Flight Centre to invest in hotels

Flight Centre is looking to diversity its business, investing in hotel management, tour operating and student travel, and will travel start-ups.

Flight Centre is saying this is all part of its next growth phase but the reality is the company has no choice with its latest profit figures telling investors that it’s in a mature market.

Flight Centre reported that revenue was 11.2 per cent to $2.7 billion in the 12 months to June 30. But the killer was the company’s underlying profit. That was down 3.8 per cent to $246.7 million due to lower margins in Australia and investment in new businesses and technology. The profit figure was below expectations that it would come in at $254 million.

Earnings fell in the US, Europe and the Rest of the World segments. In the Australian division, they grew just 1.9 per cent with its net margin falling from 2.07 per cent to 1.83 per cent during the year.

Flight Centre’s chief executive Graham Turner said the company will be pushing into hotels.

All this is part of Flight Centre’s broader corporate agenda of growing its core leisure and corporate divisions. It’s also planning to move into into tour operating and destination management. Also known as ground-handling, this requires operators to assist travellers when they reach their destination.

Turner outlined two hotel strategies for Flight Centre: leasing hotels rather than buying them, or working with hotel investors in schemes that would see Flight Centre providing management expertise. Australia, New Zealand and South Africa.

"We know we can fill them up 365 days a year right now without even denting our current hotel partners in that market," Mr Turner told the Australian Financial Review.

 "It's also to make sure we have more control over the customer experience in these markets.

After acquiring the US-based website StudentUniverse.com in December, the company is now looking to put his money into popular leisure markets such as Bali, Phuket, Fiji and Hawaii.

by Leon Gettler, August 26^th 2016