I have had a great week in Cairns capped off with a few beers with Nigel Hobbs, Head Story Teller and Director of Sales and Marketing for AJ Hackett Bungy. It was great hearing about the Macau site, which is now the largest bungy jump in the world at 230 meters! An opportunity in Shanghai sounds exciting also and I am most looking forward to being one of the first to jump in Second Life when it goes live. It was good to hear also that AJ Hackett International now has control of the domain www.ajhackett.com. I had previously done a few things with the guys at Hackett’s and this had been an issue as it was pointed to New Zealand (which is a separate business). It is good to see this is sorted and it should means a lot for their search engine and Internet efforts.
The whole week has thrown up a number of interesting hypothesis that I thought I would share with you. One of the most interesting is the growth of Peter Pans travel shops versus Backpackers World. Most accredit the rapid growth of Peter Pans on their ‘back end’ software; which means they only need one accountant. When a customer makes a purchase the money is immediately split by the ‘back end’ into the suppliers portion and the commission earnings of Peter Pans. Once a customer redeems their travel the supplier can go into an extranet and retrieve their portion without the need to invoice. It is a massive reduction in overheads for both the supplier and Peter Pans. It also means the supplier gets their money earlier, speeding up cash flow – an ongoing problem in the travel industry.
With a faster payment turnaround and their rapid expansion Peter Pans have been able to demand higher commission portions from the suppliers with little resistance. The interesting position now happening in the industry is that Peter Pans have been extending their software to a whole raft of travel desks across Australia, who are signing on to use the software because of it’s ease in use, because it lowers the cost of running these businesses (which have typically had very tight margins), because using the software gives them access to a large number of products that they might not normally have access to and because by using Peter Pans they receive a higher commission than they normally would.
There is a similar occurrence in Cairns with a company called Destination Cairns Marketing (DCM). DCM has over 60+ travel desks in Cairns and Port Douglas with a revenue model that is a real challenge to the industry. DCM partners up with a smaller travel desk that might normally only be on a 10 – 15% commission based on their volume and brings them into the DCM network which is earning as much as 25% commission purely because of the sheer size of their turnover. DCM is then able to split a portion of the increased commission back to the travel desk.
It is often discussed how Peter Pans is beginning to replicate this model nationally. The impact is clear; while suppliers are attempting to drive down commission earnings in the face of increasing costs and demands by the travellers themselves that prices are getting too high, leading agencies such as Peter Pans and DCM are driving up the average commission payments.
From my point of view the interesting point is the relentless growth of both these agencies; Peter Pans in particular is exciting based on it’s software model; as well as their growth into such stepping stone destinations as Thailand I predict these guys will only get bigger and bigger.
Two other businesses seem to be regularly bought up in discussions with all sorts of people this week. The first is Global Gossip, who to summarise sentiment, are the Sleeping Giant of the industry. The Global Gossip Internet Cafes are all well positioned and well run; and since he acquisition of Internet Outpost have really grown in number. They have an exciting network of shops now supplying a service that travellers want. The discussion nearly always centers around what will they do in terms of developing a community through their network. I hope to catch up with Peter Ovenden in the next month when I am Sydney.
The second company is Nomad World Hostels. I heard this before but decided not to make comment, but it appears that most people are now predicting a name change in the near future. Nomads recently took over the Footprints Westend hostel and renamed it The Legend Has it Westend. Is this to be the new brand, or is this still simply gossip?
Thanks to everyone I have met this week and I wish you all well – hope to be back soon.