After successive years of increased turnover and profit since the group’s inception eight years ago, The Magellan Travel Group is looking to the year ahead to further grow their market share in the leisure and corporate travel space.
KarryOn caught up with Group CEO Andrew McFarlane and Chairman Andrew Jones at their annual (and first ever offshore) conference at The Hilton Hotel in Auckland to find out more.
With 200 members and suppliers in attendance, this year’s conference themes honed in on ‘belief’ and ‘passion’ with an array of speakers and workshops to inspire, educate and entertain all.
On this year’s results
CEO Macfarlane reported in his address that in 2016 the group had delivered a fully audited result of $883m in TTV (up from $863m in FY15) and a net operating profit of $9.4m (Up half a million from $8.9m in FY15) with their bottom line costs reduced yet again from the 2015 figure of 8.2% to a lower 7.7%.
Macfarlane said it was “An excellent result given the capacity driven price deflation of the market, especially in Europe. In the last three years we’ve doubled our membership (to 120) and turnover as well as tripled profit. No other group can say that.”
“Average profit delivered to each member has increased annually over the groups eight year tenure from $30,000 to nearly $80,000. It’s that kind of return that is one of our core differences versus our competitors”.
Impressive numbers indeed for one of the industries most self proclaimed to date ‘Quiet achievers’.
On new member acquisition
This years positive results are all the more reason why the group see themselves as a very attractive player indeed when it comes to agencies thinking about moving groups.
Asked if The Magellan Group desired to be considered by any corporate or leisure agencies coming to the end of their contracts with other groups Macfarlane responded.
“We want to be strongly considered in any business’ due diligence as a proven choice – but only if it’s a good fit for both parties, otherwise it won’t work for anyone”.
Andrew Macfarlane (Magellan Group CEO)
The challenge Macfarlane said “Was how to maintain the groups niche appeal whilst delivering the message that we are not a closed shop. Our doors are well and truly open to start a conversation with anyone who feels we have the right model for them”.
Asked about the groups ceiling target on member numbers, Macfarlane quipped.
“Our strategy was never to be a thousand agent group so when we hit our target of 100 members and then went over to the 120 we are currently, we decided that our target was never to have a target again. The natural cap for us will be the number of agencies in Australia who are the right fit for The Magellan Travel Group.”
To help enable the engagement of new member conversations and increased efficiency across the business, new roles are being implemented in the coming months including a new Commercial Manager (David Stafford), a National Manager for Magellan Corporate and a National Marketing and Communications Manager to be recruited later in the year.
On Supplier relations
Clearly a high level of transparency in the group has always allowed for a robust relationship with suppliers, many without formal contracts.
On the question of whether all suppliers were playing fair in the school yard, Macfarlane responded;
“Every relationship needs to work both ways. Suppliers love our model but we all need to work together to make sure that the targets set are reasonable. Everyone’s under a lot of pressure right now, suppliers especially and we get that”.
Jones added “Every agreement is based on dollars not passenger numbers so growth may potentially be difficult this year for all of us given market discounting. What we need is for everyone to be on the bus so that together we can maximise the opportunities that do come through our doors”.
The group’s expectation from suppliers is simply that of a fair reward for their existing volume business of almost $1b along with attainable targets given the market conditions.
On the current market
Macfarlane reported in his CEO address that the travel Industry is now operating within the lowest business margins in the world. A sobering point to say the least. He clarified this further by saying;
“It’s getting more and more competitive, with more pressure than ever on margins. Agents are working harder for less, but we’re still confident as a group because we believe our high calibre agents are the best placed in market through their selling of premium products and diligence in getting optimum supplier volume through the back end”.
“Thankfully people’s propensity to travel hasn’t waned and is still as high as ever. If you’ve retired you’ll probably be still going on your trip. Generally we’re in better health today than we’ve ever been later in life – its time that’s our most precious asset”. He said.
Jones added “Corporate is strong and the medium to long term view on leisure is looking good also with airfares the lowest we’ve seen in years. So whilst Europe is flat right now, we’re seeing clients shifting their plans to safer destinations such as Canada and Alaska, The US, South Pacific, New Zealand and Asia.”
“Let’s hope there are no more major incidents in the next few months and hopefully we’ll see more European bookings return in January.” Continued Jones.
On the focus for the year ahead
Macfarlane outlined the group’s three-year focus points in his opening address, those being – Increased profit and growth for members and suppliers, the implementation of new value add services, new culture and engagement initiatives and enhanced group wide communication.
“Culture and engagement is a big focus for us this year which includes us organising our own famils on top of supplier trips. We’re already doing one a month, all with a narrow and deep focus on specific destinations working with a tourism board and experience specialists on the ground”.
Macfarlane also said that the group are now leading their own member trips to major travel conferences such as ILTM (International Luxury Travel Mart), Pure Experience and WTM (word Travel Mart) as educational famils.
Magellan’s message to the industry
In Macfarlane’s words, it’s plain and simple.
“We’re much more than a buying group so don’t let anyone tell you otherwise. This year we’ll be no more the quiet achievers – We’re ready to make a lot more noise”.
If the feedback on the last three days in Auckland is anything to go by, we’ll be looking at Magellan’s next level evolution in a year’s time.
What are your thoughts on Magellan’s plans for the year ahead? Share your thoughts below.
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