The Association of Travel Agents (ATA) initial reading of the draft Package Travel Directive (PTD) was positive. It appeared that the European authorities had listened to our key argument, that agents must be allowed to continue to act as agents when selling “Dynamically Packaged” holidays using low cost carriers and hotel suppliers.

The concept of “Assisted Travel” seemed to be added specifically to allow travel agents to sell holiday elements in the same way customers book them online, which would have been a key concession. Online, customers book and pay for a flights e.g. Easyjet in one transaction and then immediately follow this with the booking and payment for a hotel from a different provider e.g. Booking.com. The “Assisted Travel” provision excludes a holiday booking from being a package as long as each element is booked and paid for separately. However, clauses elsewhere regarding making multiple bookings within one visit, will make it virtually impossible for most high street agents and OTA’s to come within the definition of “Assisted Travel” and these bookings instead will be classed as packages. Ironically, “Assisted Travel” will cover all bookings made via Google for holiday components and will therefore give Google compiled unprotected holidays a major cost advantage over travel agents, the very thing the ATA have been arguing against.

“Assisted Travel” seemed to try to allow agents to continue to “Manually” create “Dynamically Packaged” holidays by putting holiday elements together, but arbitrarily insists they take payment separately for each element of the holiday, one component at a time. Unfortunately this ignores the practicality that customers want to know that they have secured their chosen holiday accommodation, before booking a flight or visa versa.

Under the current drafting however, if these same components are offered in a basket approach by an OTA, these elements need to be treated as a full package and financially protected. To be fair this is actually very similar to the “Flight Plus” model introduced by the UK Government in 2011 and if the draft PTD’s only applied financial protection in the same way this does, then few OTA’s would complain.

The draft PTD goes considerably further by imposing all the full liabilities of a standard package. The problem is that this does not recognise the differences between a traditional tour operation, which the original PTD was designed to cover and the modern internet world of dynamically packaging OTA’s.

The major tour operators own their own airlines and work with a narrow range of hotels, with representatives in resort and local ground handing partners. This gives them a great deal of control over their product offering and the ability to deliver the Health and Safety requirement, as well as the quality of the product in resort.

On the other hand, the online travel agency model has hardly any control, since they do not own the airline, work with a massive range of hotels and do not have a presence in resort. In my opinion the rapid growth of this sector proves that customers understand this model. They are happy to book more “independent” holidays without the hand holding of the traditional operators, because they are much cheaper, even though they offer a lower level of protection. The European bureaucrats have not presented any research showing customers are unhappy or unaware of this reduced protection.  However, the current drafting will make it very hard for OTA’s to continue to deliver these holidays and creates an anti competitive environment, which could dramatically restrict customer choice.

OTA’s often sell more than 50,000 hotels either via direct relationships or “bed banks”.  Is it really reasonable to expect an OTA to accept responsibility for the health and safety standards of such a range of hotels, whilst sites selling “hotel only” like Booking.com, can sell exactly the same hotels to customers with no such liabilities?

In the modern internet world Google is actually the largest “Travel Agent”, since with one click customers can move between booking flights with Easyjet and hotels with Booking.com. The fact that they make two separate payments seems a strange thing to define whether they need the protection provided by the PTD. This has been imposed simply because the European regulators drafting the revised PTD, recognise that it will be virtually impossible to track such transaction over the internet or decide which party should provide protection under their current definitions.

Most players would agree that the travel market is evolving into a spectrum with the major tour operators “Differentiated” product at one end of the spectrum and the giant Booking.com at the other selling virtually every hotel available. The major tour operators have been vocal about how they are positioning themselves out of the commodity market, which is the lifeblood of Dynamic packaging and are focusing on differentiated product that only they can offer. Obviously from their perspective dragging the OTA community in to the full package regulations is a positive move. It will push up the prices of the holidays offered by OTA’s making, their own products look more attractive. Not surprising they have been using both their strong influence within ABTA and direct lobbying to push for just such an outcome.

The OTA community provide consumers a lot of convenience and financial security by offering a basket approach to booking a holiday. However, the imposition of further regulatory burdens threatens OTA’s ability to be cost effective, compared to a customer using Google to book their own components individually. For example my own company, On Holiday Group has to pay a massive £200k a year plus, for public liability insurance because the market for this product is so limited. Therefore, the extra cost of liability insurance, increased compensation payment and further regulatory cost could easily push up holiday prices by £10-15 per person even before we consider the application of TOMS VAT.

The key flaw with the proposed revised PTD’s as they stand, is that they will create an uneven playing field. In a commodity market, even a few pounds can make the difference to a holidaymaker, who is simply not focused on the potential down sides when booking. In my opinion, they are likely to vote with their fingers and build holidays using Google to find flights, hotels and transfers, which they can book individually a lower cost, without the extra £10-£15 per person OTA’s will now have to charge them.

The net result could therefore be that the new regulations push more customers away from booking via OTA’s, who offer financial protection under Flight Plus, to un-regulated and unprotected holidays. The biggest winners under this legislation will be companies like Google and Booking.com, which as we all know pay little tax in the UK, whilst UK based jobs will be destroyed as many OTA’s will be forced to consider relocating to countries that do not impose these burdens or simply shutting down.

For many years the UK industry lead by ABTA and supported by the CAA have been calling for an “All Flights Levy”, where it would be the airlines responsibility to provide financial protection for their failure. Combine this with the obvious move of making individual hotels responsible for their own Health and Safety via a centralised accreditation scheme and you have the right solution. This would cover the whole of the booking spectrum including customer’s component bookings using Google and provide the level playing field the ATA continues to fight for. However, unfortunately this would appear to be a pipe dream and the ATA will continue to focus on amending the current drafted regulations.

The good news is that the European regulators so far have been willing to listen to common sense and have already moved substantially in their drafting. Therefore, it’s a time to just work harder and explain the issues clearly and forthrightly. The ATA will certainly not be giving up the fight to get a fair and balanced solution, but does need the support of the entire agency community who are all going to be adversely impacted if the draft legislation is not changed.

 

During the ash cloud crisis of 2010, holiday sales suddenly dropped by 25% whilst customers sat back and assessed how long it would be before planes could fly again i.e. a major event.

So it’s a bit of a shock that a simple heat wave over the last week has had the same level of impact on sales, with most major OTA’s reporting sales down by more than 20%. To be honest few of us saw this coming, having expected a decent lates market without the distractions of Euro Football tournaments, the London Olympics or Royal Weddings.
Like most business owners in travel I have been desperately looking around for an explanation and an idea of how long this weak demand may last.
Unfortunately my personal conclusion is that it will probably last as long as the heat wave does, and rather than delaying the booking decision, it may be simply removing customers from the market.

A combination of recession and electronic evolution would seem to have increased the vulnerability of the commodity sector of the UK travel market to good weather.
As per my previous blogs, I like to categorise the holiday market between the “Haves” and the “Have nots”. The “Haves” with their jobs and low mortgages have never been better off and are happy to trade up to the “Differentiated” holidays offered by the major tour operators. The “Have nots” who traditionally book late using credit cards, have been impacted more by the recession and hence when a heat wave hits, it’s very tempting to shelve the overseas holiday and just sit in the garden.

We also need to take into account the “Electronic Evolution” that has occurred over the last 5 years. Like many parents I used to dread the long summer holidays and the difficulty of keeping kids entertained at home. However, these days with the advent of high speed internet, X-Box, play station, video on demand and Sky TV, kids have never been happier sitting at home enjoying the electronic world.

As an industry I think we should recognise this threat and push our hotel and tourist board partners on the importance of investing in FREE high speed Internet in all holiday hotels. If we cannot provide the connectivity our kids demand in life, don’t be surprised if they start refusing to go on holiday with their parents to destinations that only offer a beach and a pool. It may have been good enough for us as kids, but it’s clearly no longer good enough for this generation.

So when the kids are happy at home and the parents can get a free tan in the back garden, I suppose a 20% drop in relatively expensive school holiday sales should not actually be a big shock, it felt this week.

However, before we all get too depressed I think we should remember that summers like this statistically only occur every 13 years and for the majority of the time UK summers are complete rubbish. So let’s all do a rain dance and hope things get back to normal – sooner rather than later!

Amadeus recently commissioned a Phocuswright study into Online Search habits, across both developed and developing nations, in order to create the framework for a set of round table debates, which I have been moderating.

The report highlighted that 50% of customers do not know which destination they want to go to at the beginning of their holiday search and are frustrated by both tour operators and OTA’s search tools. The vast majority of these require the customer to know what they want before they have even searched e.g. what departure airport, destination or dates.

In the old days customers popped into a Travel Agency and picked up holiday brochures, which allowed them to flick through a wide range of destinations and gain inspiration about where to go on holiday.

In the move to online booking we seem to have lost sight of this initial requirement and although I am sure many companies will respond to this blog claiming that their “Special offer sections” or regular email shots serve to inspire their customers, I remain unconvinced.

In my opinion, the online community is doing a poor job at “inspiring” customers or allowing them to search across destination boundaries and it’s certainly a focus I will be trying to apply to my own sites moving forward.

The channels best placed to service the need for inspiration or destination recommendation are undoubtedly the retail shop and homeworking communities. However, these channels often face the prospect of customers using their services free of charge and then proceeding to book online, either to take advantage of the lower prices for the same holiday or the extra convenience offered by online channels.

It’s a perennial problem, which explains the continued focus of companies like Thomas Cook on delivering a multi-channel approach to travel retailing, in order to service the customers with the appropriate tools at each stage of their holiday booking journey.

However, the fundamental problem is the requirement to offer competitive prices online, whilst carrying the extra overhead of the service delivered in the shop network.

Sooner or later, all multichannel retailers, we will need to have the same price’s offline as online and charge customers a service fee, if they want the expert advice travel agents can provide.

During the round table debate on luxury this week the words “Trusted Advisors” came to the fore. Experts in the luxury field felt that the key to success, was gaining the trust of clients to rely on their recommendation and expertise in pulling together a portfolio of “Luxury” product for them. All players saw the web as little more than a lead generator and call qualifier for their expert staff, based either in call centres or high street shops.

Although I understand and support this approach, I do agree with criticism made by Distributes Giles Parnell, that it’s actually very hard to research “Luxury” holidays online. Giles also criticised luxury players for not engaging with comparison sites or creating a “Luxury” portal to allow customers to shop across destinations or operators.

At the moment I think it’s the often-criticised “Flash Sale” sites such as Travelzoo and Secret Escapes, which are doing the best job of inspiring customers by offering a wide range of luxury holidays at affordable prices. I know I have booked a few trips via them that would otherwise not have occurred to me.

Anyway, a big thank you to WTM and Amadeus for giving me free access to some great experts, who certainly left me inspired and with a few ideas on how to tackle the luxury sector.

This week’s Thomas Cook interim results looked very impressive with the company identifying £390m ­of savings, forecasting a return to profitability for the full year and most importantly laying out a robust solution to its debt mountain.

So clearly Harriet Green has quickly got to grips with the financial issues and has laid the foundation for a healthier future. However, there are still a large number of fundamental issues that need addressing if Thomas Cook is really going to be able to take on TUI head to head.

To understand these issues, its probably worth reviewing the consolidation that created these two travel giants. Thomas Cook’s tour operation was originally formed by the amalgamation of Sunworld, Flying Colours and Inspiration in the late 1990’s. Sunworld and Flying Colours where relatively new start ups, which were acquired and merged together over a 6 months period and immediately added to by the acquisition of Inspirations/Caledonian Airways. So you can imagine the pain of trying to put all three together in a very short period of time.

Further growth by acquisition occurred 7 years later with the purchase of the highly distressed MyTravel Group of companies, which was rapidly relocated to Peterborough, with a 95% redundancy level. To complete the melting pot 400 Coop Shops where acquired just before Thomas Cook started to implode.

Thomas Cook’s tour operating, retail and airline infrastructures have all been created by acquisition and offer relatively weak foundations, compared to its main rival’s TUI.

Most commentators viewed the merger of the strongest brand in terms of quality e.g. Thomson’s, with the industries best management team lead by Peter Long at First Choice, as the dream ticket.

Firstchoice started the process of creating differentiated Hotel product with the launch of Firstchoice Holiday Villages and Sensatori hotels over 10 years ago. They planned and ordered the Dream Liner aircraft that are only now coming into service with TUI, 8 year ago.

These decisions were key in creating the “differentiated” product that is proving so profitable for TUI and driving their current strong financial performance.

Harriet Green has not yet put a foot wrong, however she does not have a “Magic wand” that can short cut 10 years of planning and financing required in order to create large volumes of differentiated product.

I must admit to concerns about the process of driving overhead savings by abandoning the old brand silo structure and moving to centralised buying, commercial and finance functions. This is likely to rip the heart out of most of Thomas Cook’s secondary brands like Airtours, Hotels4U and Club 18-30. Although this may be a sacrifice which has to be made, there are numerous examples in travel where 2 plus 2 can quickly amount to only 2 e.g. lose the brand and lose the volume/profit.

So although I understand the logic of what Thomas Cook are tying to do and cannot fail to be impressed by the share price rise, I think I will continue to invest my money in TUI. For me its still a gamble that the “Re-iced” Thomas Cook cake, will not start crumbling in the next few years as it has to cover the hard yards required to take it back to substantial profits.

 

At the recent WTM round table on Mobile, the latest buss word was “Mobile First”. This is where companies put mobile at the heart of their development program by developing for Mobile First, rather than retro fitting development on to mobile platforms.
Soon 75% of the UK population will own a Smart phone and the 20% growth Google has seen in search volumes in 2013, has all come from mobile. So how could you possible ignore this?

Simplistically, mobile just makes the internet much more accessible to customers, allowing them to fill “Dead time” interacting with their phones 150 times a day or sitting on the couch at home using tablets.

However, the advent of mobile presents travel companies with masses of complexity and problems beyond even the non-trivial requirement to introduce web sites that scale depending on screen size, offer different search process based on device recognition and move to a “Recommendation basis” offering 2-3 offers rather than hundreds of search results.

Online search has always been a highly track-able advertising method, using “Cookies” or “Mookies” (Mobile version of Cookies). These allow attribution so that advertisers can track customer’s through the entire booking process, giving credit to early stage search’s that do not result in a booking, but crucially introduce customers to advertisers brand in the first place. But mobile breaks this flow, because it has introduced multiple platforms.

Customers often complete complex holiday bookings on the desktop which is a lean forward technology suited to data input, that may have originated on a phone or more likely in my opinion tablets, which I regard as a lean back technology more suited to researching holidays whilst sitting on the couch. So unless you’re a major brand who can afford to take the gamble that mobile phone advertising builds brand awareness and early stage interaction, its very hard to justify it. At the moment Mobile does not deliver an effective return on investment (ROI) and I hence am not convinced OTA’s should adopt a Mobile Phone first approach.

Tablets are a completely different story. Their simplicity of use and always-open mode has lead a surge in house wives and silver surfers bypassing desktop and using these as their platform of choice to access the Internet. Unlike phones, the screen real estate makes it relatively simple to adapt existing travel sites, with a few minor tweaks to get over “clumsy finger” syndrome and gives direct access to the core holiday decision makers in the family e.g. women.

Currently high roaming charges mean that 60% of customers travelling on holiday turn off data roaming and the ability to access the Internet. However, the massive increase in WIFI access in hotels, restaurants and coffee shops, along with impending European legislation aimed at reducing roaming charges should soon remove this barrier.

Once the issue of roaming charges have been solved, mobile provides a great opportunity for OTA’s to extend their holiday offering with in-resort services via the phone. At the moment OTA’s suffer from the “Tarmac wave” where they send customers on holiday and just have to hope that they have a good time. They have no real ability to interact customers while they are on holiday, unlike the traditional tour operators who have in-resort infra structures and Reps. Moving forward OTA’s will be able to offer phone based support tools. These may be as simple as restaurant recommendations, local taxi numbers or maps marking all local attractions, delivered on their phones either on a cached basis or via live streaming.

So in summary I believe mobile represents another major evolutions of how people access and use the Internet. But in terms of driving holiday bookings I do not see the ROI on mobile phone advertising at present and will be avoiding it.
In many ways Mobile reminds me of the explosion of Social media. We all know it’s an opportunity, but so far nobody has found a way to commercially use it to sell holidays, irrespective of the marketing hype it receives.

TUI’s recent move to harmonise its approach to Flight pricing by making baggage an extra charge on its trade ATOL to ATOL flights shows how ingrained this particular “Bait and Hook” strategy has become in the travel sector, with every airline now playing the baggage game.
The moment I saw Flybe’s move in 2005 to start charging £2.00 per checked baggage, I just knew that this little game would catch on. However, I did not imagine the lengths that commercially focused airlines like Ryanair would take this to.
Looking at the Ryanair site, I can fly to Tenerife for a very reasonable £152 in August, but then I get hit with a £90 charge to check in a 20kg bag later in the booking process.
The average weight of a European suitcase is 70.8 kg – so how many bags equal a person? The answer is 3.5. If airlines simply charged by weight carried, the £90 bag charge equates to a seat charge of £316. So the maths cannot simply be justified, unless of course Ryanair are factoring in that they give a better customer service experience to the bags!!!
I admire many things about Ryanair’s commerciality and could just about live with the checked baggage charge, it if was not combined with a brutal approach to hand luggage. I don’t want to be made to feel like a petty criminal or smuggler when boarding. Do they really have to measure every bag with a cardboard slider, to see if it meets their ever-changing dimensions, and make you stand to one side if they don’t? The answer is clearly yes, when maximising short-term profits, but if it damages customer retention then in the longer term it has to be questioned.
Ironically, the very structure of the standard Dynamic Packaging site rewards Ryanair’s baggage pricing policy. The CAA vs. Travel Republic legal case enshrined the basket approach, where customers choose a flight based on price and flight times, before adding a hotel. However, it’s only after these choices are made that customers are hit with highly varying baggage charges depending on the airline selected. Hence, although the total price of a Ryanair Flight including baggage can be higher than that of a competitor, it is listed as cheaper and hence in effect the OTA’s are pushing customers to Ryanair. Combine this with the fact that Ryanair are actually often the cheapest airline and you start to explain the Dynamic Packaging sectors high level of Ryanair sales, even if Ryanair does hate us.
Baggage costs are so high, that I recently came close to investing in a new start up company called “Fetch my Luggage”. It’s actually cheaper for this company to pick up luggage from customers homes and deliver it to their hotel rooms using DHL’s land based services. I loved the idea of marketing the concept of “Speedy Travel” and cutting 3 hours off the average holiday journey time, since customers can whizz through both departure and arrival airports as they avoid baggage drop off and pick up.
However, a fatal flaw is that DHL do not allow flammable item such as deodorant and perfumes to be transported and how many of our lovely wives would agree to leave them behind! So it works, but not for the mass market in my opinion. However, if you want to send your golf clubs, Ski gear or promotional gear ahead, check them out.
More radically how long will it be before airlines start poaching each other’s customers’ luggage? Flights with Easyjet, but drop your baggage at the Jet2 counter who will deliver it to your hotel? Whacky, but an interesting idea!

It would appear that the major tour operators slowed the growth of Dynamic Packaging in January through to March by using two key early booking advantages.

Differentiated product (which is in demand and can only be bought from TUI or Thomas Cook), usually sells well in the early booking period boosting early sales. Given the big expansion of this product you would therefore expect the major’s early sales to be stronger, which they have duly delivered.
However, unless high load factors are achieved early on this differentiated product, it can quickly become a burden in the price sensitive lates market, since its high cost can cause heavy losses when sold as a perishable product close to departure.
The major’s ownership of in-house airlines, gives them the ability to offer customers a low deposit of £50, which for a family of 4 equates to £200 deposit per booking. Compare this to the £500 required for most Dynamic Packaging bookings and you can see why early booking customers may be willing to pay more or upgrade to a differentiated holiday, since the immediate cash outlay is a lot less.
In the current well-documented recession and reduced access to credit, it should not be surprising that the rampant growth of Dynamic Packaging has slowed a bit. However, the majors should not be complacent, since we have now entered the late booking market, where full balances are required on booking and traditionally customers become more price sensitive and willing to shop around for the best deals.
This year’s early Easter also means that we have 7 low demand weeks before we get to the May half term week, which will drive lates prices low and benefit the Dynamic Packaging retailers who love distressed flight seats to package up. Given the DP’s non-risk model, a tough lates market is not such a bad thing since input costs e.g. flights and hotels go through the floor with little damage to their margins.
Ironically the problem faced by most DP retailers is increased marketing costs as customers are finding it easier to shop around and are increasingly using mobile platforms, which due to the current poor user experience have an even lower conversion rate.
Online Travel Agents selling holidays will soon be faced with a stark choice.
Ignore mobile completely due to the cost of site modification and the low conversion levels, which obviously reduces traffic and risks becoming less relevant to the customer during all stages of their booking journey.
Or spending lots of money to acquire customers in the short term on a less cost effective basis, but secure your long-term market position when mobile matures.
It would appear that even in the OTA world, the majors are set to become bigger as the middle ground is squeezed hard.
!

Nice of LinkedIn to tell me I have “One of the top 1% LinkedIn profiles for 2012.” Since they now have over 200 million members this feels like quite an achievement! Did anyone else get this?!

The ATOL fund is finally back in the black, thanks to the introduction of Flight Plus ATOL and increased contributions from a whole range of retailers, but in particular OTA’s like Travel Republic who finally joined the scheme in 2012.

However, as usual when dealing with the Government, the goal posts have shifted again and instead of the expected reduction in the ATOL fee, we are faced with a “Call for evidence”. As part of this, they have made it clear that the Government wants the CAA to continue to provide “Repatriation cover”, but to remove the Governments role as insurer of last resort. Instead it is asking the travel industry to come up with its own scheme to provide financial security for the customer. In my opinion this is perfectly reasonable and actually not that hard to achieve for the Flight Plus sector, if the CAA will continue to play a key role.

The CAA has mooted “Trust funds” as one possible solution for Flight Plus travel agents, but in really this is a bit of a red hearing. Yes, “Trust funds” would extend current financial protection to cover pipeline moneys held by agents, but it does not deal with the key risk that ATOL currently covers i.e the failure of an airline, causing the failure of the Flight Plus ATOL holder.

The majority of Flight Plus holidays use Low cost carriers who demand payment on booking. Therefore, if an airline went bust, there would be no money in the trust fund to replace the flight and the ATOL holders still goes bust. The only real solution is compulsory insurance backed Supplier Failure Cover (SFC)

The collapse of an airline would cost insurers a large amount and is therefore regarded as a “Systemic Risk”. This is where the risk outweighs the annual premium paid to the insurance, to such an extent that it could take 5-15 years of premium before it’s covered. If the CAA leaves agents to get their own individual policies, then multiple insurers, all of which will have a percentage of the market, will face this one “Systemic Risk”. This is highly inefficient and in itself will lead to higher average premiums.

The logical party to aggregate all the demand for SFC and place a policy to cover this risk is actually the CAA, since its what it currently does. The only fundamental change is that the CAA would be swopping out a Government bond, for an insurer or panel of insurers who specialise in this type of risk covering.

Having researched the market extensively as part of my Non Executive duties at Rock Insurance, I know that an SFC policy could be placed for £1.50 per person or less and if £1.00 is put into a fund to cover repatriation cover, the current ATOL fee of £2.50 can be used to provide both repatriation and financial protection as it currently does.

The CAA could reduce the cost of insuring against airline failure, if it insisted that retailers used “Virtual’ credit card technology or company cards when booking flights. These allow re-charges non-delivery of service against any airline’s credit card clearer, if the airline fails and provides a level of defence in front of the insurance policy.

The CAA could then use this saving to extend the SFC policy to also cover the collapse of Flight Plus agents and any “pipe line” money. Although, some travel agents do regularly fail, these failures represent relatively small hits to insurers and therefore are relatively cheap to insure. Also by pooling the risk of failure across all Flight Plus agents, it removes the need for the CAA to insist on differential premiums depending on the risk of the agent and in turn the need operate complex trust fund schemes or financial regulation.

The above model is simple to introduce across the Flight Plus sector since it can all be achieved with no visible change to the scheme. ATOL holders still pay £2.50; customers still get financial and repatriation protection.

I wish the same could be said in the case of the major tour operators since most insurance companies will be scared by the shear scale of cost if one of the big two collapsed, irrespective of its likelihood. However, for once hopefully the CAA will not burden the Flight Plus sector with this risk as well, since after all, we are only agents!!

For the last 3 years I have been a pessimist at this time of year during the annual budgeting exercise, telling my directors to “Baton down the hatches” and plan on keeping everything tight for the year ahead.

However, even through the number 13 may generally be deemed to be unlucky, I am feeling much more optimistic about the year ahead. This is partly down to my “naïve” expectation that there will be less negative impacts next year.

No ash clouds or Arab Springs on the horizon. Although sales to Egypt are likely to remain depressed, as it continues on its seemingly inevitable slide to being a secular Muslim state. No glorious summer of sport, to keep potential customers locked to their couches, watching Euro football or golden medals being delivered in their droves by both able and disabled British athletes.

Even the Queen may keep out of things, having spent the year attracting overseas and domestic tourists to the great summer of London pageantry.

There are also some positives to drive expectations. Historically, after a wash out summer, early demand surges for next summer’s overseas holidays. Holidaymakers, who got stuck in the wet and miserable UK during last summer, spending fortunes to keep the kids entertained, often vow to never do it again. Well until the memory fades a little at least and hence weeks of rain, just before the key January booking window, can only be a God send for sales.

At a more Macro level, the pound remains relatively strong against the Euro. Although it has dropped back from €1.25 to €1.22 during the last six weeks, it remains ahead of last December’s €1.19 to the pound, meaning both customer’s spending money is boosted and the hotel element for Euro destinations is reduced.

The Dollar and Fuel prices are also looking positive with the Pound hitting an annual high against the dollar this week at $1.62 to the pound and fuel prices drifting down to last year’s levels. In simpler language these variations should give tour operators an average £10 per person reduction in holiday costs. Initial indications are that tour operator capacities are tight and hence prices can be held, with these cost reductions dropping to the bottom line.

Unfortunately, in the commodity ”Dynamic packaging” market, competition is likely to force all these savings to be passed directly to the customer in the form of lower holiday prices. Given prices are already much lower than traditional tour operators; it is unlikely that this price reduction in its own right will drive more volume for the sector.

The Dynamic Packaging market is much more influenced by low cost airlines capacity. We are seeing a slow down of both low cost capacity growth and in the shift from city routes to leisure routes. However, it should be remembered that agents dynamically packaging have 100% access to a low cost flights, compared to the 30% of seats charter operators sell off as flight only and hence even small movements can have a big impact.

Probably more relevant is the statistic banded around by Low cost airlines, that Travel agents represent less than 10% of their seat sales. Do I believe this? Not for a second, but irrespective of the real number, there are clearly still millions of more seats for Agents to package into holidays and I am optimistic that the Dynamic Packaging sector will grow by a further 15%-20% this year. Why such a radical increase?

Well we are not quite there yet, but given all the noises coming out of the major tour operators, 2013 is likely to see Agents commissions on the “differentiated” holidays sold by the major tour operators cut to a flat 4% commission plus booking fee. This is because the growth of their internet sales combined with an oversized retail chain, will mean they have excess internal distribution capacity and therefore can take or leave third party shops on their terms.

The wiser agents will therefore use 2013 as a migration year, pushing their Dynamic Packaging sales up to 40-50% of total sales, giving a substantial boost to the demand side of our sector.

Hence, 2013 may be unlucky for some, but hopeful On Holiday Group will continue to ride the evolutionary wave and Happy New Year. Which I of course also wish to all readers.