Flight Centre to expand online presence while rolling out flagship stores

FASTEN your seat belts. Flight Centre is heading for global domination, expanding its online presence and opening flagship stores.

FLIGHT Centre is positioning itself as the Apple of air travel, expanding its online reach while rolling out flagship stores.

Australia’s largest listed travel agency has posted a $244 million profit after a tumultuous year in which the Zika virus, Brexit and airline price wars hit its bottom line. The result marks a 4.7 per cent drop on its 2014-15 profit.

Founder and managing director Graham Turner remained confident that the impact of Britain’s shock exit from the European Union would be short-lived, telling investors “experience tells us that won’t last”.

Mr Turner said he would be disappointed if next year did not improve upon this performance, and that recovery had already begun, led by the company’s Australian operations.

ONLINE GROWTH

While the majority of its business is conducted offline — with physical stores expected to bring in 95 per cent of sales this year — Flight Centre’s online presence is set to grow.

“Online expansion is going to become more important to us,” Mr Turner said. “This year we predict it will be five per cent of our sales — which is significant, it’s $1 billion, but that will probably travel over the next five to six years.”

Of the $25 billion to $30 billion in sales forecast in the next five years, he said, between $2.5 billion and $3 billion would be online.

As part of its growth strategy, Flight Centre has opened a start-up incubation, acceleration and investment arm, and in January it launched packaged holiday website Aunt Betty, after acquiring US-based youth travel website StudentUniverse last December.

“Flight Centre Travel Group is a company that can change quite dramatically to take into account the latest circumstances,” chief operating officer Melanie Waters-Ryan said.

“Our appetite for change is quite high ... We’re very serious about online and we think we can grow aggressively.”

She said while Flight Centre was known for its large network of stores in shopping precincts, it was conscious of the need to “look beyond the shop” to maintain growth, with plans to boost online and call centre sales and set up a network of independent home-based contractor travel agents across Australia.

“We already have this in New Zealand, Canada and South Africa, and it’s been a huge growth segment across the globe,” Ms Waters-Ryan said. “We’ve got the foundations there, now we just want to pump up the gas.”

FLAGSHIP STORES

The results announcement comes nine days after Flight Centre opened its new flagship store on Sydney’s George St, opposite the Queen Victoria Building.

Positioned as the travel equivalent of an Apple store, 1013 square metre site is 23 times the size of an ordinary Flight Centre travel agency. It includes a ground-floor retail outlet of about 64 square metres, with staff offices above.

“This is the first in Sydney but there will be more,” Mr Turner said told The Australian after signing the $1.2 million annual lease.

Ms Water-Ryan described the Sydney flagship store, which opened last Tuesday ahead of a yet-to-be-announced official launch, as the jewel in Flight Centre’s crown. The chain has similar “hyper stores” in Brisbane, Melbourne, Perth and Darwin and Adelaide.

“We are still very much committed to the shop,” she said. “The physical distribution network we see as a huge asset, and while the growth will push to the edges, we’re certainly not going to contract and retract from the shop space ... We see it being a huge part of our model over the next 20 years.”

LOOKING AHEAD

Flight Centre, which marked the 20th anniversary of floating on the ASX last December, now operates 40 different brands and employs 19,000 staff across the globe.

The company has set goal of reaching pole position in the international corporate travel market. It is currently ranked number one in Australia, and fifth in the world, for business travel.

“This year in Australia, we aim to increase overall market-share in both corporate and leisure travel, as well as growing within key market segments,” Mr Turner said.

“The outbound travel market continues to grow — albeit at a slower rate than in the past — with this growth being fuelled, in part, by incredibly cheap international airfares to destinations like London, Los Angeles, New York and Hawaii, which are among the lowest we have seen.”

He said the company expected to outperform the market in Europe, with travel patterns in the United Kingdom expected to return to normal as the year progressed.

Student travel remained solid, Mr Turner said, with the youth market — worth $200 billion a year globally — seemingly unaffected by the “trials and tribulations” of political upheaval.

“There is a degree of uncertainty within our key economies at the start of the new year and it’s impossible to predict future conditions, but we see improvement opportunities within our businesses and growth prospects globally,” Mr Turner said.

“In leisure travel, the building blocks are in place for stronger sales growth and we are starting to see the benefits in various channels, particularly flagship shops and online.

“Twelve months ago, our online leisure presence was largely centred on Australia and on the flightcentre.com.au website.

“Today, we have a stable of dedicated online brands that are growing strongly, along with enhanced capabilities and dedicated growth strategies on the websites that operate in conjunction with our leisure brands globally.”

Flight Centre declared a final dividend of 92 cents a share, down five cents from a year earlier.

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Originally published as Flight Centre to expand online presence while rolling out flagship stores