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Flight Centre flying ahead of its rivals

The latest research by the Roy Morgan Travel Agent Monitor, which reviews 34 travel agencies, provides some interesting insights for investors. The results suggest that 34% of Australians who booked leisure travel in the 12 months to September 2013 used a travel agency.

Of the top 10 agencies used, Roy Morgan found that only two of the top 10 agencies have ‘bricks-and-mortar’ shop fronts; namely Flight Centre (ASX: FLT) and HelloWorld (ASX: HLO), which is the new name for the Jetset and Harvey World Travel agencies.

According to Roy Morgan’s findings, Flight Centre has 8.3% of the market in Australia, making it the single most used travel agency and proving that some consumers still prefer the tangible benefits of a shop front.

In second and third place, the online agencies of Wotif.com (ASX: WTF) and Webjet (ASX: WEB) accounted for 6.1% and 4.1% respectively of bookings.

Meanwhile the Harvey World Travel brand didn’t get a look in until eighth position where it holds just 1.8% market share.

The impressive performance of Flight Centre in the face of online competition goes to show investors the power of quality management, brand recognition and customer service. It is all the more remarkable when an investor considers the broad state of the travel industry. Both Wotif.com and Webjet are trading near their 52-week lows as they attempt to rejig their businesses; while Qantas Airways (AX: QAN) and Virgin Australia (ASX: VAH) are both also facing numerous difficulties, with share prices that reflect their uncertain futures. 

Foolish takeaway

Despite their seemingly ‘cheap’ prices, Warren Buffett’s warnings to always be wary of airline stocks would appear to be sage advice for any investor tempted by Qantas or Virgin shares.

Meanwhile in the travel agency space the performance of Flight Centre highlights to investors that with the right business model, selling travel services can be a very profitable pursuit. Flight Centre’s competitors all have the potential to improve their profitability, which could make them worth further investigation, particularly given their knocked down share prices.

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Motley Fool contributor Tim McArthur owns shares in HelloWorld.

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