Travel technology Pressure on price-sensitive online agents
O
vercapacity and tour operator discounting this summer placed UK online travel agents (OTAs) operating at
the mass-market end of the sector under increasing strain. Package prices as low as £200 per person in the school holidays raised fears there could be a flurry of failures in the autumn as cashflow dried up. In the end these fears proved overblown, but not before we saw OTA Bookable Holidays go into administration in October. Bookable’s failure was blamed on the
burden of costs and regulation associated with being considered a package organiser and not an agent for the consumer. But in reality margins are extremely tight in this sector and a decision by Teletext Holidays a year ago to strike an exclusive deal with Truly Holidays was a massive blow. It cut off a vital lifeline of leads to companies such as Bookable which were forced to find new distribution channels to survive. Rival OTAs dropped by Teletext in a
previous cull two years ago turned to other deals publishers such as Icelolly, Holiday Discount Centre and TravelSupermarket. But they have also been forced to spread their risk across a wider range of channels to market, including social media, flash-sale and closed-user group sites – and even traditional direct mail and database marketing. Signs of the strain on this sector were
apparent ahead of the summer when key supplier On Holiday Group failed in March, taking bed bank Holiday Brokers with it. This time a £4 million VAT assessment by HMRC – linked to the MedHotels court case – drew the blame. The timing of the collapse, as MedHotels successfully fought off a £7 million VAT claim, was significant but did not provide the full story. In the aftermath, leading industry
accountant Chris Photi, of White Hart Associates, noted the failure had “focused
54 | Travel Weekly Insight Annual Report 2014
Tighter margins put pressure on online travel agents and and led to some high-profile failures, reports Travolution editor Lee Hayhurst
10 20 30 40 50 60 70 80
0 2008 2009 2010 2011 2012 53%
ONLINE PURCHASING: 2008-14 % UK adults making online purchase in last 12 months
attention on the viability of the dynamic packaging model”. Photi pointed out bed-bank suppliers are the “poor cousins” in the profit stakes in this sector compared with the budget carriers, which derive a considerable volume of sales from OTAs without paying for this distribution. Here there is both good news and bad
61% 62% 66% 67% 72% 74% 100 2013 2014
their eyes on a greater slice of the leisure sector. EasyJet Holidays’ tie-up with Tui Travel-owned Hotelopia, announced in March, was delayed but will go live in January 2015, with the airline keen to establish the brand as a top-three holiday provider in Europe. At the same time, Ryanair has revealed its intention to take on the intermediaries by operating more like a travel agent. With the Advertising Standards Authority
20 40 60 80
0 9 8 6 2 16-24 25-34 35-44 45-54 55-64 65+ 40%
ONLINE TRAVEL PURCHASING BY AGE GROUP: 2014 % making online purchase in last 12 months
now embarked on a probe into OTA pricing there is unlikely to be any let-up in the pressure on this highly price-sensitive market.
ONLINE TRAVEL PURCHASING BY AGE GROUP: 2014 % making online purchase in last 12 months
%
10 20 30 40 50
0 44% 32% 27% 16% 16%
Travel arrangements Holiday accommodation
16-24 25-34 35-44 Source: Office for National Statistics 45-54 55-64 65+ 42% 47% 47% 46% 49% 38% 40% 83% 90% 88% 81%
ONLINE PURCHASING BY AGE GROUP: 2014
for the homegrown OTAs. Ryanair’s re- engagement with the Travelport and Amadeus global distribution systems, following a similar move by easyJet several years ago, does offer opportunities even if the airline’s main target is the more lucrative corporate traveller. But both the Irish carrier and easyJet have
70% 13 11
12 15
0 3 6 9
% made online purchase in last 12 months
% point change on 2011
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