NZ's biggest group toughs it out

By Graeme Kennedy, Travel writer

Friday 15th March 2002

Tourism Holdings is consolidating, shedding non-core subsidiaries and conserving cash to position itself for an industry recovery following September 11 and the Ansett Australia collapse.

New Zealand's biggest tourist group, THL is reacting to its disappointing half-year 61% profit slump to $2.6 million and expectations of only breaking even or making a small loss for the full period.

Managing director Dennis Pickup said the company had launched a "cash is king" strategy and aimed to emerge from the current downturn "lean, mean and hungry to claw back lost ground - this way we can quickly respond to opportunities when the industry returns to its high-growth potential, as it surely will.

"THL has moved on and we have basically become a sales and marketing organisation with a huge distribution network focused on bringing high volumes of tourists to New Zealand and taking them around while leveraging off New Zealand attractions.

"We don't have to own everything and we are getting out of the aviation sector as it is non-strategic and does not meet our investment criteria.

"We started with The Helicopter Line, so we are selling it with some sadness. But it is now only 5% of our business and less than that in revenue and not meeting our required economic returns. It is also a highly seasonal business in a market which suffers from huge over-capacity, especially in the South Island.

"We do not have the core competencies for an aviation operation and they would be better owned by specialists in the business."

Mr Pickup said he hoped four of THL's non-core businesses, including The Helicopter Line, Mount Cook Ski Planes, Milford Sound Flightseeing, Treble Cone skifield and Tourist Transport Fiji would be sold by June to enable the company to focus on its core businesses including Maui and Britz camper vans and rental cars in New Zealand and Australia.

THL was negotiating with four interested parties for the sale of its Fiji operation which runs 26 tour coaches out of Nadi. The company sold its nine South African Britz-Maui branches in 2000 as it consolidated to Australasia to focus on the attractions and rental and coaching divisions, which are now 60% of its activities.

"We are not in the business of fire sales and we will sell only at a price beneficial to the shareholders," he said. "This is a clearing of the decks, a question of just being a tourism operation which will be sales and marketing-led - that's where our core competencies are and we don't necessarily have to own the assets."

He said existing assets including Kelly Tarlton's Underwater World and Antarctic Encounter, Milford Sound's Red Boat Cruises and the Waitomo Caves continued to be "great cash-drivers" and attracted up to 400,000 visitors a year.

Meanwhile, he said the company continued to battle the rental car rate war in Australia, where its fleet had been cut to a post-crisis 470 after earlier plans for a reduction to 700.

"We plan to ride out the rate war and service our major customers with a reduced fleet until rates return," he said. "The rental cars are a clip-on to the camper van businesses, with a total fleet in both countries of around 3000."

THL will, however, open its new Australasian reservations system, Aurora, in June to replace the dated platforms used by Britz and Maui. Developed in New Zealand, Aurora would serve as a THL information hub, drive customer service and provide online access to company products for international wholesalers.

Mr Pickup said many people, particularly Americans, were still reluctant to travel although research showed it took them only six months to get back in the air after the Gulf War and they were expected this time to feel comfortable about resuming overseas holidays within a year.

"In less than two years we will see the events of September 11 as just a glitch - but right now it's a real pain for THL," he said.

"In Australia we took a double-whammy and the public didn't have the choices - it was either go Qantas at their convenience and price or don't go. Discounts dried up and capacity shrank to become a real disincentive to travel."

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