Travel needs to widen the sustainability debate.

At a recent travel forum discussing how Travel should operate sustainably in a post COP26 world, now that the awareness of the dangers of global warming and the need for climate action has grown exponentially within our client base, too much time was spent on naval gazing.

I don’t mean to be rude or dismissive but flagging newer aircraft or direct flights as “Greener” options and talking about less regular towel changes, is not going to pass as credible climate action.

The fundamental element of travel is a flight that burns fuel, is Co2 emitting and will be seen as polluting and contributing to Global warming. It’s important we own this truth and although we need to focus on every possible aircraft efficiency, such as using less polluting biofuels, it is unlikely that aircraft flights will ever be a carbon-neutral option in isolation.

It is my belief that travel needs to widen the debate and position the option of reducing personal travel, in context to the other ways individuals and business can reduce their carbon footprints.

The graph above shows that travel represents 12% of an individual’s carbon footprint, but driving an “Internal Combustion Engine” (I.C.E) car powered by polluting fossil fuels, such as petrol or diesel, causes 29% of emissions annually. More than double their annual travel impact.  

A lot of people are put off moving to EV’s, because they are on average 25% more expensive than their ICE equivalents currently and by range anxiety due to an inadequate national charging network. Both issues however are solvable as long as employers are willing to assist.

The Government has introduced massive tax breaks worth 32-42% off the cost of a personal lease depending on an employee’s tax bracket. However, these savings are only available via an employer operated “Salary Sacrifice Schemes” (SSS),  where the employer leases the car and deducts the cost from a staff members salary before Tax.

Employers have an incentive to do this in the form of 15% NI (2022 rate) savings and being able to claim half the 20% VAT back on the lease, creating a net saving of £250 on every £1,000 spent. In turn, part of this saving can be used to take out “Revenue Assurance” against any empty leases caused by staff leaving, which removes virtually all the risk of operating a SSS scheme.

Effectively these schemes make EV’s 20% cheaper to lease than ICE equivalents, even before the 66% reduction in fuel bills from the cheaper electricity power source and 25% lower maintenance costs are considered.

Range anxiety for EV owners who have a home charger is mainly a myth, since 95% of charging is done at home, as the average 200 range of an EV, is more than enough to cope with the daily commute. However, employers need to ensure that office charging is bookable and made available on a priority basis for staff living in flats or housing where home charging is not possible, and staff need to accept infrequent longer journeys need to be made by train.

The move to EV’s is clearly possible with the assistance of employers and will progress rapidly in the UK.

A further 41% of personal emissions come from home space and water heating, but this is a more complex topic to deal with, as the Government has yet to issue an incentive program to encourage people to abandon Gas water heaters. However, the recent 600% increase in Gas prices is likely to do the job for them and many people are already looking at alternatives such as ground source heat pumps and electric boilers.

As an industry, I think we need to widen the emissions debate and show that customers can continue to travel “guilt-free” if they move to reduce 60% of their emissions by moving to an EV and sorting out domestic emissions, which are both far higher elements of their carbon footprints.

Overseas travel is proven to benefit mental health and bread increased cultural understanding and tolerance. We should not lose sight of these virtues and offset these against the emissions damage travel causes, BUT only if we encourage alternative reductions and lead by example as employers.

If you’re a travel business that has not looked at implementing an EV Salary Sacrifice scheme to create a “Green Fleet” of employers who take an EV as a perk of employment rather than a business necessity, then you should.

EV’s are set to become a key recruitment/retention tool and moving 50% of staff to a Green fleet EV will on average move a business 62% closer to becoming Carbon Neutral.

In order for travel to widen the sustainability debate and preach the benefits of continuing to travel, despite its inherent polluting nature, we need to make sure outside of flight itself we have done everything possible to move both our own business and destination partners towards being carbon neutral. Again, an easy solution is to insist on electric coach’s, taxis, or airport ground handling.

The future is Green, but travellers can be educated to alternatives to simply travelling less.

Will OTB suing Ryanair create a “Me too” movement?

I read with a large degree of pleasure the announcement last week, that the UK’s largest Online Travel Agent (OTA), On the Beach (OTB), has decided “enough is enough” and has launched a legal case against Ryanair.

 OTB is suing Ryanair, accusing them of abusing its dominant position in the flight seat market, to try to force customers to book directly via the Ryanair website and not via OTA’s. This is not a new battle, as Ryanair have always declared their opposition to working with OTA’s and the travel trade in general, despite acknowledging that in 2019 at least 2 million of its flights were booked via agents.

 Ryanair has always taken an extreme stance, refusing to provide booking API’s and actively trying to blook screen scrappers. Having failed to achieve this, they have now switched to disrupting OTA customer processes by preventing their customers from using the “My Ryanair” online check-in online tools and sending OTA customers emails suggesting that OTA’s mark-up flight and baggage costs are above those charged by the airline.

 During the Covid-19 crisis, Ryanair took their anti-trade stance even further, putting OTA booking at the back of the queue for refunds. Ryanair knew that the package regulations and the ability of customers to hit OTA’s with credit card recharges would force them to refund, even if they had not been repaid by Ryanair, protecting Ryanair from a direct customer backlash for late repayment and allowing them to hold on to hundreds of millions in refunds that were due.  For OTB alone this represented a £48.7 million cash flow hit. Many other travel companies such as Love Holidays, incurred extensive brand damage because their trust funds simple did not have enough money in them to refund customers if Ryanair did not refund them. Hence, my view is that although OTB is fighting an independent battle against Ryanair, if they are successful it will lead to a “Me too” avalanche of damages claims.

 The CAA when challenged about their lack of action against Ryanair and the damage they have done to the credibility of Trust funds and the ability of ATOL principals to refund clients, freely admit that currently, their “Tool kit” of powers is inadequate.

 But watch this space, as change must come if the CAA has any chance of getting the trade behind its latest ATOL reforms aimed at ensuring customers receive timely refunds. Without airline repayments being brought under the CAA’s control, the whole trust fund model is fatally flawed.

 Although the other main low-cost carriers have embraced travel trade distribution of “Package Holidays, where they earn a higher combined margin by selling flights, hotels, and transfers, they have also sought to restrict flight only booking outside of its consumer direct sites by imposing substantial API booking fees.

 OTB has fought a longstanding battle with EasyJet over their £6 per sector per passenger booking fees. A minimum cost of £24 per booking, is clearly far more than the cost of providing the API booking technology and is pitched to cover the airline’s “potential” lost revenue from ancillary revenues. Although no third party can know the compromise reached by OTB that allows them only to charge its customers half the standard Easyjet API fee, I’m sure the threat of an abuse of power court case was a consideration.

 Low-cost carriers would obviously prefer all flights to be booked via their consumer-direct website, however, I believe that any lost ancillary revenue is more than compensated by the higher load factors OTA drive. Early holiday sales via OTA’s also move low-cost carriers faster up their load factor yield curves, allowing them to charge more for remaining seat only sales.

 Customers buying a package holiday, primarily buy based on the holiday destination and hotel offered, whilst considering the flight as a “bus service” purchased based on a combination of lowest price and best flight times. OTA’s offer the best range of options, simply because unlike low-cost carriers internal holiday companies, they offer all airlines and the ability to mix and match inbound/outbounds between different airlines. In doing so they provide a range and value that customers benefit from and is something the courts are likely to seek to protect.

 Therefore, I think our judicial system will find in favour of OTB and conclude that Ryanair is indeed abusing a dominant market position, even though the UK government via either the CAA or CMA have failed to bring them inline to date.

 Whatever happens, the trade should be applauding OTB for fighting the case and highlighting an issue that has affected hundreds of UK travel companies and continues to do so.

The Ryanair debate. To care or not to “Customer Care”?

Like many UK travellers, I hate Ryanair with a passion after a litany of Covid-19 dirty tricks. Broken cancellation buttons understated brought forward balances and a rip off £95 amendment fee per flight seat, not to mention refunds that never seem to appear in your bank account, don’t sit well with me as a customer.

However, when booking flights to Andorra for a new year ski trip, Ryanair had the best schedule and a £30 per seat lower price. So now I’m faced with a dilemma. Can I risk booking with Ryanair now that Covid-19 disruption is easing?

I’m ashamed to admit that you can guess the outcome, but it does beg the question. What is the real benefit to airlines like Jet2 and Easyjet from doing the right thing by customers?

I personally think the answer depends on what product the airlines intend to sell moving forward.

Business traveller’s spending company money are more discerning and will pay a premium to fly with Easyjet, whilst using their annual Speedy Boarding pass to book their preferred seats, carry extra hand luggage and avoid the worst of the queues.

However, leisure travellers booking a quick city break or a week away in Spain often regard flights as a bus service, booking the cheapest priced option relative to the flight times they want. Brand loyalty rarely survives even a £10 differential, with sites like Skyscanner and Google actively promoting mix and match flying between different airlines.

Ryanair is the ultimate no-frills airline, with a brutal attitude that says the lowest price wins and customers can be stripped of as much money as possible during a pandemic downturn, as they have short memories. Unfortunately, my own experience shows that they are probably right.

It is interesting that Ryanair’s, eastern bloc equivalent, Wizzair are now entering the UK departure market, targeting Easyjet routes, whilst avoiding Ryanair.  They clearly believe Easyjet are a softer target, that can be taken on with the weapon of price. How ironic given this was how Easyjet drove British Airways out of Gatwick.

I would argue that Jet2 have ringfenced themselves from this battle, having driven their in-house holiday operation to 60% of overall volumes and up to 80% on most of their beach routes. Brand value definitely does matter in the holiday sector when the tour operator is responsible for the whole holiday experience. Few customers would ever book a Ryanair holiday!

Jet2 Holidays have also successfully integrated into the wider third-party travel community, being the go-to holiday company for most high street retailers. They also provide seats to many Dynamic Packaging players now have they have removed API fees, unlike Easyjet who still damage relationships with a £12 per flight seat or £24-30 price disadvantage compared to customers buying flight direct.

In summary, doing the right thing and protecting your brand during a pandemic for me makes total sense, but I’m not convinced that in the bus route world of flight only, customers brand loyalty is worth the investment.

I think Easyjet offer a brilliant service and have a mega-brand but need to use this to rapidly grow their holiday division, to complement their strong business travel presence, as competing directly with Wizz air and Ryanair in the brutal flight only market may not be a winning strategy.

We’re all going on a Summer Holiday! But who with?

For the first time since Covid-19 arrived in March 2020, I’m confident about the future of the travel sector and think the worst is behind us, with a strong Summer 2022 ahead. However, Covid-19 has changed many facets of our industry and may reshape how customers book their holidays in the short term.

 Over the last 15 years, travel agents either on the high street or online replaced retail sales of big tour operators with Dynamic Packages created by combining low-cost carriers flight seats, with hotels from bed banks. This combined with the rapid growth of low-cost carrier’s in-house tour operation, such as Jet2 Holidays, dramatically reshaped our industry and lead to the reduction of the 4 big four tour operators of Airtours, First Choice, Thomas Cook and Thomson’s, to just one in the shape of the debt-laden Tui Travel Group.

 This erosion was further exasperated by customers “Self” Dynamically Packaging using Skyscanner, Booking.com and increasingly Googles own travel tools.

 However, Covid-19 has impacted customers and agents’ appetite for Dynamic Packaging.

 Customers have now realised that booking with faceless internet organisations, which are hard to contact by phone, is fine when things operate smoothly, but becomes a nightmare when Covid-19 travel restrictions require refunds to be chased or multiple companies to be contacted to shift holidays to a later date.

 The result will undoubtedly be a move back to “face to face” holiday booking via high street agents, or at least to fully bonded ATOL holidays provided by OTA’s like Jet2 Holidays or On the Beach, both of whom have come out of Covid-19 with enhanced reputations after providing flexible customer service and quick refunds.

 Agents who dynamically packaged Covid-19 impacted holidays, have faced a nightmare of double or triple administration on holidays with no further payment and angry customers demanding refunds that they were unable to make due to slow refunds from third-party airlines. Covid-19 highlighted the risks of dynamic packaging to agents, and many will have decided that the risk is just not worth it.

 Demand for fully bonded ATOL holidays is therefore likely to increase markedly, but at the same time, the CAA has reported that 20% of companies have not applied to renew their ATOL’s and many others (Except Jet2) are reducing the size of their ATOL’s.

 For some companies, this is because their balance sheets have been devastated by Covid-19 and they are struggling even to pass “Going Concern” tests, let alone the increasingly stringent requirements imposed by the CAA. Bluntly, these companies need to fail now and close while volumes are low, to avoid further customer disruption and bad publicity for the sector.

 Large airline “debt mountains” and the continued disruption of international travel has “Spooked” the insurance sector, which has withdrawn virtually all “Airline Failure Insurance” capacity. This insurance is a mandatory requirement to allow “flight costs” to be released from CAA approved trust funds and without this agent’s cannot legally Dynamically package holidays.

 Many agents will revert to a low-risk agency model selling bonded holidays from the major operators of Jet2, Easyjet and Tui or increasingly use DP platforms like On the Beach’s trade arm Classic Collection.  Margins may be impacted, but reduced admin hassle and risk counterbalance this, and the increased volume boost to On the Beach buying power with its suppliers will allow prices to be driven down further.

 I would expect DNATA group to follow suit in chasing trade distribution, using its Travel Republic platform and the reborn Thomas Cook OTA to consider this option once it establishes its own consumer-direct operations.

 An equally big question for the travel sector is how to get families to book early again?

 Although Europe and the USA have moved to open for “Double Jabbed” adults, there remains uncertainty about the testing required to allow unvaccinated children who are often asymptomatic carriers of Covid-19, which may lead families to take a wait and see approach in January.

 So instead of discount messages in January, I think the trade needs to continue to push booking flexibility, low deposits and free Covid-19 testing.

 The low deposit schemes need to be supplier funded as travel agents cash flows will be at all-time lows this winter. Sensible agents will boost cash flows by focusing as much effort on promoting winter sun holidays to the Canaries and newly opening long-haul destinations, as Summer 22, as cash will be king this winter.

 Pent-up demand is driving interest in the marketplace place, but it has come too late for Summer 21 with many customers having already holidayed in the UK or deciding to wait until next Summer. This is evidenced by ultra-low seat prices in October e.g., £22 to Majorca, which will not help airlines trying to re-start programs and get aircraft back in the air.

 However, prospects for Summer 2022 look good, even if the traditional January booking window become a more spread-out booking pattern across Jan-April.  The Dynamic Packaging Revolution may have reached its Zenith and Covid-19 may feel like the “meteor” that signalled the end of the dinosaurs, but it’s more likely that it has just opened the door to the agency market for the big OTA players and sifted who does the Dynamic packaging.

 We may all be going on a Summer Holiday this summer, but whom we book it with is set to change.

Revolut’s entry into Travel is not a “Canny” move.

Revolut entered the travel space as a low-cost FX provider for consumers in 2015 and is now trying to become an OTA, initially offering accommodation only via Revolut “Stays”, with a £70m “war chest” to fund 10% discounts off-market rates. Future plans include offering flights and car hire driven by google PPC advertising to build upon its “in App” cross-referral opportunities.

So, in essence, Revolut is declaring “War” on the travel trade, trying to muscle into the sector as a new B2C player, rather than working with the trade, as my own CannyApp “3% Cashback Mastercard” does.

Good news, as far as CannyApp is concerned, but who has the right strategy?

Obviously, only time will tell, but Revolut is still massively loss-making, having lost a further £126m in 2020, with the key reason being its high customer acquisition costs.

CannyApp has taken the opposite approach to Revolut, guarantying never to sell competitive products to its travel industry partners and paying a 1% referral commission, on the total spend on the card for its lifetime e.g., 3 years on Average.

This allows us to access the travel Industries “Data Lake” and to advertise to holidaymakers in a highly focused way for just the 28 days before they depart for holiday, which is the period in which holidaymakers consider their Holiday FX needs. This is clearly cheaperthan Revolut’s scattergun advertising across 365 days of the year.

By providing partners with templated “Mastercard Approved” emails, CannyApp avoids any GDPR or database sharing issues, allowing the activity to be bolted into partners existing email activities with minimal effort or cost.

The net effect is that CannyApp has a 10 times lower acquisition cost compared to Revolut, which makes scarifying commissions from selling competing travel products a very small price to pay.

Personally, I think Revolut is putting the proverbial “cart” before the horse. Customers only use their Revolut cards when travelling overseas, so it’s likely to be months if not a year before they take their next trip. Are customers going to remember to check Revolut’s travel deals? I’m not convinced, however with a £70m “war chest”, the trade needs to be aware that they may indeed become a new competitor.

The Foreign Exchange market in 2019 was worth £62.5 Billion in the UK, with 60% of this market controlled by the major bank’s debit/credit cards, so there is plenty of markets to share between Revolut and CannyApp. However, I think Revolut may have just shut the door on potential trade partnerships.

CannyApp refers to Foreign Exchange (FX) as the “forgotten” income steam for OTA’s and homeworkers, with virtually none of the major players pre CannyApp having an income stream from FX.

Given that it’s by far the largest travel “ancillary”, at first it seems amazing that OTA’s have not focused on this space, but it’s only been during Covid-19 that the opportunity has truly crystallised.

With high street branches shutting, great swaths of the UK population suddenly had to embrace “App-based Banking”, which has made it much easier for CannyApp adoption amongst its target market of “Females” booking mass-market holidays.

Combine this will a massive explosion in “Contactless” payment, replacing “paper money” and you can see how the market has moved in favour of a “pre-paid” Mastercard, which is accepted globally and can be topped up instantly by just connecting a debit/credit card.

In a travel market where customer volumes are likely to remain below 2019 levels until 2023 due to a lack of flying capacity, it’s imperative that travel companies maximise revenues per customer.

Ignoring the FX opportunity is now simply inexcusable.

Summer of the brave

A quick glance at Skyscanner shows flight prices at all-time lows for August 21, with Ryanair offering one-way flights to Ibiza from £8 per person.

Although travel is beginning to open up again, demand is clearly lagging behind supply, as customers remain confused by Covid-19 travel regulations which seem to change on a weekly basis.

Covid-19 testing is straightforward but remains expensive and a hassle. The Government continues to refuse to allow UK travellers to access and use the extensive state testing facilities, forcing them to go to overpriced and inconvenient private suppliers. As an industry, we need to challenge this illogical position ASAP if we really want demand to pick up.

Quarantine appeared to be simplified by the introduction of the “Double Jab” rule, which effectively brought amber destination to the same level as green, requiring just a lateral flow test before return and one PCR test after 2 days of return.

However, the immediate introduction of Amber Plus for people travelling to France has clearly spooked the travelling population and recent rumours in the national papers that the same rule will be applied shortly to Greece and the Balearic Islands has not helped.

The simplest explanation for the lack of demand is that UK holidaymakers have already made plans for the summer and often they don’t include going through the hassle of overseas trips.

So when will demand return?

If Covid rules remain the same, I think Facebook showing photos of sun-drenched beaches and mask free outside dining, will quickly drive the FOMO factor.

The Canaries may see the first big bounce back in demand this winter, as sunny long-haul destinations appear likely to remain out of reach, with customers remaining fearful of being stranded a long way from home or the UK Government changing quarantine classification forcing more last-minute dash home.

The widespread presence of the beta variant in France and its “Amber Plus” status, is likely to dampen demand for the French ski resorts. Combine this with the complication of crossing the border from the high-flying volume arrival point of Geneva (Switzerland) and you can see a messy ski season ahead.

My outside bet for a surge in demand is the USA, with Vegas, LA and Hawaii appearing safe destinations due to their high vaccination levels. Obviously, this is completely dependent on President Bidon abandoning the USA ultra-cautious visitor rules which is by no means a given.

 The sad fact is that strong demand is unlikely to return until Summer 2022 at the earliest, which is simply too late to save many travel businesses.

Strong demand will come back, and travel will rebuild, but lessons need to be learned and airlines brought into the trust fund regime to ensure timely customer repayments.

Unfortunately, the new proposed new ATOL rules seek to compensate for the lack of airline customer protection by loading even more financial responsibility on agents. If passed agents will have to fund airline flight purchases from their own funds as ATOL are now saying that only 20% of customer funds can be paid out of trusts before the customers return from holiday.

This will force most agents to abandon Dynamic Packaging, reducing customer choice and in my opinion leading to less financially protected holidays.

The successful operators of the future need to remain asset-light, overhead slim and nimble on their feet, however, moving forward an ATOL licence will be a noose around the neck just waiting for another Covid like event to pull the leaver on the trap door.

It’s a summer for the “Brave” in many ways this year.

Prepare for an “Adult only” Summer 21 holiday season?

The pushing back of “Freedom Day” by 4 weeks to 19th July, was yet another major blow to outbound tourism, as appears unlikely that the UK Government is going to allow outbound travel, whilst the UK domestic restrictions are in force.

 It’s frustrating that having given the outbound travel industry hope at the beginning of the year, with the introduction of a “Traffic Light” system, that this immediately went out the window, with the only mass-market holiday destination i.e Portugal removed after a few short weeks on the green list, creating a stifling “amber blanket” of excessing Covid-19 testing.

 Having been seduced into booking a trip to Portugal whilst it was in Green, I decided to go ahead and travel, using the shorter 5-day quarantine, but incurring a whopping £500 extra in testing cost in order to use the “test to release scheme”.

 My journey to and from Portugal could not have been smoother, with hardly any hold up at customs and super quick bag delivery, but that’s unsurprising given how few people are travelling at the moment. I share industry fears that the combination of extra Brexit checks, locator forms and fit to fly certification, could slow border control clearance to a snail’s pace.

 Portugal itself was a delight! Friendly people, wall to wall sunshine and great food, is a holiday recipe that cannot be beaten. Even with the extra testing costs, the total holiday cost was still better value than a UK break and unlike UK beach’s, there were no crowds.

 The UK Governments attitude to outbound travel is clear in the priorities they have set “Track and Trace” staff. When a month ago our daughter caught Covid-19 and we had to quarantine as a family, we received zero phone calls or visits. However, since returning from Portugal we have been hounded with daily phone calls and 2 home visits, to make sure we are quarantining correctly. Given I am double jabbed and have been tested 4 times in the last 10 days, this level of attention just shouts, “pointless politics”.

 The Government is clearly split over allowing overseas travel this summer, with the “hawks” constantly quoting the threat of new covid-19 variants. The hawks conveniently ignore 3 key factors;

 1.    Amber zone Stats. 151 countries have Zero returning customers infected with Covid-19 on return. Why can some of these not be added to the green list?

2.    Double Jabbed protection. Less than 1% of people who are double jabbed are being hospitalised if they catch Covid-19 and infection rates are drastically down.

3.    Variants of Concern. Current Covid-19 infections in the UK are dominated by the Delta Variant, which is the most infectious variant found to date, so what Variants of concern are we really worried about?  It’s also now proven that strict border controls just delay the entry of new variants like the Delta strain and can not prevent it. Just look at Australia and New Zealand. The only route to safety is vaccination and the UK seems to have won this race, so it’s now time to balance protection of life with economic and mental health concerns.

 The UK population is fed up with being “locked down” and wants a return to normal, which includes overseas holidays. Some factions in the Government clearly support this and want to allow people who have been double jabbed to travel to green or amber listed countries without having to quarantine on return, if they pass their 72-hour fit to fly and a 2-day PCR tests. This seems a logical and balanced way of reducing risk whilst allowing travel to restart, however, children under 18 have not been double jabbed, so families will not benefit.

 It’s unlikely that families will want their children quarantining indoors for 10 days on return from amber countries, even if they are off school and although testing costs will be reduced, they remain expensive for families putting most off travelling. I think the travel industry needs to accept any compromise offered, even if it does in effect create an Adult only market for Summer 21 holidays.

 If the Government did show some common sense, it could either make available the currently massively underutilised NHS PCR testing capacity, to families and cover its costs by charging £25 per test or accept Antigen testing for children in the same way it does in schools.

 However, so far logic has been in short supply, so start updating your marketing to focus on an Adult only Summer 21 holiday season starting from July 19th.

 Freedom Day for families is likely to exclude overseas holidays, unfortunately.

CAA ATOL Reform. Whom are the CAA looking to protect? Customers or themselves.

The new CAA ATOL Reform document is clearly presented and contains a lot of common sense. However, as usual, the CAA has ignored the same fundamental issues.

Consumers can buy unregulated DIY holidays with a few clicks of the mouse, booking flights via Skyscanner or direct with airlines and hotels via Booking.com, Trivago etc. These providers have no restrictions on how they use customer cash and no ATOL bonding costs.

Although the Covid-19 Pandemic has pushed customer back towards a human touch and personal service, there is a clear limit to how much of a price premium customer will pay for these services.

The Government has already contributed to the destruction of our high streets by making them uncompetitive compared to internet rivals like Amazon, via business rates and VAT. The CAA is now doing the same to travel, by imposing an ever-increasing regulatory load and ATOL bonding costs, that make ATOL protected holidays uncompetitive in price versus booking directly with airlines and building your own holiday.

In my experience customers booking on credit cards, worry little about other elements of financial protection and never even consider health and safety issues.

 Although the word “Aviation” appears in the CAA’s name, they are ducking the question of how airlines protect customer monies, claiming it’s outside their remit and dependent on the Government taking forward an “Airline Insolvency Review”.

As an industry, I suggest we refuse to co-operate with the CAA on this supposed “consultation”, until this ridiculous situation is resolved, and airlines are included.

Airlines and payments to them during the holiday booking process, are fundamental to allowing “Trust Fund Structures” to work smoothly and it’s completely unreasonable for the CAA to expect ATOL holders to carry further regulatory burdens because they are scared of dealing with the powerful airline lobby.

The non-regulation of airlines, when it comes to the use of customers money was the industries fundamental issue during Covid-19. It’s well documented that when Covid-19 hit, none of the major UK airlines had sufficient cash to be able to refund customers causing delays in refunds being processed which directly knocked on to the ability of OTA’s and agents to refund customers, even when trust funds were in place.

The CAA highlight “slow refunds” as a major driver for their suggested changes, but are not including airlines in their recommendations.

The CAA is looking to push all ATOL holders away from “bonding” to operating trust funds, but at the same time are greatly tightening trust fund payment terms and introducing variable ATOL fees, to allow them to reward/penalising ATOL holders with higher fees if they choose what the CAA consider higher-risk options.

The CAA are offering two types of Trust funds.

1. Total Segregation.

Here no supplier payments e.g., airlines, hotels or travel commissions, can be paid before holiday return, with the ATOL holder also having to fund all operational/advertising costs until the return date, when their margins can be released.

This requires a few fundamental changes.

o  Airline payment. A huge increase in working capital will be required to fund these, as customer monies cannot be used and unless forced by the government, it’s unlikely Airlines will change payment terms.

o  Agent Commissions. Agents instead of remitting final balances “net” of their commissions, will have to pay gross and wait an extra 8-10 weeks to receive a commission payment on the return of the customer. Again, requiring an investment of extra working capital.

o  Pipeline money. Any money held by agents will need to be held in a trust fund or segregated account, increasing administration and reducing working capital

2.  Partial Segregation.

The CAA are proposing to allow 20% of the total price of a holiday to be paid in advance to airlines, with the ATOL holder having to provide a “Bond” equal to any extra need to book flights.

o  Example. £2,000 holiday would allow £400 advance (@20%) and if flights cost £1,000 a “Bond” to cover extra £600 is required.

o  Bonds. The bond would be relatively cheap as it would be secured on money held in trust and needed primarily if the airline failed, but no market currently exists for this product.

 Variable ATOL Fees. The CAA are logically suggesting that higher risk companies or higher value bookings should pay a higher ATOL fee. However, its likely that this will mean an increase in cost, over the historic flat £2.50 fee and will give the CAA free reign to charge what they want. In reality any ATOL holder who wants to continue trading has no option but to say yes to what the CAA demands.

A cynical person would say that the only thing happening here is that the CAA are increasing their protection and reducing the likelihood of a claim on the ATOL fund. In essence, they are forcing ATOL holders to hold back further funds to refund customers for flight costs, when this would not be needed, if the CAA were able to force prompt refunds from airlines.

Why should ATOL holders take the working capital hit for this? This must be boarding on a restraint of trade issue and is likely to result in a legal challenge in the courts.

Many years ago, David Speakman (Ex Travel Counsellors) proposed a “Travel Bank” that would hold all customer payments and automatically gave suppliers access to funds once they had delivered their element of a holiday.

This has to be the right approach and airline need to be brought into line, accepting later payment when their flight seats form part of any “holiday package” sold, not just within their own holiday divisions. Only the CAA and Government can impose this, however.

The CAA’s proposed solution will simply push customers into buying cheaper “unprotected” holidays via the web or from travel companies domiciled in other European countries, not governed by the same excessive regulation that the CAA are seeking to impose on UK travel companies.

I fully support the CAA’s core aims, of speeding up customer refunds and restricting travel companies from funding their day-to-day operations from customer’s cash, since as an industry we have seen a lot of “Naked swimmers” as the Covid-19 tide has gone out.  

However, the CAA’s current proposals will just further tilt the unlevel travel playing field to an extent that only the largest OTA’s can take the working capital hit, reducing customer choice in this sector.  It will also effectively force high street agents to sell a much narrower range of bonded holidays, reducing both customer choice and the number of holidaymakers overall protected by ATOL. Neither of which should be the aim of the CAA.

This consultation is misguided and frankly highly dangerous, so please pay attention and resist its implementation.

Where will we work in the future?

Like many people, my working week has changed dramatically due to Covid-19 lockdowns.

My weekly commutes from Manchester to London, to spend 3 days a week in the offices of my various business interests have stopped and I now wonder if they ever need to start again.

We have all adapted to breaking our days into hour-long blocks and slotting in Zoom/Teams video calls to deal with specific business topics. Ironically, this has made it easier for my investments to access my time and advice, exactly when they need it, rather than when I can be in their area.

I have also found it much easier to pull together calls with the staff I need to drive a project forward, as coordinating hourly availability from people working from home seems to be 10 times easier than trying to do the same in an office environment.

Perhaps we have all got better at time management when you know the next call starts precisely in an hour and you cannot dawdle over discussions. Alternately, it may be that key staff are spending less time out of the office commuting to external meetings, now these are also being handled by video.

Homeworking as a concept is now proven and many businesses are planning a mix of home and office working, with the balance between the two often dictated by average length of staff commutes. Having a strong mix of homeworking also greatly increases the ability to recruit talent from the whole of the UK and at times international locations.

Homeworking is here to stay for businesses in general and travel in particular.

Why operate restricted 9-5 pm opening hours in high street shops when these can easily be extended by rostering home working hours, to deal with admin or customer phone/video calls?

Post Covid-19 we know customers will want more human interaction during the booking process and just as importantly pre-departure, to provide any necessary reassurance or booking amendments. However, this can now be delivered from home using video conferencing tools, which allow screen sharing and enable staff to see customers reactions to holiday pitches, improving conversion.

Destination experts can now become “National Destination Specialist”, servicing leads for a destination, in a personal manner irrespective of where the customers are located in the UK, using video conferencing. Again, it’s just as easy to do this from home than a shop location.

Homeworking however does present its own unique but common issues.

Our houses were designed as living spaces, to support our lives outside of the work environment and often do not offer dedicated office space for one person working from home, let alone two or occasionally 4 when kids home tuition is factored in.

How many Zoom calls are made from kitchens or quiet bedrooms? Not exactly ideal work environments and ones that can easily blur the lines between work and home to an uncomfortable level.

I believe that soon business will be forced by their duty of care for staff, to carry out audits on “Homeworking Spaces” and start providing grants or financial assistance to improve them.

This is why I have already invested in one start-up business focused on the space, called “WAH Solutions” (WAH = Working at Home) which is delivering pre-built “Garden Office Pods”, that offer “plug and play” offices located in employees Gardens.

However, I’m also looking at the other end of the chain, at what the offices of the future may look like?

Zoom meetings may be adequate for “pure” business meetings, but how will businesses bond their management teams or build strong relationships with suppliers and customers moving forward?

I believe that there will be many more conferences and industry forums required, with the social aspects of doing business becoming forefront of mind.

Radically and slightly off the wall, we may even see pubs further evolve. We have already seen most become “hybrid” pub/restaurants, so what’s to stop inner-city pubs also offering branded office space.

Pubs could offer branded Booths or areas in the pub, that are rented by business for their staff during the day to make Zoom calls have small internal meetings or host supplier/customer meetings. Drinks may need to be restricted to coffee during working hours, but the same spaces could be used for social activities post-work, with staff and guests able to enjoy a beer together.

If you have not yet started drafting your plans for a work environment including home working, you may find your staff moving to a business that has as this aspect of the future is both clear and here.

The office may still be needed to drive innovation, spot the next young thing and create cohesion, but working out how to do this whilst keeping those who have enjoyed working from home happy and without the massive cost of a large office, needs to be a strategic objective for travel business during the next year

The big cash squeeze

Covid has left the travel industry’s finances in a perilous state, argues Steve Endacott

In the next 12 months, the UK travel industry faces the biggest squeeze on cashflow that I have seen in my 30-year travel career.

Many companies improved cashflows in summer 2020 by issuing Refund Credit Notes (RCNs) to be utilised in summer 2021, and had hoped for a rush of new bookings as we exited Covid-19 restrictions and outbound travel restarted from May 17.

This is still broadly the roadmap, but the industry is expecting a very limited number of destinations on the government’s ‘green list’, with the mass market Spanish, Turkish and Greek volume drivers likely to be classified ‘amber’.

Travelling to ‘amber’ destinations will be expensive in terms of testing, requiring an outbound PCR or lateral flow test, followed by another lateral flow test 72 hours before returning and three PCR tests in order to use the shorter five-day test to release scheme rather than isolate for the full 10 days at home.

Even with companies offering PCR tests for £60, this still equates to an extra £280 per person in testing costs alone. Customers who are already committed to a holiday may decide to pay the extra and travel, but will customers who have not booked yet?

My view is a firm no, and I’m predicting travel in May and June will only be about 15% of 2019 levels.

Jet2holidays, which has postponed its restart until June 24, seems to agree. To me, this is sensible as it allows the operator to deal with refunds now and prepare for a peak season starting July 1. From this date, I remain hopeful that the UK population will receive a vaccination bonus and travel to most major beach destinations for the school holidays and beyond.

However, I don’t expect the government will update the May 17 traffic lights destinations until June 30, creating uncertainty for airlines and ultra-late booking conditions, which I believe will suppress flight supply down to between 50 and 60% of 2019 levels.

So although summer 2021 may still happen, Refund Credit Notes remain a noose around the neck of many businesses’ working capital, squeezing available cash.

If travel does restart, then suppliers will have to be paid and, if not, customers will need refunding. So it follows that cashflows will be hit either way. Only new bookings improve cashflow and the volume of these is under serious threat.

Low deposit schemes mean summer 2022 bookings only deliver about 20% of the cash flow benefit of a late availability sale, so even a buoyant summer 2022 does not ease the cash squeeze.

It can be assumed that working cash will be lower than normal entering the quiet winter months, and this is likely to be when travel business failures peak.

The biggest squeeze on cashflows yet to impact is being imposed by the Civil Aviation Authority (CAA) which is tightening ‘trust fund’ rules markedly, with agents’ commission no longer payable until customers return under the new ‘golden trust’ we expect to be forced on the industry.

In September, the CAA will try to force mass market tour operators like Jet2holidays and easyJet holidays into the same trust fund structure already imposed on Tui. This will cause a massive squeeze on their working capital as their tour operating divisions will not be able to pay for flights on booking, with cash only released on customer return.

The big airlines clearly have better lobbying and power than most travel companies to fight this but, legally, the CAA is forced to operate a level playing field and it’s difficult to see how such a move can be avoided.

Debit and credit card merchant acquirers are also nervous about the travel sector, with some pulling out completely and others holding on to cash for longer as a buffer against potential refunds resulting from further Covid-19 disruption.

It may not be a ‘perfect storm’, but the Covid-19 pandemic has left the travel industry’s finances in a perilous state, with many factors creating a massive squeeze on the lifeblood of business, cash!

It’s not all doom and gloom, but we have a rocky ride ahead of us over the next 12 months as we try to ride out the big cash squeeze.