Does the OTA community need a new Monarch?

Easyjet’s appointment of Johan Lundgren as CEO, was bound to herald an increased focus on their holiday division and the poaching of Tui’s highly experienced product and contracting director Gary Wilson clearly heralds the start of a big push.

 

Given the introduction of the new Package Travel reforms and the increased costs imposed upon “Dynamic Packaging” retailers, the launch of a Easyjet Holidays B2B trade proposition for high-street travel agents looks inevitable. Why would Easyjet Holidays leave the trade Jet2holidays?

 

It may even be possible that Easyjet Holiday’s launch’s their first summer brochure to the trade in January 2019, but it’s a tight timeline to increase its direct buying to build a competitive product and a launch for Summer 2020 may be more realistic.

 

The high-street will welcome the move back to a “big four” tour operators, with the new boys of Jet2 and Easyjet servicing the “commodity” beach market, that both Tui and Thomas Cook have deserted in their quest for “Differentiated” product.

 

More competition normally means more commission for a high street distribution channel that only charges for results, unlike Google or Meta sites which primarily operate relatively high risk cost per click (CPC) models.

 

The news is more worrying for the OTA community, which historically has relied upon access to low cost carrier seats to fuel their packages. Until recently, OTA’s actively welcomed the shift away from charter flights on routes, where they only had access to 25% of seats, to low cost carriers where they had free access to 100% of seats.

 

However, the launch of low cost carrier tour operations has begun to change the rules of this access.

 

Jet2’s yield team, use “opaque” packages to boost its yield curve on routes, by pushing heavily discounted seats into its package holidays. These are invisible to its competitors pricing teams and allows them to maintain a stable flight only market price. This quite legitimate yield tool, also guarantees it’s in house tour operation has package prices that cannot be matched by DIY customers or OTA’s.

 

Easyjet take a different approach and make their seats freely available via an XML feed, but charge a substantial premium for the service at £6.00 per passenger per sector, which on average is £30 per booking over its standard flight prices. This has been in operation for a number of years and clearly works for all parties, however OTA’s will now be concerned that they may be competing with an inhouse tour operation, where such a charge is a mere “wooden dollar” internal transfer, that’s unlikely to effect the final holiday price.

 

Ironically, OTA’s key commercial advantage, remains the fact that they are NOT the asset holder and are free to sell the widest range of flights with the best flight times. They can also often generate substantial savings for customers via “Split Flying” where they combine outbound seats with Easyjet with cheap inbound seats from Ryanair or even Thomas Cook on routes like Turkey which is suffering excess capacity. Therefore, OTA’s will remain a key part of the holiday ecosystem providing competition for the new “Big four” in the B2C market and potentially moving forward via B2B products sold via the trade.

 

However, strategically the OTA community would welcome a new airline partner without its own tour operation and collaboration with airlines such as Emirates, Etihad, Turkish Airways or Norwegian to establish a new short haul network is not beyond the realms of possibility.

 

As ever cost effective customer acquisition and retention is likely to be the key decider between the winners and losers in the holiday battle and I would argue that OTA’s independence gives them a strong counter balance to the new big four “airline owning” tour operators.

Leave a Reply

Your email address will not be published. Required fields are marked *