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7 July, 2017

Flight Centre buys into hotels, DMCs to nab “larger share of travel wallet”

By Hannah Edensor

Just days after Flight Centre updated its forecast for its financial year pre-tax profits to as high as $330 million, as well as announcing a number of job cuts to mid-high end support roles, comes this announcement.

Flight Centre Travel Group now does hotels, after they aqcuired a hospitality management company that they’re calling a “low-risk entry” to the market.

And hey, while they’re at it, they’re adding to their destination management company (DMC) offering, which already got a headstart by expanding its stake in its 2014 Buffalo Tours venture.

The company today announced it has secured separate deals to acquire Olympus Tours, a leading Mexico-based DMC, and Bespoke Hospitality Management Asia (BHMA), an emerging Thailand-based regional operator of design and lifestyle leisure hotels.

Wowza!

Both businesses will become key additions to Flight Centre’s rapidly expanding in-destination travel experiences network, headed by Brisbane-based Nick Lucock.

Founder and Managing Director Skroo Turner had hinted at the new business ventures in the latest financial outlook, saying the areas of hotel management and DMCs hold great opportunity for expansion and revenue.

Today, he added, “Expanding our in-destination network is a key global strategy and we are starting to develop strong foundations in this sector through our tour operators, DMCs and hotel management businesses.

“Olympus is an important addition to this network and gives us a DMC in the Americas, to complement our recently expanded presence in Asia, while BHMA provides us with a low-risk entry to hotel management, a sector that we have identified as a key future growth opportunity.”

Turner added that by expanding in this in-destination area, they gain a number of advantages, with possibly the most important being “the opportunity to capture a larger share of the travel wallet”, with Turner admitting FC has not typically captured the biggest chunk of in-destination spend.

In addition, Turner said the acquisitions meant the company had “greater control over the customer offering” and the “opportunity to capture additional margin through vertical integration”.

It also provides the capacity to create new and unique products which Turner says can be sold through FC’s global channels.

Turner was also excited about the “access to new external revenue streams”, which include sales to other travel groups and providing DMC services to tour companies and groups.

Flight Centre has been tiptoeing into the DMC market since 2014, when it initiated a joint venture with Vietnam’s Thien Minh Group. It operated in 10 Asian countries, and also included TMG’s buffalo Tours business in Vietnam.

Earlier this year, FC bought a bigger – 58.5 per cent bigger – stake in the venture, and put plans in place to increase this ownership in 2018.

The company has also been pursuing hotel management in key global markets, but not actioned anything yet.

“This is a logical step into hotel management and will deliver numerous benefits,” Turner added.

Turner explained that through acquiring BHMA, FC will snag a business that’s been growing steadily since it started, and has recently taken on larger properties, meaning it fits with FC’s long term expansion goals and is globally scalable.

The acquisition also comes with the expertise of “people and processes that we can draw upon to expand our hotel management operations in Asia and into other key regions, including Australia, the South Pacific, Europe and the Americas,” Turner added.

Flight Centre’s in-destination products also include the Top Deck and Back-Roads touring businesses. With the combination of Buffalo Tours and Olympus Tours DMCs, the revenue of both hits around US$100 million annually.

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Latest comments

Maxwell Smart says:

July 7, 2017 at 12:46 pm

Should Flight Centre look to operate charter flights as well, or are fares too cheap with the coming recession ?

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