Eurocrats seek to outlaw Agency Model

Posted on October 2, 2012 by admin

Few UK travel agents will be aware that European bureaucrats (Eurocrats) in their Brussels’s Ivory tower, are in the process of re-drafting the Package Travel Regulations and in doing so could effectively outlaw the agency model within the European holiday market.

Yet again it would appear that the opportunity to make the asset holders i.e. airlines and hotels responsible for their product, has been passed over in favour of targeting the much more fragmented and therefore weaker Travel agency community with increased regulation.

I argued forcefully during the “Flight Plus ATOL” debate, that the best way to give customers financial protection was to charge a flat £1.00 levee across all flights to cover financial failure and repatriation. It is simply ludicrous, to legislate that customers who buy a hotel stay along with their flight via a travel agent require protection, but if they buy just the flight or the two elements independently, they do not need protection. Due to a lack of effective lobbying, the UK Travel agency community lost this argument and where lumbered with the financial cost and liability imposed by Flight Plus ATOL cover.

Now, the “Eurocrats” are telling ABTA’s lobbying team that Flight Plus does not go far enough, since customers have to sue Hotels in the market they operate in e.g. Spain.

Online Travel Agents (OTA’s) often feature over 100,000 hotels and can not practically physically check the safety of each hotel and nor could independent high street agents even If they only sale 10 hotels. Logically, it must be the hotel themselves that have to be responsible for the health and safety of the product they sale. How does it make sense to remove the liability from the hotel owner delivering the product and give it to an agent selling it? This is a guaranteed route to reducing the safety focus of hotels, which is not presumably what the Eurocrats want?

If the above points do not show a fundamental misunderstanding of the market, wait to you hear about the plans to impose 14 day cooling off period on “Holiday sales”, but not to impose the same burden on airlines selling Flight only?

How can a agent book a low cost flights as part of a holiday, when the customer can cancel at any time within 14 days, but the airline will still charge agents the full flight price. The key point being missed by the Eurocrats is that the internet has fundamentally changed how holiday are purchased over the last 10 years and going back to the “good old days” of all holidays being sold as packages is just not an option. If they impose these regulations on Travel Agents it will kill their ability to compete on price with DIY holidays put together via Google as it will increase cost by around £20 per person. When asked what research has been done on the impact of this £20 per person or £80 a family disadvantage, we are meet with stony silence. Neither does it appear that customers have even been asked if they feel the need for more protection and whether they are willing to pay for it. So who even decided Europe had a problem that required fixing?

ABTA has been told airline “Click through’s” will be brought into scope, but no practical suggestions on how to do so have been put forward and Its difficult to see how legally this could be achieved. Do the Eurocrats intend bringing Google into scope? I doubt it, yet Google is the main tool used by customers to create holidays.

The first formal drafts of the new regulations are due in March 2013 and implementation will not come into force to 2016, however if UK Travel agents do not form an effective lobbying group now, it’s like that they will be regulated out of the dynamic packaging market.

I continue to work with ABTA and hope they will represent their Travel Agency members effectively, but I am greatly concerned about the clear internal conflicts with the major tour operators. These not surprisingly would welcome reduced competition from Dynamic Packaging and are pushing ABTA to support the proposed scope of the new regulations if not all of its details.

Agents accepted flight plus as a reasonable compromise to extend ATOL protection in the UK, but must fight the Eurocrats over their current intentions to try to revise the Package Travel Regulations in such a way that it will undo 10 years of progress in terms of customer choice and value for money delivered by Dynamic packaging.

Beware…mishandling Social Media can hit you in the pocket

Posted on August 13, 2012 by admin

In my opinion Customer Review Scores are likely to have the biggest impact of the much-flaunted Social Media revolution.

Tripadvisor has long been the site of choice for a customer looking for hotel review scores and to fair it does a decent job. However, the commercialisation of this data is deliberately non-customer friendly, with customers forced to trawl through the 10’s of web sites, popped up by Tripadvisor in order to charge each supplier a referral fee. In the medium term this commercialisation may leave open the door for Google who are trying to penetrate the review sector.

Ironically hotel review scores undermine a key skill set of the traditional tour operators. Historically, they have always been able to claim a higher quality of product, because their in-resort Reps and contractors can continuously monitor the quality of the product and have first hand knowledge of the hotels they sell. However, using consumer review scores web companies can now completely control the quality of what they sell, in order to offer a premium product, without ever leaving their computer terminal.

Google’s move into the review space is also changing the landscape in terms of the importance of brand reviews and how they can influence marketing costs. Companies can now include their customer review star rating in their PPC adverts, which Google’s own research shows markedly increases the amount of clicks those adverts attract, improving CTR score’s and reducing advertising costs.

Amazingly traditional tour operators like Thomson and Thomas Cook seem to have completely ignored this move to online reviews, having no scores next to their names and appear to be continuing with paper based customer review sheets completed on return flights. I think they will regret the lack of transparency in the publication of their customer’s reviews, since I still believe in general they offer a high quality product.

Yet when you look on review sites such as Review Centre, Thomas Cook for example score a very poor 1.9 out of 5 from 442 reviews. To put this into context my own Holiday Nights brand scores of 4.8 out of 5. Are we that much better? I doubt it, but unlike traditional tour operators we are working hard on Social Media and ensure that every returning customer is emailed to ask them to post a review via Feefo that will be picked up and published by Google.

Years ago, whilst at Airtours we did extensive customer research to look into why 90% of customers completing review sheets on the flight home, said they would recommend Airtours and book again, but only 40% ever did repeat book. The research showed that the “Holiday Halo”, where customers have a good holiday and feel favourably about a tour operator lasts for about 6 weeks and then fades fast as customers get sucked back into daily life and forget about their holiday.

It was to maximise the chance of re-books on holiday return, that we started launching the next summers holiday brochures at the beginning of the current season. I believe that if you do not engage actively with your happy customers in this period, it’s likely the only ones bothered to make the effort to leave a review will be the ones who did not have a good time!

I think Google’s move into brand reviews has given Social Media further bite, making customers views not only more visible, but commercial attractive as they can reduce advertising costs. Therefore, ignore this at your peril big guys, since Google and customer opinion is bigger than you.

Harvesting The Perfect Summer

Posted on July 23, 2012 by admin

Well the sun’s finally made an appearance and may even stay a week or
too. But it’s too late to dent what is rapidly becoming a bumper harvest inthe crucial lates holiday market.

On Holiday Groups sales have been running 33% up year on year for June and July and feedback from the Dynamic packaging sector shows that this is just reflecting the very strong demand in the market place.Customers have had enough of the depressing weather and simply will not trust their precious holiday allowance to the UK weather.

The recent demand surge has come at a perfect time for the major operators, allowing them to maintain peak season prices and minimise the amount of stock they need to clear at a loss. The key peak season
is now locked away at high profits and the expectation is that the strong
demand will flow through into September/October where there is still a
high volume of holidays to sell.

Years ago when I ran the Airtours yield department, we had the luxury of being able to bring in last minute peak season flying from overseas airlines, to maximise capacity on strong selling destinations. However, the long recession has killed most of these airlines off and the majors programs appear to have remained fairly static. Hence, they may be regretting cutting capacity by 9% this year, but who could have predicted this weather?

Of the major two, it looks like TUI will be the biggest winner this year since they had the larger capacity and biggest lates stock. However, in a market where demand is strong and bed stock remains plentiful, seat capacity is the key ingredient. The Dynamic Packaging sector feasting off low cost carrier seats, have seen the strongest growth, by simply adding extra load factor points to the low cost carriers programs, which have probably never been so full.

History also shows us that when the UK has a really bad summer,customers book their next summer holiday early. So I would be very surprised if the recent trend for tour operators to cut capacity is not reversed next year.

The temptation to increase capacity will also be boosted by lower brochure prices on the back of reduced fuel prices and a stronger pound.This will give the major operators the option of boosting margins or decide to put the extra margin to the bottom line, as it would be nice if as the benefits of this perfect summer for tour operating.

What’s the future for highstreet shops?

Posted on July 9, 2012 by admin

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?

The Great Escape

Posted on June 22, 2012 by admin

Once glance at the latest financials from TUI and Thomas Cook tells you how tough 2012 looks, with substantial capacity and reduced sales.

Never before has the lates market been so crucial, but also so tough to predict, as multiple influences such as Euro 2012, the Olympics and not least the recession impact on customer demand.

However, the good old UK weather may still provide the increased demand required for the Great Escape.

The early weather patterns could not have been more favourable to the trade. Bright sunshine before Easter, followed by pouring rain as soon as the kids broke up for school holidays, repeated again over the half term holiday. Genius!!

This created a small surge in peak season bookings as families decided not to risk the UK weather, leaving operators with more manageable peak season load factors.

Combine this with the late appointment of an England football manager and little hype about the team’s chance in Euro 2012, and early season sales have remained remarkably strong. Given that the Olympics do not start in earnest until August and how few people have got tickets, I think we can also discount this as a major threat to peak season sales, leaving July as a the make or break month for the trade.The key issue for tour operators is hedging their costs this year has worked against them, locking in an average £10 cost increase per late holiday, when current exchange rates and fuel prices are more favourable.

This, combined with the need to clear their more expensive ‘differentiated’ stock in the lates market, means operators need a marked increase in late deal prices in July despite the recession.

Will it happen? I guess it depends on how much it rains, but the Great Escape looks like it might be on…

Filling the Commodity Gap?

Posted on May 6, 2012 by admin

Thomas Cook’s recent £1.4 Billion refinancing clearly shows that their banks remain confident in Cooks ability to turn their international business around and implement the strategic review presented by the management team.

In the UK market, Cooks have decided to follow the lead of their biggest competitor TUI and focus on differentiated tour operating product. Since it is virtually impossible to differentiate short haul flights compared to the excellent service provided by the likes of easyJet, this differentiation is focused on the hotel element of the holiday.

First Choice and latterly TUI via their merger, has been focused on differentiation for nearly 10 years via their Holiday Villages, Sensatori and Thomson Gold brands. In doing so they have developed a higher price, higher margin proposition that is in demand and can only be purchased from them. Thomas Cook clearly has a lot of ground to catch up, but given their determination and new financial backing will make rapid progress.

So who is going to fill the “Commodity Gap”?

The birth of Flight Plus ATOL, may also signal the age of “Travel Agent Packages” (TAP’s). For many years we have seen the rapid growth of Online Travel Agents using Dynamic Packaging technology, but high street agents have been slower to adapt. However, as the majors shrink their capacities to focus on differentiated product, they will need less third party agency distribution, which may force evolution.

It is clear that independent agents have a gap to fill and the new Hays Travel packaging site is unlikely to be the only attempt to fill this space. It is likely most agents will use their own Flight Plus ATOL to package holidays using low cost carriers and bed banks like On Holiday Group’s “Holiday Brokers” brand.

The key driver of the “commodity” holiday market is the flight capacity on leisure routes provided by low cost carriers. This summer season has demonstrated that for every seat the traditional tour operators take out, the low cost carriers appear to be adding two!!

Years ago on joining MyTravel from Ryanair, Tim Jeans sat me down and explained how he could fly three Paris routes in the ten hours it took a charter flight to fly to and from Tenerife, creating 20% more revenue. However, as the recession has hit demand for city flights, the reverse argument has set in, with Low Cost Carriers switching aircraft to the Canaries in order to only have to fill one seat, instead of 3 to make the same revenue.

Although Low Cost Carriers would prefer to run their own direct sale tour operations e.g. Easyjet holidays, these have not enjoyed the massive success they expected. Similarly, although Ryanair may not like agents using their flights to package, it is virtually impossible for them to stop it and one day they may even wake up to the benefits.

The “Commodity Gap” is likely to be filled by the rapid expansion of online companies like On The Beach and Travel Republic. However, the advent of Flight Plus ATOL’s should give high street agents and homeworkers the confidence to build their own ATOL bonded holidays to fill the “Commodity Gap” created by the withdrawal of the major tour operators, so don’t write them off just yet.

Has the rain dance saved the lates market?

Posted on April 29, 2012 by admin

Who needs a downpour in a drought? Well you won’t find many tour operators or bed banks complaining as the recent weather has caused sales to sore by 40% year on year.

For once the weather gods have smiled on the industry with the perfect combination of sunshine while families where at work or school, followed by a wet Easter and a constant barrage of grey skies and pouring rain ever since. Even I’m sitting here planning a trip to get away from it!

More importantly however, is the impact it may have on the peak summer school holiday period. Although the Government may be pushing the “Staycation”, customers want relaxing sunshine as part of their holiday and the recent weather has rammed home how unreliable the UK weather is, which is likely to have strengthened demand for overseas holidays.

Another more obscure factor going in the industries favour is the lack of an England football manager! We are only 6 weeks away from England’s opening game against France on June 11th and have you heard a mention of it? The complete lack of hype this time around is a marked contrast to previous football tournaments and particularly compared to Euro 2008 in Germany when so many English fans jumped in cars, plans and trains to head out to watch first hand. Many fewer will be travelling to the less inviting Ukraine, so logically the impact on the nations holiday budgets will be less and even in the unlikely event England get to the final it will all be over by the 1st July.

The most difficult part of managing lates yield is getting prices up from the £149 price points that dominate early season to £399 plus required post 22nd July for school holidays. The points above should help early season prices and don’t forget that the Olympics do not start till after the schools have already broken up. Hence although I do expect them to dampen demand neither the Euro’s nor the Olympics will directly impact the crucial month of July when prices need to be wound up quickly.

However, please don’t think I am saying this year’s lates period is going to be easy. It looks like we are in the midst of a double dip recession and the year on year increase in fuel prices, whilst currency hedging has negated an benefit of the strengthening pound, means operators need to get £15 higher late holiday prices even to make the same losses as last year.

They say that every cloud has a “Silver lining” and as we look up at the depressing cloud cover over the next few weeks, think of the job security they may be delivering to some elements of our industry.

ATOL Flight Plus | Flight Plus from ATOL

Posted on April 23, 2012 by admin

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”

Posted on January 12, 2012 by admin

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!!

If only “Differentiation” was a Christmas Present

Posted on January 1, 2012 by admin

Thomas Cook recently announced a new strategic direction, focused on increasing its “Differentiated” product from a claimed 30% to a healthy 50%. But what exactly is “Differentiated” product??
The tour operators seem to have been slow to define this! My own definition is very simple “ Product demanded by customers, which can only be brought from that tour operator”. The key phase, which makes defining differentiated product hard, is “demanded by customers”. There is little point having “Exclusive” product that you cannot sell, because customers are buying the hotel next door for £50 per person cheaper!!!

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