Why OTAs need to get a grip of the back end to avoid waving their customers goodbye

Last week saw a war of words break out between the alternative accommodation giant Airbnb and its more mainstream competitor Booking.com.

A recent Morgan Stanley report highlighted Booking.com’s rapid growth in the ‘alternative’ accommodation sector, leading bookings owner’s Priceline to crow about how their growth would squeeze Airbnb’s market share.

Fascinatingly, Airbnb’s response was to trumpet their back office tools for owners as the key to its future success, criticising Booking.com’s lack of investment in its own tools and resulting inconsistency of customer experience.

Airbnb issued an open challenge, that unless the major OTA’s invested at least 5% of its marketing budget into these tools, the peer-to-peer giant would win this crucial battle.

From a consumer point of view, I personally think Airbnb’s back office experience is far superior to Booking’s, with customers being put into direct contact with owners by phone or chat tools within the Airbnb app.

This creates a much easier dialogue with owners than Booking’s more traditional email route.

I’ve never been left waiting outside an Airbnb property but have several times struggled to get access to properties booked via Booking.com.

Given the importance of customer retention in controlling ever escalating Google or aggregators’ marketing costs, the UK’s beach holiday OTA community may need to take note and look at its own back office tools as a means of delivering competitor advantage.

How long before we see OTA apps offering online check-in for all low cost carriers and tracking technology to show how far away a coach is from picking up customers from their hotel to take them back to the airport?

Customers may also want to use the same app to book in resort restaurants or attractions, using consolidated consumer reviews of other like-minded UK guests, who have stayed in the same hotel previously.

Why not combine the provision of a 24-hour duty office with tools to help customers access medical assistance via virtual doctors over skype and app tools to capture medical expenses and assist with insurance claims?

The options are many and the bottom line is that when you are operating in a commodity market place, where competitors can source the same hotels at the same costs, it’s going to be a race to the bottom in terms of margin, unless brand loyalty can be created.

Ironically, in its core city hotel market Booking.com is a market leader in this art, using its higher frequency of booking, to drive stickiness via its secure retention of credit card details and clever suggestive marketing. However, in the beach sector, like most UK OTAs, it is guilty of the so-called ‘Tarmac wave’.

This is where an OTA lavishes care and attention on the booking journey and pre-departure communication, but then waves goodbye at the airport and simply hopes that the most crucial part of the purchase – the holiday itself – goes well.

In-resort experience is crucial to holiday enjoyment and this is where traditional tour operators like Tui score massively over OTA’s, with their extensive in-resort infrastructure and customer care.

In the past, concerns about principal status and triggering higher VAT liabilities have caused OTA’s to steer well clear of operating in-resort structures and consolidated third party services like Destination Care, which I invested my own cash in before it failed and was written off as being ahead of its time.

However, has that time finally arrived? Possibly, but I think it will be a while before the back end, drives the OTA car.

Booking.com grabs the cash, but will it impact sales?

Booking.com, the world’s largest OTA in terms of hotel nights sold, recent accounts highlight a major pivot in strategy, in terms of the importance of cash.

Booking.com built its business based on the “Pay at Hotel” agency model, because it believed hotels would sign up faster and give better rates to an OTA who delivered payment on arrival, compared to payment many months after departure in the case of the leisure beach market. Analyst in part, credit this stance as one of the reasons they expanded globally faster than arch rival Expedia, who primarily operate a “Merchant model” where customers pay them directly.

However, Bookings latest accounts show a marked shift towards the Merchant model with revenue jumping 53.4 percent to nearly $1.05 billion, while its agency revenue grew less than one percent to $3.54 billion.

The obvious advantage of the shift is the cash flow gained. Unlike ATOL bonded holiday revenues,  the cash does not need to be held in trust accounts and can be invested into more acquisitions or higher levels of brand advertising, to drive a virtuous circle of increased sales and cash flows.

Ironically, there also appears to be a “commission” advantage in the Merchant model with average commission being 20% compared to 18.6% for the pay at hotel model, but this may be down to mix issues, as it’s hard to see why Hotels would pay more to receive cash later.

Hoteliers reaction to the shift will clearly depend on the payment terms being offered by Booking.com under the Merchant model, but there unlikely to be better than payment of arrival and a lot likelier to be worse.

Interestingly the major European bed banks like Hotel Beds operate a very different cash flow model to gain their commercial advantage.

Bedbank’s operate “B2B2C” models, where the hotels they offer are sold via third party OTA’s who act as merchants, retaining the customers cash and only pass it to the bed bank on customer departure. The bed banks then pay most hotels 60-90 days after departure, to create a cash pot that they use to “pre-pay” and give turnover guarantees to other hotels. These “Castles”, as they are known, in return give the bed banks “Exclusive Rates” that allow them to dominate the price driven beach sector, whilst still allowing them to make higher than average margins.

Historically, this practice allowed booking.com to gain rapid entry into the leisure beach sector, because their payment terms where so much better than either the major tour operators or the bed banks.

It would appear therefore that booking.com are switching from a hotel “land grab” mode, to a brand dominance mode, where they grow faster than competitors by simple out spending them on brand awareness and  relying on superior platform technology to keep customers brand loyal.

 At the end of the day cash will always be King, but it’s how that cash is used which seems to be evolving.

 

Meta on Meta. How can it make sense?

Initially, when Google launched its “Hotel Finder” product, it fan faired how the product would allow more hotels to advertise their own direct web sites, delivering providing lower prices to customers and lower commission payments for hotels as they cut out layers of the distribution chain.

Today however, Google hotel finder continues to be dominated not only by the big OTA’s, Booking.com and Expedia, but more surprisingly by other Meta price comparison sites such as Tripadvisor and Kayak.

 So what’s with the Meta on Meta game?

 Google initially resisted allowing other meta sites to advertise on its services, as it felt that the customer friction from a “Russian Doll” booking process, where customers clicked from one site to another to another, would be highly unsatisfactory. However, as deep linking of hotel and date details improved, this friction was reduced and the benefits of offering the lowest price outweighed these concerns.

 But what’s in it for the other meta’s? The simple answer is a combination of bid arbitrage and brand halo.

 The aim is obviously to charge the meta’s own advertiser more than the meta pays Google and amazingly at times this is clearly possible. However, the longer term game clearly revolves around “Brand Halo”.

 All hotel meta’s such as Tripadvisor, Trivago and Kayak are investing millions into “above the line” TV advertising. Within this media they are generally advertising to a relatively unqualified audience, who may or may not be looking to book hotels in the near future. However, it is done not for the immediate ROI, but to build brand awareness and to introduce new bookers to the brand that then can be retained to book time and again.

 Advertising on another Meta such as Google Hotel finder, delivers 100% qualified audience of potential bookers and even if the arbitrage is negative and the initial booking is acquired at a loss, it is often a less expensive acquisition tool than above the line advertising.

 Hence, the key is customer retention and what drives this.

 For hotel meta’s its clearly the utility delivered by price comparison and the belief that one visit to the site delivers the best price for a hotel. 

 They also have the advantage over Hotel direct sites, of offering a massive range of both beach and city hotels, increasing the likelihood of a repeat purchase, which in turn gives it deeper advertising pockets, with an initially negative ROI’s being acceptable when hotel direct sites will rarely advertise this aggressively.

 The intersecting question however is which Meta site does the customer go to next year? Google hotel finder or the end Meta?

 The same dilemma applies to all Hotel OTA’s advertising on Meta’s and hence the push from beach hotel OTA’s to add extra utility by offering flights, transfers and holiday insurance during the hotel booking process. The more of these products customers buy from OTA’s, the greater the chance of building “Utility” and stickiness, over pure Meta sites that just provide hotel only price comparison.

 So at the end of the day Google is likely to be dominated by those with the highest customer retentions levels and subsequently deepest advertising pockets as it’s a deeply capitalist bidding market place.

 However, the depth of the pockets depends on both customer retention and potential upsell revenues, so don’t expect the same results across beach and city destinations as the specialist beach OTA’s have a number of advantages over their more generic hotel competitors.

 I think it will remain a fascinating battle ground over the next few years!

 

Are On the Beach creating the next Evolution of Dynamic Packaging?

On the Beach’s move into B2B distribution via independent travel agents, is a highly logical move for the UK’s leading OTA and reflects the changing regulatory environment.

 

Prior to June’s role out of the new European Package Directive, OTA’s operated under the much lighter touch “Flight Plus ATOL” arrangements and therefore avoided B2B trade distribution, because selling via third parties was not possible under flight plus and required a full ATOL licence. This required principal status and incurred higher operating costs in the form of higher Public liability insurance, duty office and compensatory framework.

 

However, under the new regulation Flight Plus has effectively been scrapped and full ATOL licence are required for both B2C and B2B distribution, so why not exploit high street distribution?

 

From OTB’s point of view, high street agents provide risk free distribution, with commission only being paid on booking, creating a known cost of customer acquisition (CPA). Contrast this with the greater risk from an ever increasing cost per click (CPC) Google advertising model and you can see the attraction, particularly when there is a clear argument that the high street attracts a different customer sector to those who book online.

 

Significantly, OTB has one of the highest online margins per booking, created by a slick booking process where customers are initially hooked by ultra-low flight prices, derived by mix and matching different low cost carrier flight option, before booking directly contracted “Recommended” hotels and integrated holiday extras such as transfers.

 

These high margins will allow OTB to pay attractive commission to the trade, whilst retaining a small element of profit to cover their administration and bonding costs. Trade distribution will never be a massive profit driver for OTB, but it could easily add a third more volume, boosting its buying power with hoteliers and potentially making it a more attractive channel for airline partners to reach high street agents.

 

From a agents perspective the key question is “Why would high street agents book OTB’s Classic Online packages, rather than packaging the same elements themselves?”

 

The answer probalby boils down to speed and risk. OTB’s booking interface is better than any B2B booking tool I have seen and is provided free of charge. It will also come with full financial protection and public liability insurance, so as long as commission are competitive, it provides a simple and fast booking platform with much reduced risk to the travel agent.

 

I am sure some travel agents will be worried about supporting a “Competitor”, but holidays will be sold via a separate B2B brand and I’m sure OTB will be providing guarantees about not using email address or mobile numbers, to remarket to these customers in the future.

 

Interestingly, it may be the low cost carriers themselves who object to OTB’s move. It is expected that Easyjet Holidays will be following Jet2 Holidays lead and launching their own trade tour operation for Summer 2019. How will they feel about competing with OTB for trade distribution, when OTB are often under cutting their prices by combing outbound Easyjet Flights with inbound Ryanair flights?

 

You can certainly imagine some friction occurring here, but conversely Easyjet may be perfectly happy to take the extra £30 a booking they earn from flight API fees on these trade sales without having any of the hassle of actually selling a holiday!

 

Adding Trade distribution is a logical step for On the Beach and could easily be a win:win for both them and trade partners, however I would not be surprised to hear some trade consortia saying “Not on my Watch”.

Will the escalating fuel cost drive capacity cuts for Summer 2019?

Fuel prices have risen by 50% since June 2017 and as airlines fuel hedges unwind, they will need to pass as much of this increased cost on to customers in the form of higher prices as possible.  However, to do this they will need to reduce supply relative  to demand, which will inevitably lead to capacity cuts.

 

As UK holiday makers know, airlines don’t price their product like most companies.

Rather than pricing each ticket based on how much it costs to fly to Majorca, with perhaps a built-in profit margin, airlines set fares based on supply and demand. It’s why a Saturday day flight is more expensive than on a Wednesday 6am departure, even though the operating cost is the same. It’s just a matter of increasing demand for less popular slots by reducing price, as long as the net result at least covers the operating cost.

Therefore, when fuel prices are low as they were in 2017, airlines look to drive the utilisation of their fixed aircraft assets by introducing more mid-week and early morning flights boosting capacity. Also, aggressively expanding airlines like Jet2 massively increased capacity with the introduction of new bases such as Stanstead.

However, when fuel prices reverse its obviously harder to remove this capacity, but if it’s not removed then its impossible for airlines to match supply and demand in order to pass on the cost increase on to a customers in the form of higher prices.

This is doubly true in a UK market place facing demand damping factors such as good UK weather, a weak pound and fears of political and business disruption because of Brexit.

The easiest solution is obviously for one or more airlines to be forced out of the market, but with the benefit of the removal of Monarch already banked, who is realistically at threat of collapse?

 

Ryanair are openly talking up the prospects of Norwegian Airways and Alitalia failing this winter, but neither of these would remove much short haul capacity from the UK market, although players like Rynair might switch capacity out of the UK to the Nordics to fill the massive gap created in the market there.

 

The logical step for UK low cost airlines is therefore to reduce capacity by scraping marginal routes or moving aircraft from short flight duration routes like Mainland Spain, to longer flight sectors such as Turkey and the Canaries. Adding one Turkey flight will utilise an aircraft for the same time as two Alicante flights, in effect halving the number of seats to be sold, assuming of course they can get enough yield from the Turkey flight to balance the books.

 

There is also an argument that airlines like Jet2 are effectively reducing the amount of flights seats in the market by selling more as package holidays. I’m not however convinced that this hold much water, as in my opinion Jet2 are just swapping capacity out of the OTA dynamic packaging market into their inhouse tour operation.

 

Ironically, the simplest route to boost demand may be for the low cost airlines to finally recognise the volume of seats filled on aircraft by the UK OTA’s and do deals to reduce their high API fees (£30 per booking) in exchange for preferential promotion within the OTA’s sites.

 

But I would suggest that wouldn’t I !!!

 

Pre-booked Sunbeds – Creative commerciality or a step to far?

I personally applaud Thomas Cooks creative commercial thinking behind identifying sun beds as another chargeable optional extra in a package holiday.

Low cost airlines first brought this phycology to the market place, by first making luggage a chargeable extra and then pre-booked flight seats. They rightly pointed out that this allows them to charge a lower price for the basic flight seat and leaves customers to choose what they want to pay for.

For example, why should a customer who takes fewer clothes via hand luggage pay the same as a customer taking a 22kg suitcase, which requires airline staff to check it in, transport it to the plane and then load/unload it. In this case there is a clear cost saving that the airline can pass on to reward hand luggage only customers.

Pre-booked seats, when it was first introduced, was more controversial as there is minimal extra cost to implement this and most airlines already offered the service free of charge to its customers, who expected to be able to pre-book seats next to each other. Supposed “Full Service” airlines such as British Airways initially resisted such innovations, preferring to sell on the basis of “Differentiated Service”, but after a number of years of losing ground eventually followed suit.

Therefore, you can only applaud Thomas Cook for becoming the “Easyjet” of the package holiday world and evolving its product offering to give customers the option of paying to pre-book the best sun beds. Just like Easyjet’s “Speedy boarding” service, this not only is a valuable service to some customers, it also provides a degree of “show off ability” that they are smart enough to pre-book and can afford to do so. A few seasons of “sun bed” envy will soon see the uptake of this service soar.

The subtle down side of Thomas Cook launching this policy, is that it does allow its major competitor Tui to take the moral high ground over its “differentiated” holiday products, where I am sure it will claim sun beds are so plentiful that there is no need to pay extra to pre-book. However, for me this has echoes of British Airways stance and is unlikely to have any real impact in a world where customer choice, is just as “Customer Centric” as full service options that cost more.

This year, Turkey is not just for Christmas.

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.

Mobile is fragmenting the OTA booking process and re-shaping their basic infrastructure.

For most online player’s, mobile represents more than 50% of their traffic, but has a much lower conversion than its desktop cousin. It’s no surprise therefore, that a “Mobile First” approach has become the key focus for most OTA’s with literally 1,000’s of A/B tests constantly being applied to try to find the ultimate “User Interface” (UX) for mobile sites.

The original focus of the industry was on “Responsive” sites, that optimised the desktop journey to represent it better on mobile devices. Quickly, the UX guys realised that the “Friction points” on a hand-held device from “big finger “clumsiness issues, required different solutions to mouse driven desktop interfaces. However, the “Real Mobile” difference, is the very limited time customers view their mobile devices at one time and the development of what the marketers call “Mobile Moments”. This means that the mobile journey must be much faster and to achieve this simpler.

The latest movement in UX is focusing on “Removing friction” in the booking journey. In laymen’s terms, this means understanding the users’ intent and ensuring that the experience provided is exactly what the user wants providing clear actions, in some respect this could be perceived as “dumbing” down the booking journey by removing any possible distractions. Just have a look at how different the “Booking.com” desktop and mobile sites are. On the mobile site, filters are hidden and once a customer is in the booking funnel, any distraction from the key goal e.g. book a hotel, has been removed.

The result is that ancillary sales such as car hire, transfers and insurance, are being shunted to a post booking pitches via email or clever “Remarketing”, using cookies that allow highly targeted “post booking” advertising of ancillaries. This “two stage” approach is facilitated by getting customers to downloading the “mobile App”, as even though many customers forget they have the app on the phone, it allows much more effective push marketing and links to content rich post sale processes. What is dressed up as customer service by companies like booking.com and Airbnb, is highly profitable in-resort revenue, relating to local excursions, transport options or dinning out. These allow them to maximize revenues once a customer has been acquired, but in a two-stage booking process. They would never interrupt their mobile booking flows with these options, but once they have the app downloaded they can easily become the customers “pocket passport” and sale a whole range of “ancillary” products by using both geo location and time sensitive metrics.

Other companies have adopted similar processes, but may become unstuck due to their dependency on email as the secondary customer contract strategy. As GDPR comes into effect next

year, travel companies will be able to email customers about their booking as part of legitimate interests, however it’s still unclear whether these emails can provide a marketing up-sell message in addition. The line between allowable customer service follow up and the sale of new products, looks blurred and grey to me. For example, is it customer service to offer a transfer to customers who have brought a flight or hotel from you or a new sale they have not opted into? I would argue it’s fine, but I’m sure somebody may soon object.

Speed is also a key in a factor in a “mobile moments” environment and multiple layers of “caching” are a fundamental requirement of a mobile site. Slimed down content pages driven by AMP or price caching to drive the speed of results pages are now common. Again, compromise is required and here it is the absorption of price increases during the jump from cache to live, as not absorbing reduces conversion by up to 60%.

The ease of linking between mobile and desktop to allow a booking to be started in a “moment”, but to be completed at leisure on a desktop is key. Currently the only realistic method of doing this is to get the customer to login, which is tough in the travel environment where customers are promiscuous and on average visit 23 sites before booking. Easy login tools using Facebook etc. have helped, as do high levels of repeat booking customers, but this is a hard one to crack and will be a massive advantage to the travel company that gets this right.

OTA’s are also taking a good look at payment options and how these can be simplified, whilst at the same time pushing customers to the cheapest merchant clearing option. From January 2018, the industry will no longer be able to charge the global 2% surcharge for booking with a credit card, compared to a debit card. Logically, most customer will opt for the greater protection and better payment terms offered by booking via their credit cards. Many OTA’s already have plans centering around flexible deposits and payment terms only available for customers paying via debit card, but these tend to be complex and conflict with the requirement to simplify the mobile booking journey. Again, I think we may see a two-stage process with deposits being taken in the simplest way possible and any complexities being aimed at the balance payment process.

The key conclusion from this article is that Mobile is forcing not only a shift in booking flow but also a fundament review of booking process and the infrastructure supporting OTA’s, with caching and two staged booking process soon to become the norm. Well it would be boring if the rules didn’t keep changing in my view!

Easyjet Holidays trade launch and a further evolution of dynamic packaging in response to the European Travel Directive implementation.

Travel Agents quickly adapted to the dynamic package (DP) revolution, developing their own systems or buying relatively cheap pre-built Dynamic packaging platforms, that allowed them to combine low cost carrier seats with multiple bed bank XML feeds.

The initial DP battle was all about “Price and Range”, with agents looking to have the biggest range of hotels and the most suppliers per hotel, to ensure they could always offer the cheapest price. Many smaller travel agents and OTA’s have never moved past this “Range” is everything model.

However, over time, bigger OTA’s like On the Beach have consolidated consumer demand into a much smaller range of “Recommended Hotels”, so that they have enough volume to justify contracting the hotels directly via an in house buying team. This in turn yields lower rates and/or higher margins, which has allowed them to advertise these hotels harder and create a virtuous circle of growth, with 65% of all sales going into directly contracted product and expanding sales over all.

The introduction of the European Package directive, which comes into force in June 2018, effectively bans “Flight Plus” ATOL’s and will force all UK Dynamic Packaging companies to move from their current status as “Agent” of the Hotel to full “Principal” status.

We are told by legal experts, that this will not affect the VAT status, keeping DP agents out of the extra £20 per passenger cost imposed by UK TOMS VAT, however there is no avoiding the extra-legal responsibilities that principal status gives.

As “Principals” each agent will be responsible for implementing their own Health and Safety checking procedure and have at least one person in the company trained and responsible for implementing their policy.

In reality, H&S is a relatively low cost issue as there are a number of independent industry experts, offering off the shelf “Self-Assessment” systems that can provide the required protection. In my experience, it is very difficult for DP agents with relatively scattered sales, across 1,000’s of hotels, to actually influence the H&S implementation of an individual hotel. However, it is vital to identify any high-risk properties and to drop them immediately. In a world where you have 100’s of alternatives to offer your customers, not doing so is reckless and potential commercial suicide. Agents should also be warned, that the worst possible outcome is to implement a H&S policy and not follow it 100%, as this ratchets up the criminal liabilities of the management of the business.

In my opinion the biggest issue facing agents when they become “Principals” is the cost of Public Liability Insurance.

Currently, either customers or more beneficially the ambulance Chasing” lawyers powering the wave of “Sickness” claims sweeping the industry, do not bother with DP Agents who are acting as the agent of the hotel, as they cannot effectively sue them in the UK and would have to take cases to the hotels home country.

However, from June 2018, DP agents will become UK principals allowing customer to sue them in the UK for any accidents or sickness issues, which is obviously a major concern for the insurance companies providing Public Liability quotes. Currently, most agents have just extended their current policies up the change of law date in June 2018, as Insurers simply will not quote yet or are asking for up to tenfold increases in premiums.

I personally expect that the cost of Public liability insurance will quickly stabilize and reduce as claims histories under the new Principal status are understood. However, the need to reduce Public liability cost may force agents to cut the number of bed bank suppliers based on the H&S policies and public liability indemnities that each supplier is willing to give. This is because these “pass on” indemnities will have a major influence on the agents own public liability costs.

Conversely, not having a bed bank provider to pass on Public liability costs may make the benefit of direct contracting less attractive where passenger volumes are lower in the major OTA’s, although I expect this impact to me minimal.

It is also likely that DP agents will ask the question “Why have 1,000’s of hotels on sale, that we have not sold in the last year? as doing so increases costs.

Chuck into the mix, the need to have a 24-hour duty office and emergency procedure training for all senior management and you quickly get a strong case for consolidation of product supply.

Therefore, within the next two years, I therefore expect all major consortia such as TTNG, Advantage, Global, Hays Travel etc. to be powering not just part of their agents DP operations, but 100% with there also being an increase in sales for Low cost carriers holiday operations.

Jet2 Holidays have lead the rush to replace the supply of “Standard” beach holidays to the independent travel agent sector, as both TUI and more recently Thomas Cook, abandoned the “Commodity” beach holiday market, in favor “Differentiated hotels”. However, the appointment of Johan Lundgren, the Ex Tui Boss, as Chief Executive of Easyjet must spell a major move by Easyjet into the Holiday sector.

I have previously been critical in articles of Easyjet insistence of finding outsourced partners to run their holiday division, but believe that given Johan’s vast experience in the holiday sector, he will quickly move the holiday operation in house and launch a major program to the UK Travel agent community in time for Summer 2019. I may be wrong but I willing to take some large wagers if anybody but Johan is willing to make them!!!

Focusing on service to boost brand

I must confess to be a “Brand” convert, believing nothing is more important than building brand traffic to reduce ever increasing Google advertising cost and its nice to be Chairman of a brand like Teletext Holidays, which I’ve interacted with an for over 25 years now.

Teletext is lucky to enjoy unprompted brand recognition levels of 40%, which puts it on a par with UK travel giants such as TUI, Thomas Cook and Expedia. This alone delivers significant volumes of direct brand traffic via SEO and PPC channels, reducing average customer acquisition costs compared to other OTA players such as Travel Republic, On the Beach and Love Holidays.

Unfortunately, our customer “Consideration” is much lower as many customers lost touch with Teletext when it ceased to power the pages behind their TV and moved fully online. We are obviously addressing this with above the line TV advertising and sponsorship deals such as the recently announced tie up with newly promoted Sheffield United (Another historic giant on the rise).

Legacy brands such as Teletext Holidays also offer a key advantage that customers already know what the brand stands for. Extensive research shows that customers view Teletext as a “late deal” offer site for beach holidays booked by phone.

To offer the “by phone” service we outsource call fulfilment to Truly Travels Indian based call centre, at a considerably reduced cost versus an equivalent sized UK call centre. Conversion levels are extremely healthy compared to any UK call centre, and our ability to switch and directionally sell products means we have enjoyed strong margin growth, however the NPS scores were not at an acceptable level when I joined and have been a KPI that we have been looking working hard to improve.

It’s my belief that in today’s world of social media and review scores, focusing on the customers that do not book with you has never been more important as word of mouth and review scores can kill or make a brand. However, like many call centres our metrics and focus was primarily on conversion levels and profitability per call alone.

In order to find a cost effective solution to this problem we looked towards our sister technology business Zen3, and worked with them on the development of their Sayint Speech to Text system which has revolutionised our approach.

Sayint allows us to record every inbound and outbound call into the call centre and then translate these in too written words, so that they can be data mined using the latest big data AI (Artificial Intelligence) algorithms.

Sayint has allowed us to create “Sentiment” algorithms weighting basic factors such as call length, hold times, silences etc. and then overlay them with scoring based on the presence of both positive and negative phrases. Some examples of negatives are phrases such as “Can you repeat that, pardon, that’s more expensive, I don’t want that” and phrases like “Can I talk to your manager”. Over a period of time we have built algorithms that we use to automatically rate a call, in terms of customers satisfaction levels.

These allow us to generate a ranking by agent and an understanding of which agents are scoring well for service whether the customer books or not. The correlation between top seller and generator of highest customer satisfaction over all is often not what you may expect. The tool also allows managers to walk through calls with an agent, using drill down tools that allow them to enter the written conversational record where that negative phrase occurred, so they can then listen to that exact section of the call and coach a better approach.

This has allowed us to focus management review and training precisely where it was needed, which in turn has increased the average satisfaction levels on non-booking calls by 26%, as well as increasing call centre conversion by 15%.

It is however the improvement in satisfaction levels on non-booking calls that Teletext continues to focus on because this is both where its ability to increase profits lies and the biggest numerical influence on its average review scores in sites like Trust Pilot and Feefo. Good scores in these areas in my opinion make customers more likely to click on your brand adverts when they see them or book with you if they are looking for that third party reassurance.

Sayint also has allowed Truly to reduce its call audit team from 10 to 4 whilst increasing the volume of audited calls by 400%, by being able to accelerate the speed at which keywords in booking calls can be found.

Like most large call centres, I know we have and continue to have quality issues to deal with due to a relatively high staff turnover, but at least management now have a tool in Sayint that gives them the measurability and visibility to force the required action to make improvements.