A recession-busting strategy

This is instead of floating?

Well it’s a precursor, so it’s a pre-IPO capital raising. We’ve put the float back for a couple of years because it’s not going to be a good time to list in the next two years. So we think we’ll do a pre-IPO capital raising now, make some acquisitions in the next 12 months, get those bedded down, and then list after that.

Now swine flu, trouble in Thailand, trouble elsewhere… no impact?

Look swine flu, it was bit short and sharp as in it looks like it was much ado about nothing, and touch wood when I say that. But it doesn’t look like it’s got really serious implications.

Your heart must have dropped after having being through SARS.

Absolutely; about a week ago I was in the office of one of the largest tour operators in the world and we’d finished our meetings and we were walking through the office, a huge office. All the lights were out, it was about 7:30 at night, and we got to one quarter of the building and all the lights were on and everyone was there, and the person just said to me “that’s central America”. Poor buggers, and I think they were there until midnight.

It was pretty scary there, and look hopefully it’s nothing. The issues in Thailand, they are significant… I mean Thailand tourism has got big problems. And our numbers to Thailand aren’t what they should be, that’s for sure. Fortunately over the last few years we’ve diversified enough that it doesn’t matter as much.

What’s your big emerging markets, destination and source?

The biggest emerging market at the moment is probably Europe, as in source market. We’ve got some good entrees into new wholesalers, and what the Europeans would call tour operators, that we’re supplying product to. So we’re expecting pretty substantial growth in the next 12 months, two years.

Which countries?

Switzerland and Germany primarily but also Holland. Into the destinations, Africa is growing incredibly solidly for us. Three years ago we hardly sent a person to Africa, this year we’ll send about 12,000 people.

Where are they going?

East Africa and southern Africa have been strongest, but traditionally east Africa is a bigger destination. You might remember there were all those problems with the Kenyan election a year or so ago. And that killed tourism to east Africa for a while, but it is actually bouncing back quite strongly again now.

Now the Australian tourism industry… you’ve been a critic for a while. What’s wrong with it?

Look Australia is just not a very great place to run a tourism business.

Is it size of population?

I guess in our particular space, we’re a tour operator at the end of the day, and we like to run a very experiential, hands-on kind of product where people get involved and get excited and that kind of stuff.

Australia – it is a big place, there are big distances between it, and we just find that it’s difficult to run a product like we like to run in a place like Australia. On top of that there are legislative and regulation issues that we find tougher than just about any market in the world.

Which in particular?

Things like the fact that there’s no common Australian standards. I mean you’ve got legislations for different states.

How hard is it to fix all that?

You think if you’re running a vehicle from Sydney to Cairns, it shouldn’t be difficult. Queensland’s got one set of legislation, New South Wales has got another. They want to know where we’ve parked the vehicle when it’s not on the tour. I mean why do they care? Isn’t it our problem if the vehicle gets towed away? It’s crazy stuff, and you’ve got to register itineraries and register drivers and register all sorts of things.

Your key to success was really your value proposition. Right at the beginning of the business you did something different and you were niche. Is that some of the issues that we see?

Look I think Australian tourism as a commission for instance does a pretty good job in terms of presenting Australia on the world stage. But I think it is hard when it all boils down – Australia doesn’t have anything that is really that unique and we’re a bloody long way away. And the world is a carbon constrained place, as we all know these days, and in a recession it costs more money to get here than it does to wherever else and you’re polluting more to get here than wherever else. And when you get here, what are you actually seeing or doing that is particularly different?

You are terrible, you are so pessimistic.

It’s great, and I have at least a month of holidays here a year.

What should Australian tourism businesses be doing here? One of the things I’ve noticed is that generally their websites are terrible.

I don’t know. If you went to the tourism authority of Thailand or Zimbabwe or whatever, well Zimbabwe is a bad choice, but would they be any better?

Not the Australian Tourism Commission but actual individual websites of your operators or the companies themselves. You’re getting more small tourism businesses doing their own websites.

And it is interesting because I think that New Zealand by contrast has done an excellent job of positioning itself both on a national level but also on a micro level in terms of creating that fly fishing experience. And I think New Zealand has done us in spades over the last 12 years or so.

They’ve sort of done just what you’ve done. Got a strong value proposition, got a niche and built a very strong brand around that. Who’s successful in this space apart from you, in tourism generally in Australia?

In terms of inbound, I don’t know if there is anyone, in terms of inbound tour operators into Australia that really stand out as a great success story. There are various outbound companies that are successful, like in terms of retailers like Flight Centre that’s going to a global model. But in terms of actual operators running product on the ground in Australia, it’s very difficult to think of anyone.

Why is that?

Well I don’t know. It doesn’t fit our business model in terms of that niche that you were talking about before. It’s tough isn’t it? It’s a very expensive place to do product here. The cost of labour is high, the cost of regulation is high, your cost structure is high here.

Tourism is meant to be one of our great future industries, yes?

I’m not giving you the answers you want, am I? Just speaking from a truly Intrepid perspective, we take a global perspective on where we are going to invest dollars. Whether that’s through an acquisition or through some form of start up or whatever, and Australia, to be honest, isn’t in our space.

So you won’t look at acquisitions here?

Not aggressively; we’ve had a bit of a sniff around here and there but we’ve walked away from a couple and it’s low on our priority list. We’d prefer to put a couple of million dollars into lodges in Africa for instance than we would into accommodation services in Australia. We’d prefer to expand our fleet of vehicles in the United States rather than have a fleet of vehicles in Australia. We’d prefer to buy some river boats in France than we would on the Murray-Darling.

Why?

Look the numbers here are small, the seasons are small, the regulation is high, the cost of labour is high, the return on investment is low. Where do you want me to stop? It’s just not the business case unfortunately, in our particular circumstances, that we perceive as good in Australia as it is in other parts of the world.

But there is an irony, isn’t there. We carry 80,000 people around the world this year and Australia will carry about 1000, so it’s about 1% of our turnover. Even though we’re based here, and we get about 38% or 39% of our travellers from Australia, we don’t carry many here, we don’t operate many here.