Abacus chief bullish on 2010 trends

2010 is off to a good start for Asia’s travel industry,  thanks mainly to a strong performance in the last quarter of 2009.

The predictions were made by Abacus, CEO and president, Robert Bailey, at a media presentation in Singapore earlier this week.

Abacus International, Asia’s leading global distribution system for travel agencies, revealed in its 2010 market study that new business practices had surfaced during the economic downturn that will underpin growth and set the underlying trends for the year ahead.

Mr Bailey, stated that along with other key industry players, Abacus had seen earlier-than-expected recovery with uptick in bookings registered since October last year.

“The travel industry had seen some of the most difficult times in the past year, but we closed the year with better-than-expected results.”

The company ended 2009 with a 1% decline in overall bookings against earlier predictions that suggested losses of 6 to 9%. It is now forecasting 3 to 5% growth in travel bookings for the first half of 2010.

Recovery kicked in the last quarter of 2009, when Abacus reported “booking value at around the 2007 level” for the same period.

“Advance bookings and the economic outlook trend improved in the fourth quarter,” he said, noting the region headed into recession faster and remained mired down longer that during previous downturns but is now showing signs of a faster recovery.

Mr Bailey identified the trends that helped to trigger an earlier than expected recovery trend.

One was emerging markets Indochina and central Asia as key growth regions. Several other markets such as Nepal, Bangladesh and South Korea had also contributed to Abacus’ better-than-expected business results.

The importance of emerging markets was also highlighted in a recent report by the International Monetary Fund (IMF) as the key contributing factor for the region’s better performance in 2009. Asia is expected to enjoy 5.7% GDP growth in 2010, with emerging markets leading the rest of the world out of the downturn.

New business practices that surfaced during the economic downturn are also set to continue as travel management companies and travel agencies start to see the value that these changes have brought to their business models.

Another contributory factor driving recovery during the first six months of this year could be a 10 to 15% improvement in corporate travel.

There were “strategic changes in corporate bookings,” he explained, “based on compliance to travel polices and teleconferencing has got in there as a structural change.

“However, as the investment climate improves, companies will revisit plans and that will bring more traffic into the Asian region.”

In the latest Abacus Asia Travel Sentiment Survey of around 200 leading travel agents across the region, 92.3% said that the changes they have adopted during the economic downturn have strengthened their business and put them in better shape for 2010.

“The sale of ancillary products was cited as the number one strategy. We found that almost 60% of the agents indicated that the sale of ancillary products such as hotels, travel insurance and other non-air products had helped sustain their business revenues. This is an additional revenue stream for which we have been providing keen support to our travel agents through relevant solutions and partnerships,” said Mr Bailey.

Meanwhile, around 40% of the agents ranked the launch of promotional deals and packages as the second most important change. Allocating more resources to online channels tied with technology investments as the next most important changes with 30% of the travel agents saying that these investments have brought improvements to their businesses.

Mr Bailey explained that the surge in online travel bookings had helped revive overall booking figures over the past year: “The huge increase in internet penetration in emerging markets as well as aggressive airline promotions have helped boost passenger numbers.” The prospect for the online segment continues to look positive. According to the Abacus Asia Travel Sentiment Survey, 71.3% of the travel agents that have no existing online business component said they are planning to develop one.

Another key contributor that will further stimulate growth in the region’s travel industry this year is the low cost carrier sector. As fuel prices make an upward trend, consolidation efforts as well as network expansion will form key strategies in the year ahead.

Moreover, as competition stiffens in the industry, network carriers may well adopt ancillaries as the next revenue strategy whereby fares are unbundled and categorised according to specific airline services and flight requirements.

In the year ahead, nascent trends that the industry is currently showing sporadic interest in are expected to emerge stronger as travel players discover the relevance and benefits that they can bring to their businesses. These trends include the use of online marketing, as well as the adoption of digital applications and mobile technology.

In conclusion, Mr Bailey said: “Asia’s huge potential for growth and its relatively younger travel industry mean that travel players in this region are strategically well-placed to capitalise on the new realm of opportunities as the economy steps into a recovery phase.”