As we sit recovering from one to many Christmas turkey dinners, it may be time to look at the year ahead and assess the role that Turkey as a destination is likely to play in the success of the UK Travel Industry this year.
The collapse of Monarch airlines gave a stark warning as to how nasty the “Spanish route” price war had got, with average yields having dropped by 30% over a 2-year period for most airlines.
As we all know, terrorism and political unrest has seen a massive concentration of demand into Spanish destinations, resulting in scarce last-minute hotel availability and large price hikes. Fortunately, for OTA’s whose flexible model allows them to be “parasites living off the misery of others”, these hotel price increases were offset by reduced last minute flight prices, as airlines struggled with excess last-minute capacity to fill their aircraft.
For virtually the first time, we saw how disastrous the low-cost model of discounting early can be, if high hotel price’s mean they cannot fill the last-minute seats and have to “double discount”.
The failed Turkish coup in July 2016 ensured that not only late demand for Turkey in 2016 was dramatically reduced, but also led to large swaths of capacity being redirected to Spain in 2017. Therefore, even though Turkey remained stable in 2017 and late demand surged back, there were few seats left to match with the plentiful and cheap hotel availability.
However, some airlines desperate to remove capacity from the Spanish blood bath, are flooding capacity back into Turkey for 2018.
Ironically, in these situations a high degree of “Exclusive”, but committed hotel product is working against TUI, who have increased capacity by 100k passengers, compared to the massive hike in capacity that Thomas Cook have put back into Turkey, with a virtual doubling of capacity to 600k passengers. Although, exclusive product is highly profitable, it cannot be moved around and does expose the owners to big swings in destination demand.
Also, the successful short duration, high frequency flying model of Ryanair combined with 5th freedom flight permissions issues, resulting from being an Irish rather than UK carrier, has kept them out of this potentially lucrative Turkey alternative. Easyjet on the other hand have no such limitations and having acquired profitable routes from GB Airways many years ago, know Turkey’s yield potential.
Easyjet’s biggest UK competition is likely to come from Thomas Cook being nervous of their large capacity increase and reducing perceived risk, by dumping flight only seats at low prices early to boost load factors.
A more left field threat is Turkey’s own low cost airlines like Turkish Airways, which have the benefit of being based downstream and so are able to move capacity around
Europe to exploit regional peaks in demand e.g. both Scottish and English school holidays with one flying program.
Turkey is one of the UK’s few major beach destinations outside of the Euro and with the pound having strengthened markedly against the Turkish Lira over the last 12 months (+20%), the price benefit of an All-Inclusive holiday to Turkey over its Spanish compatriots has never been higher.
Unfortunately, the same price advantage also applies to Germany, the other European beach power house, and capacity is also piling back in from that source market, so 2018 may be the one and only year for the British travel trade to gobble up as much Turkey as possible.