Retail brands need to evolve
SOUTH Africa’s retail
travel landscape is in
a constant state of
change as a result of the
rapidly declining value of the
rand, political uncertainty
and other external factors.
“In a challenging economy
we have to do what we can
to stay focused and bring
the best value to the table,”
says Monica Horn, product
manager for the Harvey
World Travel Franchise
Support Team.
According to Monica, the
exchange rate and social and
political issues within South
Africa, have created a climate
of uncertainty. This has had a
serious impact on the travel
industry.
“All these factors are
massive challenges, which –
with the present leadership
– don’t seem that easy to
overcome,” she says, adding
that retail travel agents will
have to work harder to add
value and keep customers
loyal.
Andrew Stark, md of the
Flight Centre Travel Group,
says companies that embrace
new ways of doing business,
will remain relevant to their
customers and stay in
business. “Those that don’t
will fall by the wayside just like
Blockbuster or most music
stores,” he says.
According to Andrew, today’s
retail shopping experience is a
blended experience comprising
both online and offline,
giving customers choice.
“Diversifying of brands will
also appeal to customers in
10 years. We are doing a full
circle again where customers
are looking for niche offerings
and advisers who can offer
in-depth knowledge and
expertise,” he says.
Whereas the political
uncertainty, the rise of
technology and the crippling
rate of exchange have all
had an effect on the market,
the truth is that nothing has
shaken the retail industry as
much as SAA’s decision to
review its override commission
agreements.
Jo Fraser, franchise director
for Club Travel, says the main
driver for most consortiums
at the moment is the growth
targets set by the airlines to
earn override income. “We
see the largest groups losing
significant corporate accounts,
and then venturing into the ITC
arena, where they have never
played before, to enable them
to keep their numbers up.”
Seeking growth in a stagnant market
The reality, according to Jo,
is that there is currently no
growth in the market. As
such, consortiums that rely
solely on their own members
for growth are suffering. Jo
says Club Travel has decided
to follow a two-pronged
approach, owning and
operating corporate, leisure
and online businesses,
while offering centralised
ticketing and administrative
infrastructure. “We see this
as key moving forward for
when those Iata agents from
inside and outside the group
decide an Iata licence is no
longer necessary to conduct
their business.”
Consortium membership
bases do not seem to be
experiencing real growth,
agrees Franz Von Wielligh,
gm of Flight Specials.
“There is movement of
agencies between different
consortiums but no new
players coming in to this
segment,” he says. He says
the fact that South Africa
still has one of the highest
Iata licence-to-agency ratios
worldwide shows that
local agencies still see a
high benefit in having their
own Iata licence, however
the cost of having one is
prohibitive and has led to an
explosion in the ITC market
locally.
“I think probably the
challenge for all retailers
is to constantly grow your
business in a market that is
not growing,” confirms Sean
Hough, ceo of Pentravel.
He says Pentravel’s growth
has so far come off a small
base, which means the
company managed to grow
profit by over 734% over five
years. “Now it’s time to face
the real challenge to create
real growth,” he says.
According to Mladen Lukic,
gm of Travel Counsellors,
for many years, the primary
motivation for consolidation
was the ability to extract
higher returns when it comes
to overrides. “As a business,
we are against directional
selling. At the same time,
we think that the changing
relationship with suppliers
will have far-reaching
consequences for a lot of
consortiums.”
Mladen argues that a
number of consortiums in
South Africa have passed
their sell-by date and have
nothing to offer now that
the overrides are shrinking.
“Many of these consortiums
have been blinded by
override gain and have
completely ignored the
customers’ requirements,”
he says, adding that
customer interest needs
to be taken to a much
higher level.
Consortium models
must shift
In the US there has been
a shift over the past year
away from large aggregating
consortiums towards smaller
host agencies that offer
personalised attention
to member agents who
specialise in lucrative niche
markets, such as luxury,
all-inclusive resorts and
destination weddings. Mladen
predicts we could see the
same change in South Africa.
“Consortiums now need to
galvanise around a different
call to action. Up to now it
was: I’ll join a consortium
because then I’ll get a better
deal from suppliers. Now the
thinking has to be: I’m going
to join a consortium because
I like to specialise in a certain
area.”
Franz agrees and says
there has been a clear shift
in the way consortiums are
being run. They have started
moving away from simply a
bulk-buying entity to position
themselves as entities that
offer a more holistic benefit
approach. These benefits
include additional revenue
streams for members that
are not necessarily based on
supplier agreements.
A shift away from
consortiums altogether is also
possible, warns Mladen. He
says there has already been
a shift away, with a number
of large companies exiting
their consortium over the
past year. “The main reason
for this was that, on their
own, these companies were
able to shape their strategy
much better. The problem
with most consortiums is
that there is no common
management process and no
common vision. There is very
little commonality other than
that we all gather from time
to time to giddy up the large
overrides.”
Strategies for success
Putting people first
Our people are what
make us successful,
says Sean Hough.
He says Pentravel
consultants need
to have travelled
internationally and
have a degree or a
diploma but, more
importantly, they
need to subscribe
to Pentravel values.
“We think culture is
more important than
strategy and it’s the
task of every person
at Pentravel to help
grow our culture and
make it stronger and
stronger.”
This strategy has
paid off as, according to Sean,
Pentravel has a 91% customer
satisfaction rating on HelloPeter.
“This is backed up
by our own NPS (net
promoter score) which
is also over 90% and
our repeat and referral
percentage which is
over 60%,” he says.
This year, Pentravel
launched a new
tag line: ‘delivering
sunshine since 1983’.
“We say that it is
not necessarily our
purpose to handle
travel arrangements
but rather believe it’s
our purpose to make
people happy, and this
starts with our own
people first. In other
words, we aim for
Pentravel to be a place where people
want to work and where customers
love doing business.”
Diversity of brands
Success breeds
success, according
to Andrew Stark. He
explains that one of
the secrets to Flight
Centre’s success is
the diversity of retail
brands the company
is offering.
“Flight Centre
Retail has been
working on its five
retail brands,
namely Flight
Centre, Cruiseabout,
Student Flights,
Flight Centre
Business Travel
and Flight Centre
Associates, for a
number of years now.”
Andrew adds that continuous
hard work on
customer retention,
customer acquisition
and unique product
is starting to pay
dividends.”
He says Flight
Centre’s retail
brands offer a
blended option of
both offline and
online options.
“Ironically 99,9%
of our business
is still offline,” he
says, explaining
that customers do
like searching and
comparing online
but prefer to book
with a travel expert who is 100%
accountable.
Owner-managed stores
All Harvey World Travel stores are
owner-managed, so customers get
to ‘work with the boss’, says
Monica Horn.
She says this often means that
consultants work diligently to ensure
consumer satisfaction, which
results in repeat business.
“We find that the HWT business
comprises a diverse mix of SMMEs
and corporates. Agencies often
acquire new business with a leisure
spin-off, largely through referrals from
existing corporates.”
ITC models – a definition is needed
AS THE popularity of ITCs
has increased over the
years, different ITC models
have started emerging.
Although these different
models are often tarred
with the same brush, it
is important to make a
distinction.
Independent ticketing
agents
“What we loosely call
an ITC is often just an
Independent Ticketing
Agent (ITA),” says Dinesh
Naidoo.
He says an ITA pays a
set ticketing fee to the
consortium for each ticket
issued. The client’s money
goes directly into the ITA’s
bank account.
According to Dinesh,
if you are a seasoned
travel consultant with
administrative and financial
knowledge, this might be
the option for you as the
price of having a head
office could be steep.
Independent ticketing
consultants
Independent ticketing
consultants work a lot
more closely with the
host company. The host
company will request a
commission split and
money from the consumer
will go directly into the
bank account of the host
company. In return, the
host company offers
back office support and
assistance.
Tammy Hunt, eTravel
operations director, says
the benefit of being an ITC
is that it provides financial
protection to the consumer
as well as the supplier.
It also prevents the ITC
from having to become an
admin or finance person
when their expertise lies
in sales and customer
service.
The traditional ITC
has been in the game
for a number of years
and has built a good
healthy client base, adds
Andrew Stark.
Photocap:Warming up
Members of the Serendipity team prepare for their annual conference taking place
this month. The group got together to shoot a promotional video in support of the
Springboks for the 2015 Rugby World Cup.
Rise of the ITCs
THE ITC segment of the
travel industry has seen
phenomenal growth over
the past few years, both
internationally and in South
Africa.
“The ITC model is the
largest growth area in the
travel industry worldwide,”
says Jo Fraser. She reveals
that the number of Iata
licences has dropped
significantly because
corporate agencies often
choose to surrender their
licences and outsource their
airline ticketing to the larger
consolidators.
Chantal Gouws, area leader
for Flight Centre Associates,
says a lot of people are
trying to get a better worklife
balance, which can be
achieved by becoming an ITC.
“Retail travel consultants
usually reach a stage when
they want flexibility and the
opportunity to still do what
they love, while maintaining
the relationships they have
built over the years. I think
this is the perfect solution.”
According to Franz Von
Wielligh, the most obvious
benefit for an ITC is that they
don’t have the cost involved
in setting up an Iata ticketing
office. “Secondly, most travel
consultants are phenomenal
at selling travel but may fall
short with all the admin and
back-office functions related
to this. ITCs can then focus
on making money instead of
spending 60% of their time
figuring out the admin side of
things.”
Clients are also tempted
to turn towards independent
agents, as they tend to give
clients more personalised
attention, says Dinesh Naidoo,
group operations director
for Serendipity Worldwide
Group. It is, after all, their own
business.
Mladen Lukic says the
need for more personalised
service is not exclusive to
the travel industry. “The 21st
century is based on one-onone
relationships. Long gone
are the days of outsourcing
and insourcing – that’s 20th
century thinking. The entire
sales process in the current
connected economy requires
one-on-one relationships.”
According to Mladen, ITCs
are perfectly positioned
to fulfil the need for more
personalised relationships.
“The ITC handles the
management as well as
the fulfilment element of
the travel requirement. It’s
impossible for any chain or
electronic vendor to create a
similar relationship to the one
the ITC has with his client.”
Chantal says the ITC model
will undoubtedly continue to
grow at a rapid pace. She
warns that host companies
need to make sure they
reference check all ITC
candidates, as well as do
credit checks, as there are
risks of fraud and people not
adhering to financial minimum
standards.
“We all know there have
been quite a few fraud cases
recently. However, we believe
that by by having certain
systems in place, we are
looking after our clients who
trade with us.”
