Comment: FLT powers on as JTG review continues

Comment: FLT powers on as JTG review continues
By admin

The financial results for the first six months of the 2013 year have come thick and fast this week, with mixed fortunes for the travel sector.

And while the top line figures, by their very nature, provide an insight into a companies financial health – or otherwise as the case may be – it is the strategic direction that comes under equal scrutiny, for it will ultimately shape their future financial well being.

This week saw a tale of two retail groups.

One, Flight Centre, which turned in yet another strong set of financial results and further updated the market on its vision and strategy, and another, Jetset Travelworld, which reported a poor result – albeit one in line with expectations – and whose direction remains very much under wraps.

It was hoped that the JTG of today would offer at least a glimpse into the JTG of tomorrow following a "business transformation review" that has so far taken six months. Travel Today revealed last September that Boston Consulting Group was conducting the review as JTG struggled to adapt to changing distribution trends amid a huge drop in FY12 year end profits.

But details were thin on the ground. What we did learn is that JTG is "well advanced" and that "substantial progress" has been made over that six month period in terms of drawing up strategic options for its retail, wholesale and travel management divisions.

Yet those transformational initiatives are still in their infancy, to use the words of chief executive Rob Gurney, with associated costs and launch date of any new JTG strategy still unclear.

In fairness, transformations of this nature do not happen overnight and as you would expect, the review has been conducted very much behind closed doors, although Gurney did outline the five areas of focus, which included leveraging the scale of the group, building a digital proposition and developing a deeper knowledge of the customer.

Flight Centre, on the other hand, further mapped out its strategy which has its online/offline "blended model" as a central plank. Marrying the two channels, and by allowing customers to switch between them irrespective of where they made the initial booking, is a clever notion and one that requires a huge amount of infrastructure costs.

The aim is to build on its traditional face-to-face retail roots but also attack and compete with the rising threat of Webjet, Wotif and others who sit squarely in the online camp.

With JTG remaining is a state of flux, it's little wonder that Flight Centre boss Skroo Turner believes these online players are his major competitors rather other bricks and mortar travel agents.

And this is why Flight Centre is going down this "blended" path. The online tide is not about to turn and Flight Centre is positioning itself to remain relevant as that tide advances.

Of course that competitive landscape could all change once JTG does finally unveil the initiatives that it hopes will transform the business. But for now, Flight Centre has its eye firmly on its online rivals.

Questions have been asked about Flight Centre's approach and whether it risks cannibalising its bricks and mortar offering. Furthermore, could it irritate consultants who may lose bookings to what has been dubbed their "cyber twin"?

Not so, says the retailer, which insists consultants will receive "revenue recognition" should a consumer book online and then follow it up with an enquiry to an agent. It could just work.
Interestingly, Wotif, which reported its results 24 hours after Flight Centre and JTG, turned in a disappointing set of figures, with its Asia and rest of the world division seeing a worrying 19% fall in revenue.

Now under the experienced leadership of Scott Blume, the retailer will not be pressing the panic button any time soon. After all, as Wotif stressed, it sells 10% of all Australian accommodation. But once Flight Centre – and in the slightly longer term JTG – bed down their online offering, the pressure may build.

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