2003 was the best year for Apple Holidays’ expansion drive. In addition to the Orange Holidays located on the second floor of Low Yat Plaza, Apple Vacations was also actively recruiting to expand its business.
Actually inbound travel was the basis upon which I first involved myself in the travel industry, and it was now time for me to go into this sector in a big way. Back then, other than the small FIT groups from Europe, Australia and the United States, almost all the inbound GIT groups had been from Hong Kong and Taiwan, which were the major markets for Malaysian travel operators at that time.
Among the most active players in the inbound sector were Mandarin, SKC etc., about 20 of them, big and small. How was Apple going to carve itself a place in this crowded red sea inbound market? So called red sea because the tour fee for each inbound tourist was actually running below cost. They stayed at 3-4-star hotels and the cost of a group meal was RM8 to RM12 per pax.
Just as I was about to venture into the inbound sector, inbound tour groups from China were still not yet allowed although partial liberalisation could be expected soon.
The thing is, the home ministry would only issue special KDN permits to four to six travel agencies “with some relations”.
One day, (the late) Wah Chai who owned seven tour coaches, (the late) Tam who was responsible for the Taiwan market, and leading local Chinese language tour guide Harrison, came to me together to talk about inbound travel business, and I instantly agreed to their proposal of cooperation.
I was always thinking: it would be a great idea being able to work with experts in various fields to explore a new business within my own capability. The three of them collectively boasted a steady stream of customers, a sizeable transportation fleet and a good number of tour guides!
As for Apple, we only had our industrial reputation and know-how to offer. All that I needed were credit and cash flow. So we came together and set up “Apple Inbound Tour Department” to be headed by Tam. Over the next one year, we bought two new tour coaches to strengthen our transportation fleet.
In the meantime, we were also looking into the feasibility of taking in inbound groups from China. Sure enough a new kid in the block like Apple would never get that “special treatment” from KDN, but at least we could try to “borrow” the permit from someone already holding the KDN inbound permit. You should know what “Alibaba” is, right?
Some of the agencies with KDN permits didn’t actually do China tours and they only “leased out” their permits to other operators and earned about RM10 to RM20 of permit fee from each inbound tourist. What a business!
Such a modus operandi was in place for at least ten years. Is there anything wrong with such a system? At least everyone gets what he wants!
Honestly, the profits for inbound tours from China, Hong Kong and Taiwan were very meagre, and could even be a money-losing business because the tour fees charged could be lower than the cost expenses! More often than not the revenue (or profit) came from shopping commissions, etc. Most of the shopping stops were jewelries, pewterware and local souvenir stores.
As for tour guides, they might also enjoy additional incomes from money changers, group photo taking and the fixed tips paid by group members. In short, even if we might lose money on one thing, we could still make money from other things such as commissions. In the end, the operation can still be profitable!
That’s why this inbound sector has attracted the participation of many large consortia which have the financial means to provide one-stop services from setting up shopping stops, restaurants, hotels, to tour coaches, everything! In the end, inbound travel from Greater China has become more of a “a gambling business” whereby the quality of tours and industrial reputation are no longer their considerations.
Third year into Apple’s inbound business, we slowly managed to establish our own branding and reputation. At the same time, we insisted not to jump into the price-cutting war.
As a consequence, our fees appeared comparatively higher and our inbound business volume became stagnant for some time. Reassuringly we had been able to secure the loyal support of some outbound agencies in China, Hong Kong and Taiwan.
Unfortunately, profitability is not the greatest concern for inbound agencies. What we are more worried about is the impact from unpredictable natural and human-induced disasters which we have no way to avoid.
(Lee San is Founder and Group Executive Chairman of Apple Vacations. He has travelled to 132 countries, six continents, and enjoys sharing his travel stories and insights. He has also authored five books.)