KUALA LUMPUR, Nov 21 — AsiaTravel is struggling to achieve profitability as the political unrest in Thailand and the missing Malaysia Airlines flight MH370 has seen many tourists avoiding key destinations.

Leisure and business travel service provider, Asiatravel.com Holdings Ltd, says it is confident that participating in TripAdvisor's instant booking feature will boost its by monetising its 140,000 global hotel inventory.

Executive Chairman Boh Tuang Poh says it is the first online travel agency in the Asia Pacific region to use the feature.

Senior Vice-President of TripAdvisor Adam Medros says the instant booking feature will remove “friction” from the booking process and benefits AsiaTravel.com by improving downstream conversion.

Meanwhile, AsiaTravel.com sold 40 million shares to a Chinese firm, ZhongHong Holding Co Ltd for S$9.6 million (RM24.8m) in October.

It intends to use the net proceeds for general working capital purposes.

AsiaTravel.com says it believes the synergy with the theme parks and malls developer will benefit stakeholders of both companies.

Investor Central. We keep your investments honest.

1. Can TripAdvisor's instant booking feature boost revenue? AsiaTravel.com believes this partnership will boost its bookings as it will utilise its 140,000 global hotel inventory. But we would like to know the positive impact on revenue from this relationship with TripAdvisor? Q3 revenue improved 4.6 per cent to S$22.9 million but it made a loss of S$2.5 million in Q3 FY14, wider than the loss of S$1.2 million in the previous year.

Management Reply: Our decision to participate on TripAdvisor is strategic; firstly to expose Asiatravel.com, invite first time bookers and then secure repeat usage. It’s an investment that will generate returns over a certain period.

2. What are the terms of commissions paid to TripAdvisor? Currently, Asiatravel is working with TripAdvisor on a cost per click model (CPC) for hotels within Asia. With the commission based model of instant booking, Asiatravel says it is confident it can expand the number of hotels available beyond Asia on the TripAdvisor site. But the company did not disclose any details about the commission arrangement.

Management Reply: Commissions are confidential information but the commission model pays on transactions which we believe is more viable than a CPC or advertising model.

3. Is ZhongHong benefitting more than AsiaTravel.com from the share sale? ZhongHong Holding Co Ltd, a company listed on the Shenzhen Stock Exchange, will buy 40 million shares at S$0.25. The company is involved in marketing, sales & development of commercial properties, particularly in tourism related real estate such as theme parks. AsiaTravel says the synergy between the two companies will strategically and mutually benefit both. But apart from the cash for working capital, we wonder how AsiaTravel benefits from the share sale to ZhongHong.

Management Reply: ZhongHong’s property development pipeline includes several tourism projects. Since we are the first online travel agency to develop complete travel packages online and because we also operate both B2C and B2B platforms, we can market and distribute ZongHong’s destinations & products to the consumer and into the travel industry worldwide. Besides marketing partnerships, there will be deep and significant projects beneficial to both parties which we will announce as and when they are finalised.

4. How exactly will it use the proceeds from share sale to ZhongHong? AsiaTravel.com just mentioned that it intends to use the net proceeds for general working capital purposes. Its working capital, net of current assets and current liabilities, was S$18.7 million in FY11, S$12.2 million in FY12 and S$9.3 million in FY13.

Management Reply: Working capital includes key items like strengthening of product portfolio and expanding the sales & marketing network.

5. What strategies is it using to compete against others? In its Q3 FY14's announcement, advertising costs increased due to intense competition. AsiaTravel.com says it will not indiscriminately match its competitors on advertising to compete, and is testing out various non-cash and innovative initiatives.

Management Reply: We are working on various online and offline initiatives to increase our overall visibility, new activities in key markets and increasing touch points with consumers. These will be announced progressively when we launch them.

We thank Fred Seow, Vice-President for Marketing & B2B, for his response.

Legal notice

While our purpose is to ask the questions which the man on the street would ask, and to help the everyday investor make informed investments, please note that:

Our reports and presentations ('our contents') are not investment advice nor should they be construed as investment advice or any recommendation of any kind; nor meant to cast allegations or insinuations of any kind against any individuals or entities. Before acting on the material in our contents, you should either seek independent advice tailored to your particular circumstances and intentions or rely on your own judgement.

Our reports and presentations express our observations, opinions and theoretical analysis based on the facts that we have gathered or have been provided to us. While we endeavour to ensure that our contents are accurate and are presented in good faith, we cannot and do not warrant the accuracy, adequacy or completeness of the material or that the material is suitable for its intended use; and we disclaim any such warranties express or implied that may be presumed by any party; neither do we take responsibility for the views of companies or other stakeholders or observers or sources quoted or hyperlinked in our contents. While every precaution has been taken in the preparation of our contents, we (and our principals) shall not be liable for any losses or damage or inconveniences due allegedly to errors or omissions in any facts or due allegedly to reliance on our contents in any way whatsoever; nor for any damage to any computer hardware, date information or materials allegedl y caused by our contents.

All expressions of opinion and observations in our contents are subject to change without notice and we do not undertake a duty to update and supplement our contents or the information contained herein in the event we obtain any further or more complete information. — Investor Central