During the recent ITT conference in Qatar, I posed a direct question to Garry Wilson, CEO of Easyjet Holidays. I asked, “At present, 2% of EasyJet’s 100 million seats are sold as holiday packages. To become the market leader, this volume would need to triple to 6%. However, presuming the overall market does not expand this swiftly, from whom do you anticipate taking market share?”

Garry’s diplomatic response was that the growth would originate from converting more of EasyJet’s flight-only customers into holiday packages.

This straightforward remark underscores the significant strategic advantage of EasyJet Holidays over its competitors.

Over its lifespan, EasyJet has cultivated extensive brand recognition. This, bolstered by prominent advertising, generates enormous visitor traffic to its website. Here, customers are automatically presented with a cross-sell option to purchase a holiday package in addition to the flight to their chosen destination.

Naturally, my understanding of Easyjet’s intra-group financial allocations is limited. However, it is apparent that this approach endows Easyjet Holidays with the industry’s most competitive customer acquisition costs. Consequently, they are positioned to either offer the most affordable pricing, maintain superior profit margins, or effectively balance these considerations.

Converting another 4% of their 100m flight passengers to holidays is a straightforward task and itself would make Easyjet Holidays the UK market leader. However, why would they stop here?

Consequently, the question facing many travel boardrooms is, “Who will lose share as EasyJet Holidays expands?” and “How do we make sure it’s not us?”

The answer will be significantly influenced by the distribution channels EasyJet Holidays focuses its efforts on.

Jet2 Holidays have stolen the march in distribution via travel agents, flexibly allowing agents to decide their commission levels. However, if agents want price parity with the company’s online pricing, their earnings are limited to a low 6% commission payment, potentially making them vulnerable to attack by Easyjet.

Interestingly, Jet2 Holidays’ current success in transitioning its business into a tour operation-led group presents challenges to further growth. Currently, 60% of Jet2’s flight seats are packaged as holidays, and this proportion rises to 80% for “beach holiday” routes. Therefore, unlike Easyjet, they must broaden their route network to expand their holiday business further, leading to the initiation of new bases, like Liverpool. However, this expansion process is considerably slower than simply increasing the share from 2-6% of flight capacity.

Historically, Tui’s tour operating branch boasted a “differentiated” offering through exclusive hotel contracts with some of the most ideally situated establishments. However, the repercussions of Covid-19 and the substantial debt incurred by the Tui group have significantly reduced its exclusive inventory, exposing it to vulnerability in short-haul locations within Easyjet’s flight range. Nevertheless, Tui’s fleet of 13 Dream Liners provides a distinctive advantage, enabling the holiday firm to provide long-haul beach vacations to destinations such as the Caribbean, USA, Mexico, and Goa, an offering that Easyjet cannot match.

The top online travel agencies (OTAs) face the greatest threat from expanding low-cost carriers’ in-house tour operations, given that they lack proprietary airlines and rely on access to third-party flight seats. Paradoxically, their key strategic advantage is the access to low-cost seats of Ryanair, an airline that has publicly expressed disdain for them.

Featuring all the low-cost carriers equips the OTAs with a superior flight program in terms of route diversity and scheduling. However, if they are burdened with Easyjet’s API booking fees amounting to £6 per individual per sector, leading to a substantial £48 price disadvantage for a family of four, they evidently cannot compete on equal footing in terms of price with Easyjet. Nevertheless, by utilising Ryanair flights, they often can match or even surpass EasyJet’s holiday prices on numerous routes, making access to Ryanair, the only low-cost airline without an in-house tour operation, a vital strategic defence.

Online holiday consumers typically browse 23 websites before finalising their booking, reflecting their considerable promiscuity when choosing the holiday brand to book with. This tendency is frequently fuelled by Google PPC advertising, a sector primarily dominated by Love Holidays. Unlike its major competitor, On the Beach, Love has not invested in above-the-line brand-building advertising, potentially making them vulnerable as Easyjet enter this space.

While it is currently unclear who stands to lose, logic dictates that Easyjet Holidays is set for rapid expansion and will be the largest UK tour operator within 5 years.

So, whether the future is bright or not, it’s likely to be Orange.