Our troubled times have not been kind to the travel industry, and travel agencies have felt the brunt of it. By JASON BAKER of IBISWorld.
By Jason Baker
Tough times for travel agents are set to continue. The $2.5 billion market has been growing at a snail’s pace over the past five years as travellers have switched to booking trips online and commissions have been squeezed. The Bali bombings, the outbreak of SARS and the war in Iraq hit the industry particularly hard in 2003.
Slightly stronger revenue growth of 2.2% is forecast in fiscal 2008, as economic growth strengthens and discount domestic and international travel continues to increase.
Flight Centre dominates the travel market, with 38% market share. Its nearest rival is MFS with 10%. Jetset Travelworld has 4.3% and STA Travel 2.14%.
Flight Centre, which was listed on the ASX in 1995, was recently the subject of a proposed $1.65 billion takeover and privitisation by Pacific Equity Partners and founders. The deal was scuttled by Flight Centre’s independent directors who believed the potential capital gains risks were too great.
In March 2007, Flight Centre bought Sydney-based TravelSpirit, an independent wholesaler, which trades under the brands of Explore, Venture and African Traveller. TravelSpirit would provide Flight Centre with a new technological platform and product.
IBISWorld forecasts that the travel industry will grow at an average annual rate of 1.5% over the next five years to reach $2.78 billion in 2011/12. Industry revenue is expected to increase during fiscal 2009, as relatively strong economic growth continues.
Discount domestic and international travel is also expected to continue to increase during the year. Revenue growth is then expected to weaken during 2009-10. Economic growth is forecast to slow during year, and is likely to affect demand for domestic and international travel.
Industry revenue is forecast to continue to grow at a low rate during the remaining years of the outlook period to 2012/13. Although economic growth is expected to strengthen, competition is likely to remain high.
Overall, significant restructuring of industry operators will continue as the industry has consolidated into four or five key travel agency groups. In addition, significant price-based competition will continue to exist, as profit margins will remain low during the outlook period.
Technology changes are also expected to lead to an increase in individuals preparing their own travel itinerary and booking directly with operators (thereby bypassing the agency function).
A market research study of 25,000 households in early 2007 when asked where they booked their last holiday over the last 12 months responded as follows: 14% used Flight Centre, 6% used Wotif.com, 5% used Virgin Blue’s Blue Holidays and 4% used Qantas Holidays.
About 2% of respondents each used lastminute.com, webjet, Jetset Travelworld and STA Travel. 75% of international travellers booked through a retail agent, while 25% of domestic airline travellers did so.
IBISWorld supplies business information databases, including industry reports, company reports and business indicator reports. www.ibisworld.com.au
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