Following the announcement that Australian travel group, World Expeditions, has taken a majority stake in iconic Otago Rail Trail operator, Trail Journeys, the Ticker gets the background and the details of the deal.
Trail Journeys is the second NZ acquisition by Australian adventure travel group, World Expeditions, with both following a similar “recipe” according to chief executive Sue Badyari.
“About five years ago we bought into Adventure South, a Christchurch-based guided cycling company. We really enjoyed working with the former director there and ended up buying out all the shares. We have since put a new management structure in and it’s going really really well.”
“The same recipe will be applied here. We have taken a majority stake of 51%. Founder and director Neville Grubb will stay involved for a couple of years, and once we have got it really nailed we will buy the remaining shares.”
She explained that both Adventure South and Trail Journeys are companies that have essentially been marketing to the domestic market, but WE plans to put them “on the international spectrum”.
“We love NZ as a destination, but we also see great value in owning these sorts of small companies. With the WE engine on the back we can build them into companies with a greater international mix using our international office structure.”
Grubb expressed a similar feeling about the growth potential the deal offers the business he founded around 15 years ago which now has a fleet of more than 400 bikes for hire, and provides passengers’ luggage transfer, accommodation and transfer service, as well as storage services on the Rail Trail, the Roxburgh Gorge Trail and on the Clutha Gold Trail.
“They have the exposure and the international reach through their marketing network and databases to really help the business grow, although it will be business as usual for Trail Journeys on the ground.”
It’s a good outcome for Grubb, who said he put the wheels in motion around three months ago.
“I knew the then-manager of over Adventure South who put us in touch with the CEO. A few of their clients and also one of their staff members had come across and done the Rail Trail and had gone back raving about it, so they were interested. From there on it was just a matter of sitting down and working out how we could do it.”
“As someone who started the company off, and wants to see it go forward, you couldn’t ask for a better result.”
World Expeditions was founded around 42 years ago, and the privately-owned group has four offices in its native Australia, as well as outposts in Auckland, London and Ottawa.
Given the location of these operations – and New Zealand’s popularity with Australians as a travel destination – it is no surprise that a push into Australia is the first order of business.
Badyari said: “There are a lot of Australians coming across the Tasman, they love that short-haul one-week kind of trip and the quality proposition so I think the company is going to be really successful in driving more Australian business.”
While Badyari said it is too early to share any growth forecasts she point to progress the company made with Adventure South following its takeover as a guide of what to expect.
“Within a year of acquiring the majority stake in Adventure South we had doubled the Australian business, and that continued year on year to grow. When we look at what the current client mix at Trail Journeys, we would assume we would get the same type of growth.”
Not that growth will be limited to NZ’s Tasman neighbours.
“In all cases the Trail Journey’s business will receive the marketing support through all of our offices and networks, so that the brand will become much more globally renowned in future years.”
However, there is a caveat. “Having said that I think where we are going to get limitations is obviously in macro-issues with NZ tourism, which is to do with availability of accommodation.”
Badyari says it is too early to say how the company would respond to that challenge, whether it might look at developing or joint venturing to bring forward its own accommodation for example.
In any case, the Otago operation is well positioned to take advantage of new trails that are coming online between Wanaka and Queenstown.
Although there are no public numbers for how many cyclists Trail Journeys looks after annually, Grubb said they have “the majority of work on the trail” which is completed by around 15,000 people each year, with many thousands more doing shorter sections.
A report from the Central Otago District Council showed between spring of 2014 and autumn of 2015, users of the 152-kilometre trail injected around $10.4 million into the local economy.
Grubb also pays credit to a number of new companies “who are doing a good job” and adds: “I would imagine with the Queenstown – Wanaka trails coming we will see more companies pop up – there will be opportunities for everyone.”
And the opportunities are not just limited to Otago, with the government having made a huge investment into cycle trials nationally.
The Great Rides building programme that began back in 2009, partly triggered by the success of the Rail Trail, has seen more than $100m spent on trails around New Zealand including the South Island’s Alps 2 Ocean and Old Ghost Road.
Badyari, as you would expect, is well aware of this push. “What we really love about the Trail Journeys business is that it is very complementary to Adventure South in that it is offering self-guided cycle journeys. That is not part of the mandate of Adventure South which is really about guided holidays.”
“With the opening of all the different cycle routes in NZ, there has been a huge investment by the government, there is a huge amount of potential so this is a fantastic launch pad to get into the cycling sector.”
The Trail Journeys deal also gives WE a minority stake of less than 20% in Trail Journeys Nelson, which offers guided and self-guided cycling tours from its bases in Nelson, Mapua and Kaiteriteri.
So with interests in three South Island operations what is next for WE?
“We have always got our eye keenly out for other acquisitions that are complementary. We do run trips already in the North Island through the Adventure South brand so in terms of expansion we obviously can do one of two things: look at further acquisitions of established companies – and we’ve obviously touted that as a very probable idea – or expand through our existing companies. Either or.
“We can offer cycling and hiking through the Adventure South brand, but Trail Journeys will stay true to its original scope which is providing cycle opportunities – they have got a very loyal following and we are not going to change that.”