THL gears up for influx of independent tourists

By Graeme Kennedy

Friday 17th March 2000

STICKING TO CORE BUSINESS: Dennis Pickup

High-flying Tourism Holdings Ltd (THL) is selling its Pacific island and southern African assets to focus on expected growth in the Australasian market.

The Auckland-based transport and attractions company has become the world's biggest motor-home rental business with more than 3500 vehicles including its 1500 Maui fleet in New Zealand and almost 2000 gained with its $161 million November purchase of Australian operator Britz.

THL has integrated the two businesses and will launch an Australian car rental venture on April 1, initially with 200 vehicles, before moving into other Australian tourism sectors including attractions to mirror its vast New Zealand operation.

Managing director Dennis Pickup said the further expansion would come when the Britz acquisition was a proven financial and operational success.

"We are not going in gung-ho. Other New Zealand businesses have done that before and failed, while others have done their homework and succeeded," he said.

"We will not get carried away by the hype of tourism but stick to our core business - we won't go back to smorgasbord tourism. We are really focused on delivery of our plans and keeping our vision as a tourist transport operator leveraging our attractions to increase shareholder wealth.

"We are moving back to Australasia. We see the tourism market as one and inbound growth into Australia is phenomenal with 8.4 million visitors expected by 2008 which creates huge capacity issues - and we will be there."

Mr Pickup said THL would sell the southern African motor-home business it inherited with the Britz purchase and the Fiji tourist bus company it bought six years ago. While both were profitable and growing, they did not fit THL's future strategy of seeking bigger opportunities available in Australasia.

The company reported a pretax profit of $15.1 million in the six months to December 31, up more than 300% on the previous period, on revenues 18% higher at $96.5 million after a year of divestment and rationalisation in New Zealand while completing the Britz purchase in Australia.

THL reduced 61 companies (26 of which were joint ventures) to 23 in the great 1999 sell-off and marshalled what was left into just three divisions.

It dropped its share in the Milford Track, Mount Cook Village and Alpine Guides along with six small South Island businesses and got out of retail, all forms of accommodation and wholesaling in Australia and the US - "all businesses too small for us as a corporate player," Mr Pickup said.

Founding director and shareholder Chris Alpe has rejoined the company as chief executive of THL Rentals, which includes Maui and Britz, Koala in Australia to target the US market, second-tier campervan companies Backpackers and Kiwi Campers, 750 rental cars in New Zealand and the formerly Britz-owned Australian car-rental venture, which will focus on inbound tourists rather than the corporate and domestic tourism markets.

Mr Pickup said former Fletcher Challenge executive Jude Laurenson had been hired to handle marketing and repositioning of the rental brands.

"Motor-homes began in Europe with the Free Independent Traveller (FIT) - people who didn't want to go on a packaged tour," he said.

"The Germans, who get five to seven weeks' holiday a year, started the trend and once they did Europe, they started looking for other destinations.

"The cost of an airfare to come to Australia or New Zealand is proportionately not great in a longer holiday and the big appeal of motor-homes is freedom - which particularly suits clean, green New Zealand.

"The Americans followed, and they come in convoys of up to 50 vehicles - they travel in convoys round the world and it is a great growth area for us. We had to go to Australia - it is so much bigger and under-represented in motor-homes.

"Our major markets are the UK, Europe and the US and as scheduled packaged tourism moves toward FIT, motor-homes and rental cars will be the winners. And what happens when the Japanese lead the Asian FIT market as the Germans did in Europe?

"They are getting more confident with language, travelling outside the packaged tours without guides and driving our vehicles. They also want the freedom and the rest of Asia will follow them."

THL has reduced its combined Maui-Britz depots from 24 to 13 (10 in Australia and three in New Zealand) while maintaining the same geographic coverage.

The company's Project Combine last year rationalised accounting and reservations centres and installed a national call centre in a move expected to improve profit by $1 million.

THL's coaching division, Mr Pickup said, would continue to grow with its branded Mount Cook and Johnston's charters, Oz and Kiwi Experience and the Auckland Airport Airbus. Package tours were enjoying worldwide growth, particularly with older generation travellers.

The company's Great Sights division, he said, had been restructured and was focusing on the fast-growing FIT market and cross-selling from transport into attractions, which in New Zealand include Kelly Tarlton, Milford Sound Red Boats, Treble Cone ski field, The Helicopter Line and Mount Cook Ski Planes.

"We will be looking for attractions in Australia to leverage off our tourist transport business."

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