Diversify and die: Tour agency boss' strategy to invest in property fails
Tour boss' big dreams end with closure of agency
As traditional travel and tour businesses decline, one tour agency boss thought he could reap huge profits by dabbling in regional property investment.
But he got his fingers burned instead when property cooling measures put a dampener on his diversification plans.
Neck-deep in debt, Mr Terry Tay was forced to shutter his 13-year-old travel business Asia-Euro Holidays last Friday.
The Singapore Tourism Board revoked Asia-Euro's travel agent licence the next day.
At least 300 customers were reportedly affected by the sudden closure.
Although Asia-Euro's sudden closure is reminiscent of Five Stars Tours folding out of the blue last year, experts told The New Paper that it does not represent an industry-wide trend.
Singapore Polytechnic's tourism and resort management senior lecturer, Mr Conrad De Souza, said: "Each year, a couple of hundreds of new travel agents enter the market and another couple of hundreds close down.
"These are new start-ups who are trying their luck venturing into new territory without weighing the costs and failing to foresee stiff competition."
Some agencies, meanwhile, look at diversification as a solution, but as in Mr Tay's case, it can backfire.
On Monday, Mr Tay and his wife were interrogated by the Commercial Affairs Department for six hours, according to evening daily Lianhe Wanbao.
While he is not sure how the case will pan out, Mr Tay, who has chalked up a $2 million debt, said he is mentally prepared for the worst.
"I will face the consequences of my actions," he told Wanbao.
The Asia-Euro boss conceded that the bulk of his financial woes came from a series of failed property investments.
After making money from a local property that he invested in, Mr Tay put his money into 14 other apartments and landed properties in Singapore, Malaysia and Thailand.
A series of property cooling measures were introduced, causing prices to plunge and the losses incurred forced Mr Tay to close down his travel agency.
Turning to gambling to relieve his stress in the past three years contributed to his financial woes, he said.
But Mr Tay was quick to emphasise that it made up only about five per cent of his debt, as he only used the slot machines in the casino.
He hopes to repay his debt by selling off the properties and he has fewer than seven properties now, Lianhe Wanbao reported.
The remaining cash will go towards repaying the Asia-Euro victims, he told the evening daily.
Tour agencies face new challenges
To stay afloat in a highly competitive, quickly evolving industry, some travel agencies turn to diversifying their businesses.
But one misstep and the move could work against the travel agencies instead.
There are two sides to the coin, said Dr Michael Chiam, a Ngee Ann Polytechnic senior lecturer in tourism.
"If you diversify in the right thing, the returns will help you sustain the business.
"If you diversify into unfamiliar territory, it could mean a lot more work," he said.
Global Travel's general manager Simon Er warned that unsustainable brick-and-mortar agencies may become "an industry-wide problem" if they do not figure out how to survive on low profitability yet maintain high labour and operating costs at prime locations.
The "very thin margins" they run on are due to the similar product offerings and "negligible commission" from airlines, experts said.
While there is no hard and fast rule, tourism consultant Christopher Khoo highlighted the danger of moving into uncharted waters to make a business more lucrative.
The managing director of MasterConsult Services said: "If I'm in the travel industry and I think I'm good at it, I'll invest in it - the technology, the system and the people - and make money in that.
"If I think I'm going to be a good roti prata seller, I should be one.
"But I shouldn't mix A and B."
Tour agencies that folded
The Singapore Tourism Board suspended travel agency Journey Of Dream's licence, citing unprofessional conduct and failure to provide the travel packages its customers had paid for.
The month before the suspension, 97 of its customers reported problems with their bookings after one of the agency's employees went missing.
SHIN MIN DAILY NEWS FILE PHOTO
Five Stars Tours (above) abruptly closed its eight outlets, leaving around 3,000 customers in the lurch. Most of its 200 employees then filed unpaid salary claims with the Ministry of Manpower.
Local travel agency Ananda Travel suspended business after several years in the doldrums, leaving several customers stranded. The agency had to cancel half of its travel bookings and stop taking new ones. Industry experts pegged the cause of its failure to various unsuccessful ventures here and abroad.