15 February 2002
ANALYSIS
The liquidation of the Ken-Air Leisure Group in Singapore is a dramatic development and has intrinsic lessons for players in the regional travel trade.
What went wrong and what brought down a 29-year-old leading travel company? One leading outbound operator called it a “sad milestone for the travel industry in Singapore”.
It pioneered the tour business, especially longhaul tours to the US. It is a household name among outbound brands in Asia. It has won numerous awards. It is a name known in major destinations.
Its founder Kenny Goh is regarded as one of the leading lights of the industry. As former president of the National Association of Travel Agents Singapore (NATAS) and the ASEAN Tourism Association (ASEANTA), his views are respected and sought after by the media.
The Ken-Air name went beyond outbound tours as Goh and his wife Kristine expanded the empire into one which would eventually embrace the 14 subsidiaries that have been liquidated. Through much of the 90s, both expanded into businesses ranging from theme parks, car rental, groceries, video and film distribution to loyalty stamps.
His travel empire covered incentives and meetings, destination management, corporate ticketing, outbound tours and e-commerce.
Goh was one of the pioneers who boldly entered where no agent dared in the mid-90s – into Internet territory when he set up the SPY Travel Network with a grant from the Economic Development Board (EDB), said to be 60 percent of start-up costs.
Many applauded him at the time for his vision and courage to enter the e-commerce arena. He was held up as a role model by bodies such as the Singapore Tourism Board, which effectively provided free premises for the start-up of SPY, for daring to break the barriers of the traditional travel agency business model.
There were suitors aplenty in those days for SPY with various parties reportedly expressing interest in buying the e-commerce platform. Goh has since sold his shares in Linbert Travel Exchange, the company he set up to manage SPY.
For a while now, there had been rumours that Ken-Air was in trouble and that it was facing mounting pressure from banks to which it owed about 90 percent of the S$30 million loss it cited in its liquidation.
But no one expected it would have to come to that – a voluntary liquidation by its founder himself.
Industry observers had hoped that negotiations to buy the business would be sealed before the final surrender and that the collapse of such a household brand would not hit the media and thus, expose the industry to the public eye, especially at the time it did – the eve of the annual NATAS Travel Fair.
But hit it, it has.
Goh has attributed his financial woes to the fallout of September 11 which devastated his US business and the mad cow disease which crippled his European tours.
He has also put the blame squarely on Singapore Airlines, which pulled Ken-Air’s plates on January 5.
But industry sources say Ken-Air’s problems started before those events which may have been the catalysts, but not the root causes.
September 11, for instance, affected all outbound operators, not only Ken-Air, and sources say the impact was probably felt more deeply by companies such as SA (UIC) Tours and Chan Brothers which had the bigger market share to the US and Europe.
Plus, they argue, it didn’t exactly happen during the Singapore peak season. Ditto with the mad cow disease, they say, which also did not hit during peak season.
As for SIA’s termination of its appointment, observers say the airline must have had good reason to do what it did. “Why would an airline withdraw from its biggest supplier for no reason?” said one agent.
Most say that it was an over-ambitious expansion plan that backfired. “Many companies do very well in their own business but sometimes they can diversify into other areas with higher risks.
Sometimes diversification is good, sometimes it is bad,” said an agent, based outside Singapore.
One source who had close links with Ken-Air cited “lack of focus, over-diversification and distraction” as factors which contributed to its downfall.
One key lesson to be learnt in this whole episode too is the issue of brand loyalty in the Singapore market specifically, and the Asian market, at large, said one source.
“It shows that no matter how well known your brand is, the consumer in Asia is only loyal to price, unlike in the US or Europe where people are willing to pay a premium to travel with a brand.”
Another major tour operator, based outside Singapore, said that Goh “blew it with his e-commerce craze! That and only that brought him down.”
However, history will record that one of Goh’s biggest contributions to the travel industry was his vision and belief that travel agents could change the rules of the distribution game if they got technologically smart.
In that regard, he was well ahead of everyone. Perhaps too ahead.
