By Monika Canty
Region’s top travel bosses make their predictions for the travel industry in the year ahead
Benjo Van Laarhoven, Executive Vice President, Alshamel International
We anticipate further growth of double digits for our business travel division. Revenue per transaction will be up due to growing average ticket price, while hotel revenue will show more moderate growth. Alshamel will enter new territories in 2011 creating more value for our customers and leading to further growth.
For our leisure division we are budgeting growth in transactions and revenue. Alshamel will launch new distribution channels, new content and new products. When it comes to cross-selling opportunities we see our largest growth in B2B2C Leisure. Our GSA’s will grow. We have signed agreements with new partners and foresee further expansion in 2011.
We are part of the global game. Therefore we will still see the impact of the volatile state of the economy particularly in Europe. At the same time we are seeing some improvement from our North American source market and benefit from the Far East engine of the global economy.
We anticipate the GCC, Jordan, Iraq and Afghanistan to benefit from a strong home market. As the largest consolidated network in these countries we are able to level our local strength with the challenges in the global market place.
Alshamel will launch new concepts for leisure distribution; and will enter new territories with our corporate division. We will further invest in our verticals: energy services, military and government.
Because of our strength in energy services, we will move into countries like Sudan and Algeria. We are always interested in expansion through acquisition. We are looking into expansion in the African market. Economies like Kenya are growing faster and higher than the Middle East - although they are coming from behind.
The biggest challenge is that the cost of business is increasing. The increasing costs of financing our trade: including the increasing cost of money, the increasing cost of bank guarantees, shorter BSP cycles, longer pre-financing cycles, and the cost of account receivables will have a huge impact on our margins. There is a lot of pressure on travel agencies.
I predict that a lot of the smaller agencies will go out of business in 2011 - even some of the bigger names in the UAE are struggling. Financial stability will become more and more important in the year ahead. Customers need to look at the financial stability of their agency. I think we will see the trend that has already started that some agencies won’t be able to cover the increased cost. Agencies must help each other and protect each other by telling each other who the bad payers out there are.
Social media like Facebook will change the way travel companies interact with consumers and the other way around. Customers don’t look at websites anymore - they are looking for comments from “people like me”.
We are currently reviewing our web presence entirely. There’s a huge opportunity for travel agents to get in touch with the end-consumer today. We can talk to them directly through social media. We can, for very low cost produce a video stream and put it up on YouTube.
We all need to embrace social media. You have to track what is being said about you on the web. If you know people are looking there, you have to go there to market yourself.
The entry of tailored Online Travel Agencies (OTA’s) into the Middle East will have huge impact. OTAs with an Arabic flavour will enter this market in the coming months. With the huge uptake of internet activity, people will start to book travel with their smart phones. There will be some leakage from normal agencies to these online travel agencies. On the other hand travel agencies can also launch their own online offerings, so it will be interesting to see what the bigger agencies do.
Asim Arshad, Chief Executive Officer, Orient Travel Services
I don’t expect big growth in business travel in the year 2011 over 2010. Local airlines sales have shown a fair increase in the year 2010 compared to 2009, but bear in mind that 2009 was a very bad year, so any growth over a dull year looks formidable. However all multi-nationals and SMEs are showing constraint and have been cautious about their travel budgets so I do not expect considerable growth this year.
The industry grew in 2010 - BSP figures are indicative of this fact. Additional capacity has been introduced in the market. FlyDubai started expanding its network with new routes and destinations. So overall if you look at the number of travellers, the UAE has shown a formidable growth in 2010. I would like to believe that these levels will be maintained in 2011.
As we have opened a number of new outlets in 2010, our plans for 2011 are to focus on these new areas of opportunities. For example, our new office on Sheikh Zayed Road, Dubai is well positioned to cater to the high-end leisure segment in Umm Suqueim, Jumeirah and Barsha especially. Likewise I plan to ensure that our new retail outlets in Al Quoz, Dubai, Madam and Sajaa in the industrial area of Sharjah start working to capacity. I still see that we have a lot of opportunity to grow our business in the leisure segment in Dubai and in all segments of the market in Abu Dhabi, as we are a relatively new entrant there.
We will be facing a number of challenges in 2011. The biggest problem is the accounts receivables and credit facilities that we extend to our corporate customers. Today it is becoming increasingly difficult to realise your payments on time, even from large organisations. This will be our biggest challenge in 2011.
Likewise business going global is reducing our profit margins - as more and more global negotiations take place, they drive the service fee down further. So a major challenge in 2011 will be to keep your profit margin high.
Another challenge we face is airlines going direct to the consumer by offering special deals or benefits on their websites. Simultaneously, online booking companies that have come into this market are taking substantial business away from traditional TMCs especially in the retail sector. We are trying to combat these issues by having our own online booking tool that is equally efficient so that we can have a bigger reach for prospective customers.
Emerging trends in the industry for the year 2011 will be higher online adoption. Online adoption in this region at the moment is very low compared to US, Canada and Europe, but it should show an increase which is definitely not very good for traditional travel agency business.
Budget travel is on the rise with cost-cutting measures from companies who are now opting to use LCCs such as Air Arabia, Flydubai, Watania, Jazeera, Air India Express and Nas Air etc. TMCs and travel companies are selling LCCs, but unfortunately our profit margins are much lower compared to our sales on legacy carriers.
Abdulla Abu Khamseen, Executive General Manager, Kanoo Travel
I believe 2010 was the year of recovery and airline profits are forecasted to have hit new highs by the end of 2010. Although the momentum created will continue in 2011, I am cautious about predicting market growth in 2011 versus 2010. However, I believe the Middle East region will experience a higher rate of growth compared to other economies across the world based on new contracts and infrastructure development that is already on track.
In my opinion, economic recovery began in 2010, and will remain positive. The Middle East region will be one of the fastest economies to bounce back from the recent crisis. Amongst many industries that will benefit from this recovery, the travel trade will be one of the biggest gainers with many Middle Eastern carriers already investing in increasing their fleet and network in 2011.
We will invest in improving our deliverables, our E-commerce solutions and our people in order to continue to offer only the highest quality of service. Our plans include the launch of our very own fully-fledged online travel reservations portal, complete with payment gateways and dynamic pricing systems offering air, car and hotel products to our corporate and retail customers.
Opportunities for growth
Whilst leisure travel has experienced growth in this market with more and more options for economical overseas travel, the recent recovery has seen corporate travel surge as well. I think every TMC should have a multi-channel approach with a clear strategy on both streams of business. Our Kanoo Holidays products will continue to target retail customers, and our corporate travel teams in partnership with American Express Travel Services will focus on business travel.
With global business boundaries now almost non-existent, there are no limits to the extent foreign competition could impact us. Many international online operators have encroached into our territories offering travel products online. In addition, an ever increasing number of international travel management companies are consolidating regional business travel transactions at call centres across borders. Our challenge will be to prove to corporate customers that an international level of service can be offered in our region. Our investments in modern call centres, technology and training were all made with the intention of offering the finest level of service locally.
Trends for 2011
More and more passengers are beginning to use the internet before and after they have travelled. The internet has become a way of life for us all.
In 2011, the number of tickets purchased and hotels booked online will increase. Passengers will also use the internet to research destinations, travel options, travel information, suppliers and travel tips. As a travel company it will be our duty to prepare ourselves for this new generation of traveller, understand their needs and wants, and offer suitable solutions catering to them.
Mohamed Al Rais, Deputy Managing Director, Al Rais Travel
My forecast is positive for next year. We already noticed in the last quarter of 2010 travel movement coming back in both the corporate and leisure sectors. I predict the travel market will grow around 15% in 2011. Travel is interlinked with the economy and we can see business in Dubai improving in general. Banks are financing again, and many construction companies have started work again. All this will bring cash into the country, giving people money to travel for business and leisure.
As I learned from HH Sheikh Mohammed, there is nothing called a crisis, it is only called a challenge. When people hear the word crisis they feel down and unmotivated to work, but the word challenge gives people the power to fight or work harder to achieve. I think the challenge for 2011 will be a smoother one and it will be a positive year.
Plans for 2011
Our company plan is to increase our market share and grow by at least 15% if not more.
The growth in online business is our biggest challenge, as airlines and hotels are aggressively trying to sell their products to customers on the web. We have to tackle this by providing excellent service and added value to our customers.
David Milican, Senior General Manager, SNTTA Emir Tours
Forecasting has become extremely challenging today with all business segments now affected by later booking patterns. But based on the enquiry levels over the last quarter, and the volume of business already on the books for 2011, we are forecasting growth in all areas for next year.
There is growth and we are bullish about how we see 2011 performing. But at the same time, there has to be certain amount of caution with a number of economies in Europe still badly affected by the economic downturn. The UK MICE performance has started to improve, but feedback from the market is still fairly negative.
Plans for 2011
Dubai will always be the main provider of business, however, we have seen a strong growth in interest for Abu Dhabi. As the tourism infrastructure grows in this emirate, we see good potential for growth over the next few years. We have also witnessed strong growth in Oman and will continue in our efforts to promote this beautiful country.
We must not forget that we are part of a global tourism market. The competition from other destinations is providing the customer with overwhelming choice. We must not sit back on our laurels. With the continued support of the tourism authorities, we are confident that this region will bounce back in 2011 and beyond.
With the increase in budget hotels, we can see an increase in markets that are now able to afford a visit to the region. We will continue to tap into these markets and forecast good growth in 2011 for this type of product. Specialising in golf tourism, the outlook for this particular niche market is looking very positive. The additional golf courses in Dubai and Abu Dhabi have made these destinations much more attractive to the golf tourist.
Abdullah Bin Omeir, Deputy CEO, Omeir Travel Agency
The forecast for 2011 is definitely positive. Business is expected to grow at a slow and steady pace in synergy with the economic recovery. The travel industry in this region is on the upward path after the global economic meltdown. This can be reiterated by a double digit growth in hotel guests and the increase of 4.4% in aircraft movement from Abu Dhabi International Airport. With all major projects on schedule in Abu Dhabi, business traffic to the emirate will create a boom for the tourism industry supported strongly by Abu Dhabi Tourism Authority.
Plans for 2011
We plan to revolutionise the travel business by servicing our customers with just one phone call, through our new 24/7 call centre with Interactive Voice Response (IVR) facilities.
Opportunities for development
The MICE market is set for a huge growth with the increase in the number of hotel rooms and aggressive marketing support from ADTA, while the opening of Ferrari world and the Formula 1 Grand Prix has supported the growing leisure market.
Travel has always been a fragile industry, susceptible to both internal and external factors. We have two major concerns facing our industry: the threat from the increase in internet bookings which is eroding our revenue. To counter this we have introduced IVR services whereby clients sitting in the comfort of their home can be serviced by professional staff.
Also, the global economic meltdown has seen a cut in the travel budgets of major corporates and ministries resulting in a decrease in front cabin traffic. Strategic negotiations with the airlines have offset the deficit to a larger extent.
Consumers are getting to be more and more knowledgeable and well informed through researching destinations online, and making bookings via the web; resulting in a loss of revenue for travel agents.For all the latest travel news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.