Tourism Holdings CEO: Corporate saviour or tough asset-stripper?

By SELWYM PARKER

Dennis Pickup's style of management neatly expresses the principle of "creative destruction," in the famous phrase of economist Joseph Schumpeter.

As chief executive of Tourism Holdings with its fleets of Maui and Britz motorhomes, rental cars and tour coaches, its helicopters and aircraft, its Milford Sound Red Boats, and its attractions such as Kelly Tarlton's, Mr Pickup has cheerfully ripped apart the publicly listed company in the past 22 months.

He is proud that Tourism Holdings has sold no less than 44 companies, closed operations in North America and Africa, and moved the head office to cheaper premises.

Further sales are in the pipeline - the transport business in Fiji, Treble Cone skifield and a couple of coach operations.

"Just not strategic for us," says Mr Pickup dismissively about these surplus assets.

This is a man who observes without a hint of regret: "I've downsized a lot of businesses."

It was Mr Pickup, after all, who oversaw the sale of 240 hotels at Lion Nathan and who roared through Auckland Healthcare, where he enjoyed working with the medical staff and disliked dealing with the "politicians, policymakers and purchasers." A ruthless corporate doctor? An asset-stripper?

Not when you look at Tourism Holdings' recent performance after two years of creative destruction, Pickup-style. Turnover in 1999-2000 is up 56 per cent, profit up 121 per cent to $14.8 million and forecast to rise by a further 60 per cent next year.

Yet Mr Pickup is far from satisfied. "We've got a long way to go financially," he says.

This is how creative destruction was meant to be. Schumpeter, a Harvard professor, argued more than 50 years ago that the accelerating pace of technical and organisational innovation would send "gales of creative destruction" throughout future economic systems.

In short, constant renewal at the price of constant instability.

Although Schumpeter was not exactly thinking of New Zealand's tourism industry, he could hardly have been more right if he were. Tourism Holdings, NZ's biggest land-based tourism operator, has to work in a dynamic, fluid and unpredictable industry.

And Mr Pickup loves it. "I told my managers at the very beginning: 'We're going to have fun'." But how did the fun-loving Mr Pickup manage to shrink the company and build profits at the same time?

According to analysts, the Tourism Holdings he inherited was a conglomerate that had grown too quickly, too widely in a geographic sense, and too loosely. There was little cooperation between the various businesses. The group lacked a disciplined strategic direction.

And it was too far-flung - it is difficult for a New Zealand-based business to operate in different time zones and under different laws.

So Mr Pickup and the board reasoned that Tourism Holdings had to take a few steps back before it could go forward again. And it all started with cost-cutting.

The moving of head office from Dunedin to modest premises in Shortland St, Auckland, over four successive moves is but one example. "We've cut overheads with each move," says Mr Pickup with satisfaction. "Our cost of governance and administration is lower than it was in 1998. There's only nine in this office and were here to add value to the business."

Mr Pickup loves numbers. He recites the average age of his corporate financial team (32), the average age of his managers (36), the number of managers appointed from outside the tourism industry (60 per cent) and from within the company (40 per cent).

He also highly prizes quality information and bemoans the absence of it in the industry. Tourism Holdings is spending $4 million over the next two years on an information technology system that feeds useable data to managers on a daily basis. "Do this and the monthly and quarterly accounts look after themselves."

Tourism Holdings is not afraid to spend a dollar. For this year the company has ordered 425 Mercedes-Benz motorhomes at $70,000 apiece (almost $30 million). It is all part of the relentless battle to stay on top. "I would rather be number one than number two," says Mr Pickup. "But market leadership breeds complacency and arrogance."

Schumpeter would approve.

*Selwyn Parker is available at wordz@xtra.co.nz