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JTG to Launch New Consumer Brand and Digital Platform

July 23, 2013 Corporate No Comments Email Email

HIGHLIGHTS

  • JTG to launch new consumer brand, helloworld
  • Significant marketing presence planned for helloworld
  • Key commercial terms agreed for JTG to enter into a long-term strategic partnership with Orbitz Worldwide Inc for helloworld online
  • Majority of implementation expected to be completed within 18 months
  • Full year results to be announced on 27 August will include further analysis of implementation costs and benefits

Jetset Travelworld Limited (ASX: JET) announces today that it will launch an exciting new brand, helloworld. Existing members and franchisees will have the opportunity to adopt helloworld to create an extensive network of over 1,000 travel agents. This new retail network will be supported by a long-term strategic partnership to be entered into with US-based online travel company Orbitz Worldwide Inc (OWW) which will see the Jetset Travelworld Group (JTG) utilising Orbitz proven global technology.

Rob Gurney, JTG CEO says,

“We believe that helloworld will change the way Australians choose to travel. With more than 40 years of travel industry experience behind our agencies, the goal of helloworld is to offer travellers unparalleled convenience, industry-leading service and the best value, tailor-made travel experiences. We look forward to the journey ahead. The new brand will provide an opportunity to leverage our agents’ vast experience,” says Gurney.

“The existing portfolio of brands has served our members and franchisees well over many years. However, by building critical mass under a new, contemporary brand, we will drive stronger economic alignment, build purchasing power and scale and secure key supplier relationships. This unification will enhance growth, services and incentives for agents and suppliers and create a compelling multi-channel experience for customers.”

“The consolidation of JTG’s marketing spend to focus on helloworld will provide franchisees with a greater share of voice through digital channels, on TV and radio, in print and in partnership with our suppliers,” says Gurney.

“It will also build sustainable, long-term shareholder value focused on growth in Total Transaction Value (TTV) and revenue. This will build on the platform that has been established since the merger of Jetset Travelworld Limited and Stella Travel Services in September 2010 which, to date, has achieved cost reductions of over $50 million.”

THE STRATEGIC REVIEW

“In September 2012, we initiated a long-term strategic business review of JTG that focused on leveraging the Group’s scale to secure its position for success in the growing and dynamic travel industry. Following the initial review, we spent a further six months comprehensively testing and validating a wide range of strategic options with agents, suppliers and consumers to determine the most effective path for JTG’s success,” says Gurney.

“During the strategic review, I personally spoke to over 150 agents as well as key suppliers. We conducted a survey across the entire franchise network, surveyed Australian consumers who have travelled in the past 12 months and held in-depth consumer focus groups. It has been a long and comprehensive process as we are committed to finding the most effective ways to meet the challenges of Australia’s rapidly changing travel industry. The launch of the new brand sets our direction for the future,” says Gurney.

LEADING DIGITAL OFFERING

“Customers are increasingly looking for the ability to research and book their travel through both online and offline channels. We want our franchise network to share in this growth,” says Gurney.

As part of the brand’s transformation, JTG and OWW have agreed to key commercial terms to enter into a long-term strategic partnership whereby Orbitz will power the helloworld online travel site. Orbitz is a leading global online travel company listed on the New York Stock Exchange that, for the year ended 31 December 2012, reported TTV of US$11.2 billion and revenue of US$778.8 million. Orbitz uses innovative technology to allow consumers to search for, plan and book a wide range of travel products.

OWW owns a portfolio of consumer brands that includes: Orbitz; CheapTickets; ebookers; HotelClub; RatesToGo; and corporate travel brand, Orbitz for Business. The Orbitz website was launched in 2001 and OWW has been a public company since July 2007.

“OWW’s powerful global technology platform will provide JTG with robust desktop booking functionality, as well as industry-leading mobile capabilities. This will offer customers mobile-optimised booking experiences and mobile-enhanced applications. The technology platform, powered by Orbitz, promises to provide helloworld’s online customers with a best-in-class shopping and booking experience.”

“This initiative is highly complementary to the strength of the retail network and will allow helloworld to participate in one of the fastest growing segments of the travel sector in a way that has not previously been accessible,” says Gurney.

“We already have an excellent working relationship with JTG on a number of fronts and this is an opportunity to further strengthen our partnership. JTG and Orbitz Worldwide have agreed to key commercial terms that allow a pathway to a long-term strategic partnership. This will provide JTG with a highly competitive online offering which will directly benefit consumers through a combination of great online and full-service travel agencies under one umbrella” says Barney Harford, OWW CEO.

NEW RETAIL MODELS

Existing and new franchisees and members will be invited to join helloworld. They will have the opportunity to work under a choice of three retail models, with applicability across leisure and corporate agents. The new models are: the helloworld fully branded model; the helloworld Associate membership model; or the Affiliate network. In addition, existing brands will continue to operate according to their franchise and membership agreements until the end of the agreement term, if preferred.

“Our new retail models are designed to strengthen our consumer offering and optimise the individual businesses of our franchisees and members. helloworld will be launched with a new, streamlined and simplified incentive scheme, designed to enhance the alignment of the economic interests of the franchisees, members and suppliers,” says Gurney.

It is the Group’s intention to embark on an intensive process of engagement with all existing franchisees and members over the next two months, communicating the values of helloworld and details of the new retail models. The majority of the transformation is expected to be complete within 18 months.

EXTENSIVE SUPPORT FOR FRANCHISEES AND MEMBERS

Franchisees and members who choose to adopt helloworld will be supported throughout the process via extensive training and mentoring, a focused marketing campaign, basic lease negotiation support and the benefit of helloworld’s Customer Charter and Customer Protection Policy.

“A range of support services will enable our franchisees and members to focus on growing their business and serving their customers as we move through this critical phase. Our franchisees and members are our greatest assets. They have translated their passion for travel into a lifelong commitment to giving Australians the best travel experiences. The helloworld brand will maximise the strengths of our retail networks to help every helloworld agency become more efficient and competitive,” says Gurney.

“Our long-term store fit out program will transform the retail network and make the in-store experience truly interactive and collaborative.”

IMPLEMENTATION

Supported by a consumer campaign, it is expected that the first helloworld stores and the online platform will launch during the second quarter of the financial year ending 30 June 2014 (FY14). The store fit out program will continue throughout FY14.

For the year ended 30 June 2013, JTG has incurred $10.8 million of non-recurring expenditure on the business transformation across a range of activities including business restructuring in Retail support and QBT, cost reduction initiatives, project management and brand transformation.

The investment in the business transformation will be funded from existing cash reserves and headroom in the Group’s debt facility arrangements. The Group’s capacity to fund extensive transformation has been demonstrated since the September 2010 merger. Over $38 million was invested in merger integration activities and other capital investment during the FY11 and FY12 financial years. This investment delivered cost reductions of more than $50 million compared to the pro-forma costs incurred in the financial year ended 30 June 2010.

During this period of investment and subject to trading conditions, the Directors intend to maintain the stated dividend policy of paying a dividend pay out ratio in the range of 40-60% of net profit after tax.

STRONG SUPPORT FROM THE TRAVEL INDUSTRY

JTG has received extensive support from the travel industry on its strategic direction.

“As a shareholder in Jetset Travelworld Group, Qantas supports this new direction. Consolidating the Group’s retail assets around a new brand and creating a stronger online offering puts the business in a better position to meet the needs of the travel trade and consumers.”

Gareth Evans, Chief Financial Officer, Qantas

“As a supplier to JTG and its valuable customer base, we support the launch of a new, contemporary brand with a marketing spend focused on driving growth. This strategic initiative positions our industry as dynamic, innovative and attuned to the changing needs of customers.”

Ann Sherry AO, Chief Executive Officer, Carnival Australia

“The Travel Corporation supports the initiative taken by JTG to set a new strategic direction for the Group. The introduction of a new multi-channel contemporary brand provides us with a strong business partner aligned to the changing needs of customers and suppliers.”

John Weeks, CEO, The Travel Corporation, Australia

TRADING UPDATE

The full year results for the year ended 30 June 2013 will be announced on 27 August. The unaudited trading results for the 12 months ended 30 June 2013 indicate that Adjusted EBITDAI (earnings before interest expense, tax, depreciation, amortisation, impairment and non-recurring items) is expected to be in the range of $52 million to $54.5 million representing an increase on the prior year result in the range of 3-8% (subject to any adjustments that may arise).

THE FUTURE

Gurney says the long-term strategy for JTG is firmly focused on growing a strong position in the market by better leveraging the scale of the Group, building on consumer insights and delivering new and innovative products to meet changing needs.

For our shareholders, this business transformation will deliver long-term value through:

  • Creating a highly consumer-focused travel distribution network
  • Consolidating marketing spend to capture a greater share of voice
  • Capturing growth through digital distribution

“We are ambitious in our goals to reshape the Australian travel industry and have embarked on a major transformation for the Group. Over the next 18 months, we will focus on implementing the most substantial changes,” says Gurney.

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