Will the Internet Destroy Flight Centre?
Will the Internet Destroy Flight Centre?
A recent Ask the Experts debate raises some interesting questions about the impact of the internet on Flight Centre. It's something we've been having heated arguments about internally for the past five years and, given the response by members, it seems the views among the wider investment community are just as diverse.
Steve G kicked off the debate with this comment about a recent Flight Centre experience:
"Just some feedback on our local flight centre and why we won't be going back. We went to a local flight centre to book flights based on a newspaper special. Those particular flights had all sold so we then looked at other deals. The service was adequate, not great, from two of their people - I wouldn't employ either of them. Perhaps they weren't trained adequately. The price for comparable flights were much more expensive- we declined and ended up using Jetstar direct via the internet. We saved enough from the flights compared to the flight centre to pay for our accommodation, which we also booked online direct via the accommodation site (we could have booked via Jet star but the same accommodation was dearer via Jetstar's site). I think more people will gradually move online for travel themselves. Jetstar online service was great/ will definitely re use in future."
I've included the responses below, but what do you think? Does Graham Turner have his head stuck in the sand? There's no doubt the internet is stealing market share but is there room for both? When I told a friend of mine who runs a Flight Centre store (and historically booked all of my holidays for me) that I'd organised my entire Japan holiday over the internet this year, he shrugged and told me I only used to waste his time anyway. 'You only ever wanted to book a flight and then organise the rest of the trip on the run, yourself' he said. 'I make 90% of my profit from the rich customers who want to book a $30,000 family holiday in Europe without lifting a finger ... I'm like a glorified sectretary, and there's no way the internet can dispose of me'.
Is he right?
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We recently used Flight Centre for a family holiday to Singapore and surrounds. I could not be happier with the service and the advice received. The consultant was very knowledgeable, easy to contact and followed up very thoroughly. We were also able to contact an Emergency Line at any time. For "run of the mill" special advertised fares, the internet will probably eventually take over, but there is still a place for companies like Flight Centre. Their fares were considerably cheaper than those we could find on our routes.
my wife and I recently went on a trip to Nth Qld that my wife organised through our local Flight Centre. In contrast to Steve's experience the amount we saved on accommodation by using FC rather than booking direct almost completely covered the cost of our flights. They also reorganised our itinerary including transfers when Virgin Blue changed the flight schedule, which made it no hassle for us. We did have one incident on the trip where the resort did not have our booking in their system when we turned up. They blamed it on either their head office or FC but further investigation revealed this not to be FC's fault, so I can only say we had a good experience as far as FC was concerned. We also used FC in Canada a couple of years ago to organise a trip to Florida and had no issues. The other point I would make is that my wife and I have both done a fair bit of travel in our lives and while initially were inclined to book it all ourselves we are now tending to consider a travel agent as our starting point. I imagine when we retire this may reverse but that is a good 20 years away (barring exceptional investment performance from my II inspired portfolio :) )
FLT I have had two experience with flt, one to thailand where the net was hugely cheaper and easier to organise, and one recently to germany where the opposite was correct. In addition the trip to Germany I needed to arrange a bassinet, and it was much easier dealer with FLT then trying to do it online. I think for some destinations or simple trips the net is better, but anything slightly more complex then FLT is the way to go. I would hope that FLT are working on improving their website which is in my opinion pretty old in terms of usability, though perhaps this is delibrate in order to get you in the door?
My daughter works for FLT. Maybe this can be construed as vested interest and defensive, but.... she quite often remarks that people often are not comparing apples with apples. Comparing jetstar with qantas maybe, sorry but it's not a real comparison. The savings from flights paying for accomodation.... Hmmm. I recently went on a domestic holiday and after checking the net found them very competitive for what I required would not pay for accomodation.
The sort of dicsussion below, re FLT, lends itself well to a "Bristlemouth' type forum. It would be great to have a company specific forum. On the subject of travel, I wonder if time will reduce the fad-like status that internet bookings currently enjoy, and that the internet will just be seen as another medium, with pros and cons, but neither cool nor daggy. Ultimately, if all I want is some R&R in a fairly exotic environment, do I really want to spend hours and hours to get the 'optimal experience' - and do I place such little value on my own time that I'm not willing to spend an extra 5-10%? If it's no longer 'cool' to book on-line, and I'm not looking to hand-feed endangered lemurs in un-discovered natural surrounds, and I'm not trying to make a statement about how alternative I am, then perhaps I won't mind using a travel agent. To me it seems like a no brainer.
Re the Flight Centre experiences: I agree that customer service is an important part of any business, but whether it should be the main decider of whether to invest in a company or not may be another matter. How many of us have Telstra shares?
Thanks Simon. In response to your last sentence, this is one of the key issues I'm mulling right now. From the outside, it appears that Flight Centre wants less and less to do with the internet, and this must be a deliberate strategy on their part although it's one we disagree with.
I think that's a fair point on comparing Jetstar and Qantas, but not one we need to settle. It's a matter of individual opinion. For one person, a $5 difference will be enough to get them onto Jetstar, and therefore airlines are a commodity for them. For someone else, they'd fly Qantas almost regardless of price, airlines aren't a commodity. And the total of the various opinions dictates what sort of premium Qantas can charge. It's worth noting, though, that when a Flight Centre representative tells you that Qantas is better, there's no denying that they have a vested interest.
Personally, I've generally had similar experiences to you on pricing. I've found Flight Centre particularly competitive on accommodation in recent years.
Don't think I'll be looking these responses up and down and deciding our recommendation on Flight Centre. But customer satisfaction is, as you've noted, an important part of the puzzle, and this discussion also highlights other areas that are important - such as the company's approach to the internet. This situation is not necessarily comparable with Telstra, where unhappy customers have fewer alternatives. But I agree that a quick survey is not the final word.
I have not used FLT since my first major overseas trip 9 years ago. Since then, I have organised most of my own extensive travels with the aide of the internet and guide books. I get a thrill out of looking around different websites and putting together a trip. The one time I have used a travel agent since was while I was living in Germany and I wanted to book a stopover on a trip back. I do this in the web form of the airline. So from that perspective, travel agents still have more flexibility for more complex trips and packaging.
Hence, this is where travel agents need to focus on their value adding ability, because the advent of flight price aggregators has eroded margin on flight-only bookings (which may explain FLT's reluctance to go down this path).
So, despite not using them personally, I do own FLT shares because I know there are a lot of people who don't have the time, confidence or inclination to sort of the details of travel.
I'll also probably never travel first class, but I appreciate that people do and they subsidise my Qantas economy class flights.
I think focusing on the experience of individual customers is a myopic view to take. The important issue is whether the industry will be facing headwinds or tailwinds in ten, twenty years time and whether Flight Centre will be able to assert a position of dominance. Regarding the prospects of the industry, bricks and mortar travel agents will certainly not be gaining too much traction with the "JB Hi-fi" crowd. However I believe there will be a very large segment of the population coming into retirement with large amounts of disposable income who are not entirely comfortable booking over the Internet and who would prefer a face to face encounter.
Regarding prospects of the company I believe scale is a significant competitive advantage. The company shares a symbiotic relationship with the airlines. For the airlines to sever the relationship would be like cutting off their own proverbial noses. Having said that every company has its price and at current prices (12.50) I believe that the shares appear fully priced.
Have to say that I've had some good experiences using both flight centre and internet options. I'm agreeing with most of the above ideas that ff is easier if you are organising a holiday somewhere you are unfamiliar with and dont have time or inclination to do the digging.
We are new to Australia and our experience at Flight Centre there was not as good as here. However what we did find was that as the countries have to market themselves better internet planning gets better and better. We don't like package hotels so we can save a lot by using internet. NZ has a great trip planner and you can produce an itinerary and load all bookings as you would get from a travel agent. If you want to do the hard slog you get a better deal doing it yourself. However do you want to phone hotels and guest houses and book or haggle and you run the risk of a bad experience as you don't have the knowledge base. I think that FLT is a better option the further you travel from your home base as they can give you more accurate advice re standards and get you the right accommodation that suits your needs. My bigger concern is that few airlines seem to be making money (a fair return for risk and capital) and this has existed for some time. How long can this last before the industry has to lift pricing and what impact will that have on FLT. I also worry about the USA I think they are in for a long term restructure of their economy and as this happens there are always consequences. Is there a flight centre in China or India?
I've only used FC once, 3 years ago. The FC employee was lazy and sloppy. She had to be prompted to finalise important aspects of the trip. The final itinerary referenced flights we weren't even booked on. At the destination the transport had not been pre-booked. The hotel room she had recommended and booked was disgusting. That ruined the whole holiday. I'm sure most FC employees are very good and we were just unlucky to deal with one that wasn't. It shows though that you can't rely on just 1 or 2 customer's comments to form a view of the entire company.
We recently enjoyed a family (of four) holiday of a lifetime to Europe for seven weeks. We booked all our flights and accomodation online and everything went very smoothly and ultimately turned out exactly as expected. Trying to get accurate FC quotes for airfares that included all charges (taxes etc) online was difficult, if not almost impossible, whereas it wasn't a problem with other online travel agents. We booked our airfares through Travel.com.au so we knew exactly what we were comparing and paying for and had no problems. We spent quite a bit of time looking up accomodation providers through other websites. Most reasonable hotels in the western world provide plenty of photo's online and generally can't hide form online reviews! We emailed accomodation providers directly and found them all to be very prompt, helpful with their replies and often requiring minimal or no deposit. Although we have previously used FC and had a good experience we have no doubt our trip would have cost significantly more if we had booked it all through a travel agent. Having lived in the US for a number of years I believe it would be a mistake by FC to ignore the online market, especially there. I would think a good balance between the two would appeal to a broad range of the market and cover most bases!
FC is not sitting ducks in response to the onslaught of the internet. If you happen to find a cheaper fare online, simply make a print-out and bring it to your local FC for price-matching.
I did it for my last few trips and it worked out really well because you get real travel agent service for a web-based fare! Don't forget you also get a free $20 coupon in addition to the price matching.
Just click on 'Fly Free' on the FC website for more info.
This discussion is great, and thanks TII for setting it up in this forum. However, whatever fears we may have about what the future holds for FLT, we also have to be conscious of the fact the this is a business that has been generating incredible revenues, which have held up even in the current economic crisis. Until very recently, it has been generating excellent returns on equity, and fantastic amounts of free cash-flow. If we change our minds about what the future holds on the basis of a down-turn in profit in one reporting period, then I don't think we are being rational. Whatever structural changes are happening, and HAVE BEEN happening, in the industry, they shall progress over time, not over one reporting period. If Graham Turner appears to have his head in the sand, then perhaps that's because he is well aware of the current economics of the business. I prefer a leader with a steady approach, and a keen eye on his goose that lays the golden eggs, then a leader who is making big-bang strategic pronouncements, and dashing of on make-or-break corporate manouvres. I would suggest most business risk comes from the latter style of leadership, not the apparent 'head in the sand' of Graham Turner.
I agree that I wouldn't be buying more at these prices (though we should all have been diving in at under 7 dollars!), however I wouldn't be selling either (unless I needed to re-balance my portfolio). Great businesses have a tendency to win, in the long run - and yes, I still class FLT as a great business. They are in the business of travel, an industry that's not dying any time soon. I'm willing to bet someone will be able to make a decent doller on travel in the years to come, and the current pure internet models may not be the winners. I'd be surprised if a business like FLT cannot find a way to adapt to the future. Incidently, I have noticed that Expedia (ultimate internet trabvel business?) has not been growing it's sales at substantially greater rates than FLT, over the last 5 years or so (I think). This may be telling us something. But yes, everything has it's value, and if the price of FLT got to $20 I'd sell a good chunk of my shares, and at $25 I'd probably sell the lot.
The job of a travel agent to me is to consider and advise on things about your destination you dont know about and take these into account when putting your holiday together. If your visiting a regular or well known desitantion it would seem to me that the internet would be the way to go if it results in a cheaper booking. If your doing something less known or complex however (eg: flight, then then moving from one destination to another via a combination of land and air travel - not knowing whats the best way to go between each place) then there is value to me in using a travel agent.
My reluctance to use Flight Centre for this purpose however is that I feel that the person talking to me does not know much more about the destination than I could through a couple of hours of internet research. I was recently told by Flight Centre staff for example that I could drive between two
destinations that I later discovered were very difficult to drive between due to the terrain. I dont blame them for this as they cant become travel experts through simple training but afterwards I used a boutique agency that were far more knowlegable. The staff seemed like travel experts not sales people and had been in the travel game for many years. Maybe Flight Centre would benefit into the future by positining themselves more as travel experts than travel agents.
I feel that "first time" travellers are more inclined to use travel agents like FC. For subsequent trips, they get a bit more adventurous and get involved with their own planning, especially if there was bad planning/advice on the first trip. This natural progression will ensure that FC will still be in demand for quite a few years. I do think that FC will have to change the way it interacts with its customers i.e. a better internet experience than it offers now. Cost Control will necessitate a greater internet presence.
My thoughts: the internet provides the ability to bypass the middlemen (eg FLT) and book direct. For some people in some circumstances, this is what they want. For others, eg the less travelled, time poor, lazy or concerned about quality, then they may prefer to have someone package their holiday for them. I believe they do have a future, but this is "taming the wild beast" that the internet can be, for those who are either not sophisticated shoppers of travel or not well travelled. Personally, I use them to buy around-the-world tickets, as they are complicated products that is difficult to buy direct, but even here, the OneWorld alliance (qantas and co) allows you to purchase one of their products (but no infants, no premium economy) on-line.
Don't you think the reverse is also quite possible? That is, as a first time traveller (with all the associated excitement) you do all the research (on-line) and all the bookings direct. You then realise that the 'convenience' of the internet is not quite what it's cracked up to be, ie it takes a LOT of time. The next time, or maybe the time after, you may decide that perhaps you can't be bothered bypassing a travel agent.
I would add a further groupto Davids list of people who may be inclined not to use the internet-the nervous,and amongst this group are the elderly.I work with many elderly people and there is a group of them[the more affluant]who love travelling internationally.They are as a group a little more nervous[including re issues such as internet transactions] and I would think much more inclined to use flight centre.I think these propensities are unlikely to significantly abate with time
A couple of years ago Turner made a comment that it would be 20 years before the internet would seriously hurt FLT. At the very same time he was seriously growing its corporate business until it now represents 35% of TTV and one of the top five corporate travel agents in the world. At the time I thought it was just to boost volumes but now it looks more and more like a defense against the internet. After all, in corporate travel the price/cost isn't the key determinant so the threat of the internet is less prevalent. Not only that but what sectary is going to book their boss a flight, transfers and accommodation directly on the net and risk a stuff up when it can be done more efficiently (and cheaper) by the company designated travel agent. With this strategy I don't think Turner has his head in the sand but is fully aware of the internet risk.
FLT's leisure travel business is only at risk long term if airlines, hotels etc want to compete directly and openly on price alone and customers only care about price alone – both unlikely. In the meantime 85% of Australian outbound flights and holiday travel continue to be booked through a travel agent which all gives support to Turner's 20 year comment.
I am a director of a boutique travel agency - It amazes me
the lack of understanding that people have when booking a
holiday. Did you know that when you book on the internet
a majority of the sites are not covered by theTCF (travellers compensation fund). Did you know that for every good story
you hear there are hundreds of horror stories. FLT is considered as a bit of a joke - " the evil red empire" they churn and burn the furture travel experts! 6 month average staff retention and 1 trip overseas every 2 years and you want them to be experts! However the point is how does the internet effect FLT it does greatly due to low repeat clientele
There are two competing reasons to use a travel service or travel agent: to save time or to save money. Those who fixate only on money will never be happy with a travel agent, as the agent won't usually find the best deal, and at very least the agent won't let you have fine control on your costs. Those who want to save time tend to not care as much about money, and that is the segment that Flight Centre seems to focus on.
The store owner's comment that 90% of his profit comes from rich people booking trips is a really key comment here don't you think. 90% means they could effectively chase away all consumers, remove probably 20% of more of their overhead, and become an even higher margin enterprise. One would guess they tolerate consumers only to help keep their buying volumes high, but that's not what gets their profit.
One question the 90% profit comment raises is why doesn't Flight Centre advertise in magazines and web sites that cater to the rich? Why don't they offer specialized agent services that target the rich specifically? They could advertise in Conde Naste and provide an 800 number that is manned by a separate "high net worth" group, for example.
Does Graham Turner have high net worth as his explicit focus? It's not so clear he does. Maybe he should?
Interesting. Though I'm guessing FLT managerment have got a pretty good idea of who their best customers are. The 90% statement may have been a bit of a throw away line (though Gareth, or is it Steve, may want to clarify). I notice FLT does a lot of their advertising in papers such as The Herald, rather than The Age (in Victoria) - I don't see them advertise in The Fin Review (eg Sophisticated Traveller). So perhaps 'rich customers' may need further clarification.
I think there are two major reasons to go through a travel agent:
- uncertainty about what you want to do for your holiday
- saving time organising lots of little details
I've used Flight Centre for holidays twice - once 6 years ago for a 4 week trip to the US and once for years ago for a trip to Japan.
On both occasions, I used FLT because organising domestic travel in the destination countries from Australia was a pain at the time. It may be less of a hassle these days - I haven't had to travel to either of those destinations recently.
For the US, sites like Orbitz didn't accept foreign credit cards in 2003 so organising domestic flights was a hassle and I had no idea about (or inclination to research) local car rental options. Having FLT deal with those was very convenient. I organised all my own accomodation for that trip though (since Expedia was perfectly happy to accept an Australian credit card for accommodation and I spent a lot of the time staying with friends).
For Japan, I specifically wanted one of the Japan Rail Passes for use on the bullet train, and at the time those were only available by going through a registered travel agent. I don't know if that rule has changed or not. Again, I just used FLT for the flights and domestic travel arrangements - I organised my own accommodation.
These days, for simple trips or trips with a already defined purpose (e.g. visiting friends), I'd never use a travel agent - online booking is something which I can do at a time which is convenient for me rather than being constrained by the travel agent's opening hours. But I can still see the appeal in going back to an agent for a complex trip or one where I wanted some additional advice on visa requirements and the like.
So it all depends on the breakdown of FLT's profit between simple trips that are easy to organise yourself over the internet in an hour or two and the more complex trips that would take many hours or even days of research to be confident you were getting a reasonable deal. Going through FLT may not always get you the *cheapest* deal, but you can be reasonably confident that the selected airlines, accommodation and other travel arrangements aren't going to be atrocious and you probably aren't going to get gouged too badly on the price.
If the later kind of trip is actually more profitable from an employee effort invested point of view, then the migration of simple travel to a do-it-yourself online model may not be a bad thing overall.
In a lot of ways it's a classic risk/reward trade-off for the prospective travelers: going through an agent is typically going to be lower risk than doing things yourself (i.e. if you make a mistake doing your own bookings you may end up in dodgy accommodation or traveling with a dodgy carrier, but travel agents should be sticking with the more reputable organisations), but it is also typically going to be more expensive (e.g. an agent might recommend Qantas flights when Jetstar would have been perfectly acceptable and much cheaper).
The internet is, in the long term, a game changing thing.
The economics of using the internet are the reason for this. EVERYTHING is cheap to do, and the reach you get is huge. For any company selling services of any kind, you can reach your customer directly. Cut the middleman, everybody (except the middleman) benefits.
A consequence is that the full service industries of every kind are and will be under pressure. Examples abound - stockbrokers and travel agents spring to mind immediately. HOWEVER, when it comes to knowledgable advice and help, its a different matter, and there will always be a place for the full service provider as a consequence.
Want somebody who knows how to get from Paris to Geneva by train? A good travel agent will have the answer and it will take 30 seconds to find it, show it and book it. Do that yourself on the internet and you can - but expect it to take 3 days of research and a great deal of messing about. DIY = Learn It Yourself.
For the bargain hunter (where the cost of their time is zero), the internet is a dream. For those who don't know, don't care, don't understand, need advice then the full service providers are the only viable solution.
This means that the likes of Flight Centre will have to provide top notch service. If they don't they won't survive. If they do, they'll do OK. The long run prognosis though, is that better internet services, more people using it, more people who are savvy means that their growth options are severely limited.
They will survive but like ANYTHING that becomes commoditised, their margins will suffer and competitive pressures will bite.
In the long term
One analogy that's been in my mind (disclosure: my family owns Flight Centre shares) is an account of a conference which I think was provided in Outstanding Investor Digest a few years ago. It was a newspaper conference and apparently Warren Buffett asked; if the internet had been invented first, would the newspaper industry have been born in its current form? The answer seems self-evident.
Applying the same logic to Flight Centre, if the internet had come along before it, I can't imagine it could have become as large as it has, though it may still have a presence for the reasons canvassed by many Bristlemouthers here.
All interesting stuff. I wonder though if the predominant dynamic is the desire to cut out the middle man. Sure, this is a big factor, and suppliers of goods and services have always been the main proponents. But the ability to do so has been there since the advent of the telephone, mail order and teleshopping. I'm not suggesting these mediums can compare with the internet, but by the same token, if customers were hell bent on removing the middle-man, they have had the means to do so. Dell is a case in point. Also, the newspaper industry may not be a fair comparison, after all, the money tree here is the notice-board effect (classifieds), where the internet has a powerful advantage. I think there will be a place for aggregators (middle men) - as without them the internet is simply a public notice-board where every man & his dog can sell his wares. The problem, as I see it, is that low barriers to entry mean most aggregators won't make any money. Perhaps then a bricks-and-mortar component may help FLT maintain some competetive advantage. But to be sure, it's all very uncertain.
Have to agree - very interesting. I think Mars is on to something with the difference between middlemen and aggregators. There are two aspects to consider - 1 the range of services as per the newspaper vs travel agent example. I'm not sure what label to put on the other but I am thinking of financial services, in particular loans. The internet would allow people to bypass banks to arrange loans directly but matching up the amounts for a borrower to a lender continues to add complication.
Just a comment on being able to do it at your convenience. For a simple trip you could easily arrange a flight, etc with a travel agent via email and pay by BPay or similar. It takes longer in elapsed time but potentially requires less effort.
I take your point - but it took me less than 60 seconds to find the info on Paris-Geneva by train. Admittedly I knew a place to look in this case (Deutsche Bahn has timetables for most of europe - but the same applies for places like Japan and the UK (that's http://www.deutschebahn.com/site/bahn/en/start.html for the english language version)). So in my experience most of that generalist information is readily available on the internet for tourists (at least for all the first world destinations I've been to over the last 5 or 6 years) and travel guides are happy to list them. In my experience generalist FLT travel agents have been able to offer little advice of value in my travels over the years. When I have asked they seem to regularly consult a catalogue - which I may as well do myself. OTOH I have found that handling semi-complicated airline bookings is easier through a physical agent and when I first started travelling one of the most valuable things a travel agent did for me was handle all of the visa applications - but there are less of those these days for Australian citizens. I'm beginning to believe that the corporate travel part of flight centre will be the most important business in the future.
I would add to John's point that, if you're prepared to spend 10 mins a day on research, you're a lot less likely to end up with a dud hotel using the internet than you are booking through Flight Centre. Your Flight Centre agent wants return business for sure, but booking you into a high margin product will be their overriding concern. There are plenty of sites our there like hostelworld.com, where members get an incentive to provide an independent review and rating of the accomodation they have just used. The aggregated results are an almost faultless assessment of the place you're thinking of staying. And if you've got a question you don't know the answer to, try the Lonely Planet discussion boards (www.thorntree.lonelyplanet.com). I've never left with an unanswered question.
For mine, most people that think you get a better result using a travel agent haven't really tried to use the internet. The complexity is another issue, though (for the record, you can still only buy a JR pass through a travel agent). If you need to fly to more than one destination, I've almost always found a travel agent could find me a cheaper fare than the internet.
There are two other possible issues being overlooked.
First are we forgetting or placing no value in the sales role FLT plays in the booking process. FLT stimulates travel by advertising and helps close the sale by the work of the agent. This is a valuable process for which different suppliers will want to tap into when suits. For example Qantas is most likely trying to get market share from Singapore Airlines via FLT since the relationship fell down. As long as advertising continues to work, closing a deal is important and distribution is important to suppliers then FLT has a place regardless of alternative sales methods.
Also there was time in the 60's in the USA when it was thought the growth in mail order catalogues would see the end of traditional retail shopping – who would go to a shop when you can view everything from a catalogue at home? Obviously that didn't eventuate. Commerce on the internet is a modern day electronic version of the mail order catalogue - you see something you like and you pay for it most likely with credit. The internet in its current form has distribution but only limited sales power.
Fair enough Steve, and that means the internet will increasingly favour more adventurers travellers seeking less travelled destination. No surprises there, after all, its this sort of traveller that's going to be most internet savvy. However, I think the point remains, that for those who are seeking well travelled destinations and more mainstream experiences, then FLT is unlikely to provide a 'dud product'. That is, FLT will tend to favor mainstream travellers (ie the bulk of travellers?). Now if a company the size of FLT shouldn't be targeting this market, then who should it be targeting? Switched on travellers seeking off-the-beaten track experiences have 'known' for ages that they can get a better product elsewhere, but that hasn't stopped FLT growing its revenues.
We always book on the internet if it is a simple in/out of the same city overseas,however you always come unstuck when trying to do multiple stopovers and returns from a city different from your original set down point.Flight centre recently found us a HOT deal to the US for a multi stage fare where the internet had no chance competing.I am a fan
chris
Has anyone thought about how FLT can leverage the internet to its own advantage? If FLT comes up with a coherent strategy of using the internet to augment its services, it will be a monster with a huge moat.
One could argue that low margin business moving to the internet, as has been happening, is providing FLT with a natural (windfall) leverage to the net. What a beautiful thing, all those knockers saying they can do better on the internet are doing FLT a favor!
It certainly, wont destroy flight center mate. Scroo is smarter than u and me combined, Steve. But it will undoubtedly eat away at the I.I's margins, that is just a given. Time to get on board the resource boom buddy, all you recommendation are fully valued or flee ridden dogs.
Good lick to all I.I subscribers you are gonna need it as resource boom number 2 passes you by.......
I'm not sure you have got T.I.I's margin issue down pat - it's most likely the other way around.
I'm kind of curious what makes you say the stocks that the lads at the T.I.I still like are all fully valued. Pick anyone of them you like and tell me why it is fully priced (some detail needed) but if you are going to use any recent share price movement in your answer - don't bother.
As for your resources view I think you have been listening to Paul Lekakis’s song a bit too much.
Not sure how it will eat away at TII margins. Please explain.
Diminishing Returns, Mars. For less than a third of the price of T.I.I sub, I can join ASI and have some fun while I loose my money instead of just buying dogs and watch them track to ever greater lows. And they my friend have picked some absolute gems.
Justin here is a dog for you mate: SIP, will never ever overcome the Terry White Chemist Mafia. Pharmaceuticals in this country is a closed shop. This may be a growth industry, but, SIP will be competing with Indian generics as soon as the government opens up the market.
Now boys Stop feeding the troll and go and re-read Ben Graham's Intelligent Investor. Because speculation is not investing when it is done intelligently... the sort of thing that goes down at the T.I.I
I don't know anything about ASI, so still don't understand how it fits in with TII having its margins diminished by the internet. As long TII sticks to it's knitting, avoids the temptation of pandering to short termists and those seeking rapid riches in popular/speculative industries (such as resources), then it will keep being of value to me. Only if TII gives in to these temptations will, I believe, the internet present a long-term threat. For then it will be competing with many, and the internet will expose them to intense competition and diminishing returns. Otherwise, if they do well in the long-term (and in my opinion this will only be by sticking to their knitting), then internet will rapidly telegraph their performance, such as via this blog.
Australian Small Cap Investor, well worth a look. I agree with you whole heartedly Mars. Patience is the key to great investments undoubtedly. But to neglect whole sectors of the Aus market and focus on industrials is just poor form in my book. Not all speculative stocks are rubbish mate, great fortunes have been made and lost investing in these stocks, that often do not get the attention they deserve from the market. So to write off whole sectors as rubbish is just fool hardy. Case in point Ken Talbot, are you going to sit there and tell me ken is a mug for investing in specks such as gmx, mmr and the like? You are kidding yourself buddy. T.I.I neglecting resource, oil and gas stock is just poor form. Australia is resource rich mate, this is what we do best focusing purely on industrials is a waste of energy. Where were they with DANKS mate, had price to book of 0.2 when I brought mate, not even a mention from these mugs! Save your money mate and start reading AFR publications, because this is a glorified one mate.
Good luck to you
LOL....you got me Barry as you can only answer the question you are asked. I should have been more specific about the list....you picked one that I dislike a lot also...what was SIP doing buying Arrow for $700m? All I know is I don't know what SIP is worth. If you want another crack how about HVN?
And I think you mean read chapters 8 and 20 of BG's book....you can keep the rest of that book for yourself.
Your still wrong about the margins of an online publisher - costs of printing and distribution decrease while capability to improve the service (podcasts, timely updates, spreadsheets, interviews etc) increase adding to the service credibility of the provider and experience of the user. People don't subscribe based solely on price - it isn't a commodity product. It sells on the back of differentiation from other service providers. Whether you like it or not TII owns the 'value investing' proposition in this market. The net improves their economics by decreasing costs but not impacting revenue so long as they maintain their integrity - which I am also sure they will.
I don't Bazza....that looks like a dodgy claim on DKS. With $10 of equity per share to get 0.2 P/B you needed to pay $2 (pretty simple math). But the low was 20 Nov at $4.50 for only 3000 shares or 0.45 P/B otherwise the lows were around $5.00 for 50 cents in the dollar price to book. So not sure how you get your 0.2 P/B...sounds like it is made up. Either way you are looking at a business that has only made an average ROE of 7.5% over the last 5 years. Even at $5 or 50 cents in the dollar this business is only just OK priced at the bottom. In fact this is the worst kind of business to own – in my opinion this business defines the term dog with flees. It's only saving grace is being a pawn in a bigger game with a low market cap. DKS shareholders of today are lucky and owe WOW a big thank you for getting them out of this instead of stepping on them.
So let’s say you did buy near the bottom anyway and you can bail out now - that's about a 1.7X bagger at max. A good return for a single stock but not outstanding really - who hasn't got at least a few of 1-2X baggers in their portfolio from the lows pickings....and they didn't take a WOW takeover to make it happen. Not only that but now you face having your gain crystallised and paying tax before you get the 50% discount. Meanwhile for those who bought quality industrial businesses they still have their 1-2X baggers, aren't forced to pay tax and even better aren't stuck with what to do with their funds on a higher market like DKS shareholders are....you might have had your cigarette puff but now you have got to find another - but then again sounds like you might decide to put it all on copper.
The boys at TII know what they are doing and their focus is good. I don’t know but maybe you need to read Buffett’s letter to shareholders again. Good luck to you and happy punting.
You say: "Where were they with Danks?". Barry, I don't measure TII purley by the opportunities they neglected to present to us, any more than I measure how bad my mother is at playing the lottery because she didn't guess last weeks numbers. In the long run you'll do better by focusing on a few things, than trying to be abreast of many. More money has been lost by chasing rivers of gold than by plodding along and avoiding big mistakes. I just hope TII can hold steadfastly to their value investing proposition (which I think they will) and not give in to the demands of people like yourself. By the way, I don't need TII to get everything right in order to be of value to me. They are a very important source of information to me. That doesn't mean all they write is holy scripture. I would suggest, infact, that they have to continue to have the courage to make mistakes in unfashionable ways. The moment that lose the stomache to do this, they have proabably lost their value proposition. Name just one similar competitor with value investing credentials.
I have to echo Justin's comments - I took a look at Danks yesterday to see if it was a business I may have missed, but based on its economics I can't see any reason why I would have bought in. It has also had pretty close to zero revenue growth.
On Barry's other point, I have in fact just finished rereading BG, and yes he does say there is nothing wrong with intelligent speculation but stresses that you still need to not confuse it with investing. He also specifically says his book is not aimed at speculators, and any company not paying a dividend (so most small cap resources) is by definition a speculation. Lastly he stresses that there is no need to try to cover the entire market but rather stick to the areas you know, a view reiterated by plenty of other successful investors. IMHO TII does this well, and more importantly they listen to feedback to improve their service.
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