Thomas Cook recently announced a new strategic direction, focused on increasing its “Differentiated” product from a claimed 30% to a healthy 50%. But what exactly is “Differentiated” product??
The tour operators seem to have been slow to define this! My own definition is very simple “ Product demanded by customers, which can only be brought from that tour operator”. The key phase, which makes defining differentiated product hard, is “demanded by customers”. There is little point having “Exclusive” product that you cannot sell, because customers are buying the hotel next door for £50 per person cheaper!!!

Thomas Cook and TUI have both decided to try to split its product portfolio between 50% differentiated product and by inference 50% commodity holidays, but what are the implications of this decision?

TUI or to be more accurate, their inherited First Choice management team, have lead the way in terms of creating differentiated product over the last 10 years with the development of First Choice Holiday Villages and more recently the outstanding Sensatori products. Both concepts have focused on a high standard of accommodation with markedly increased staffing levels to ensure the over all quality of holiday experience. Unfortunately, it has to be recognised that these investments cannot be delivered over night and represent a major increase in committed risk hotel stock. During the current recession where both major tour operators are cutting capacity by around 8% to reflect weak demand and with political upheaval in key location like Egypt slashing demand overnight, such investments require a long-term view and a relatively brave management.

So how else can tour operators differentiate their products??

To answer this question, it’s probably wise to focus on the key weaknesses of low cost “Commodity” operators such as Expedia, Travel Republic and On the Beach. These low cost retail operations rely on third party hoteliers or bed banks to provide their hotel stock. Therefore they have virtual no influence on the hotel delivery and few if any, in resort staff to deliver “On Holiday” services. Conversely traditional tour operators work much more closely with a narrower range of hotels and have many years experience of operating Holiday Reps and extensive excursion programs.

However, returning to my opening point…. these services only provide “Differentiation” if customers demand them. Tour operators have been relatively slow in my opinion for the changing demands of the 21st Century traveller and in particular children.

Here are just a few of the things I think could be implemented at low cost to create “Differentiation”.

 Internet access. I would install high-speed broadband into each hotel supported by comprehensive WIFI so that customers can access the Internet from the plethora of devices they now take on holiday e.g. Smart Phones, Ipad’s and Laptops.
 Sky TV. Its not just the dads who want to make sure they do not miss the big football games, but many parents with young children who need some entertainment in their rooms when they have to retire early to put the kids to bed. We may hate the thought of spending our holidays overseas watching TV but it does provide a useful support for those quiet moments.
 The age of Electronic Kids
o Electronic games competitions. The average games consol is less that £150 today, so it can not cost more than £10k to kit out and maintain an electronic games room. However, rather than just dumping kids in these rooms and leaving them how about running electronic Wii Tennis, Play station FIFA 2012 or many other interactive online sports competitions?
o Kids Karaoke or Wii Dancing. Face painting, colouring pens or more electronic fun? I know which one my kids would vote for.
 Sports Camps. This is already been done to some extent with the likes of Chelsea Football school and a limited number of Rugby camps, however so much more could be set up here and sold into UK sports clubs.
 Music Events. The massive popularity of music festivals and one off concerts shows how “Experiences” are highly valued by UK customers but major tour operators have left it to independents such as Ibiza Rocks to exploit this sector. This should not be just the domain of youth operators but could and should be brought into the mainstream.
 Increased staffing in resort. Mark Warner built their entire business on All Inclusive resorts with very high staffing levels to cater for the family market where customers where willing to pay for other people to keep their kids entertained while they sat and read by the pool. However, their prices are very high and given the advance of the All Inclusive concept in the mass market, you have to believe there is a lower priced version ready to be launched.

I have highlighted the above ideas since none of them are capital intensive, but are hard to deliver unless you control 100% of the hotels rooms and have an in resort staffing infra structure. By making the electronic options above fundamentals of a Thomas Cook hotel experience, I think the tour operator could create a differentiation over other hotels where these services may be available but also often are not.

If I could achieve the above in the Dynamic packaging sector, believe me when I say that I would have done it already!!