate acquisition and business transformation steps to join the internet revolution or wake up one day and find this newly restructured business losing more and more market share to online upstarts (Webjet, Travel.com.au and Bestflights.com.au) and online powerhouses (Expedia, Travelocity and Travelport).

Sunday, April 01, 2007

Flighties back in flight

With a new structure and plan the Flight Centre privatisation in back. You will recall that shareholder Lazard said "No" to the initial PEP bid for Flight Centre. Well the deal is now back but in a joint venture structure. According to News.com.au (in what is now becoming the Australia structure benchmark - see the PBL Media and 7 Media deals) the Flighties operational assets would be put into a JV part owned by PEP (33%) and part owned by the listed Flight Centre vehicle (67%). This deal may not necessarily need shareholder approval, thereby dodging any input from Lazard. Will watch closely how this unfolds in the coming week.

Friday, March 02, 2007

Flight Centre and Lastminute Australia updates

Two parallel but unrelated activities going on in public traded travel companies in Australia. The Flight Centre bid collapse and potential build up to a potential sale of the Lastminute.com.au joint venture. There is some great commentary on this from Tom Boreham in the Australian on both of these public companies and the public travel market in general. Interesting read.

Tuesday, February 27, 2007

Flight Centre privatisation in trouble

Word on the street (ok - from Travelweekly) is that the privatisation of Flight Centre is in trouble. The billion dollar plus deal was announced in October but is seems that management and the board are not going to get to the magic 75% voting mark to make the deal happen. The article says that it is Lazard Asset Management (28% owner of the company) that is holding out. Chances are they are simply looking for an increase in the bid.

However I would caution anyone against calling the deal dead. The PE firm behind the deal - PEP - are not going to give up too easily and with $400 plus million resting on the deal, the management including Scroo Turner are certainly going to keep fighting. Chances are we will see a revised bid very soon.

That said - this is not a slam dunk must do deal for PEP. I have not done the financial analysis so cannot say for certain if the value is right or wrong. But I do know - and said before- that Flight Centre has not reacted properly to the rise of online travel, to reductions in airline commissions, to changing staff patterns, to the international challenges (especially in the US and UK) or to the need to have more depth and breadth in directly contracted land product. If the deal does go through, PEP will need to address all of those issues


UPDATE - Ouch - Flight Centre stock is down more than 10% as a result of all this.

Wednesday, January 31, 2007

Flight Centre - doing in right in corporate travel

e-travel blackboard are reporting that Flight Centre's corporate travel management arm - FCm - have made a play for the east coast market in the US with the acquisition of a 25% stake in Garber Travel Services. I have been (rightly) critical of Flight Centre's mistakes in the online market, however as both a consumer and observer of business travel I believe they have made a number of smart strategic and tactical moves in the corporate market - so while I do not know Garber Travel Services, I congratulate FCm on continuing their expansion. As a consumer of travel I have a previously commented (here) on FCm's great service and the need for an air-warrior/warrioress to have a strong travel management company - even in this age of online. As an observer, Flight Centre have managed to acquire and integrate a number of smaller travel management company with little or no observable integration headaches, maintaining standards and bringing scale and savings.

Have to end this quote with a "curse you Google" moment. Is it just me or is publishing using Blogger becoming a risky business. This is the second time I had to write this post due to Blogger eating the last attempt.

Wednesday, November 15, 2006

Qantas speaks to me but manages to ignore me at the same time

I have just returned from an enjoyable lunch put on by FCM (Flight Centre's corporate travel arm). As you know I am a fan of good corporate agents - even with my strong history in online travel. They invited former Australian cricket captain Steve Waugh to speak. Very enjoyable lunch and talk from Steve. I even managed to win a copy of his autobiography.

Qantas was a sponsor of the event and a representative of their corporate sales department opened the event with a speech and general introduction. Now, keep in mind that this Qantas rep is speaking to a room of FCM clients. That is hard core road/air warrior travellers. Almost certainly everyone present is a top tier Qantas flyer. The Qantas rep spoke for 15 minutes on "what is happening about Qantas". He talked about the airlines they plan to buy, the battles they plan to fight with their unions and the costs they plan to cut. Also took a few minutes to complain about fuel prices and low cost carriers. I found this staggering. Here he is with a captive audience of some of the top individual customers of the business and not once did he say thank you. Not once did he talk about a commitment to the corporate travel, about quality of product and customer service...nothing about how he was going to make things better for us as top customers. It was like he was talking to a room of share holders, not customers.

To me this summarises all that is wrong with Qantas. They have become so bottom line focused that they have lost a sense of how to keep customer's happy. They have monopoly or near monopoly rights on key routes (especially the Pacific Route and the politician traffic out of Canberra) that they are not aware of the growing disquiet among their customers. If I was the Qantas rep at this luncheon I would have spent less time basking in the reflective glory of being at Steve Waugh's table and more time shaking the hand of every single customer in the audience thanking profusely and begging for feedback.

Thursday, October 26, 2006

Scroo goes private, pockets hundreds of millions and blames suppliers

Flight Centre was once the darling of the Australian travel industry, stock market and corporate culture watchers. They were expanding around the globe, growing at 20% a year and had established a city, village, country, family etc culture that was the envy of retailers everywhere. Somehow it all started to go wrong. First Ansett went bust, then Qantas pulled commissions, the wrong CEO was appointed, the push in the US was failing, 9/11, SARS, domestic downturn, Santa Claus was late, the Tooth Fairy decentralised purchasing and dropped spending by 20% and Dr Seuss inc stopped booking long haul.

As a result of all of this Flight Centre has decided to go private. To de-list and join the private equity bonanza. This will make the founders - especially Graham "Scroo" Turner - hundreds of millions while maintaining a lot of control (btw the staff are not happy). As part of the transaction Turner says that pressure will be applied to suppliers to improve the margin decline from reduced sales per store and airlines butchering of commissions.

That all sounds possible but truth be told I think it is because they have executed poorly online. For such a strong brand and company with such strong cash flows and supplier volume Flight Centre has done a terrible job building an online business. It is not like they haven't had the chance. Every single one of the big online travel B2B and B2C players have been through the Brisbane headquarters of Flight Centre (me included) trying to sell a solution for launching, enhancing, growing, molding, making etc Flight Centre online. Flight Centre was always receptive and keen but the culture that made them strong offline made them weak online. Their strength in incenting individual stores to think independently and drive sales in a decentralised fashion impeded the ability to create a centralised online sales function - stealing sales from the stores. Flight Centre was caught in the classic offline retailer dilemma - how do I grow online and not cannibalise offline. Well...you can't.. and they should have made that decision quickly in 2001 and gone on to dominate online travel in at least Australia. Flight Centre spent too long wrestling with this dilemma and thus ceded the online space to the Wotifs, HotelClubs, Webjets etc of the world. Purchases of Quickbeds and Travelthere were not aggressive enough plays and once bought were under invested in both in technology and marketing.

You can't doubt the power of the Flight Centre brand but they had the chance to learn from the mistakes of American Express in the US and Thomas Cook in the UK and take their huge brand online and own the market. Going private looks like a great deal for the Flight Centre management, a good deal for shareholders but it is an admission of the failures of the Flight Centre online strategy.

Tuesday, September 26, 2006

Come on Tim - stop complaining and use a Travel Agent

Yesterday I spoke of the difficulties in booking a combined London and Tel Aviv trip and longed for the old direct access to Galileo.

Good comment was posted in response -

"Here's a wild concept, Try a Travel Agent Amazing when you delegate this sort of task how much more time one has to spend with family..."

It is a good point - but - I am. I use a great corporate travel agency - Fcm. Worked with them in my old job and very happy to bring them across to my new company. I find that as a heavy user business traveller I cannot get the service I need as an online only self booker. That might sound hypocritical given my rants about trying to book leisure travel offline but hear me out.

There a couple of things that a great corporate agent gives me that I can't do on my own online:
  • pricing - despite all the advances in loading of net fares and search and matching technology I have not found a site that gives me access to the cream of the negotiated business class fares, especially those that are more complicated that London or San Fran return and even more so now that I am in a very small company (6 people). This is certainly the case ex-Australia but I think is also true if I was based in Europe or the US;
  • panic in the middle of the night service - I have had half a dozen occasions in which I have had to find someone to speak to out of business hours to fix a big problem: stranded in Paris trying to get home on a Friday with Heathrow shut-down due to a fuel spill; re-routed to Brisbane due to fog; called on a Saturday morning by boss needing me to be in London by Monday morning etc....; and
  • billing, expensing and reporting - I know that the various corporate arms of Expedia, Travelocity, Orbitz and more have great compliance and expensing mechanisms but none of those are available in Australia.
They are the good points. On the bad side, I find that the individual agents (while very responsive) are not as upto date in their knowledge of non-conventional routings. With each complicated booking combination I find that I have to send suggestions as to which routing to take and airline to use. So while the "panic in the middle of the night" service is fantastic from a good corporate agent, the "find the creative/crazy options" service is not. This is why I want Galileo/GDS access to search and explore. Leads to a product recommendation for corporate travel providers - self booking tools and nice but for complicated users like me I would love:
  • web access to itineraries that can be stored on multiple devices and feed into outlook;
  • search tool that looks at native GDS for scheduling options (no need to prove availability and pricing); and
  • hotel review information
Of course - if you want this level of service you have to be prepared to pay more for it in service fees...I am.

UPDATE - Anonymous commentator recommended that I save time and follow the advice in this link - oh that I could. (link fell off the comment page so am reposting here)