SINGAPORE’S Integrated Resorts, which open at the end of this year, are expected to attract 15 million visitors in the first year of operations – that’s 40,000-50,000 visitors a day.
Most of them will stay in hotels on Singapore mainland, opening up a new business opportunity for companies that transport them to and from Sentosa.
One such company is Asiatravel.com, an online travel reservation service listed on the Singapore Exchange.
”We will be going into that space very aggressively,” said its executive chairman, Mr Boh Tuang Poh. “With our own coaches, and our very attractive rates for hotels outside of Sentosa – we can offer very attractive packages, including airport pickup.”
Asiatravel.com has 40 coaches of various sizes, and is one of the biggest coach operators in Singapore – a fact that is not well-known.
”If we can do just 1,000 pax a day – that’s 2% of 50,000 - it’s critical mass for us, and it can be a very profitable operation,” said Mr Boh during a presentation to analysts and fund managers at a roadshow organized by Financial PR recently.
This business segment contributed S$27.3m or about 32% of revenues in FY08, a growth of 23% Y-o-Y. It has been slightly profitable or has been breaking even at the net level in most years, according to DBS Vickers.
The core - and highly profitable - business of Asiatravel.com is, of course, selling hotel rooms and flights online.
Some key facts:
* Asiatravel.com sold 620,000 room nights in FY 08, up 24% from the previous year.
* About 40% of the bookings were for check-ins within five days.
* The customer base is: 65% Asia, 16% Europe, 10% USA and 6% Oceanic.
Unlike many online travel websites, Asiatravel.com has a physical presence in the form of offices in 8 countries, such as Singapore, Malaysia and Thailand.
It also has a network of partners’ offices in Taiwan, Japan and another 4 countries operating under Asiatravel.com branding. “We do not bear the costs but we share the profits with these partners,” said Mr Boh.
The ground presence enables Asiatravel.com to work closely with hotels, most of which are standalone operations instead of being large chains.
Mr Boh said a key strength of Asiatravel.com is the over 5,000 hotels – in Asia mainly - that it has direct contracts with. Asiatravel.com provides these hotels with its proprietary system which enables the hotels to vary their room rates real-time according to supply and demand.
These rates and the room inventory are guaranteed to Asiatravel.com and no other agent.
For hotels outside of Asia, Asiatravel.com will link up with the reservation systems of international hotel chains. “The difference here is that the room rates are not exclusive to us.”
Asiatravel.com is the only major site that offers options for paying before the trip and after check-out. For people who opt for the former option, Asiatravel.com negotiates for low rates with hotels, targeting mainly leisure travelers. In the post-checkout option, the rates are higher and are targeted at business travelers, whose travel plans are usually not confirmed until close to the travel time.
Serving the most under-served
Asiatravel.com’s compounded annual growth rate of room nights sold is 22% since FY 05, inclusive of the first two quarters of the current FY which started in October ‘08. Interestingly, the CAGR for its online profit is 48%.
“All tourism indicators were negative in the first half of FY09 but we managed to buck the trend with positive growth in room nights. This shows the resilience of our business model. Keeping our fingers crossed, 2010 is a strong recovery, and if the past trend is any indication, we can do better than the 22% CAGR.”
The other core offering of Asiatravel.com are flights. In just 1.5 years, it has acquired the largest footprint in Asia offering flights on major airlines. Flights are instantly reserved with online payment.
Unlike its peers, Asiatravel.com offers flights with stopovers – for example, from Singapore, you fly to Hong Kong, stay a few days there and then go on to Taipei before returning home.
“Multi-stop flights is one of the most under-served segments in the market,” said Mr Boh, adding that Asiatravel.com continues to expand its range of such offerings.
Another variation: flights returning from an airport different from the arrival airport, such as you fly from Singapore to Beijing and then return to Singapore from Shanghai. “If you buy these flights as one-way flights, it would be very costly. If you buy from us, it’s much lower.”
Giving an idea of the potential of the online reservation business in Asia, Mr Boh said Europe’s tourism market grew 2.2% CAGR between 2001 and 2006, but its online travel market grew 50.3% CAGR.
That gives a hint of the kind of explosive growth that Asiatravel.com could enjoy in the years ahead, especially when the economy recovers.
Read about Asiatravel.com's FY08 results: ASIATRAVEL: Dividend per share up 43%
