Slimmer travel website sheds brokers

By PETER GRIFFIN

Online travel merchant travel.co.nz is shedding its travel brokers and coming under tighter control from its Australian managers as they seek to stem losses.

Travel brokers - travel agents without desks - generate business for the website and gain a commission in the process.

Travel.com.au chief operating officer Linda Bell said the local website would follow the Australian model, for which fewer brokers were used and costs were lower.

"The overheads associated with the broker model such as we run in New Zealand means it is not a viable model for us."

She said travel.co.nz had 50-60 brokers.

"We expect a reduction in revenue in the short term while we grow our online and corporate business. It's difficult to quantify an exact dollar amount at this stage," said Bell.

But one broker, who did not want to be named, said as little as $3 million a year in bookings was coming through the site, showing the online model was not working. Brokers were accounting for the vast majority of sales, although a marketing push would increase sales through the site.

"Turnover will probably go from about $60 million a year to $20 million without the brokers," said the broker.

Travel.co.nz and its Australian-listed parent are in the disclosure blackout that comes with the end of their financial year. They will report their latest results at the end of August.

But a look at the last set of accounts shows just how tight the online travel business is.

Travel.co.nz reported a loss after tax of $588,000 in the year ended June 30, 2001.

Although it had revenue of $59.7 million in that year, it made commission on that of just $4.5 million. Of that, it paid commission of more than $2.6 million - presumably to brokers.

Bell would not comment on the recent departure of managing director Greg Southcombe. The Herald believes Southcombe and travel.co.nz are engaged in legal action, but Southcombe could not be reached for comment.

Travel.com.au's chief executive David Tonkin runs the New Zealand operation from Sydney.

Bell said a more aggressive play in the New Zealand market could be expected from travel.co.nz.

The company's sponsorship of the TV travel show carrying the travel.co.nz name was expensive but proving effective in driving traffic to the site, she added.

Australian travel websites in general have felt the squeeze as airlines try to reach travellers directly through their websites and third party commissions are cut, especially on domestic travel.

Recently in Auckland to drum up interest in his hotel room booking site www.wotif.com, chief executive Graeme Wood said Australians had taken to booking hotel rooms on the net more quickly than their Kiwi counterparts.

He said Wotif, part owned by Brierley Investments, kept staff at a minimum and was experiencing fourfold growth each year.

"We don't need many staff, because the hotels are constantly updating the rates themselves through a web portal."

Wotif made a 10 per cent margin on hotel room bookings.

About 250 bookings from New Zealand were received each week, compared to 8000 a week in Australia.

A spokesman for the comparatively low-profile Travel Online (www.travelonline.co.nz), which is part-owned by internet provider ihug, said "we're ahead of last year in relation to enquiries and bookings, and we're intending to bring in an enhanced online booking solution".

Ihug founder and Travel Online director Nick Wood said he had not checked in on his Travel Online investment lately.

"There's not a lot of money in travel in the first place, and with the airlines squeezing the margins on different routes it was never going to be a huge money making exercise," said Wood.

But forecasts show more promise for travel.com.au after continous losses.

Despite losing A$3.58 million ($4.1 million) in the half year to December 31, a result the company said bore the full brunt of September 11 and the Ansett collapse, pre-tax earnings of about A$1 million have been tipped for the year.