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By Lorna Duley

Saturday 1st March 2003

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Want to hear an impressive business growth story? How about zero to $500 million turnover in just 16 years? That's what Christchurch-based House of Travel has achieved. From an initial business plan in 1986 to open 35 outlets in three years (actually 37 were opened), managing director and founder Chris Paulsen has grown the business to 84 outlets and 856 staff.

Projections for the future are to sustain this growth, with plans in 2003 to open a further four stores, increase turnover by 15% and achieve a resultant 20% increase in profit. By 2007, it is planning 110 stores, turnover of $800 million and a 50% increase in profit results over 2002.

Ambitious, perhaps, but if anyone can make it happen, the charismatic 51-year-old Paulsen can. Not a great achiever at school (he had two goes at School Certificate before passing), Paulsen left at 16 to join Air New Zealand as an office junior and by age 26 he was the company's Southland area manager. Tired of playing the middle management political game, he decided to strike out on his own. He and friend Lindsay Barron sold their cars to raise the $10,000 needed for a shareholding in Auckland-based travel company Scholles Oakly. This shareholding gave them the right to operate in the South Island. When Scholles Oakly was bought by Passport United in 1986, Paulsen started up House of Travel.

Paulsen saw strengths in other travel industry models he believed would be essential for success. First, the commitment of local owner-operators who were truly part of the community they served, and second, the essential purchasing power of a large travel group. Other companies had tried to combine the two through franchising, but here, Paulsen saw a critical weakness. "Over time the franchisee begins to resent the control exerted by 'head office' - they are buying the buying mechanism and very little else. The relationship becomes very cynical."

So Paulsen designed a new model. "A partnership, with one partner looking after the brand and bulk buying, while the other is looking after the customer - built on trust, not cynicism." The arrangement is simple: each House of Travel retail outlet has a shared ownership arrangement - in most cases 50/50 between a local operator and House of Travel Holdings. Some of the larger stores have two local owners and a 30/30/40 ownership where Holdings holds the 40% share. This gives both partners a real stake in the success of the business. Commercial director Tony Moffat explains: "It's a model that works very well. Each partner has only one voting right so every issue that arises has to be resolved through conversation. While this may take longer, the outcome is better as both parties have contributed to the solution." Financially it's successful for both parties, with the average House of Travel store turning over $5 million a year compared with the industry average of $2.6 million.

Has House of Travel success come at a personal cost for Paulsen? He admits he has had to make sacrifices. "You just have to make sure you sacrifice the right things." One thing he won't sacrifice is his marriage (which has so far lasted 30 years) and time with his two sons. And it's not just words: every year he takes a month off to go overseas with his family. He also regularly competes in the gruelling two-day Coast to Coast multisport race. "Sometimes you just have to let go, empower other people to make decisions and realise that very few things in business are fatal."

For example, says Moffat: "Just the other day I called [Paulsen] at 5.15pm about something I thought was critical, but he was in the supermarket as it was his wife's birthday and he was making her a special dinner. We agreed that it could wait till the next day."

And when IT staff were working on launching the company's web-based flight search software Searchflight with a deadline of December 2002, Paulsen became concerned they were working too hard and their health would suffer, so he extended the deadline to March 2003, Moffat says.

In the end, what does three months matter, Paulsen muses. "Sometimes you have to go two steps back in order to go forward. We are trying to build an icon New Zealand company, a 50-year company, something bigger than all of us, something to leave behind."

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


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