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15 Sep, 2008

PATA Hit By Financial Downturn

(TTR Weekly Editor Don Ross contributed to this report)

The Pacific Asia Travel Association is to report declines in income from its major revenue generating activities this year, setting the stage for what is expected to be a testy board of directors meeting in Hyderabad, India, between 19-21 September.

Financial statements to be presented to the board indicate that PATA has reforecast its budget to report a net surplus of only US$52,000 in 2008, well below the US$225,000 reported in 2007.

This will be due to a confirmed loss on the CEO Challenge, the high-profile conference held in Bangkok earlier this year, a PATA Travel Mart that is projected to report far lower net earnings than those in Bali last year and membership dues which are in a state of flux as companies and individuals seek real value from membership.

The inaugural CEO Challenge was publicly proclaimed a success but the financial figures disprove that claim. It turned out to be much worse than the former PATA annual conference it was designed to replace.

Figures to be presented to the board meeting show that the event pulled in earnings of only US$ 224,389 while chalking up expenses of US$ 237,852, a loss of US$ 13,463.

This, in spite of a five million baht subsidy from the Tourism Authority of Thailand, sponsorship support and no speakers’ fee expenses. PATA’s vast conference experience, the travel industry expertise of its board and committee members, and more than six months of all-hands-on-deck PATA staff effort also failed to help it meet the attendance targets.

In the buildup to the CEO Challenge, Board members were told that a new-format conference was an untested scenario and would take time to produce results. But management had a full two years to prepare, and several board members had voiced concerns about many aspects of its proposed content and format.

There is talk of holding the next year’s conference again in Bangkok in December 2009, and the preliminary budget forecast is somewhat optimistically predicting a surplus of US$ 147,000.

Also set to hit the skids this year is the PATA Travel Mart, due to be held just before the board meeting in Hyderabad. This is projected to report earnings of US$ 820,000 and expenses of US$ 649,229, for a surplus of US$ 170,000.

But this is well below the 2007 mart in Bali which generated a surplus of US$ 458,181, based on earnings of US$ 1,067,069 and expenses of US$ 608,888.

The 2007 PATA mart, the second largest source of revenue for PATA after membership, was considered to be one of the most successful ever, both in terms of income and attendance.

This year, however, the mart has faced stiff competition from the new travel trade show ITB Asia to be held Oct 22-24 in Singapore.

Furthermore, the selection of Hyderabad as the host city has not helped. Although the city boasts a new airport, it is not an international gateway.

Due to the tight hotel situation in India, complimentary rooms for the buyers have been hard to come by. In order to entice quality buyers, PATA this year is having to pay for many of the buyers’ rooms, driving up its expenses for the event.

There is lingering concern is about potential buyer no-shows. Although many agreed to come due to long-standing personal connections with PATA, several have complained about flying on Air India and the time-wasting connectivity problems through the major hub cities.

Although the PATA Mart does not appear to require any structural changes, the proliferating number of regional, sub-regional and national travel marts means that its future cannot be assured.

Membership dues income is also under pressure. The 2008 budget reforecast cites potential earnings of US$ 2.19 million. However, this is below the original forecast of US$ 2.32 million and only slightly higher than the 2007 income of US$ 2.10 million.

With many small and medium sized companies dropping out due to cost pressures, PATA is becoming increasingly dependent on its premier partners, a small group of large travel & tourism companies in the Asia Pacific which pay more money than their regular membership dues and get additional exposure at PATA events.

In 2007, the premier partners paid US$ 134,000 for the privilege, a figure that is budgeted to rise to US$ 200,000 in 2008 and US$ 238,000 in 2009.

Board members will also be asked to approve a proposed budget forecast for 2009 that somewhat optimistically projects all the revenue-generators to revert to normal levels of earnings.

Major decisions also await the board as it starts the search for a new CEO to replace incumbent President and CEO Peter de Jong who took office in 2001 under a five-year contract, and then was given a three-year extension.

By the close of deadline last week, 30 candidates are known to have applied. According to reliable internal sources, PATA chairman Janice Antonson has told Mr. de Jong that he is to be excluded from the selection committee.

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