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Premier Travel: 15% growth is Benchmark

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Julian Brown

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A BISX-listed firm yesterday said it is aiming to grow Premier Travel's annual revenues by between ten to 15 percent following the completion of its first-ever venture capital investment.

Julian Brown, Benchmark (Bahamas) president and chief executive, told Tribune Business it anticipated "doubling" the travel agency's business volumes within two years following its $1.3m capital injection into the firm.

Confirming that its venture capital arm, Benchmark Ventures, has the option to convert its investment into equity ownership after two years, Mr Brown said the goal was to marry the traditional travel agency model with the "convenience" of an online booking platform.

Confirming that Benchmark has taken full management control of what it described as "the oldest Bahamian-owned and operated travel agency", he added that Premier retains "a lot of growth potential" given the $1bn air travel market "in and out of The Bahamas".

Mr Brown said an estimated $200m-$250m of that figure was captured by Bahamian-owned airlines, and by "innovating" Premier and educating persons on the "value" added by traditional agencies - especially during emergencies - the agency could be restored to former glories.

Revealing that Benchmark had been helping to "restructure" Premier for some 12 months prior to making its investment, Mr Brown said the long-term goal could be to take the firm public via an initial public offering (IPO) once it was ready.

"It's representative of the economy. We're a tourist destination," Mr Brown told Tribune Business of Premier. "We think it's a business that has very, very high growth potential. At the moment we're restructuring, but don't see why we can't in the next two years double the volume of the business.

"We're down to where the restructuring is not interfering with the revenue. The business was still turning revenue somewhat before we got involved and started the restructuring. It's has no advertising and we've not talked about it.

"We're now talking about it, focusing on the top-line and believe ten to 15 percent growth a year is reasonable. Air travel is a very big industry, and we believe it offers significant growth potential for businesses in The Bahamas, Premier and the travel business in total."

Premier Travel and its eight-strong staff had already been relocated from their former Collins Avenue office to the Benchmark-owned office complex at the corner of Carmichael and Fire Trail Roads prior to the BISX-listed firm's investment.

Mr Brown said the move placed the agency closer to Benchmark's controlling and managing minds, and added: "We believe there's close to $1bn of air travel in and out of The Bahamas on an annual basis. That's an awful lot of money.

"If you look at domestic travelling airlines they're probably bringing in over $200m-$250m of that a year. There's a lot of opportunity. We think there's a lot of growth potential. There's been a migration from the agency to the online business, and we're going to do our best to bring those together in Premier, where you have a travel agency operational and the convenience of being able to book from and secure reservations online."

Benchmark's investment is not without risk. The global travel and tour operator industry has largely moved from brochures to online bookings, which can be fatal for companies that fail to keep up with such trends. This was graphically illustrated last week when the UK travel and tour operator, Thomas Cook, went bust and left thousands of tourists stranded across the globe.

And Premier Travel seems to be an exact match for the type of companies Mr Brown said Benchmark Ventures would target when he announced its creation earlier this year. He promised it would target established businesses that need new "capital, management and direction to thrive in the 21st century economy".

The Benchmark chief yesterday agreed that many travel agencies had "failed to transfer to the new economy", with cut-throat competition within the sector also responsible for many business closures as revenue streams shrunk - caught between pricing pressures and the availability of online bookings.'

However, Mr Brown argued: "I think there's a lot of 'value added' in the agency business. If you're booking in premier class, if you're booking as a group travelling, if you're booking as a family it's still easier to book through an agency. We also think agencies are the best place to resolve any problems that may arise when you are travelling."

He said this was brought home to him first-hand when his mother tragically passed earlier this year, and he was in Canada while his sister was in Orlando. Both needed to revise their travel plans and return home, and Mr Brown said a travel agency was able to get them both on a flight and back home that same day even though they had no reservations or plans to do so.

"We were also able to use the agency to recoup some of our tickets that were still valid and pending because of the emergency to return home," he added. "That's the value of having travel agencies.

"People that are frequent travellers appreciate that if you are away from home and things change, and you have to revise what you had planned, speaking to somebody in an agency has very significant value which you can't get by using Expedia or Travelocity because no one is there."

Mr Brown said the market needed to be educated on the value of a travel agency, particularly Bahamian millennials who were thrilled at the convenience of online bookings. With Premier Travel having "both elements" and the same service standards, he argued that customers will ultimately not know the difference. "That's where we're going to target Premier Travel," he said.

With plans to improve Premier Travel's technology platform, and grow its reach, the Benchmark chief said his company's investment would enable it to bring the full range of its structural, financial and operational management skills to bear.

Benchmark Bahamas Limited is please to announce it first Venture Capital investment through its wholly own subsidiary Benchmark Ventures Limited.

The deal, completed on September 30 with Premier's parent, Sandman Ltd, saw Benchmark invest $1.3m via a two-year convertible preferred note. This means it has the option to convert its investment into equity within two years, while also giving it preferred status in any creditor's queue. Benchmark currently has no seats on the Premier or Sandman Boards,

"The long-term goal for us is to innovate it, and once we do that consider whether or not the market is ready for a travel agency that could go public," Mr Brown told Tribune Business.

"That's the way we'll look at all deals. We look to get the option to put capital in, spend time understanding the business, and then make a decision to convert or get out. In the case of Premier, there's a very high possibility we'll convert. This is the next phase of the development of the capital markets in The Bahamas."

Benchmark Ventures is targeting an under-served niche given that the Bahamian economy has traditionally lacked private equity/venture capital finance in a substantial, organised form.

These funding forms effectively represent a missing link in business financing needs. While the government and its various agencies, including the Entrepreneurial Venture Fund and Small Business Development Agency (SBDC), are focused on entrepreneurs, start-ups and micro businesses, there is little attention being paid on graduating small businesses to become medium-sized or even larger companies.

That is typically where private equity/venture financing comes into play in developed countries, with pooled investor capital taking ownership positions in companies in a bid to generate higher profits and returns. This sometimes involves major corporate turnarounds, and the installation of new management teams to effect the desired revival.

This is the space Benchmark (Bahamas) is now seeking to fill with its new subsidiary.

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