Lease costs and out-of-hours service ‘key to Hays success

Extract from Steve and Ian’s Pub-cas

A reduction in lease costs and the development of an out-of-hours homeworking network will be key to ensuring Hays Travel’s expanded retail presence has a long-term future, according to former Airtours chief Steve Endacott.

Speaking to fellow travel industry veteran Ian Brooks during the first episode of a new Travel Industry Pubcast, Endacott insisted high street travel retail continued to have a future following the collapse of Thomas Cook, but must evolve to become more convenient for customers.

The demise of Thomas Cook caused significant pain for the industry but led to Hays Travel acquiring all 555 of the travel giant’s agency branches for £6 million.

Brooks, partner in Gail Kenny Executive Recruitment and a non-executive director at Arena Travel, said: “The more you look into that deal, the more you can see he [John Hays] has bought himself wriggle room.”

Endacott doubted whether all the shops will be retained with the key element being how many leases can be re-negotiated. Given the current difficulty on the high street, he predicted that Hays will end up with 350-400 outlets.

“It won’t be 550, I can guarantee that, but I think it will work for him,” predicted Endacott. “It depends who will provide the stock for him, which leads on to our second question – who is going to replace the capacity taken out by Thomas Cook?”

Brooks backed the Hays deal but questioned how much longevity there is in the high street and how long retail can work in travel.

Endacott responded: “The key thing is customer access. If you are relying on Google to recruit customers it’s too expensive, so you have to have a 30%-40% return loyalty factor and it’s quite difficult to deliver in an online world where you don’t actually control the end result experience which is the case of most OTAs.

“Looking at the cost dynamics, I think that if he can get the lease costs of the high street down, if he can potentially put a homeworking network to support those shops to make them more convenient in terms of opening hours, I think the high street has a long-term future.

“They key issue is how it manufactures its own product, to go alongside the product of Jet2 and Thomson [Tui] because we both know they will drive as much direct to their channels as they can. If they perceive the independent channels weak, they will cut commissions.

“So I don’t think independent retailers can rely completely on those products, although in certain areas you have to sell them, but they have to complement them and complement with what?

“Yes, there’s expansion in long-haul, yes there’s expansion of tailor-made, yes there’s expansion of experiential but they still need beach product and I wouldn’t be 100% relying on the only two big players at the moment replacing that stock.”

Brooks admitted to being “quite shocked” to hear Endacott promoting high street retail to online.

Endacott responded by describing homeworking as the number one model followed by OTAs and the high street.

He added that the high street must still evolve to be more convenient for the customer at a time when homeworkers are available in the evenings and for home visits.

“They don’t demand that the customer has to repeatedly walk into their shop,” he said. “So, therefore, I think there is still an evolution to go but the relationships in the shops can and will be extended as we move forward into the next generation high street retailer.”

Will cheap late deals disappear for summer 2020?

One of the key reasons for Thomas Cook’s collapse was that unlike Tui, it did not manage to create a differentiated holiday product. This left it in the commodity holiday market that was disrupted by fundamental differences in yield-management procedures between low-cost carriers and traditional tour operators.

Traditionally, tour operators received a flat fixed-price from its in-house airline across the season. For example, a flight seat to Majorca would cost £135 per person from April 1 to October 31.

Tour operators then overlaid accommodation costs and margin profiles, to create base brochure prices per hotel, which were then overlaid by relatively crude “flight supplements” to differentiate between different departure airports and times. These prices were then printed in brochures and remained relatively fixed, until the lates market, which is defined as three months before departure.

In the lates market, tour operators moved to a per flight pricing model and would move allocated on arrival and named hotel prices up/down per departure, based on how many seats they had left to sell.

Historically, tour operators sold 40% of their capacity in the lates market and of this 70% was sold at a loss, in order to hit its target of 98% load factors on its flights.

Over the years this model evolved with fluid brochure pricing being introduced, but this did not change the fundamental proposition that early brochure bookers were charged the highest price and late bookers were often rewarded with lower prices.

Low-cost carriers’ yield models are diametrically opposite, with prices starting low and moving up as buckets of four seats are sold. They aim to do their yield-management early and penalise late bookers with higher prices, to create a virtual circle of rewarding and encouraging early booking, which I have to say is a much more logical model!

OTAs have exploited this model and could often buy seats to Majorca in the early market for £75 per seat, allowing them to package these flights with the same generic hotels as the tour operator and undercut them on price.

Tui recognised this threat and quickly moved to offer differentiated hotel product that was only available from them and could not be replicated by OTAs or low-cost airline holiday divisions. However, Thomas Cook, due to its debt levels, could not invest in hotels as much and so continued to be undercut, causing its profits to collapse and its tour operator carryings to shrink.

The obvious question is why did they not simply switch to the low-cost yield model?

The answer is relatively simply. As a Plc, its directors were paid millions in annual bonuses to improve profits and the radical change in pricing policy was likely to damage short-term profits.

This is because for 40 years customers have been told to book early to get the best deal, only to see cheaper late deals. It would have taken several years of re-education and could easily have resulted in cheap prices in both early and lates markets, as competition to dispose of committed seats drove prices down.

However, with Thomas Cook gone, there is likely to be a dramatic reduction in cheap deals in the lates market moving forward because of how the Thomas Cook capacity is being replaced.

A large element is being replaced by Jet2 and easyJet which do their yield management early and try to avoid last-minute stock. It will be interesting to see if their yield teams can cope with such a massive jump in capacity this year and in the short term they may still have to dump seats in opaque package prices. However, this is likely to be done months before departure and not at the last minute.

Tui, which is adding two million seats, still operate the old tour operator yield model, but importantly no longer face competition from Thomas Cook in the late booking market. Having a lates market controlled by one player only is likely to result in a major increase in late deal prices.

So after all these years of lying, it may be the first year that the industry can honestly advise customers to book early in January in order to get the best deal, not only in terms of availability, but also price.

Is the vertically integrated tour operator model dead?

A new species of company is set to dominate the next generation of holidays, says Steve Endacott

Comments from opposition MPs in parliament and Thomas Cook pilots, saying that the “profitable” Thomas Cook airline should have been saved, even if the rest of the group collapsed, highlights how little these people understand about the traditional vertically integrated model.

I often describe vertical integration as a “funnel”. The largest part needs to be consumer access via in-house or third-party distribution, which then feeds customers to an in-house tour operation and then on to the airline.

Traditionally, tour operators have hidden as much profit as possible in the in- house airline, because it allows them to reduce TOMS VAT by over £30 million a year. This is because VAT is only paid on the non-flight element of a package holiday profit, as transportation is zero rated for VAT purposes.

This combined with the fact that the airline is guaranteed a fixed price for 100% of the seats they fly, means that in a vertically integrated group it’s impossible for the airline not to be profitable.

It is the tour operation that carries the risk management and often this can lead to losses, as they have to fill guaranteed aircraft or hotel beds in the lates market below cost.

While running Airtours/Mytravel holidays, I often found myself arguing with the airline about having to cancel poor selling routes, since unsurprisingly these were often the airline’s most profitable.

With only Tui left of the traditional vertically integrated groups, it’s interesting to look at how different the new players Jet2 and easyJet Holidays operate.

First and foremost, these are low-cost airlines, with tour operations that use less than 20% of their total seat capacity currently. Therefore, the profitability of the airline is real and not subsidised by other elements of the group.

The tour operation is the junior brother, but is seen as a benefit because it allows the airline to “dump” distressed seats in an “opaque” manner, within package holiday prices, that are not visible to competing airlines price scanners.

It also delivers earlier booking holiday customers, from different channels that complement, rather than competes with its flight-only sales and allows base load factors to be reached quicker.

Given that low-cost carriers move prices up in buckets of four seats, these early sales allow it to achieve a higher yield on average compared to routes without the support of holiday sales, I’m told.

Interestingly, the new players show no interest in owning high street shops and predominantly rely on customers coming directly to their websites via above the line brand advertising.

However, their web activity is now evolving as they develop their tour operations, with a massive increase in the level of destination, resort and hotel name bidding via Google. This is set to force Google PPC costs even higher this January and could be a real headache for online OTAs like On the Beach and Love Holidays.

So just as the dinosaurs died out to never roam the earth again, it would appear that a new species of holiday company is set to dominate the next generation of holidays. It’s going to be a fascinating few years.

Who will be the Thomas Cook collapse winners?

The impact of the Thomas Cook collapse is set to rumble for many months more, but the positioning to capture their customers has already commenced.

When ILG collapsed in the 1990’s, the clear winner was the fast moving Airtours and in 2019 Jet2holidays appear to be a mirror image, with their Northern heartland, price conscious brand and aggressive approach.

The Friday before Thomas Cook collapsed, Jet2 just happened to take the unprecedented step, of putting a 3.3m seat program on sale 18 months in advance of departure covering up to Winter 2020/21, giving a clear signal to the trade that they intend to take as much share of Thomas Cooks ex-customer base as possible.

The biggest headwind Jet2 face in the race for expansion, is their choice of fleet provider. Like main package rivals TUI and low cost competitor Ryanair,  Jet2 operate a fleet of Boeing aircraft. With the grounding of the new Boeing Max Jet continuing to run, there is a world-wide shortage of Boeing aircraft and deliveries schedules are up in the air.

However, currently only 3.81m of Jet2’s 9 million seats are sold as packages, so it’s a relatively easy move to switch more capacity into its tour operation on holiday routes and push up its flight only prices.

A similar reaction is likely from Tui, leaving only Ryanair and Easyjet as major sources of capacity for the Dynamic Packaging sector. Whether these two giants will also push up prices is less clear, but if capacity remains tight on leisure routes such as Turkey, it is a likely outcome.

Easyjet being a Airbus configured airline, has none of the Max Jet disruption issues, but is playing catch up in the package holiday market, with its tour operation re-launching on new platform in December. No volumes are being quoted, but expect cautious expansion in its first year of operations under the new management team.

Unfortunately, by the time they are ready Jet2 may be out of sight in terms of mass market holiday scale, having absorbed a lot of the market share made available by the Thomas Cook collapse.

Independent retails also look likely to be benefactors with 600 less competing shops on the high street and partner in Jet2 that will replace the holiday capacity of Thomas Cook rapidly, but has no high street chain to sell via.

Obviously, in the longer run Jet2 would like as much distribution as possible to come via its online sites and may use preferential pricing tactics to drive this, but in the short/medium term while they are expanding rapidly, they are highly unlikely to antagonise their trade partners.

The same cannot be said for the supply of seats to dynamically packaging OTA’s ,who compete head to head with Jet2’s online platform. Why would you give price parity to a competitor? Therefore, expect even higher price differences between Jet2’s website and XML supply to third parties.

OTA’s in the longer term are going to have deal with the difficult issue of reducing third party seat supply, after the recent losses of both Monarch and Thomas Cook as seat providers and the increasing price disadvantages being applied by Easyjet and Jet2 as they ramp up volume in their own tour operations.

Ryanair and Easyjet will continue to provide enough capacity in the short term, but in the longer term “Charter” partners may be needed, which will require a radical change in operating models for the ultra-low commitment OTA community.

So the question of who’s my long term airline partner has never been more crucial.

Who needs brochures?

Tui’s decision to keep brochures is like holding back an internet tide of its own creation, says Steve Endacott.

In the 1990s, when travel agents worked from black and green Viewdata terminals, brochures were an essential part of the sales process.

We used to talk about three stages for booking a holiday: dream, research, book.

The dream stage has always been a weakness of the booking journey.

Historically, it often comprised conversations with friends and families in the pub or at the school gate, although dedicated TV travel channels and programmes like Wish You Were Here also helped shape destination selection.

Customers then wandered down the high street to pick up a range of brochures to complete the research stage and most would then return to the same shop to book, even though by the late 1990s tour operators were trying to erode this by advertising direct booking numbers in brochures.

The high street lost out on ‘late’ allocation-on-arrival bookings because the customer did not need to see brochure pictures.

This allowed Teletext-fulfilled call centres with lower overheads and more-convenient opening times to dominate the late-booking sector, until it was superseded in turn by more-convenient internet booking.

An average cost of £1 per brochure and 20 brochures per booking created a high cost of sale which encouraged major tour operators to invest in online channels at the expense of shops.

The roll out of high-speed broadband in the last 10 years has also allowed Tui to develop excellent video content which, when combined with millions of detailed user reviews, makes the online experience far superior to traditional brochures.

So why, after pushing so hard to scrap brochures, has Tui reversed its position and announced it will continue to produce brochures?

I think the answer is that customers’ purchasing habits have been slower to evolve than expected and brochures still facilitate the high-street booking process in the following ways:


A key weakness of most travel websites remains that you need to know where you want to go before you can search.

Brochures offer ‘flickability’ with customers able to scan prices and pictures for a whole range of destinations quickly and effectively allowing them to help shape the ‘dream’ stage. 


Holidays are the most expensive annual purchase but end with customers leaving a shop with nothing tangible except a promise to deliver a holiday months later.

Brochures act as a psychological voucher that allows customers to show friends and family what they have purchased.

Ethical bonds

Brochures create an ethical bond between customer and shop as they remind customers of the effort the travel agent has put into assisting them with their holiday selection, which often leads them back to the shop to complete the transaction.

This is one of the reasons high street shops convert 25%-40% of customers who walk through their doors even though few book on the first visit.

Conversely, online competitor sites are only one click away and, because no emotional bond is created, customers feel free to shop around leaving conversion levels at a sub-1%.

Even given the above, Tui’s decision to continue to produce brochures feels like the action of a King Canute, trying to hold back an internet tide of their own creation. Bluntly, the better Tui’s online experience becomes the faster its shop network is going to close.

So although I see a strong future for independent agents selling complex holidays such as long haul, touring and cruising, from multiple suppliers, but it’s hard to predict such a healthy future for employees of major tour operators’ retail chains.

Does Thomas Cook’s relaunch of Airtours make sense?

The industry has seen many travel groups created by acquisition and consolidation over the years.

The big four tour operators – Thomson, First Choice, Thomas Cook, Airtours – become the big two of Tui and Thomas Cook while many independent travel businesses were hoovered up to create specialist groups like Travelopia.

Have these deals ever delivered shareholder value?

Given the recent £1.1 billion write off by Thomas Cook of its MyTravel (Airtours) acquisition, it’s clear two plus two did not even make three in this case.

The merger of Thomson and First Choice to create Tui is less clear cut, but the First Choice brand has been downweighed markedly and now only offers a relatively limited range of all-inclusive holidays.

The basic problem is that it’s hard to create differentiated hotel product and, when you do, it’s natural to want to offer this via your strongest brand which is also displayed on your aircraft and retail divisions.

This leaves little room for secondary brands – hence these start to shrivel and disappear.

Similarly, although there are demonstrable synergies from the use of central IT and finance functions within specialist groups, the process of acquisition often leads to founders leaving which, over a period of years, leads in turn to a loss of brand identity as more junior managers are employed or senior managers asked to manage multiple brands.

Specialist groups like Travelopia can work, but many have not.

Given the above, Thomas Cook’s decision to re-launch Airtours as a dynamic-packaging brand appears sensible, but at the same time challenging.

It certainly makes sense to separate out the differentiated hotel product, operated exclusively on inhouse flying, and have common Thomas Cook branding across the retail shops, airline and tour operation.

Using the Airtours’ brand to sell the commodity bed-bank hotels combined with a range of low-cost carrier seats within its own retail outlets and online could also work.

However, it will always be a difficult balancing act within the Thomas Cook retail network.

The main tour operation will not want one million dynamically packaged holidays to be sold at relatively low margins via its shop network, as happened previously, while some of its own charter-flight seats are empty.

It also won’t be easy to re-establish the Airtours’ brand in a Google-dominated distribution space against the established, technology-driven OTAs On the Beach and Love Holidays with their slick marketing.

What makes less sense is expecting independent travel agents to sell Airtours’ dynamically packaged holidays, when they can dynamically package at higher margins using their own technology and the same prices from low-cost airlines and bed banks that Airtours has access to.

Jet2Holidays’ and easyJet Holidays’ trade sales are driven by access to exclusive discounted seats from their airlines, which drive their price competitiveness and give independent agents reason to book.

Creating clearly differentiated products between brands is to be applauded, but Thomas Cook will need to be willing to make a major investment in technology and marketing for the Airtours’ relaunch to be a success.

However, as a debt-free tour operation owning historically recognised brands, they are in a better position than most to pull it off.

Is capacity out of control?

Too many holidays are on offer this summer, argues Steve Endacott

The merger of MyTravel with Thomas Cook in February 2007 was credited with triggering a wider market consolidation, being shortly followed in September 2007 by the merger of Tui Travel and First Choice.

As well as obvious synergies from cutting duplicated overheads much was made of the mergers allowing the volume of holidays in the market to be reduced, bringing capacity back in line with demand.

‘Beach boredom’ had shortened the average holiday length to 7.2 days as we saw the growth of city breaks and long-haul alternatives.

The impact is clearly shown in the Atol returns between 2007 and 2011, when the annual total of Atol-protected holidays shrank from 26.7 million to 18.5 million.

This allowed the big-two tour operators. Tui Travel (as it then was) and Thomas Cook, to control capacity in the marketplace and, most important, during the key late-booking period when losses from selling distressed late-availability holidays were markedly reduced.

However, a quick review of the 2019 Atol figures shows capacity has shot back up to 27.2 million.

The emergence of players like Jet2holidays (3.8 million), On the Beach (1.6 million), loveholidays (1.2 million) and easyJet Holidays (0.7 million) has replaced the capacity that was cut.

It should not be a surprise that the increased capacity has combined with the hangover from Brexit and last year’s hot summer to leave the beach holiday market awash with cheap, late deals.

The yield-management systems of low-cost carriers may also be causing downward pressure on prices.

These systems move the price of a flight up in ‘buckets’ of four seats depending on how the load factor is improving against a forecast booking graph.

In normal a year, prices should rise sharply towards the departure date as carriers approach a target load factor and seek to maximise the returns from remaining seats.

However, in a poor year when the demand curve is not being met prices remain low or can even reduce 12 to eight weeks before departure, just at a time when the major tour operators bring on sale their own late-availability stock.

This glut of low prices is now highly visible to customers on their laptops and phones, reducing any pressure to get holidays plans sorted as there are clearly plenty of holidays left for sale.

As I have argued previously, a glut of capacity suits a late-availability specialist like my own Teletext Holidays. But as for most online travel agents, it’s only the recent poor UK weather that has driven sufficient demand for us to benefit from the distress of tour operators and low-cost carriers.

With the expansion of easyJet Holidays in 2020 under the guidance of its ‘TUI mark II’management team, it’s hard to see the rapid increase in holiday capacity reversing.

In my opinion, capacity in the UK beach-holiday market is spiraling out of control.

Will tax losses save the Thomas Cook brand?

Steve Endacott sees a future for the oldest name in holidays

There has been much speculation about the future of the Thomas Cook brand, given the recent £1.4 billion write down of assets and first-quarter loss.

The company is clearly seeking to reduce its debt mountain, by selling some core strategic assets in the form of its airline division and potentially its Nordic business.

But what does this leave of any value? Its tour operations may end up locked into a deal for airline seats at uncompetitive prices with the buyer or need to be dramatically reshaped in order to work with fewer fixed seat allocations and more flexible flight stock bought on the fly from low-cost airline partners like easyJet, Ryanair and Jet2.

The more flexible ‘dynamic packaging’ model has the attraction of removing the need to sell holidays in the lates market at a loss, but it may also reduce Thomas Cook’s ability to operate ‘differentiated hotels’.

These hotels are normally ‘guaranteed’ and need to be matched with flight seats to maximise yield. This is easily done in destinations with large low-cost flight capacities like Mallorca, but will be much harder in smaller Greek Island destinations which have traditionally depended on charter flights.

The sale of the airline is also likely to see the tour operations shrink in size if Thomas Cook stays an independent force, which in turn is likely to lead to further high street shop closures.

However, I don’t believe Thomas Cook will stay independent.

My experience at MyTravel, which I re-joined in the weeks before its own financial meltdown occurred, made me realise how resilient major tour operators like Thomas Cook are.

Investors owed billions are unlikely to try to enforce the repayment of the debt if they believe it will cause a collapse and lead to them getting nothing back.

As long as they are not forced to put in more cash, they will wait and hope for a rescuer to come over the horizon.

Similarly, although the CAA may be tempted to take action as Thomas Cook’s overseas customers decline rapidly at the end of the summer, pulling the bond will trigger a claim on the Atol fund that could easily wipe out most of its healthy reserve. Again, there will be a natural inclination to wait for a rescuer to emerge over the winter months.

Even overseas hoteliers have little ability to force overdue payment, unless they have leverage in the form of customers in the winter who they can threaten to throw on the street at a time when Thomas Cook cannot just move them to other hotels, for example at peak Christmas dates.

So the question is who could save Thomas Cook and why?

The answer is the same as why MyTravel was saved – the accumulated tax losses.

Thomas Cook this year alone has created tax losses of £1.4 billion that can be used by a profitable player in the same sector to offset any profits they make and remove all tax payments.

However, if Thomas Cook is allowed to collapse the brand equity is destroyed and the tax losses are lost.

In the longer term, the obvious buyers for Thomas Cook are the highly-profitable Jet2holidays or easyJet Holidays. You could even see a game of chess developing similar to when the big four became the big two.

The development of easyJet Holidays would be dramatically brought forward by the acquisition of Thomas Cook’s tour operations and high street distribution, in both the UK and other European source markets like Germany.

However, would Jet2holidays sit back and allow its major competitor in one swoop to catch up on its own massively successful tour operation or would it be forced to block the move by buying Thomas Cook itself?

Just imagine Thomas Cook’s strategic strength, if had preferential access to easyJet’s flight network at a £36 per booking price advantage over other OTAs (easyJet charges OTAs a £6-per-sector API fee).

It’s also easy to see how hoteliers would be attracted to working with a tour operation with access to such enormous and flexible aircraft lift.

However, as usual in these situations, the initial buyer may be a venture capitalist firm that can see the long-term strategic play and is willing to take the short-term restructuring pain to make Thomas Cook a more attractive proposition to an even wider range of potential buyers.

This could easily include the US Booking and Expedia groups, both of which are under-represented in the European holiday markets compared to North America.

Thomas Cook may be on the ropes, but I would not count this historic UK holiday brand out any time soon.

Expand high street travel shops or shut them?

Agents should match convenience found online, says Steve Endacott

Should traditional bricks and mortar travel agents expand their number of high street travel shops or shut them?

Like many strategic questions, the answer depends on what you are selling and how cheap high street shops become as non-travel retailers abandon high streets.

Thomas Cook simply does not need as many shops. If it sells its airline arm this is likely to result in a reduction in its tour operating capacity as the number of committed seats falls and it evolves into a more flexible capacity model.

Fewer holidays to sell, equals fewer shops and hence its shop closure program. However, should the independent sector be filling any gaps created?

There is no doubt that the internet and the “always on” experience offered by smartphones is dramatically impacting our shopping experience.

Why bother heading down the high street when virtually anything you want to buy is a click away via Amazon, eBay or the recently revitalised Google Shopping channel.

Music, electronics, white goods, mobile phones, estate agents and even clothes to a lesser extent, are rapidly moving online.

This is leaving great swaths of the high street empty because high rental costs and business rates make the high street an expensive channel, compared to online sales.

This equation however, is not as simple in the travel sector, where the shear range of products online and the emotive nature of holidays provides a natural counter balance.

The average online conversion of visitors to bookers, is less than 1%, as customers on average visit 23 sites and revisit the site they do book with, three or more times before booking.

Every year the cost of generating these leads from Google increases, with this year’s inflation rate running at above 20%.

Compare this to a high street shop, where conversion of people walking through the door ranges from 15% to 30%.

Now consider a world where landlords are losing tenants at the fastest rate ever seen.

This makes it inevitable that high street rental costs are going to collapse and local governments are also likely to be forced to cut business rates in order to prop up declining high streets.

So at a time the internet is becoming more expensive, the high street is set to become more attractive.

However, with low-cost carriers like Jet2 and EasyJet set to dominate the commodity beach holiday sector via direct online sales, the high street winners are likely to be independents specialising in more complex long-haul, cruise or high-value holidays.

But with a reduced number of people walking down the high street, it’s also important for travel agent shops to evolve their customer acquisition strategies.

In my view the advent of cloud-based phone systems mean that the next generation of high street retailers should evolve to service the following functions.

• Walk-in traffic. Still a key business driver.
• Brand building. A high street presence is a great local brand driver in itself and fulfilment centre for localised advertising within social, rugby, cricket and football clubs, as well free local papers if they still exist.
• Call centres. Why not have online bookable or phone to book web sites, supported by a call centre based in the high-street shop? Look at how successful Trailfinders are.
• Homeworkers office. Explore staffing the shop with homeworkers, whom work in the shop two days a week on a rotational basis and from home the rest of the week. They can then either travel to customers home’s, book over the phone or arrange appointments in the shop, for face-to-face consultations or to handing out brochures.

Moving forward, high street agents need to be as convenient to customers as the internet and this requires changing working practices to offer longer opening times and the ability to start a holiday purchase in a shop, but complete it by phone.

So, evolution may be required, but I’d advise renegotiating rents, not shutting shops.

Comment: Are OTAs eating each other’s profits?

Tough trading extends online, says Steve Endacott

I often flippantly describe online travel agents (OTAs) as “parasites living off the misery of others”.

Ironically, this is actually a positive description of their asset-light, non-risk model, where they buy flights and seats to package into holidays.

This lack of commitment allows them to exploit drops in flight and hotel prices in a market where customer demand is weak. These lower prices attract customers, so demand gradually matches supply price.

Unlike traditional tour operators’ committed models, OTAs do not take a hit to profits from unsold seats or being forced to sell seats below cost to fill aircraft.

The pain being taken by major tour operators Tui and Thomas Cook is clear in their recent financial reporting.

Cook has clearly decided to throw the kitchen sink at this year’s financials with a £1 billion write down, increasing winter losses to an eye-watering £1.5 billion. But a deficit of 12% on summer sales shows how tough summer 2019 trading is following a hot summer in 2018 and Brexit lingering in the background.

Historically, OTAs’ profits appear to have been relatively immune to downturns in demand and UK OTA On the Beach’s recent 12% rise in winter profits to £11.9 million strikes a positive note.

However, On the Beach’s strong growth in low-cost ‘brand’ traffic, driven by growth in repeat bookings and effective above-the-line advertising campaigns, hides a worrying underlying trend.

This trend is the 20%-plus price inflation seen on most Google pay-per-click (PPC) travel terms.

As search demand has declined by 10% in line with general UK market demand, OTAs which have been brought up on continued upward growth in turnover and passenger numbers are competing even harder to maintain growth, pushing up bid prices.

The impact on profits are further inflated by having to replace low-cost SEO traffic, which naturally declines in line with demand, with more-expensive paid traffic in order to just stand still.

This is why most OTAs are currently naval gazing at their process and customer care, as customer retention and positive brand building have never been more vital to continued profit growth.

After years of summer relaxation, confident that the pain of others will balance the books against lower demand, it may be that OTAs have now joined low-cost airlines and tour operators in fearing a hot summer and a continuing Brexit hangover in the UK.