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What’s the future for highstreet shops?

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Ten years ago I used to talk about “Click, Walk, Talk” distribution and the rapid migration from walking to shops, to talking by phone via call centres, driven by online research. Followed by the migration from calling to just clicking, once online technology matured. Given this view I have positioned the On Holiday Group business to be strong online, supported by call centres, without a high street shop in sight.

TenHowever, I have never predicted the death of High Street shops and believe independent high street agents could be in a strong position once the major operators have decimated their current over weight shop networks.

TenHarriet Green the new CEO of Thomas Cook comes from a background of modernisation, using the Internet as a key distribution platform to cut costs. I therefore think she will take a hatchet to Thomas Cooks 1,200 shops, cutting them to less than 400 over the next 5 years, as she maximises the benefit of the massively strong Thomas Cook brand online.

TenAlthough, Google click costs have escalated massively in recent years, reducing the cost effectiveness of the Internet for travel companies without a strong brand, for those who attract customers directly to their brand, the Internet is massively more cost effective than shops.

TenHence logically the big 2 UK brands Thomson and Thomas Cook will continue cut shops as Internet sales naturally grow or more rapidly if they drive this channel.

TenThis cut back provides a massive opportunity for independent high street shops or homeworkers if they evolve slightly. They are best positioned to offer customers independent advice on the whole travel market, across both the price sensitive commodity market driven by Dynamic packaging systems and the higher priced “Differentiated” product offered by the major operators. This will be a key advantage over the single product focused shops of the majors and may give them an advantage over the online players such as Travel Republic. Currently these only sell dynamic packages and it’s unlikely that the tour operators, focused on driving their own online sites, will allow other online players to sell their products.

TenHowever, Independent shops do need to evolve to make themselves more convenient for customers. Personally, I would look to make a shop the central point for a local network of homeworkers. Each homeworker would be rotated between staffing the shops, where they would deal with personal appointments or walk in enquires and offsite work such as house visits or out of hours phone support.

TenEach shop would have its own personalised web site where customers could review availability, but still look for personal advice before making their selection via the shop, on the phone or in their homes.

TenSo will I be putting my money where my mouth is and opening shops? Possibly, but more likely I will be partnering with people who have them and want to evolve. Know anybody?

ATOL Flight Plus | Flight Plus from ATOL

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Congratulations to the CAA…you pulled it off and have brought the Dynamically Packaging sector to heal and into the ATOL fold as of May 2012.

There have been a few keystrokes of luck along the way. For example if DNATA had not acquired Travel Republic, it is likely that they would have again taken the CAA on head to head and gone down the perfectly legal  “Agent of the Customer” route avoiding the requirement to offer Flight Plus ATOL cover. This in turn would have left the rest of the sector with the difficult choice of giving a competitor a significant pricing advantage or following suit scuppering Flight Plus in the process.

Secondly, Flight Plus is being launched at a time when the weakest airline players like Excel, Globespan, etc. have already bitten the dust leaving the bulk of flight supply in the hands of stable airlines like Ryanair and Easyjet. Hence, the market for SAFI and Supplier Failure Cover have opened up enough to allow Agents to re-insure their increased risk from supplier failures.

Flight Plus ATOL will definitely benefit the CAA and the Government, but I have reservations whether the changes will actually benefit the customer, as I can see even more delays in customers getting their holiday money back in the case of a major airline failure.

Historically when a tour operator collapsed agents made customers pay again for their holiday and then reclaim their money back from the CAA, which often takes up to 9 months. Under Flight Plus, legally the agent cannot charge the customer again and must replace the flight at their own expense and reclaim the cost from their insurers if they have SAFI or Supplier Failure Cover.

However, there is no legal requirement for agents to have such insurance cover and no way for customers to know which agents do or do not have insurance. So what happens when an agent does not have insurance and cannot afford to replace the flight? The customer can no longer directly claim from the CAA as it’s the travel agent’s liability and therefore they would have to take legal action against the agents and only if this forces them into bankruptcy would the CAA pay out.

The simple question is, how long would this take and how is this clearer for the customer?

Given that all major Dynamically Packaging companies have been providing SAFI or Supplier failure cover as financial protection for the holidays they sell, its hard to see how the move to Flight Plus ATOL has improved the protection offered to customers, but it is clear that a the ATOL logo is not the uncomplicated insurance customers may think it is.

The “Have’s and the Have not’s”

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I can honestly say I was one of the few people in my circle of travel friends who was confident before Christmas that January would be as strong a booking period as ever. My logic has remained unchanged since the recession started 2 years ago and is based on the premise of the “Have’s and Have not’s.

The “Have’s”
Have mortgages, have kids and most importantly have job’s. This customer segment have never been better off financially, due to the exceptionally low interest rates on their family homes, which historically have tied up a lot of their disposable income. This sector books early and hence its not surprising to me that the current January booking period has remained buoyant.

However, like most companies involved with Online Travel sector, we have been surprised by the sharp rise in online searches this year with On Holiday Groups B2B search traffic running 85% up year on year, with Google reporting a 26% year on year increase in search’s overall for the travel sector. Unfortunately, bookings have not risen at the same rate, as it appears customers are searching around much harder for their online holiday deals. This in itself is not a massive surprise given the recession, but it does mean that yet again the biggest winner is Google who must be rubbing their hands and whilst many OTA’s are seeing margins eroded due to falling conversion levels.

It would also appear that Thomas Cook’s financial woes have impacted both its tour operation whose bookings are rumoured to be running 33% down year on year and its 1,200 strong high street shop network. How much of this is due to the recent negative PR about the Thomas Cook brands or a very passive discounting policy compared to TUI is not clear. However, the increased online traffic has to have come from somewhere and this is an obvious potential source.

“The Have Not’s”
Have not got job security and have not got the same access to credit they had pre-recession. Traditionally a lot of the late holiday market has been funded by credit cards and last year we saw a relatively weak late’s market due to this.

Make hay now, as it may not last.
Sorry to be the harbinger of doom in such a good sales period, but I can only recommend you fill your boosts now, since its likely to be long hard late booking market.
Sales may be great now, but the “Have not’s” have not kicked in yet and this year we have to deal with both Euro 2012 in June and the London Olympics in August. So be warned its still going to be a tough year with the only obvious ray of sunlight being the strengthening pound which will boost holiday makers overseas spending power compared to UK holidays and of course the unreliability of the UK weather!!