FLIGHT CENTRE CONTINUES GLOBAL EXPANSION STRATEGY WITH NEW ACQUISITIONS
Written on the 7 July 2017 by David Simmons
FLIGHT Centre Travel Group (ASX: FLT) has made two separate acquisitions in Mexico and Asia after it picked up Olympus Tours and Bespoke Hospitality Management Asia.
The acquisitions follow Wednesday's announcement that the Brisbane-based travel group expects to achieve the top of their targeted range after strong recovery in the second half of 2017.
Flight Centre managing director Graham Turner says the acquisitions are a key part of the group's strategy.
"Expanding our in-destination network is a key global strategy and we are starting to develop strong foundations in this sector through our tour operators, DMCs (destination management company) and hotel management business," says Turner.
"Olympus is an important addition to this network and gives us a DMC in the Americas, to complement our recently expanded presence in Asia, while BHMA provides us with a low-risk entry to hotel management, a sector that we have identified as a key future growth opportunity."
Flight Centre is planning on developing its status as a global DMC through acquisitions and organic growth.
Olympus Tours is a leading Mexican destination management company which will become Flight Centre's second destination management company alongside Asia-based Buffalo Tours.
Olympus, founded in 1994, will provide customers with on-the-ground services including transfers, day-trips, and organising tours and cruises.
The privately-owned Mexican business generated almost $33 million in revenue during its 2016 financial year.
Olympus' networks includes offices in Mexico, the Dominican Republic, and Costa Rica.
Thailand-based Bespoke Hospitality Management Asia manages and operates a number of properties in Bangkok, Phuket, Koh Samui, Pattaya, and Chiang Mai.
BHMA is the company's first investment in the accommodation sector according to Turner.
"This is a logical first step into hotel management and will deliver numerous benefits," says Turner.
Flight Centre pushes ahead with strategy to create global DMC
BHMA is due to undertake the management of a 265-room hotel in Bangkok during FY18.
The group manages a range of properties for most budgets, from five-star hotels to midscale lifestyle resorts and casual villas.
During FY16 BHMA generated $1.3 million in revenue, with top and bottom-line results expected to grow rapidly as new properties become operational.
Anthony McDonald founded BHMA in 2013 and will remain with the business following Flight Centre's acquisition.
Flight Centre first secured a presence in the DMC sector in 2014 with a joint venture in Asia in conjunction with Vietnam's Thien Minh Group.
In March the group announced it would acquire a larger interest in the joint venture as part of a broader plan to create a global DMC.
On Wednesday Flight Centre updated its 2017 fiscal year guidance, saying the group achieved record full year sales and its share price rose around 10 per cent on the news.
Flight Centre's total transaction value is expected to exceed $20 billion comfortably above the $19.3 billion result achieved at the end of FY16.
Second half profit growth was underpinned by strong results in North America, Europe, the Middle East, and Africa.
Shares in Flight Centre Travel Group (ASX: FLT) on Friday are currently down 0.25 per cent to $43.46.
Author: David Simmons