Strong dollar impact "overestimated", insists Flight Centre
The influence of the exchange rate over where Australians choose to go on holiday has been overestimated, according to Flight Centre, as the retailer sought to deflect any concerns over the weakening dollar.
The retailer said tourists may adjust their spending once abroad but claimed currency fluctuations were not a key driver in the decision-making process.
It added that the dollar’s influence on its financial results has also been overestimated.
In a presentation to Citigroup today, chief financial officer Andrew Flannery said contrary to popular belief, the strong dollar has not been the catalyst for outbound travel growth or for the recent surge in departures to the US. Nor does a weak dollar lead to a growth in domestic travel, he said.
A far more pivotal driver in travel to the US has been cheap airfares, with currency fluctuations having no material effect on the US share of Flight Centre’s business.
“The Australian dollar fell from US$90.6 to US$0.65 between July 2008 and February 2009 but FLT’s US ticket numbers increased more than 30% during the same period,” the retailer said. “The major stimulus was cheap airfares [when] return fares fell below $1000.”
The US market share of 10.4% in 2001 was largely unchanged from the 10.2% in 2012, he added.
When the dollar reached parity in October 2010, Flight Centre even said there was a slight decrease in the percentage of US tickets it sold.
Other countries are gaining market share more rapidly than the US, including Bali, up from 9.6% to 11.3% and Thailand, up from 6.4% to 7.5%, Flight Centre said.
Flannery turned to Britain as a further example of the dollar’s limited influence, with the share of UK holidays falling from 9% to 6.1% just as the dollar appreciated from GBP0.37 to GBP0.65.
The exchange rate also had no impact on Flight Centre’s mix of domestic and international business.
“FLT Ticket Centre data highlights a lack of correlation between a strong AUD and international versus domestic sales mix,” it said.
A similar number of domestic leisure tickets were issued between 2009 and 2012 when the dollar strengthened.
Email the Travel Weekly team at traveldesk@travelweekly.com.au
agents dollar exchange rate flight centre outbound travel retail travelLatest News
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