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Brighter Prospects For Asiatravel.Com?

Contributed by Shares Investment

By Ong Qiuying

Today, the advancements of technology and increasing affluence have made travel easy, convenient and even cheap sometimes. Travel and holidays have been integrated into the lifestyles of so many that a robust industry has been created for those making a business out of them. Asiatravel.com Holdings (Asiatravel) is one company that has successfully combined technology and easy bookings for holidays by a mere click away.

Strategic Alliances & Strong Marketing Channels

From a niche online hotel reservation site, Asiatravel has transformed into a total travel reservation service provider offering air tickets and tour packages reservations, with a network extending to 79 countries in Asia, Europe, Americas, Middle East, India and Africa.

In the current year, Asiatravel has been on an aggressive business expansion strategy and to leverage on new marketing channels. Its multi-faceted marketing approach is geared to increase its business volume exponentially and to differentiate and position itself as a leading Pan-Asian online travel services provider.

Asiatravel’s Executive Chairman, Boh Tuang Poh commented in a press release, “Synonymous with travel, planning for travel and lifestyle needs should be borderless. Asiatravel is on a fast-track business expansion path with strategic alliances, aimed to bring the best value to customers, anywhere and anytime.” In June 2011 alone, the company announced two strategic partnerships with two different banks to offer value in packaging travel solutions and options for its customers. It launched the regional ‘HSBC-Asiatravel Cash Reward Programme’ that offers HSBC credit cardholders cash rebates of up to 6% on hotel and tour bookings to any destination. Asiatravel also partnered MayBank to reward cardmembers with exclusive travel cash rebates as the only travel merchant with MayBank offering such cash rebates.

This opens the doors to other channel partners through HSBC and MayBank and offers more value-driven deals. Additionally, these strategic partnerships provide Asiatravel more visibility as a reliable online travel network agency.

New Business Faces Fierce Competition

Other than focusing on its core business, the company is also on the lookout for other mergers, acquisitions and any potential business opportunities. Earlier this year, ahead of the current hype on group-buying coupon sites where the latter usually get merchants to slash prices by a substantial amount, Asiatravel had rolled out such an online platform, www.atCrazy.com, which offers consumers products and services in the travel, health and lifestyle segments.

Barely a year into this business, the fierce competition and practically zero barriers to entry to the industry has sent investors wondering if this will last. The industry has been dominated by few large players such as Deal and Groupon Singapore that smaller ones find hard to compete, especially in terms of marketing and promotions. Smaller players struggle to stay in the game, often finding trouble getting repeat campaigns and even harder finding merchants willing to stretch their margins. Contrary to that, the larger sites that are already more established, find themselves turning down repeat offers to avoid boring consumers and are nudging price points to attract different segments of consumers. This is truly a real concern for Asiatravel, having to take on such a saturated market.

Nevertheless, this online platform is complementary to its core business and will help Asiatravel reach a wider audience, create more awareness and expand its revenue base.

Bottomline Dragged By Higher Advertising & Promotion Expenses

In its 1H11 financial report, Asiatravel posted a 35.2% increase in revenue to $23.1 million while earnings dipped into the red, recording $0.8 million in losses. Prior to this, Asiatravel had already announced two quarters that were bottomline-poor. However, Kim Eng Securities notes that it is not surprising given its emphasis on driving revenue growth and its initiatives to add new products across all its core destinations, including its new group-buying website, establishing new sales channels and increasing its branding activities. These led to high advertising and promotional expenses resulting in the poor earnings.

Still, the transformation has generated a robust topline growth in 1H11 with a surprisingly strong result given that the March quarter is a traditionally weak period and external events such as political turmoil in the Middle East and natural disaster in Japan had slowed down travel demand.

Furthermore, Asia is proving to be a dynamic region for world tourism. The Pacific Asia Travel Association had reported that the tourism arrival statistics for Asia Pacific had a gain of 11% year-on-year for 2010. According to the April interim update of the World Tourism Organisation (UNWTO) World Tourism Barometer, growth was also positive in all world regions during January and February 2011, except the Middle East and North Africa. Asiatravel will be able to ride on these waves of booming tourism worldwide. Hence, going forward, Kim Eng Securities also expect Asiatravel’s current revenue growth strategies to drive faster growth in business volume and margins in the long term.

While Asiatravel’s longer term outlook appears promising, getting there would mean creating a more stable foundation for its businesses through increased spending on advertising and promotions. These expenses could likely weigh on the bottomline in the next few quarters before investors see the positive returns.