Tour operator Scott Dunn might be a small company compared to its new parent company Flight Centre Travel Group. Still, it punches well above its weight in the luxury travel segment, especially in the U.S., where Flight Centre lacked a luxury presence.
Flight Centre, the Australian-based travel agency well known for its mass-market brands, is firmly fixed on tapping into the rising demand for luxury experiences with an expected 15 percent growth in revenue for the segment.
The firm recently acquired UK-based tour operator Scott Dunn for $150 million toward this end. The luxury-focused brand, founded in 1986 as a luxury ski operator, will now act as an “entry point into the U.K. and U.S. luxury market where Flight Centre is underrepresented.
The luxury travel segment has seen a business boom coming out of the pandemic. Globally it was valued at $638.2 billion in 2021 and is projected to reach $1,650 billion by 2031. It continues to be the pandemic anomaly with no signs of a luxury bubble bursting soon.
The move kickstarts the group’s pre-Covid plans to elevate and grow its luxury collection, together with its only other luxury offering, Travel Associates, in Australia and New Zealand.
James Kavanagh, Flight Centre Global Leisure Travel CEO, believes the economics are quite favorable, stating that expected “growth rates in the U.K. and the U.S. are between 9 to 11 percent.”
“Luxury accounted for about 7 percent of our sales volume in the leisure segment. Scott Dunn will bring it to about 9 percent. So the uplift is not too significant from a sales volume but will lift revenues to 15 percent. This end of the market has good, attractive financials, and we’ve got a great value proposition to win more share.”
Kavanagh described the Scott Dunn customers as typically “cash-rich and time-poor guests looking for an exceptional experience that makes up quite complex trips,with an average of about eight components in a trip.
According to Scott Dunn, it sees an average U.S. booking value of $40,000 per trip. This is in contrast to Flight Centre’s average trip spend of $3,000 and its other premium offering Travel Associates’ average trip value of $10,500.
“So we know they’re willing to pay for these services, and this segment is unlikely to be commoditized,” added Kavanagh.
Post-Covid Transformation Program
Both companies have significantly evaluated their business models following the tough Covid period, according to Kavanagh.
Scott Dunn exited one of their brands, Imagine Travel, and it has also exited its chalets and Villa product. Flight Center, in turn, offloaded a couple of the brands running in different markets, notably Universal Traveler. The companies would not be looking to exit any underperforming brands, he added.
“Underperforming brands within our companies have reasonably been addressed for now.”
Support and Operational Efficiency
Sonia Davies, CEO of Scott Dunn, said the company was excited about joining a big global organization like the Flight Centre Group as it would significantly improve its capabilities regarding tech and modern CRM systems.
“It might not sound sexy, but we want to upgrade our telephony system because we are almost like a call-center operation. We speak to all of our guests over the phone. We also don’t transact over the internet. Flight Center have the tech and a brand new shiny CRM (customer relationship management) system, and we want to be able to do much more personalized and bespoke marketing to each of our individual guests.”
Flight Centre has also signed a three year partnership with digital infrastructure provider Orro, expected to address high redundancy across the groups’ 26-country strong network, by improving network visibility and reducing network connectivity costs.
While some analysts have raised concerns that losing key Scott Dunn staff would not bode well for the company, Davies stated that “joining a company better known as the travel geeks of the industry, would certainly improve the long-term career aspirations for her team” of about 200 employees.
“We were profitable last year, and we’re seeing that continue even with the macroeconomic challenges in 2023,” Davies said, with the company doubling its profits in 2022, compared to pre-Covid 2019.
Ultimately Scott Dunn’s strategy remains unchanged, especially within the U.S. market, where the company continues to differentiate itself, “with customized experiences, not scheduled tours, nor do they sell through the trade.”
UPDATE: Average trip values for Flight Centre and Travel Associates have been included in this article.