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10 January, 2022

Flight Centre responds to claims its retail network is “losing relevance”

Flight Centre has hit back at claims its retail network was “losing relevance”, asserting that the challenges of post-COVID travel will highlight the need for travel experts.

Brian Han, a market analyst for Morningstar, has predicted that Flight Centre’s leisure business faced a long-term decline as consumers increasingly turn to online and direct bookings.

Han said Flight Centre’s retail network was losing relevance after almost half its roughly 1,000 brick and mortar stores closed in 2020.

“Flight Centre has a strong network of services that has driven solid end-user traffic and bookings over the past 20 years, but we do not believe this is sufficient to protect the company against online competitors over the next 10 years,” Han said, according to the Sydney Morning Herald.

A spokesperson for Flight Centre told Travel Weekly leisure would continue to play a “crucial role” in the company’s future.

“While we made some changes during the pandemic, we have maintained a very strong leisure network that incorporates multiple channels for customers,” the spokesperson said.

“This network is underpinned by an extensive retail shop footprint that remains highly accessible and it also includes websites, call centres and a growing stable of independent contractors.”

The spokesperson said Flight Centre expected these new channels to capture a greater share of its earnings, with online now generating about 20 per cent of bookings, which is more than double the eight per cent the company saw before the pandemic.

Han also said Flight Centre’s bargaining power was likely to erode against airlines when negotiating commission rates, with international travellers seen to be the most likely to book direct.

Flight Centre’s managing director, Graham ‘Skroo’ Turner, told the Sydney Morning Herald that except for a few larger airlines, he expected fierce competition would force carriers to pay the same commissions.

However, he admitted Flight Centre would be increasing its online presence, which it had already begun to do before the global pandemic began.

“We are shifting business more into online, and when you look at places like the UK, North America and Europe, we have a significant leisure business but still a very small market share and we’re looking at growing that,” Turner said.

Han said Flight Centre’s continued success in its corporate travel business would give the company enough liquidity to ride out the pandemic.

“Travel will be more complex post-COVID and this will really highlight the value expert travel advisors add,” the Flight Centre spokesperson added.

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