Allegiant Travel Company · NASDAQ:ALGT
Allegiant Travel — Investor Day (September 2018)
76 slides from Allegiant Travel's investor day presentation, Sep 13, 2018
Slide 1: Investor Day Las Vegas, NV September 2018
Investor Day Las Vegas, NV September 2018 1 1
Slide 2: Forward looking statements
Forward looking statements This presentation as well as oral statements made by officers or directors of Allegiant Travel Company, its advisors and affiliates (collectively or separately, the "Company“) will contain forward-looking statements that are only predictions and involve risks and uncertain
Slide 3: Agenda
Agenda . Maury Gallagher: Welcome & Introduction . John Redmond: Sunseeker Resorts Evolution . Ben Mammina: Building Sunseeker Resorts . Micah Richins: Operating Sunseeker Resorts . Jason Shkorupa: Food & Beverage . Scott DeAngelo: Marketing Sunseeker Resorts . John Redmond: Closing Remarks 3 3
Slide 4: State of the State
State of the State . Airline in great shape – transition is done! . Plan: ~125 aircraft end of ’22 – add ~10 aircraft/year . 2020 revenue/cost programs on pace . Operations – focused on being one of the best . KISS outcome = improved airline performance . Airline – Job #1 4 4
Slide 5: History – Evolution of Model
History – Evolution of Model . 30+ years in airline industry – deregulation . Commuter business – learned about GDS/middlemen . How not to do it - 3rd party customer approach • GDS Clearing House • Travel agents OTAs . Direct to customer – no 3rd party distribution - need: • IT system - Integrated P
Slide 6: Middlemen
Middlemen . Middlemen – present since beginning of modern travel system . Direct distribution is difficult . Critical to distribution - ability to reach large numbers of travelers . GDS evolution – Sabre/Apollo/Worldspan and others . Internet – Online Travel Agency (OTA) – Expedia/Priceline/Traveloc
Slide 7: History – Direct to Customer
History – Direct to Customer . G4 Model - leisure customer/leisure destination • Focus on small towns - customer awareness – big fish! • Direct advertising replaces GDS – brand awareness small town • Weekly schedule vs. daily schedule • Base approach – all aircraft in leisure base – best economics •
Slide 8: A Unique and Better Airline
A Unique and Better Airline . Leisure customer Built to be different • Will travel in all economic conditions • Vacations are valued – price dependent Leisure customer . Small/medium cities • Filling a large void Underserved markets • Increasing opportunity – industry restructuring • Diversity of ne
Slide 9: Travel Company – 3rd Party
Travel Company – 3rd Party . 3rd party products have been critical to G4 success . Since 2005 – sales of ancillary/3rd party products • Ancillary products - $3.4B • 3rd party products – $1.3B • Profits - 3rd party - $400M • Hotels - 6.5M+ room nights . Travel company concept – going for many years .
Slide 10: Big Picture – “Amazon” of Leisure Travel
Big Picture – “Amazon” of Leisure Travel . Customer is focus – leverage ability to talk directly to customer . Evolution of relationship between product and customer . Digital/physical world • Digital only – e.g. Google/Facebook • Digital/physical – Amazon • Critical tool set for digital/physical –
Slide 11: Allegiant: OTA with its Own Products
Allegiant: OTA with its Own Products Customer OTA Allegiant Travel Sells Leisure Travel Products Family Management Rental Airline Golf Entertainment Hotel Contracts Car Centers 11 11
Slide 12: Allegiant Country
Allegiant Country 12 12 Source: 2010 Census; within 90 miles of airport
Slide 13: Allegiant 2.0 – Focus on Customer
Allegiant 2.0 – Focus on Customer . How to create barriers to competition? . Fork in the road – stay airline? Increase travel company? . Allegiant 2.0 – start of new chapter but continue to be DIFFERENT! • Complete Airbus transition – end of November • Expand travel company – Sunseeker Resorts • Sta
Slide 14: Why Sunseeker Resorts?
Why Sunseeker Resorts? . Control customer(s) - focus on 3rd party products, particularly hotel . Last few years – tough to get hotel product – counter cyclical . Want more assets to sell – destination resort powerful . Capture enhanced customer spend . Florida – ideal location for resort . Leverage
Slide 15: West Coast of Florida - Big Fish/Big Pond
West Coast of Florida - Big Fish/Big Pond . West Coast of Florida (WCF) - Excellent Resort Location . Competition - Sarasota to Naples/Marco Island • No well known major destination resorts • Properties – average 20 - 30 years old . Demographics • Baby boomer destination • WCF – Midwest stronghold –
Slide 16: Florida Network Map
Florida Network Map . 230 Routes . 81 Cities . 7 Destination Cities . 5 Crew Bases 16 16
Slide 17: Sunseeker Resorts Economics
Sunseeker Resorts Economics . Great ADR numbers - $200+/room night . Sell directly to customer – like we have for past 16 years • >6.5 million room nights - $780M of top line revenue • Package products – air/hotel/car • Leverage customer database . Products – all our brands . No 3rd party distributi
Slide 18: Sunseeker Resorts Evolution – Maintain Optionality!
Sunseeker Resorts Evolution – Maintain Optionality! . Sunseeker Resorts – original model – ‘asset light’ – sell condos generate cash . Hotel alternative – simple (we like simple) – KISS approach – better returns . Budget $420M (excludes spend-to-date) . Sunseeker Resorts cash requirements – fairly s
Slide 19: Sunseeker Resort Charlotte Harbor
Sunseeker Resort Charlotte Harbor 19 19
Slide 20: Seeking a Larger Slice of Wallet
Seeking a Larger Slice of Wallet Spend Per Round Trip Itinerary* $1,800 $1,600 $290 $286 $1,400 $143 $311 $260 $253 $157 $219 $1,200 $247 $137 $235 $146 $147 $135 $1,000 $221 $220 $218 $234 $216 $220 $158 $800 $123 $250 $141 $600 $1,024 $930 $400 $788 $847 $897 $783 $626 $629 $200 $- Florida Punta G
Slide 21: Florida: Logical Choice for Sunseeker Resort
Florida: Logical Choice for Sunseeker Resort Florida Traffic Growth Routes Served from Florida Destinations 9,000,000 250 228 230 7.93 M 8,000,000 7.08 M 200 191 7,000,000 6.30 M 6,000,000 156 5.20 M 150 5,000,000 121 4.01 M 114 4,000,000 100 2.78 M 3,000,000 2,000,000 50 1,000,000 - - 2013 2014 201
Slide 22: Robust Drive-in Market
Robust Drive-in Market . 33 million people live within 500mi of Sunseeker Resort, 14 million Average Daily Traffic Trends of whom > 275mi 60,000 . Nonstop air service only available to Atlanta, Orlando, and Key West* 50,000 40,000 30,000 20,000 10,000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2
Slide 23: Why Port Charlotte?
Why Port Charlotte? Manatee 3,086 Rooms . Rapid growth of Allegiant 29 Hotels Avg Age: 24 Sarasota footprint 4,712 Rooms 39 Hotels Avg Age: 23 Charlotte . Availability of favorably priced, 1,432 Rooms 16 Hotels waterfront land Avg Age: 19 Lee (Ft. Myers) 10,830 Rooms . Growth converging on area 94 H
Slide 24: Air Traffic Outpacing Hotel Room Growth
Air Traffic Outpacing Hotel Room Growth Hotel Room vs. Capacity Growth (% Change Since 2009) 35% 30% 25% 20% 15% 10% 5% 0% (5%) 2010 2011 2012 2013 2014 2015 2016 2017 Seats to Naples, Fort Myers, Punta Gorda, and Sarasota Manatee, Sarasota, Charlotte, Lee, and Collier County Hotel Rooms 24 24 Sourc
Slide 25: Growth in Product Catered to Longer Length of Stay
Growth in Product Catered to Longer Length of Stay AirBnb Cumulative Growth Cape Coral Airbnb Occupancy 3,500 3,124 100% 3,000 90% 2,424 80% 2,500 70% 2,000 60% 1,441 50% 1,500 Rental Units 40% 1,000 780 30% 20% 500 285 111 10% 5 17 49 - 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 Port Charlotte
Slide 26: Allegiant Footprint Rapidly Expanding
Allegiant Footprint Rapidly Expanding Punta Gorda (PGD) Growth: 10 minutes from Sunseeker Resort 2,500,000 50 44 45 2,000,000 41 40 33 35 1,500,000 28 30 24 25 1,000,000 20 20 15 500,000 10 5 - - 2013 2014 2015 2016 2017 2018 PGD O&D Passengers PGD Destinations Allegiant Stimulates New Traffic in So
Slide 27: Port Charlotte Offers Proximity to Distribution
Port Charlotte Offers Proximity to Distribution Allegiant Distance from Tampa International Airport Annual O&D passengers Airport (TPA) destination resort St. Pete Clearwater International Airport (PIE) PGD 10 minutes south 1.5 million Punta Gorda ✔ RSW 45 minutes south 9 million Ft. Myers Sarasota-
Slide 28: Why a Large Resort?
Why a Large Resort? . Larger Share of Wallet . Building a resort destination, not a hotel . Larger resident base . Ability to offer additional amenities (marina, golf, food & beverage) • Excitement • Greater share of leisure spend . Keep guests at the resort longer . People want to be around people
Slide 29: Current Resort Plans
Current Resort Plans $420 million budget (excludes spend-to-date) . Phased approach . 500+ hotel rooms . Revenue ~ 65% rooms, 35% non- . ~180 condo-hotel units (2 towers) hotel . Ability to rent as suites for long-term stays . IT solutions for resort & future . Ability to sell as condos . ~40K squar
Slide 30: Highly Experienced Team
Highly Experienced Team 30 30
Slide 31: Ben Mammina – EVP Design, Construction and Development
Ben Mammina – EVP Design, Construction and Development . Started with Allegiant as EVP Design, Construction and Development a year ago • Initiated the creation of a new development group • Managed the entitlement, design, budgeting of the Sunseeker Resorts project in Port Charlotte . Ph.D. in Civil
Slide 32: How Certain is the Project Budget?
How Certain is the Project Budget? . Construction Unit Pricing is Known • Internal Analysis • Cummings Corporation • Local General Contractors • Local Sub-Contractors . Planning for the unexpected - $48 million plus • $13 million of contingency in the General Construction estimate (about 5%) • $15 m
Slide 33: Micah Richins; EVP/COO – Sunseeker Resorts
Micah Richins; EVP/COO – Sunseeker Resorts . 25+ years of hospitality experience . Deep knowledge of marketing, revenue management, analytics, distribution, operations and entertainment . Formerly Chief Commercial Officer for MGM Resorts International, controlling pricing, promotion, and segmentatio
Slide 34: Why Did I Join Allegiant Travel Company?
Why Did I Join Allegiant Travel Company? . It matters who you work with . Innovation / disruption as a core value . Incredible supply / demand dynamic . Ability to influence distribution and develop a new market 34 34
Slide 35: Extension of the Allegiant Business Model
Extension of the Allegiant Business Model . Ownership of the customer relationship . Leverage and supplement an already powerful database . Use of airline data to inform decision making . Utilize enterprise functions like HR or Finance for cost efficiency . Margin advantage of fee avoidance • No OTA
Slide 36: Terminology & Competitive Set
Terminology & Competitive Set . 224 Southwest Florida Properties: Sarasota to Marco Island . STR Markets: Florida Central*, Fort Myers, Sarasota/Bradenton . STR Classes: • Luxury • Upper Upscale • Upscale • Upper Midscale • Midscale • Economy 36 36 Source:*STR Florida Central includes all properties
Slide 37: Coastal Southwest Florida Product is Dated
Coastal Southwest Florida Product is Dated 100% 2010s, 21 • Average age: 26 years 90% 80% • Less than 10% built after 2010 2000s, 71 70% 60% • 60% built before 2000 50% 1990s, 39 • Competitive disadvantages: 40% • Deferred maintenance 30% 1980s, 43 • Built at grade • Tired design elements 20% Pre-19
Slide 38: Memorable Product Lacking
Memorable Product Lacking 100% Luxury Class, 20 90% Upper • Luxury (9%) and upper upscale (14%) Upscale 80% Class, 32 product is underrepresented 70% Upscale Class, 45 • Over 76% of the Southwest Florida 60% product is upscale or lower 50% Upper Midscale 40% Class, 53 • Difficult to achieve pricing
Slide 39: Minimal Large Resort Product
Minimal Large Resort Product 100% 8 10 90% • Only 8 large resorts (300+ rooms) between 80% Sarasota and Marco Island 70% 113 60% • Average age is 37 years old 50% • Hyatt Regency Coconut Point is the only 40% one less than 30 years only (built in 2001) 30% 93 20% • Size is a driver of excitement and
Slide 40: Ease of Access Advantage
Ease of Access Advantage Resort Punta Gorda Sarasota Fort Myers (PGD) (SRQ) (RSW) • Sunseeker Resort will Sunseeker Resort Charlotte 10 minutes 60 minutes 44 minutes be the closest option Harbor for fliers to PGD & Hyatt Regency Coconut Point 46 minutes 101 minutes 24 minutes SRQ Sunseeker Resort Ch
Slide 41: External Analysis: Innovation Group Findings
External Analysis: Innovation Group Findings Services Findings . Orlando based consulting team . Occupancy: 90%+ . Commissioned by Allegiant for Sunseeker Resort & Port Charlotte area Market Analysis & Feasibility study . Hotel ADR: $185+ . Widely respected professional services firm for leisure & .
Slide 42: Why Meeting Space in a Leisure Hotel?
Why Meeting Space in a Leisure Hotel? . Mitigates occupancy / ADR risk . Advanced bookings add predictability to forecasts . Smooth seasonality curves . Targeted group business extremely profitable . Purpose built space with fresh designs creates distinct advantage . Advantage of airline as a differ
Slide 43: Unlocking Asset Light Opportunities
Unlocking Asset Light Opportunities . Tremendous opportunity for management contracts and franchise • Key strategic benefit of building Sunseeker Resort . Sunseeker Resorts investment enables assembly of key talent required to establish a management company . Execution of the resort provides credibi
Slide 44: Robust Opportunity for Management Contracts
Robust Opportunity for Management Contracts Target Properties: Allegiant Markets . Potential Targets: 350 • Hotels > 100 rooms 300 288 • Not managed by key brand 49 250 • Within 25 miles of a G4 FL airport 200 142 . 684 properties 150 22 • 120 with no contract 239 100 95 15 77 • 564 with a contract
Slide 45: What Problems Are Owners Solving for?
What Problems Are Owners Solving for? . One size fits all approaches . Weak revenue management and distribution . Dependency upon OTA’s . Limited access to evolving technology . Inability to leverage data for decision making 45 45
Slide 46: A Better Management Company
A Better Management Company Traditional Offerings Key Differentiators • Revenue Management • Paradigm breaking technology • Distribution • Airline distribution pipeline • Sales & Marketing • Airline charter • Operations • Business intelligence and advanced • Design & Development analytics • Spa & Fi
Slide 47: Jason Shkorupa – VP F&B and Resort Development
Jason Shkorupa – VP F&B and Resort Development . Spent 26 years with MGM Resorts until joining Sunseeker Resorts in September 2018 . MGM Grand’s annual F&B revenues $300M+, one of the largest F&B operations in the nation serving 25–30K meals daily . Great relationships with celebrity chefs Wolfgang
Slide 48: Food & Beverage Program Philosophy
Food & Beverage Program Philosophy . Will be the market leader of Food & Beverage in the region . Offering broad variety of F&B experiences – “One stop shop” . Self-concept and self-branded • No management or franchise fees • Efficiency in design, back-of-house kitchens, receiving and infrastructure
Slide 49: Food & Beverage Vision
Food & Beverage Vision . Compelling overall Food & Beverage Portfolio. “Must see venues” . Creating a sticky environment. Pockets of fun. Drive wallet share . Approachable resort casual & refined specialty offerings . Recognizable experiences and “never seen before experiences” in this market . Appe
Slide 50: Corporate Business, Activations, and Events
Corporate Business, Activations, and Events . Meeting Space: Banquets & Catering • Corporate groups and social gatherings • Mixers, receptions, weddings, birthdays, anniversaries, charity, and social parties • Higher average spend / most profitable F&B business . Extensive Special Events & Programmi
Slide 51: Sunseeker Resorts Marketing
Sunseeker Resorts Marketing 51 51
Slide 52: Scott DeAngelo; SVP/CMO – Allegiant Travel
Scott DeAngelo; SVP/CMO – Allegiant Travel . 20+ years of Marketing, Analytics and Product leadership experience across B2C and B2B . Deep expertise in marketing strategy, data analytics and commerce technology across retail, payments and travel/hospitality . Formerly head of Product, Pricing and Da
Slide 53: Overview of Total Charlotte County Visitation
Overview of Total Charlotte County Visitation Allegiant is able to address a large portion of total Charlotte County visitors from fly and drive markets Total Visitor Count to Charlotte County 1.5M+ active customer 3,665,562 email addresses from drive areas 365,186 256,617 65,799 1,029,759 1M+ custo
Slide 54: Allegiant Inbound ITNs to PGD
Allegiant Inbound ITNs to PGD Allegiant generated more than 365K ITNs to PGD in the past year, up 53% over the past two years, with a healthy mix of first-time and repeat visitors Allegiant Inbound PGD Itineraries by Quarter First-time vs. Repeat Visitors 140,000 120,000 In past 12 months: 100,000 8
Slide 55: Allegiant Inbound ITNs to PGD by Feeder Market
Allegiant Inbound ITNs to PGD by Feeder Market Above and beyond PGD, Allegiant generates nearly 400K ITNs into nearby PIE and more than 650K ITNs into other Florida markets from PGD feeder markets – more than 1.4M total customers Cumulative Customers to Florida Markets by Origin City 1,500,000 1,350
Slide 56: Allegiant Well-Positioned to Steer Hotel Choice
Allegiant Well-Positioned to Steer Hotel Choice In what order do you typically book the following when planning a leisure trip? Allegiant Customers 3% 13% 17% 9% 83% 57% First Second 88% 83% Third+ 30% 14% 3% Air Hotel Car Activities 56 56 Source: Heart+Mind Strategies LLC Market Research
Slide 57: Allegiant Creating Preference for PGD
Allegiant Creating Preference for PGD Top Customer Conversion Markets to PGD Total Customers Consider visiting Punta (following initial Allegiant travel to another destination) Converted to PGD Gorda/Fort Myers, FL 14,000 33% 133,940 12,000 19,472 10,000 +2.2X 25,444 8,000 15% Customer Count Custome
Slide 58: Survey Responses
Survey Responses While all Allegiant markets show strong interest in PGD vs. other destinations, Allegiant’s largest and fastest growing markets show the greatest interest Larger Market Customers Likely To Visit Destination 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Smaller Market Customers Likely to Vis
Slide 59: Allegiant Customer Demographics
Allegiant Customer Demographics Allegiant customers are far more likely than average to be in higher Income and Net Worth segments Household Income Household Net Worth $150K+ 8% 17% $750K+ 13% 22% $75K- 24% $250K- $149K 26% $749K 37% 37% $100K- $30K- 19% 38% $74K $249K 19% 35% <$100K 42% $0-$29K 30%
Slide 60: Survey Responses: Average Spend on Leisure
Survey Responses Average Spend on Leisure Average Hotel Spend Per Vacation Night on Leisure Vacation 4% 6% 14% 19% 8% 6% For Allegiant customers 14% 15% 23% booking hotel in PGD: 27% 23% • ADR for standard 45% 42% 25% hotel room = $221 23% 22% • ADR for suite hotel 17% 14% 15% room = $289 7% Custome
Slide 61: Allegiant Customers at Luxury Resorts
Allegiant Customers at Luxury Resorts Data indicates Allegiant customers stay at Luxury Class or Upper Upscale Class resorts along the Florida coast near Punta Gorda (includes only those customers with Allegiant app activated and permissioned for geo tracking) Number Hotel Name Check Ins Length of S
Slide 62: Strong Card Engagement by PGD Customers
Strong Card Engagement by PGD Customers Inbound PGD customers are ~3X more likely than the average …and their spend on the card is more than 50% greater than customer to be an Allegiant World Mastercard cardholder that of all other Allegiant World Mastercard cardholders $9,508 +52% $6,259 77% 92% 23
Slide 63: Customers Pick Destination Prior to Building Budget
Customers Pick Destination Prior to Building Budget Which of the following best describes how you typically plan your leisure trips? I start my planning with a specific budget in mind and pick destinations/ 23% 22% 23% activities that fit with that budget I start with a specific destination/ activit
Slide 64: Lower Airfare Likely to Boost Dining and Hotel Spend
Lower Airfare Likely to Boost Dining and Hotel Spend When/if you are able to get a lower price on airline tickets for a leisure trip, what other parts of the trip are you most likely to spend the savings on? 56% 56% 39% 38% 37% 35% 28% 26% 24% 20% Dining Nicer Hotel Activities Shopping Entertainment
Slide 65: Strong Commercial Organization to Drive Air + Hotel
Strong Commercial Organization to Drive Air + Hotel 65 65
Slide 66: Marketing and Sales Plan In Motion
Marketing and Sales Plan In Motion Illustrative Creative 66 66
Slide 67: Allegiant Forward Look
allegiant Forward Look
Slide 68: Projected Sunseeker Resort Income Statement
Projected Sunseeker Resort Income Statement Year 1 Year 2 Year 3 Year 4 Year 5 Revenue Hotel Revenue $ 32,854 $ 35,264 $ 37,473 $ 39,007 $ 40,600 Suite Revenue 24,825 27,241 29,280 30,598 31,728 Food and Beverage Revenue 25,900 29,254 32,134 33,828 35,420 Golf and Marina 4,513 4,907 5,104 5,333 5,49
Slide 69: Standard King Comparison
Standard King Comparison 69 69
Slide 70: Bedroom Suite Comparison
2 Bedroom Suite Comparison 70 70
Slide 71: Bathroom Comparison
Bathroom Comparison 71 71
Slide 72: Florida Network Map
Florida Network Map . 230 Routes . 81 Cities . 7 Destination Cities . 5 Crew Bases 72 72
Slide 73: Sanibel Harbour Marriott
Sanibel Harbour Marriott 73 73
Slide 74: Naples Grande Beach Resort
Naples Grande Beach Resort 74 74
Slide 75: South Seas Island Resort
South Seas Island Resort February 8th –10th 75 75
Slide 76: SpringHill Suites Punta Gorda Harborside
SpringHill Suites Punta Gorda Harborside 76 76