A few weeks ago, I was highly pessimistic about travel’s outlook for Summer 23, but the Governments £100 billion energy price cap intervention, will make a massive difference to travel prospects in the short term.

 UK households saw a 54% increase in energy bills on the 1st of April as the energy cap for an average house was raised to £1,971 per annum and faced a further 80% increase on the 1st of Oct, and yet another 52% increase to £5,549 on Jan 1st 2022, just as travel hoped to move into its peak holiday booking period.

 Prior to the energy cap’s introduction, a massive 8.9m of the UK’s population was predicted to move into fuel poverty where they must make decisions between “eating and heating”. A total of 25m households were forecast to have virtually all their disposable income for non-essential luxuries eroded a few weeks ago, I was highly pessimistic about travels outlook for Summer 23, but the Governments £100 billion energy price cap intervention, will make a massive difference to travels prospects in the short term. 

UK households saw a 54% increase in energy bills on the 1st of April as the energy cap for an average house was raised to £1,971 per annum and faced a further 80% increase on the 1st of Oct, and yet another 52% increase to £5,549 on Jan 1st 2022, just as travel hoped to move into its peak holiday booking period.

Prior to the energy cap’s introduction, a massive 8.9m of the UK’s population were predicted to move into fuel poverty where they must make decisions between “eating and heating”. A total of 25m households were forecast to have virtually all their disposable income for non-essential luxuries eroded to zero, with most quickly running down any savings they had.

I love the optimism of the travel industry, but you’d have to be a complete ostrich with your head in the sand not to realise that the travel sector, like the hospitality and hairdressing industries, were all heading towards an “Armageddon” situation, given the weakness of businesses balance sheets post the massive Covid-19 disruption, that we are only just emerging from.

The Government’s intervention is massively beneficial to the travel sector, as many customers will still have short-term disposable income to spend on a long overdue overseas holiday before the true impact of the recession is felt in the UK and therefore this should save the Summer 23 early booking market.

However, the industry must still remember that fuel prices have doubled in the last year, which will greatly impact the winter “second” holiday market as two holidays a year, become a luxury that only the “haves” can afford.  

Whether “Armageddon” has been avoided or just postponed, really depends on how effective the Government is in the next 18 months in terms of resolving the energy crisis, via either ramping up gas exploration, nuclear power, or solar/wind generation, as a £50billion a year price cap is simply not sustainable. 

Inflation is like a stealth tax that most UK households are aware of, but assume they can counterbalance with wage demands. It, therefore, has a much slower impact than interest rate hikes, which potentially make mortgages unaffordable.

Unfortunately, inflation is currently at 10.9% and the most effective historically control has been increasing interest rates, which immediately filter into mortgage rate increases. However, the Government needs to boost the economic output, which means that it is unlikely to allow interest rates will rise above 5-6% in the next few years, as this could easily create a house price collapse and massively impact consumer confidence.

The travel industry’s short-term challenge will be passing on the substantial holiday price rises required to offset dramatically higher aviation fuel prices, which are further exaggerated as aviation fuel is purchased in dollars, at a time when the pound is at an all-time low of 1.15. This combined with the hotel price increases as they seek to recover increased operating costs is expected to cause a 15% year-on-year price inflation in holidays.

As previously outlined in other blogs, this will create a market divided between early booking “haves” and a dramatically weaker late booking market where the “have nots”, simply cannot afford to grab those last-minute bargains.

The jury may be out about the impact of the energy crisis on travel, but caution is a sensible short-term option. Here are my personal top tips, for companies selling short-haul beach holidays, as part of their mix.

• Stop flogging a “Dead Horse”. If your business has a debt mountain that is going to take more than 3 years to pay off, consider “popping” the Company and walking away, or if possible, launch a “Phoenix from the Ashes”, but make sure you protect customer cash as a priority if this is your intention. I know from personal painful experience, that at times, soldiering on is not the best option.

• Cut overheads. 

• o Location. Highstreet properties with a rateable value of £15k or less, now do not pay business rates, dramatically reducing operating costs. Few of these shops are on mainstream high streets and therefore require local community outreach and social media campaigns to drive sufficient traffic either in person or by phone.  
• o Staff costs. Covid-19 removed most of the “fat” from travel companies, so any further cuts will be highly painful and personal. It’s time to let those senior people go and be prepared to roll up their sleeves. get involved and invest in junior staff to make up the deficit.
• o Risk. Switch to selling third-party packages, which carry less re-book and ATOL risk, at a time when further travel disruption is likely.

• Invest in community outreach. Avoid the easy, but expensive Google route and invest in low-cost branding opportunities in local communities’ projects such as sponsoring the kits of junior rugby or football teams. Don’t be afraid to market directly to potential customers via these groups “WhatsApp groups”. Charity starts at home, but so does local marketing and if you’re smart both are tax deductible.

• Incorporate homeworking into your business model. This allows both lower salaries and increased opening hours.

• Increase ancillary income. Every business needs to “wring out” every pound of income from each lead generated. 

The future may not be bright, but as in any crisis., those who evolve and adapt will be the winners. Don’t put your head in the sand and instead create a prosperity plan, that acknowledges and accepts the risks the future poses. Opportunity knocks!

When low-cost carriers entered the travel scene in the mid-1990s, they focused on operational efficiency by flying high-frequency short durations city routes. However, as they grew, they realised that it was easier to maximise aircraft flight hours by incorporating beach holiday destinations, such as the Canaries with their longer flight durations into their programs.

This led to the dynamic packaging revolution and the creation of low-cost tour operations like Jet2 Holidays, which over the last 15 years has destroyed the traditional charter-based tour operation model, with only a weakened Tui Holidays left remaining.

Low-cost carrier’s yield models diametrically opposed those of charter operations, with seats discounted early to boost load factors, rather than dumped at the last minute. However, in recent years it’s the “hook and add” yield model that really dominates low-cost flight sales.

Initially, Low-cost carriers introduced a “First come seating process” to force customers to arrive early at their low-cost but remote departure gates. However, they quickly realised that they could charge for the privilege and the first “Add on” was created in the form of paid-for “Priority/Speedy boarding pass”.

As airline booking technology advanced, this morphed into charging differential prices for different seats on the aircraft and today this is a highly fluid algorithm, based on historic demand for those seats on a route-by-route basis.

The post-Covid-19 restart issues of airports and the difficulty of checking hold luggage, has been a massive bonanza for airlines like Ryanair, who not only charge £30 a head to book front row quick exit seats but add a further £26-£30 to book priority boarding, which allows 2 items of luggage which is often sufficient for a short holiday.

Recent industry statistics show that flight “Extras” now represent 40% or more of the average flight fare charged by some low-cost carriers.

Price comparison sites and Google, make it easy for customers to click between sites to compare the seat prices of different airlines. However, research shows that 80% of customers only compare the lead flight prices of airlines, assuming most airlines charge the same for pre-booked seats, luggage, and speedy boarding extras. They are clearly wrong and Ryanair seems to have mastered the low-price “hook and add” methodology better than most.

To be fair, I am not aware of any customers complaining about this “Add what you need approach” and not surprisingly other travel sectors are now joining in.

Airports now charge a £5.00 drop-off and pick-up fee to access the airport by taxi or car, whilst charging customers to bypass the worst of their inefficiencies with a £5.00 fast track security or passport control fee. The income from these fees must now be close to overtaking the landing fees they charge to airlines, but customers have accepted it.

Tour operators have been relatively slow to adapt this extra’s model, but many years ago did remove “transfers” from the basic holiday price, on the basis that it allowed customers a choice of continuing to be herded onto transfer buses or to book private taxi transfers.

They also operate their own price tricks such as “Free kids”. In the small print, it says that these do not count towards “occupancy” in self-catering rooms, allowing them to in effectively recover the cost of the accommodation used by the “Free Kids”.

Hotels have always charged different amounts for sea views or larger rooms, but have now joined the game by putting bookable double sun beds and “Cabanas”, in the best spots by the pool. You could soon find a booking tool in hotel rooms, that saves the 7 am alarm call to get your towel on a lounger, by making them all bookable for a fee the night before.

So, what could be next in this “Hook and add” game?

Could airlines sell standard weight tickets and introduce “Super Scales” at checking to measure not just the weight of the luggage, but the size of the humans they are transporting?

If Michael O’Leary is willing to consider charging £1.00 to use the toilets on board his flights, he could easily charge a “Super Size Supplement” to cover the fuel cost of flying larger customers!

The hook and add-yield model will only continue to get more sophisticated as it will be a brave airline that bucks the trend and reverts to all-inclusive flight pricing.

However, in the holiday sector, Jet2 Holidays have bucked the trend by including 23kg of luggage and transfers as part of their ultimate holiday package, so it’s clear that even in this price-conscious sector product differentiation can allow a premium to be charged.

Who’s right and who’s wrong will only emerge over time, but even though I hate to admit it, so far Ryanair does seem to be a consistent winner.

Rampant UK inflation at 9.4% will severely hit the disposable income of families and lower income groups, which are still recovering from reduced income during Covid-19.

The Covid-19 outbreak saw average household savings rise sharply due to a reduction in discretionary spending on luxuries such as holidays, with debt levels remaining static. However, this was not the case for lower-income families who ran down savings, creating a market where the “Haves” have more disposable income than ever, and “Have Nots” simply cannot afford to travel.

The travel industry has seen the impact of this in Summer 22, with the “Haves” spending on holidays increasing by 15% as they chose more expensive hotels and longer duration holidays. However, the “bargain-driven” late booking market has been relatively weak given its higher dependence on the “Have Nots”, who only book when they know they have enough money to buy the holiday and credit card capacity to cover their holiday spending money.

Summer 2023 is likely to get even more difficult with inflation likely to remain high and unless interest rates are increased forcing up mortgage costs, sterling will remain weak against the Euro and Dollar, pushing up holiday prices.

With aviation, fuel prices also surging and only Ryanair hedged at low rates for 2023, airlines must push up flight costs or face reduced profits. Combine, this with increased hotel operating costs and it’s likely that holiday prices will have to increase by 10-15% just to stand still.

This price increase may be paid by the “Have’s” whose pent-up holiday demand should drive decent early bookings in January 2023, as holiday booking patterns return to normal. However, without the large number of deferred holidays that boosted early load factors for Summer 2022, the year-on-year comparison stats will look poor against artificially high 2022 comparators.

The true pain will again be felt in the lates market.

Low-cost airline yield programs are based on low early prices, with flight prices increasing in increments as load factors improve, with late bookers facing higher prices to encourage early booking. However, what happens when they cannot shift these late seats at high prices?

Jet2 has always “dumped” unwanted seats into heavily discounted but opaque “Package Holidays” as an alternative way of managing yield, however now Easyjet are following this lead which could be bad news for OTA’s.

Historically, OTA’s growth has been driven by access to all airline seats on a price parity basis, but as the low-cost carriers in house tour operations grow, they are now facing competitors with access to cheaper flight seats. Ironically, Ryanair and their low-priced flight seats are the key weapon in the OTA’s defence if their shareholders allow them to take the commercial risk of selling such a hostile partner, as demonstrated during the Covid-19 refund chaos.

The combination of weakened demand in the lates market, as economic pressure removes millions of late bookings “Have nots” and a temptation for low-cost carriers to dump seats as packages could create a high volume but low-priced “lates” market. This could provide a bonanza for independent agents and home workers, whilst undermining the ability of OTA’s to compete potentially reshaping holiday distribution yet again.

There are few constants in the UK outbound holiday market and it’s clear that Easyjet Holidays are set for rapid growth as they play catch up with the much larger Jet2 Holidays, but how this growth impacts holiday sales of other trade partners will be fascinating to watch.

The consumer protection scheme needs to move from ‘financial protection’ to ‘holiday protection’, argues Steve Endacott

The CAA’s ATOL bonding scheme was created in 1973 when the popularity of overseas holidays was increasing. The initial aim was to prevent fraudulent companies from selling holidays that did not exist and to create a fund to pay for the repatriation of customers stranded overseas if a holiday company collapsed.

The financial protection element was only introduced later, after the collapse of Clarksons Travel Group in 1974 leaving 100,000 customers with bookings without a refund.

However, the introduction of Section 75 of the 1974 Consumer Credit Card changed the landscape, making an ATOL holder’s credit-card clearer liable for repaying any monies paid on credit cards for holidays not delivered.

Ever since, the CAA and Abta have passed off as much liability as possible in a collapse, in effect making the merchant clearer a ‘shadow’ bonder.

This liability made travel businesses higher risk for clearers. But the collapse of Monarch and Thomas Cook, combined with the debt mountains created during Covid-19, has led to a ramping up of travel to a high-risk sector with some clearers withdrawing or drastically reducing their exposure to the sector.

The consequence is both an increase in clearing costs and in the amount of monies held by merchant clearers.

A second problem of the current ATOL scheme is that it creates an uneven playing field, as online accommodation players and airlines remain unregulated.

They don’t have to pay the £2.50 per passenger ATOL Protection Contribution (APC) on bookings and don’t have to provide bonds or tie up working capital in trust funds, giving them a significant cost advantage.

Customers shop around looking for the cheapest deal and seem happy to financially protect themselves by booking on credit cards.

So, what is the value of Atol?

 Why should the industry continue to pay £2.50 per passenger if customers don’t value the financial protection element and the CAA repatriates all stranded holidaymakers during a collapse, irrespective of whether they have paid the APC?

ATOL reform: Protect the holiday

The ATOL scheme could still be a valuable tool for the traditional travel industry if tweaked a little.

When a customer buys a holiday, they are paying a large amount of money for a promise that the holiday will be delivered at a date in the future and receive an ATOL receipt, which promises a refund in the case of failure.

I believe that instead of focusing on financial protection, the Atol scheme should offer a guarantee that ‘Your holiday will always go ahead’ if an ATOL holder fails.

This would require some key changes.

1. Central data storage of all Atol holidays booked

If a company collapses, the CAA needs to move quickly to arrange alternative flights home and rebook future flights, but they are often left with poor data and no expert staff capable of making large volumes of holiday amendments.

This leads to a situation where the easiest route is just to get people home and cancel all future bookings, disrupting many holiday plans.

Yet today all travel companies have electronic back offices and can provide booking handoffs via APIs that could be used to create a central, live Atol registry of all bookings. This could be implemented by travel technology firms in months as it’s a key element of their day-to-day work.

2. Rebooking partners

The CAA cannot afford to have expert staff sitting around doing nothing so rebooking needs to be outsourced to a panel of partners. I estimate this would cost around 3% of the original booking, as the agent would have both a high volume of bookings and no advertising costs.

3. All dynamic packaging flights must be booked with virtual cards

The major OTAs protected themselves during the Monarch and Thomas Cook collapses because they had booked flights on virtual cards, which at the press of a button could create chargebacks against the airlines’ merchant clearer.

This moves the flight risk back to the airline’s merchant clearer and means the airline starts paying for ‘shadow bonding’ costs.

4. Insurance

The CAA may wish to self-insure once the fund reaches an acceptable level. However, initially, it would seem sensible to insure both the 3% rebooking cost and the cost of rebooking flights, which often cost 50% more than the original flight as carriers boost prices following a collapse.

Tour operators versus dynamic packaging.

The above would operate effectively for dynamic packages as the original flights will have been paid for.

In the case of tour operators with in-house airlines, the cost would be much greater as new flights would have to be secured.

However, in the modern world where virtually all destinations are served by multiple low-cost carriers, there would normally be sufficient capacity or airlines willing to replace the flight schedule. This may require the CAA to have short-term rights over a collapsed airline’s airport slots.

The CAA has said it’s not the ‘risk’ of failure that varies greatly in our highly competitive sector, but the ‘impact’ of a failure.

But the collapse of Thomas Cook, which wiped out the Atol fund, proved the bigger a company and the bigger its in-house airline, the bigger risk it represents.

The CAA, therefore, needs to move away from a flat £2.50 APC as soon as possible and create impact-based rates with companies which have higher costs, if they fail, paying higher premiums. This may be because they have an airline or simply sell higher-value holidays.

This is no different from any insurance-based scheme. In the case of dynamic packages, nothing is lost except the rebooking cost, hence these would carry a low premium. Tour operators would need to pay more.

The value of the ATOL brand

The ATOL brand has been around for 50 years and, even with its faults, the Atol logo provides reassurance and is one of the reasons many customers still book ‘packages’ rather than buying components online.

If we could enhance the proposition to ‘Holiday Protection’ with a guarantee that a holiday would still go ahead if an Atol member fails (excluding exceptional circumstances), we would create a clear differentiation from component booking.

Combine this with the experience customers had during Covid, with Atol holders rebooking holidays many times at no extra cost, then you have a powerful reason for customers to book Atol-protected packages.

The CAA could then spend more of the ATOL levy on funding advertising, pushing this new, stronger message.

To make any of the above happen, we need open and honest debate between the major players and not paper-based responses taking months to collect and that produces no clear outcome.

However, consultation is needed and needed fast, as the current ATOL scheme is in danger of sleepwalking into being a bureaucratic burden that adds no meaningful value to the customer.

The consumer protection scheme needs to move from ‘financial protection’ to ‘holiday protection’, argues Steve Endacott

The CAA’s ATOL bonding scheme was created in 1973 when the popularity of overseas holidays was increasing. The initial aim was to prevent fraudulent companies from selling holidays that did not exist and to create a fund to pay for the repatriation of customers stranded overseas if a holiday company collapsed.

The financial protection element was only introduced later, after the collapse of Clarksons Travel Group in 1974 leaving 100,000 customers with bookings without a refund.

However, the introduction of Section 75 of the 1974 Consumer Credit Card changed the landscape, making an ATOL holder’s credit-card clearer liable for repaying any monies paid on credit cards for holidays not delivered.

Ever since, the CAA and Abta have passed off as much liability as possible in a collapse, in effect making the merchant clearer a ‘shadow’ bonder.

This liability made travel businesses higher risk for clearers. But the collapse of Monarch and Thomas Cook, combined with the debt mountains created during Covid-19, has led to a ramping up of travel to a high-risk sector with some clearers withdrawing or drastically reducing their exposure to the sector.

The consequence is both an increase in clearing costs and in the amount of monies held by merchant clearers.

A second problem of the current ATOL scheme is that it creates an uneven playing field, as online accommodation players and airlines remain unregulated.

They don’t have to pay the £2.50 per passenger ATOL Protection Contribution (APC) on bookings and don’t have to provide bonds or tie up working capital in trust funds, giving them a significant cost advantage.

Customers shop around looking for the cheapest deal and seem happy to financially protect themselves by booking on credit cards.

So, what is the value of Atol?

 Why should the industry continue to pay £2.50 per passenger if customers don’t value the financial protection element and the CAA repatriates all stranded holidaymakers during a collapse, irrespective of whether they have paid the APC?

ATOL reform: Protect the holiday

The ATOL scheme could still be a valuable tool for the traditional travel industry if tweaked a little.

When a customer buys a holiday, they are paying a large amount of money for a promise that the holiday will be delivered at a date in the future and receive an ATOL receipt, which promises a refund in the case of failure.

I believe that instead of focusing on financial protection, the Atol scheme should offer a guarantee that ‘Your holiday will always go ahead’ if an ATOL holder fails.

This would require some key changes.

1. Central data storage of all Atol holidays booked

If a company collapses, the CAA needs to move quickly to arrange alternative flights home and rebook future flights, but they are often left with poor data and no expert staff capable of making large volumes of holiday amendments.

This leads to a situation where the easiest route is just to get people home and cancel all future bookings, disrupting many holiday plans.

Yet today all travel companies have electronic back offices and can provide booking handoffs via APIs that could be used to create a central, live Atol registry of all bookings. This could be implemented by travel technology firms in months as it’s a key element of their day-to-day work.

2. Rebooking partners

The CAA cannot afford to have expert staff sitting around doing nothing so rebooking needs to be outsourced to a panel of partners. I estimate this would cost around 3% of the original booking, as the agent would have both a high volume of bookings and no advertising costs.

3. All dynamic packaging flights must be booked with virtual cards

The major OTAs protected themselves during the Monarch and Thomas Cook collapses because they had booked flights on virtual cards, which at the press of a button could create chargebacks against the airlines’ merchant clearer.

This moves the flight risk back to the airline’s merchant clearer and means the airline starts paying for ‘shadow bonding’ costs.

4. Insurance

The CAA may wish to self-insure once the fund reaches an acceptable level. However, initially, it would seem sensible to insure both the 3% rebooking cost and the cost of rebooking flights, which often cost 50% more than the original flight as carriers boost prices following a collapse.

Tour operators versus dynamic packaging.

The above would operate effectively for dynamic packages as the original flights will have been paid for.

In the case of tour operators with in-house airlines, the cost would be much greater as new flights would have to be secured.

However, in the modern world where virtually all destinations are served by multiple low-cost carriers, there would normally be sufficient capacity or airlines willing to replace the flight schedule. This may require the CAA to have short-term rights over a collapsed airline’s airport slots.

The CAA has said it’s not the ‘risk’ of failure that varies greatly in our highly competitive sector, but the ‘impact’ of a failure.

But the collapse of Thomas Cook, which wiped out the Atol fund, proved the bigger a company and the bigger its in-house airline, the bigger risk it represents.

The CAA, therefore, needs to move away from a flat £2.50 APC as soon as possible and create impact-based rates with companies which have higher costs, if they fail, paying higher premiums. This may be because they have an airline or simply sell higher-value holidays.

This is no different from any insurance-based scheme. In the case of dynamic packages, nothing is lost except the rebooking cost, hence these would carry a low premium. Tour operators would need to pay more.

The value of the ATOL brand

The ATOL brand has been around for 50 years and, even with its faults, the Atol logo provides reassurance and is one of the reasons many customers still book ‘packages’ rather than buying components online.

If we could enhance the proposition to ‘Holiday Protection’ with a guarantee that a holiday would still go ahead if an Atol member fails (excluding exceptional circumstances), we would create a clear differentiation from component booking.

Combine this with the experience customers had during Covid, with Atol holders rebooking holidays many times at no extra cost, then you have a powerful reason for customers to book Atol-protected packages.

The CAA could then spend more of the ATOL levy on funding advertising, pushing this new, stronger message.

To make any of the above happen, we need open and honest debate between the major players and not paper-based responses taking months to collect and that produces no clear outcome.

However, consultation is needed and needed fast, as the current ATOL scheme is in danger of sleepwalking into being a bureaucratic burden that adds no meaningful value to the customer.

The recent TV and press coverage surrounding the mass cancelling of flights by various UK airlines due to staff shortages as travel restarts after Covid-19 disruptions, reminded me of the arguments for and against travel Super Brands.

 Back in 2002 the Airtours Group, decided that it was time to bring together its Going Places travel agency chain, Airtours tour operation and MyTravel airline under one super brand called MyTravel and ever since other travel groups have been following suit.

 The “Vertically” integrated model was born in the 1990s as the battle for high street distribution heated up. Three of the big four tour operators, due to the dominance of Thomson’s owned “Lunn Poly” shop network, decided to buy, and build their own chain of high street agents. This gave them guaranteed distribution and the ability to trade sales of competitors’ products in their shops, for sales of their tour operations in that competitor’s outlets.

 At the time the branding of the retailer was left independent of the tour operator, because it was felt that to be cost-effective the shop needed to serve all the needs of the local community, selling a wide range of holiday companies to maximise commission, whilst “directionally selling” to its inhouse tour operations. This also meant it had plenty of stock to sell in the “lates” market, in the unlikely case that its own tour operator had sold well and had little left to sell.

 Each division of integrated groups operated its own “Profit and Loss” account and not surprisingly initially far too much effort was spent on internal arguments about commissions, until “Matrix” earnings were introduced at a Group Level. Simply put, the retail division needs to believe that its highest commissions came from its in-house tour operation e.g., 15% and the tour operator regards its in-house shops as its cheapest distribution e.g., 10%. Clearly, an impossible task before David Crossland introduced a matrix group subsidy that consolidated out in top-level accounts.

 Similar arguments also existed between the tour operator and the airline division, which was often used as the “Bank”, with the tour operator being deliberately overcharged for seats compared to market rates, to ensure that they did not discount profits away. Not surprisingly the bank/ airline normally won any arguments.

 The motivation for the creation of a single “Super Brand”, stretching across tour operation, airline, and retail shops, was always the “brand synergy” that it created, with one TV campaign benefiting all divisions and customers being surrounded by a coherent and always present branding experience.

 The biggest opposition to the “Superbrand” came from the high street shops who feared for their commercial survival if customers believed they only sold in-house tour operations. In hindsight, they may have been right as the shrinking of in-house shops has been much faster than independents on the Highstreet, however, this argument is blurred by the growth of the lower-cost internet which clearly suited single brands.

 It was international expansion that finally finished the debate at Tui. How could Tui continue to retain the massive legacy Thomson Brand in the UK whilst bringing together all its other international brands under the common Tui Branding?

 Although this was initially resisted by the UK management team, they eventually yielded and the transition from Thomson’s to Tui was completed in an incredibly short period with minimal damage to its market position. I think however that this was mainly due to the strength of the “Exclusive and differentiated” hotel stock that Tui controlled, and the weakness of its biggest competitor Thomas Cook.

 The biggest fear of creating a “super brand” was that one of the group’s aircraft might crash crashing and potentially destroy the brand overnight.

 Thankfully this has never happened, but how much brand damage has cancelling 36,000 holidays due to  “operational” issues at the airline,  done to the Tui super brand in the UK.

 Travel requires a massive amount of “Brand Trust” as buying a holiday is one of a customer’s highest annual purchases, where effectively all they receive on booking is an email and/or paperwork promising to deliver the holiday in the future.

 Covid-19 has already damaged customers’ confidence in this “promise” with credit note refunds, but how much worse is large scale holiday cancellations?

 Tui will rightly argue that 36,000 holidays is a small fraction of its overall carryings, but cancellation is a major breach of the holiday promise and these disappointed customers are unlikely to book with Tui again, However, I fear that the “halo” impact of the widespread TV and press coverage could create a 50 times multiplier impact, creating 3.6m passengers who will hesitate to book Tui next year.

 Whatever the actual level of brand impact, the last thing the Tui Tour Operation needs is brand damage at a time when it has also lost a large amount of its exclusive stock. The large debt mountain Tui was forced to take on board during Covid-19, needs to be paid down by further rights issues of shares and this can only be done when sales and profits return to pre-Covid levels.

 This latest brand damage will push back further the date that this vital refinancing can occur.

 In the meantime, a shortage of working capital has forced Tui to reduce its hotel pre-payments dramatically, leading it to lose many of the exclusive hotels that created its “differentiated” product, creating a negative virtual spiral and leaving Tui competing head-to-head with Easyjet and Jet2 holidays in the “commodity” beach holiday market. A battle I think they may lose.

 I remain highly confident that Tui with its long history of holiday excellence and strong management, can trade out of this current situation, but they cannot continue to shoot themselves in the proverbial foot.

 I’m sure there will be some interesting internal debates regarding compensation between operating boards, but it’s all irrelevant compared to the prospering of the Super Brand itself.

 All I can say is good luck Tui, I genuinely wish you well as the last man standing of the original big four tour operators.

How quickly do we forget the sheer hassle of Covid-19 protection in the UK?

 Facemasks have disappeared, the NHS Covid App remain untouched on our phones and when’s the last time you took an Antigen test to enter an event.  However, not everywhere in the world has recovered to the same pace as the UK, where triple vaccination and a mild, but dominant Omicron variant, have reduced the impact of Covid to little more than a bad cold.

 The fear has gone and with it a lot of our tolerance for any Anti-Covid measures.

 Visiting Barbados on holiday this week, it was clear that most UK holidaymakers simply did not comply with local laws requiring masks to be always worn in public spaces. The general attitude appeared to be “We are on holiday, and this is bullshit”.

 How quickly we forget our own lockdown measures and caution to protect the vulnerable in our society. Barbados continues to have shortages in Vaccine supply and suffered from a lot of misinformation about vaccine safety, which led to only 53% of the population being vaccinated.

 Like many destinations, tourism is the lifeblood of the economy and lockdown hit pockets hard in Barbados, making the welcoming back of tourists essential. This has left the country facing a tricky balancing act between public safety and removing enough restrictions to attract tourists from the USA and UK where all restrictions have been lifted.

 Ironically, I think the requirements to wear masks will put UK customers off travelling to a destination more than the extra costs of outbound lateral flow tests, although the fear of being randomly tested at entry and forced to stay in a quarantined hotel for the duration of your stay definitely creates some booking fear.

 Could we see future booking patterns being influenced indirectly by a country’s vaccination status?

 Unfortunately, the answer is a resounding yes, as we are bound to see new Covid-19 variants develop this coming Winter, forcing greater restrictions is destinations with more exposed populations.

 Barbados as a destination retains its ultra-laid back and friendly vibe, which combined with beautiful beaches and sunny skies make it both a favourite winter and summer sun destination. However, like most destinations, it is struggling to deliver previous standards after the Covid disruption.

 We stayed at the 4-star Boutique “House Hotel”, which recently became part of the Elegant Resorts Group. The hotel had excellent historic review scores when it has been a Bed and Breakfast hotel situated next to the world-famous Daphne’s Restaurant. However, during Covid Daphne’s shut down and the hotel even though it did not have its own kitchens turned into an “All Inclusive” hotel, using the facilities of nearby group hotels to add a range of food options to the simple buffy focused food served on site.

 This concept may eventually work, however, while the hotel continues not to have a front desk but relies on “Ambassadors” i.e staff multi trained to serve all roles, things can go horribly wrong. In our case, it was being turned away from other group hotels because restaurant bookings had failed to be made or laundry disappearing for days. This combined with some truly inedible food being served up during our first two nights, lead to a complete “toys out of the pram” meeting with the management team.

 Fortunately, the House has experienced top management able to accept the situation and put in place a recovery plan that got the holiday back on track, which when combined with their friendly staff created a great overall experience, which saved the brand’s credibility.

 For me, it just shows how hard our industry will have to work as we come out of Covid to meet the expectation that the prices we are used to charging generate.

 Which hotels will reduce their prices, because they have brand new chefs or service teams not used to serving in 4/5-star hotels? Will discounts be given for rooms that have not seen a lick of paint during the Covid-19 shutdowns?

 With the industry desperate for recovery cash, the answer is clearly no. This means the expectation gap this summer is likely to be bigger than ever and with reviews/social media easily accessible on all holiday phones, we are likely to see hard built reputations destroyed during this first recovery season.

 As they say, it is not just preventing errors, but how they are recovered that really impacts a hotel’s band, so a big thank you for a great holiday to the House’s staff and Elegant Hotels team.

Travel companies are reporting surging demand and a 30% increase in average prices for Summer 22 sales. The dam of pent-up holiday demand has clearly broken and its vital that travel companies hold these higher prices, rather than chase volume and compete them away.

 Customers are clearly upgrading their holidays using “Covid Savings” and spending more after a long absence of holidays from their lives.

 Fortunately, this results in better quality hotels and “safer” destinations being selected, with Spain bouncing back much faster than value destinations like Turkey. This is good news as I expect much higher complaint levels, from the “cheaper” end of the hotel market, which has seen zero investment over the last 2 years and will be even more tired.

 Covid-19 disruption could reappear from nowhere as we saw with the Omicron Variant, so expectation as to what is an acceptable margin needs to increase for both retailers and tour operators alike.

 The best insurance policy a holidaymaker can take is using the expertise of travel agents to find suppliers with flexible covid terms and/or booking an Atol bonded package where the operator is taking responsibility for all disruption. This has value and must come at a cost, so agents just need to look the customer in the eye and say, “No discount”.

 OTA’s may not be able to look the customer in the eye, but customer “intent” can still be read from how they progress through a site and used to yield prices to maximise returns.

 Travel does not have “Magic Circle” rules banning its members from revealing its yield tricks, so here are my top 10 favourites.

 1. Price by source of traffic.

Customers naively believe that the price they see on a website is the price everybody sees. This is not the case with modern websites, which cache basic prices and then overlay different markup levels depending on the source of traffic. The OTA then cookies the individual computer to maintain these prices if the customer then returns from a different source to make these games invisible to the individual unless they change device.

o  Price comparison sites. A few pence make a difference in the display order here and so OTA’s apply their lowest markups. However, as soon as customers move away from the selected hotel they have clicked through to, margins jump back up on alternate hotels. If the customer adds flights these also carry a higher-than-normal margin as the OTA seeks to regain the reduced margin needed to attract clients from price comparison sites.

o  Hotel name on google. Less competitive than price comparisons, but margins are lower than if the customers enter the site at a destination level, as they are deemed to be closer to booking and more price-sensitive having done extensive research.

o  Destination level. Here the OTA boosts margins via “Merchandising” best-selling hotels to the top of the search results, controlling what is sold to a greater degree.

 2. Lead Flight prices.

Flight prices are much easier for customers to cross-check than 100’s of individual hotels. Lead flight prices set customers impression of price competitiveness and carry the lowest markup, however, these flights tend to have the worst flight times and customers often chose better flight times, so monitoring clicks and applying higher margins to these popular flights is vital.

 3. 60% off messages.

UK trading standards rules state that prices must have been valid for 30 days ahead of the start of any discounts and must apply to a “reasonable” volume of holidays. To create headline discount messages OTA’s simply raised prices on hotels they don’t often sell by 60% for 30 days and then discount them, allowing headline-grabbing messages, that drive the sales of better selling hotels where the price has never moved.

 4. Split flights.

Combining an outbound flight from one airline with an inbound from another is key in keeping OTA’s competitive against low-cost carriers in house tour operations like Jet2. It gives the OTA a better range of flight times and allows them to break the yield management of airlines, who know that 80% plus of customers choose 7night durations and apply a higher flight markup to these combinations via higher inbound flight pricing.

 5. Buying inbound flights in Euros.

UK based low-cost carriers’ price in sterling and convert to Euros, apply 2-3% currency buffer. It is often £3-4 cheaper per flight for OTA’s to buy seats on the airline’s euro site and combine them with sterling outbounds.

 6. Admin fees on deferred payment schemes.

Most OTA’s prices are based on paying a deposit and balance 4 weeks before departure on booking. However, many now offer monthly payment options that attract “admin fees” of £2.50 per payment, that are cleverly hidden and often remain unnoticed by customers but boost booking markings by £15.00 per booking. The key here is that this extra £15 never appears in the lead advertised price on the site and it sometimes allows OTA’s to cut margins even further based on the percentage of customers taking these schemes.

 7. Repeat visits/booking.

Ryanair over 10 years ago started dropping cookies on customers computers that added £10 to flight prices if the customer repeated a search within 24 hours, as this indicated strong purchasing intent. Few customers ever noticed, but even today I still search on a laptop but book on a phone to stop airlines playing this game.

Insurance companies have been banned by “treating customers fairly” FSA rules, from charging loyal customers more than new customers. Interestingly these rules do not apply to travel yet and many OTA’s apply higher margins if customers are entering their site from email marketing to previous customers, as these are deemed more likely to book having booked previously with the brand.

  8. Misleading competitor price checks.

Bed banks and hotel only OTA’s, deploy considerable resources to scanning competitor prices to adjust their own margins to fractionally undercut them, in a penny matters XML supply marketplace.

Historically, these price checks tended to be overnight scans and could be “cheated” by reducing price for the peak evening booking period between 6 pm-9 pm and then reverting to higher prices at night when scanning occurred. Monitoring usage activity by account login to look for tell-tale signs of scanning, also allowed competitors scanners to be “fed” false higher prices, but these needed to be randomised by hotel to avoid detection by manual checks.

Both have now been stopped by countermeasures, but it remains a game of chess, but with big volume gains if you can successfully fool competitors’ price scanners.

 9.  Ignoring competitor prices

The most profitable UK OTA completely ignores competitor pricing and focuses purely on its own conversion levels.

When the conversion levels drop for a destination below the site’s historical average, this is deemed to indicate that its prices are uncompetitive, and margins overall are reduced. This sounds extremely simple but is operated at a micro-level, with adjustments by flight route, destination, resort, hotel, and date range being constantly made. Pricing your customer pipe “live” using click intent is the closest any OTA has got to looking a customer in the eye and knowing what they will pay.

 10. Ancillary sales.

It amazes me and frustrates me as an investor in the CannyApp FX product how little focus travel agents or OTA’s put on upselling their customers with ancillaries such as Foreign Exchange, where they can earn an Extra £35 per customer or other lower margin extras such as car parking, car hire, lounges, or fast pass security/customers vouchers. Having, already covered their marketing costs with the core holiday sale the profit, from sales of these items falls straight to the bottom line and in a marketplace where margins are always under pressure, they must be the future.

 As an industry, we have a once in a lifetime chance to reset the bar or what is acceptable margin for our labour, so let’s please take it.

Visiting Cuba this week was a massive reminder of how important Tourism can be to many holiday destinations.

 Cuba is clearly on the brink of economic oblivion.

 The Trump administration back in June 2019, cut the lifeline of American Cruise lines depositing 6,000 trophy hunting Americans, that had been banned from visiting Cuban for 50 years, on its shores each day. Nobody in Cuba understands why their communist ethos, suddenly became unacceptable to the USA again or what would need to occur to earn a reprieve.

 As with many Cruise ship destinations, some locals regarded Cruise tourists as low value “ice-cream” eaters, who did not stay in local hotels and returned to the giant cruise ships each night to eat their meals. Crucially, however, the cruise tourist kept local clothes retailers and supermarkets well stocked, with the hard currencies they spent, used to fund Cuban food imports, given few people outside Cuba will accept the currency.

 Remove the Cruise customers and three years later virtually every cloth shop and tourist venue in Havana has closed making it a shopping ghost town, with few places to eat and drink. The lack of hard currency to buy imports is also causing major food shortages, with locals having to queue 6 hours a day to just secure the basics required for living.

 Although Cuba still feels relatively safe, it’s clearly teetering on the edge and its uncomfortable for well feed tourists to be constantly passing long queues of locals gathered outside every open shop in town. What was a must-do 2–3-day visit to Havana has now shrunk to a 1-day culture vulture tour, for some of the UK tourists visiting the beaches of Varadero.

 The lack of hard currency has also left an uncomfortable situation for tourists, where the back market exchange rate for the Cuban Peso is 120:1 pound, but the official tourism rate set by the Government is 30:1. So exchanging paper money gives 4 times the power of using a credit or debit card. So for once, my CannyApp FX card was left in the wallet as even I could not “Canny it” and save money.

 Not surprisingly, the biggest money local earner is exchanging tourist money. The first thing the Tui rep focused on during the inbound coach trip to the resort was getting their newly arrived guest to change £20 each into Pesos at a 1:60 rate. Potentially a good deal for the tourist compared to hotel prices, but clearly a better deal for the rep.

 This same sense of constant manipulation follows tourists everywhere in Cuba, with only the brave being willing to exchange cash on the streets and most looking for trusted intermeddles which are few and far between, as even most respectable Cubans are looking to grab as much hard currencies as possible ahead of an imminent economic collapse, they all seem to be expecting.

 Our Tui Dream liner was completely full of happy inbound tourists, and many will have had great holidays in Varadero having not left their All-Inclusive complex’s but is this sustainable or responsible tourism?

 The hard currency they deliver to the Cuban economy is vital to its economic survival, but questions remain over how long this can continue, as the average occupancy hotel is 12% or lower, making staffing and maintenance of hotels a real challenge.

 The impact of the Covid-19 shut down is everywhere, with even supposedly 5-star hotels looking tired and in need of repair, reducing them to 3-star equivalents. Unfortunately, as the tourism world emerges from Covid-19, I’d expect the same situation to exist in numerous previously popular destinations, such as Egypt, Gambia, and Morocco to name a few, which brings into question exactly how we define responsible tourism.

 Personally, I think it’s vital that we support countries like Cuba and help them through their crisis, but this will require travel businesses to remove the rose-tinted photos from websites and fully educate their customers on what they can expect for their hard-earned holiday money. It clearly goes further in places like Cuba but comes with some caveats.

 Customers also need to take a hard look at review sites, since average hotel scores, including pre-covid ratings, may often be misleading about the current situation. Even travel powerhouses like Spain are finding it difficult to persuade their population to return to hospitality jobs, making maintaining service levels hard as tourism returns. The travel agent “knowledge” network has never been more important to recommend the right destinations to customers.

 The future of travel is clearly bright again, but we will be faced by many new obstacles as travel re-emerges with short-term travel likely to be dominated by those destinations who can get their infrastructure working normally the quickest.

 In my opinion, this is likely to be Spain, Greece and potentially Turkey although it also has its own economic challenges.

 I love to travel but maybe more cautious in my choices for a while.

As travel search-demand restarts, the bid costs for all major Google search terms are already rocketing, as travel companies compete to build back their bid histories and dominate the top of search results.

 Now I must confess to some history of Google bashing having launched a customer referral scheme 12 years ago called “Google Bypass”. Not surprising an expected lawsuit quickly followed and we had to revert to the less controversial “Share and Earn” band.

 However, my key issue with Google remains.

 Although Google is clearly “Not Evil”, its perfect information and bidding algorithms, have facilitated the travel industry in competing away virtually all its booking margins, with Google estimated to be taking 90% of all commissions earned.

 Finding alternative routes to customers and maximising database, use has never been more important. Here are my 5 tips for reducing reliance on Google.

 1.  Friend get Friends schemes.

Often the best advocates for a holiday, are customers who have already booked it since they have been through the research process and have selected your company’s product based on quality and price.

However, how many companies then use these potential advocates to bring other couples or families on the same trip or incentivise them upon return to recommend the trip to other people? Few in my experience.

 It is important to get the basic’s rights

·      Linked bookings. Lead customers do not want to take responsibility for paying for other people’s holidays and therefore don’t want to add passengers to a booking as most systems allow, but want to create a new booking linked to the original.

·      Incentives. People do not like making money from friends. The incentive, therefore, needs to be either shared or paid to the friend. For example, one of CannyApp partners is offering “£75 Holiday money” loaded on the card, as a booking incentive to the secondary bookers, so that they can take the friends who recommended the holiday out for a meal on holiday.

·      Make claiming simple. Complex schemes don’t work so make it easy to claim an incentive.

 “Friend gets Friend” schemes normally result in a direct secondary booking avoiding commission, but sensible operators will also consider rewarding the originating travel agent.

 2. Long tail Satellite TV advertising.  

The exponential growth in the number of satellite TV channels has led to many channels not having the minimum number of viewers to even charge for showing an advert. Campaigns across these “Long Tail” channels therefore can often deliver 40-50% of free adverts, reducing the average cost per view and lead generated.

 But why would you want to advertise on channels with few viewers? Well, it’s the same principle as “long tail” google advertising. Even though volumes are low, if channels are cheap and are seen by the key housewife market they can work.

 For example, children’s or old films channels often deliver the best cost per lead, as the adverts can be more interesting than the programs for housewives who have them on as background noise or to keep kids happy. The move to home working has also increased response levels from Music channels, often played as background noise, with interesting travel adverts grabbing attention.

 Historically, high TV production costs prevented smaller companies from exploiting direct response TV, but productions costs have dropped dramatically, with adverts using stock video footage costing as little as £2,500, allowing introductory campaigns from £10k, although a campaign covering several months will cost £30k plus.

 Even small travel businesses often spend £60k per month on Google advertising and satellite TV delivers a large Halo “as seen on TV” boost to brand confidence-boosting google CTR’s.

 3. Nested Email Services producing personalised emails.

Too many travel companies pump out weekly “Deal” emails, which quickly get dismissed as irrelevant by customers.

Sophisticated email systems focus on just getting a customer to visit the company’s website so that the customer’s search behaviour can then be used to produce increasingly focused personalised emails.

 If a customer searches for a Tenerife holiday departing in May from Gatwick, then the next email will offer only Tenerife or similar destinations, until their next click to the site gives more information about the board basis or hotel they are looking for.  Nested “if they” email databases are not rocket science.

 A company’s database of previous bookers is one of its most valuable assets, but many travel companies abuse it with boring and non-relevant content. Personalised emails are 10 times more effective.

 4. Use the “Travel Data Lake” to add value.

Only 1 in 100 customers visit a site book, giving you full contact details, and entering your customer database.

 However, 68% of customers complete a search indicating their broadly holiday requirements. Research shows that in 78% of cases, the customer sticks within +/- 3 days of the holiday date originally searched and 92% don’t change departure airport.

 Why not cookie these customers to allow, the advertising of travel ancillaries such as Foreign Exchange, insurance, or airport parking during the key 28 days before they depart using retargeting adverts via Google or Facebook.

 The customer may not buy a holiday from your company this year, but if you sell them a holiday ancillary, you’re adding them to your marketing database for next year holidays and cutting Google costs.

 Cookie use is becoming hard via Apple devices, but can still be exploited via Android platforms so make the most of this opportunity while it lasts.

 5. Ask your customers about their last 5 years of travel?

Travel companies tend to be internally focused and don’t spend enough time trying to understand what other travel products their customers buy during a year or in a longer holiday cycle. Simply ask them, as many customers are happy to tell you!

 This information can be invaluable in understanding future destination booking patterns as customers often return on a cyclical basis to old favourites.

 It is also useful for creating “look-alike” Agent profiles when selling via Highstreet agents or homeworkers.

Create “most likely to sale” profiles, based not just on the sales of your company’s products, but on the sales of competitors you know the customer also books e.g., Kuoni Longhaul sales may indicate a potential Cruise booker.

 Whether you consider my tip 5 tips useful or not, any sensible travel company must avoid being a “Google” junkie and diversify their customer acquisitions strategies. Otherwise, the only winner from the travel rebound will be Google.

The Covid-19 has hit the travel sector, harder than virtually any other UK business, with UK lockdowns being followed by the shutting of international borders, which combined with the imposition of testing and extra paperwork, devastating short term consumer confidence.

However, this week Government announcement removing Covid-19 testing appears to mark the “Beginning of the End” for Covid travel restrictions, with the UK leading the way in learning to live with Covid.

The future of travel looks bright but may require a re-think of how things are done.

For example, Summer 2022 is set to be driven by last-minute bookings 4-5 weeks before departure, as customers who have been hit by a barrage of disruption over the last 2 years remain cautious about booking early.

Low-cost carriers yield models will quickly adapt, even without historical comparators, because putting prices up based on the rate of sale, has never been rocket science. However, driving frequency of rotations on routes will be much more of a gamble, often resulting in flight consolidations and further customer disruption.

Leaving aircraft sat on the tarmac, is likely to continue to be a requirement this summer, as airlines chase yield over volume. Beach destinations with their longer average flight times and earlier booking profiles, will look more attractive compared to city routes, leading to holiday capacity returning faster.

Don’t be surprised to see a big expansion of Easyjet Holidays on the back of increased trade distributions, bought with attractive commission levels. Letting Jet2 Holidays dominate trade distribution has been a historic strategic error, that current Easyjet CEO Johan Lundgren with his tour operating background, will not allow to continue.

Tui’s market share is likely to suffer as their airline does not have the same economies of scale as Jet2 or Easyjet, giving it a higher cost base in the commodity holiday market they are being forced to enter now that Covid-19 has severely disrupted their “differentiated” product.  Tui’s strong brand and reputation for customer service may counter this price disadvantage in the short term, but their debt mountain is one of the biggest in the sector, meaning that long term decline seems inevitable.

High street agents need to evolve rapidly, as Covid-19 has pushed more shoppers online, reducing footfall and making profitable operations very hard, as demonstrated by the Hays Travel £39 loss last year and estimated on-going £2m a month losses. Unprofitable shops need to be shut rapidly, all leases renegotiated, and local counsels pushed to accept that current “business rates” are unsustainable.

How quickly all this will occur, remains open to doubt, but I believe that within the next 2 years, high street shops, acting as hubs for local homeworkers will be the model of choice in the “personal service” travel sector. These hubs will incorporate video conferencing, such as Zoom, as a normal selling process due to its consumer convenience, allowing customers to be walked through online content whilst in the comfort of their own homes and for agents to see consumer reactions, markedly improving conversions.

Personalised travel services don’t have to be delivered face to face anymore and, in a post, Covid-19 world why would staff ever again want to sit waiting in a shop for customers to walk through the door when they can drive their own appointment diary and enjoy the benefits of working from home.

However, if as expected the cost of high street shops is reduced dramatically, because of the lack of demand, having a high street location still makes a lot of sense.

Combining a local homeworking network with a Highstreet shop could offer the best of both worlds. The shop could drive brand awareness and therefore consumer trust, whilst providing a professional administration centre and a point of customer introduction via walk-in traffic. It simply needs to be staffed on a rotational basis and have longer opening hours via homeworkers and video support.

Online Travel Agents (OTA’s) also need to adapt their models,  making “Amending” bookings just as easy a process as booking in the first place. Although OTA’s don’t control their flight supply, the increased flexibility offered by airlines can be passed on electronically and customer portals for self-amendment have never been more important.

OTA’s also need to step into resort with customers, providing relevant added-value services whilst on holiday. These will primarily be delivered via apps but could also be supported by branded Foreign Exchange cards, offering preferential exchange rates and cashback deals on local products.

Covid-19 has undoubtedly reshaped the travel environment and it’s the businesses who recognise this and adjust the quickest who will be the winners.

Will your business be one of them?