Dynamic packaging: Time for agents to act

When will travel agents ever learn that the business world has moved on?
Thomson's announcement that it is cutting commission to 7% - followed in a blink of the eye by Thomas Cook and First Choice - took no one in the industry by surprise. MyTravel has remained non-commital but it's surely only a matter of time before it, too, follows suit.
And almost as inevitable as the cuts themselves was the response from high street retailers. Anger and a vow not to accept 7%.
While the anger is understandable to a point, agents need to realise that the business world has been turned on its head in recent years, a change fuelled largely by the Internet.
Thomson, First Choice and Thomas Cook have all spent millions developing e-commerce strategies and driving business online. They are enjoying considerable success, with Thomson and Thomas Cook in particular among the most popular online travel brands.
By 2008 Thomson predict 50% of its mainstream package business will be booked on the web with Thomas Cook aiming to drive 20% of sales online as early as next year.
These are not small numbers.
This, of course, means that traditional high street agents - particularly third party ones - will be a far less important avenue of distribution for mass market operators.
This is the way it is. It is not operators becoming spiteful and seeking to deliberately put agents out of business. They are attempting to bring their holidays to market at the cheapest possible cost which may, or may not, result in cheaper prices. And if that means cutting commission, so be it.
What we may now see, or at least what we should see, is a genuine explosion in dynamically packaged holidays. Until now, the growth has been relatively low-key, despite what some people may claim. Yes, it's been growing, but we're still talking low numbers.
That could now change. If agents can no longer afford to sell Thomson and the like at 7%, then it's simple. Don't.
There are dozens of companies clamouring to work with agents to develop dynamic packaging and all the main consortia have developed systems to cater for this market. If the systems are half as good as head office claim they are, then members should have no trouble building a package from scratch and earning a decent margin.
The traditional agent/operator business model is effectively at an end, at least with the mass market firms. It's time for retailers to stop talking about dynamic packaging and actually do it. And the commission cuts have given them the green light to do so.

The ABTA convention- a point of reference for the online market?

Travolution approached the ABTA convention in Marrakech with interest-ABTA was under pressure this year to revamp the format and make it a better event, and that was from its traditional members. The convention has suffered in previous years from the absence of online players, or to put it correctly, newer forms of distribution affecting agents, operators, and online players- have never seemed greatly represented. Yes, Brent might make a speaking appearance, but the agenda has always seemed dominated by commissions and other ‘nitty-gritty’ issues, whist neglecting the winds of change whistling around the sector.

Was this year different? Well in some ways: We sensed a real change in attitude in most traditional players- both agents and operators seemed less inclined to dig their heels in and defend the old ways. Many we spoke to are recognising the need to change are investing in new skills, new opportunities, and becoming more fleet-of-foot. The session on Search marketing chaired by Travolution was packed- and travel agents were well represented. There also seems to be recognition that Darwinian evolution is necessary and unstoppable- there may well be 1,800 casualties among traditional travel agents in the next few years (as Chris Mottershead suggested in his session)- but some of these will re-emerge as ‘new shape companies', and those who survive will be stronger. It was good to see e-marketing companies like Spannerworks there- as well as healthy representation from Expedia/Hotels.com, lastminute.com and Cendant among the delegates.

The conference itself worked better as a networking format- less disparate than in previous years, and the new ‘talk zone’ met with approval from both delegates and suppliers. The conference content itself was disappointing: ABTA rightly needs to attract speakers from other sectors, as the upheavals in distribution/the supply chain are mirrored in telecoms, music, automotive, etc- but John Caudwell missed the mark. Tough, successful businessman he may be, but he failed to tell the audience anything meaningful. There is a real meaningful comparison between the retail paradigms in mobile telephones Vs travel. Sadly, we failed to hear it.

Once again this first day degenerated into lengthy discussions on commission cuts, fuel supplements and the role of ABTA. These are important, but ABTA missed a real opportunity to set its stall out for the future, both by providing inspiring content and by outlining its future role. What should be its future role? See below for our view.

Overall, if new forms of distribution are your pre-occupation, you’d have had a useful time at ABTA this year- but your value would probably have come from fellow delegates rather than the stage.

ABTA should view itself as a media organisation rather than a regulatory body

There are many views on ABTA’s future role, but, for what its worth, this is ours:

In the broadest sense, what is happening in travel is that deregulation- of airspace, of channels, of suppliers- has and is shifting the balance of power to the consumer. The reality is, the consumer increasingly doesn’t care about bonding and other protection issues- the shear volume of passenger numbers on Ryan Air proves this- many of these trips are linked to independently sourced accommodation, and therefore unbonded.

The key issue here, is that consumers are self-regulators- cautious consumers care a lot about protection, and regulate themselves by choosing bonded providers. Less cautious consumers take more risk. This is why, despite the advent of self-check-in- many consumers still CHOOSE to queue up to check-in- they would rather not take the risk. The real risks of things going wrong with your holiday supplier are getting lower- what if Ryan air goes bust? Come on- with something like 900 million Euros cash reserve, the chances are unlikely. Evidence suggests that even consumers who have been caught by the (rare) demise of a low cost carrier/supplier are still prepared to take risk in future- they regard themselves as unlucky, and in real terms, with disposable incomes rising, losing £800 per person (the average package price) is bloody inconvenient, but not the end of the world.

Therefore, ABTA needs to shift itself from standing for what consumers care increasingly less about- regulation and bonding, towards what they really care about. What do they really care about? Information. Without information they can’t exercise independent choice. Consumers are hungry for independent travel information- why else do they spend so much time on search engines, and in the research process. Time after time studies show that online travel brands are poor information sources- they are investing in only so much information to get a converted booking to their site.
ABTA has a real opportunity to position itself as the consumer’s information brand- the independent stalwart of advice and reference- a position is can hold due to combined volume of its suppliers/trade members. ABTA’s role should be to explain to consumers why fuel supplement’s occur- rather than get bogged down in should they occur- thus adding value both to their members and to the end customer. If ABTA can be the nodal point between changing suppliers and information-hungry consumers, this is a powerful position.

This means re-inventing itself as a media organisation. In today’s information economy all businesses are media brands to a certain extent, but for ABTA this will require a fundamental shift in its thinking, its structure, and its commercials. We can hear Newman street responding to this with ‘but lots of consumers already come to to our website for information..’ That’s the tip of the iceberg- do you satisfy them? Do consumers regard ABTA as the information voice of the newly-empowered traveller? Wouldn’t it be powerful if they did?

Supermarket giants could sqeeze smaller travel brands

Expedia's belief that increasing numbers of non-travel companies will muscle in on the sector appears to be spot-on.
Formula One - a travel site of sorts you may argue - is launching a white-label site using Expedia's inventory and technology. Tesco, already working with lastminute, has hinted at a more aggressive approach in selling holidays. Now ASDA has got in on the act, launching a travel site aimed, in line with its target market, at the "cost-conscious" traveller.
This, as Expedia reckoned, will be the tip of a very large iceberg.
All of which puts pressure on the traditional travel players who are fighting to get themselves established as online brands.
The likes of Expedia, lastminute and ebookers, together with major offline brands such as Thomson and Thomas Cook, will hardly be losing sleep. They are well-known and reliable brands with significant marketing budgets and expertise to cope with an increasingly competitive marketplace.
But it's those smaller brands attempting to make a mark on the web which could find themselves squeezed out.
Tesco is not a travel brand yet it hardly matters. Such is its power and brand identity, it could easily make an impact and even buy in the skills and knowledge necessary to make it work.
The question is though, why does Tesco, ASDA and other non-travel retailers want to bother with travel? Yes, it's hugely popular, but it's a volatile industry and the margins are notoriously small.
But in it they are and they could make a mark.

Yahoo! Travel to roll out new search technology

Yahoo! Travel is rolling out new search technology that it believes will improve conversion rates and better engage potential customers.
The technology, called ‘assisted filtering’, will provide shoppers with a more flexible mechanism that will initially keep the search broad before drilling down to specific offers.
Using a combination of traditional drop down boxes, holidaymakers without fixed plans can select the month of departure – rather than specific dates – destination country, duration, city of departure and accommodation board.
As the user selects the favoured options, search options are automatically and instantly updated to ensure users are only presented with relevant options.
A spokeswoman explained: "In most website searches for example, customers have to insert specific dates and departure airports only to find there is nothing available. They must then start all over again. Assisted filtering will only bring up what is available."
The technology will initially feature on the Yahoo! ski and snow site with plans to extend it to other markets across Europe by the end of the year
Yahoo! Travel European general manager Tim Frankcom said: "This search is designed to offer the flexibility to address the needs of all users from those who know they have a free week in a particular month and want to find what options are available to them, to those who know exactly where they want to go and when.
"By putting the user in the driving seat, users become more engaged in their search and can be confident that the offers they view are relevant to their personal requirements.
"We are confident this combination of engagement and relevancy will improve conversion rates form our advertisers."

Shift in search terms force marketing re-think

Online shoppers are becoming increasingly specific with search words, forcing companies to re-think their marketing strategies.
Online search technology and marketing agency Adprecision said customers are using fewer generic terms and nailing down exactly what they want as soon as they start searching.
The trend has seen more companies bid for ‘longtail’ key words – specific phrases rather than individual words.
Adprecision commercial director Alasdair Cross said: "It’s a general trend for the use of longtail words which are much more specific searches. Instead of generic terms such as ‘flights’ for example, users are now putting ‘flight to New York in December’. Internet users are becoming more sophisticated."
Cross said the cost of longtail words are currently cheaper – around the 50p mark - than many words because of the specific nature of the searches.
But although fewer people are likely to type in the phrase, those who do are more likely to book, he said.
"More specific searches indicates shoppers are at a more advanced stage of the buying process," said Cross. He said improved conversions from such search terms could lead to an increase in the bid price.
Cross added that key words such as ‘Dubai holiday’ have risen from between 30p or 40p three years ago to around £3.

Expedia forecast growth of 'full travel' websites

The online market will become increasingly intense as more businesses develop full travel websites, Expedia has forecast.
Director of new channels EMEA Michael Anderson said companies increasingly want to branch out from their core market and offer a full range of ancillary products.
And he said the growth won’t be limited to travel firms. Companies outside the sector will also muscle in and take a share of the online travel boom.
Anderson’s comments comes as Expedia prepares to operate a white-label site for Formula One, the official motor racing body. Under Expedia’s Private Label arm, it will provide the technology and inventory for the site.
"It will offer flights, hotels and race tickets. Everything you need for a trip to the Monaco Grand Prix or anywhere else," he said. "All types of corporations outside the travel industry are looking at this.
"Looking ahead I see more competition but also more co-operation. Competition because more companies will start to sell other services and offer full travel websites. Traditional offline companies will also go radically online.
"But there will be co-operation because you cannot do everything yourself. It takes longer and costs far more money to develop the technology and build the inventory.
"To develop a dynamic packaging engine for example requires a considerable degree of investment which must be spread over thin margins."
He predicted websites will increasingly turn to Expedia – "and others" – to provide the platform.
"The barriers of entry are low as the technology and product are in place," he said.
Where Expedia makes its money is by taking a share of the commission.
Expedia Private Label is expected to play an increasingly important role in the business as more customers go direct to suppliers.
Figures produced by Anderson show 71% are forecast to go direct in 2007, up from this year’s 65%
"We are going deeper and deeper into marketing areas," he said.

VisitBritain ramp up e-commerce strategy

VisitBritain is launching a flight engine on its website featuring more than 500 carriers offering inbound flights to the UK and domestic flights to English destinations.
British Airways, Virgin and Bmi are among the airlines to have built links to visitbritain.com along with online agencies including Opodo and Orbitz. Low cost carriers also feature on the site.
The move comes as VisitBritain continues to invest in its e-commerce strategy. It is regarded as leading the way in the market.
Director of commercial and marketing services Kenny Boyle said: "The new service is another element of VisitBritain’s online and CRM strategies to remain ahead of our competitors around the globe.
"The flights engine provides an even more comprehensive information service for people planning to travel to the UK.
"Our customers can come to single, impartial organisation to view a range of flight options and searches for the best offers available."
VisitBritain will earn no commission from sales with customers clicking straight through to the airline or agency websites.

Opodo 'not a major thrust' for parent company

GDS system Amadeus has said online agency Opodo will not form a key part of its future strategy.
Multinational customer group vice president Gillian Gibson said of a one billion euro, three-year investment, the bulk will be spent on developing its GDS distribution platforms.
"We are building a low cost carrier solution and a hotel distribution platform," said Gibson. "Opodo is not a major thrust of our strategy. We are a technology company, not a retailer."
The comments came during a debate where the GDSs were asked whether owning online agencies put them in direct competition with their agency customers.
Sabre, which owns Travelocity and lastminute.com, said owning online agencies gives them a far better understanding of how they work.
"It also gives us close links with airlines and enables us to negotiate good supplier content," said EMEA senior vice president Richard Adams.
But Worldspan vice president and general manager EMEA Graham Nichols said: "We differ from all of them in that we do not compete against our customers. You don’t have to buy an online agency to understand them. There is no advantage in that."

Thomson brings worldwide product online

Thomson is striving to break away from its image as a short haul package operator through the launch of a new bookable website featuring its range of worldwide product.
The operator said customer research showed high demand for tailormade product to be made available online.
"We know that around 30% of our online users research online before contacting our call centres or high street shops so it made sense to launch the worldwide website as part of the thomson.co.uk web portal," said TUI UK head of new media Graham Donoghue.
It wants to emphasise the depth of product as move away from the traditional view of being a short haul package operator.
The inclusion of sections titled Thomson Elite and Uniquely Thomson hope to reinforce that message.
High quality images will also feature while Donoghue said videos and chat rooms are will follow.

Booking decisions fuelled by convenience before price

Research has revealed that customers are increasingly looking for convenience ahead of price when they book online.
According to a PhoCusWright survey, 28% said they buy a combination of air tickets and a hotel from the same site to save trawling through separate websites. Slightly fewer – 27% - said discounts were their motive.
Of those loyal to one particular site, 37% said it was convenient to book flight and hotel while only 25% said cost was the driving force.
Other findings show 71% are now booking hotels online, compared to 60% in 2003, while 50% of combination packages were for air and hotel, 24% air, hotel and car, 23% air and car and just 4% hotel and car.

Sabre deal pays dividends as lastminute expand product

Dynamic packaging will overtake sales of pre-packaged deals for lastminute as early as next year as the tie-up with Sabre begins to show tangible benefits, according to holidays and flights director John Bevan.
He said the split is currently 50/50 but forecast self-packaged deals to surpass the traditional market during 2006.
Bevan told Travolution that dynamically packaged long haul sales were picking up along with short breaks to the Mediterranean.
He added that Sabre’s global reach was enabling lastminute to quickly expand its own product into areas it is currently weak.
“There are big numbers coming through for dynamic packaging. It has worked well for city breaks because it’s simple product to buy but we are now finding long haul coming through,” he said.
Bookings are for what he described as “easy destinations” such as the Caribbean where people tend to stay put in one location.
“We have strong links with the low cost carrier and are also seeing more shorter stay breaks in the Spanish islands,” Bevan added.
Lastminute is also continuing to shake-off the image as dealing only in next week departures with the average DP booking made four weeks in advance.
“Top searches are for early December and January. It is not just people looking for next weekend,” said Bevan.
But he stressed it has not lost sight of the last minute shopper looking for a break or for an 11th hour birthday gift, describing it as “something we are proud of.”
Turning to the deal with Sabre, Bevan said it has given lastminute more scope to expand.
“Sabre has a global contracting team and has guys all over the world contracting and we can tap into this source. They will also contract specifically for the UK market. It is allowing us to expand much quicker into area such as the Far East and Australasia.”
Despite the growth of its in-house product, Bevan insisted it would always work with third party operators to ensure a variety of product. He added lastminute had no intention of adopting the direction selling model of its off-line counterparts.

Price comparison site to build blogging community

Cheapflights is looking to develop a blogging community with the launch of section on its website featuring the latest travel news, airport information and special offers.
Flight News – accessible through news.cheapflights.co.uk - will enable users to comment on any item that appears on the site and share information with fellow travellers.
The site, described as totally non-commercial, can also be broken down in to specific carrier news with links to websites.
Cheapflights, which has launched a UK and US version of the blog section, said the aim is to create a totally independent information channel and give consumers another reason to begin their flight search with the company.
Director of business development Liz Faherty said: "The introduction and widespread use of blogs are providing consumers with an invaluable tool for initial research on a variety of subjects. It is providing web users with completely independent advice."
She claimed price comparison sites are "leading the way" in developing the industry’s online presence with the new blog service taking the it "one step further."
Around 500 items have already been loaded onto the site. Comments and items will be updated daily.

FEXCO outline "aggressive" growth for online business

The Irish travel firm which acquired online accommodation provider Placestostay.com from technology supplier CNG is conducting a "root and branch" review of the business as it prepares to look for global growth.
FEXCO All Travel said it had "aggressive" plans for the site – which offers around 25,000 exclusive rate properties - and would look to expand the depth of product and its number of partners.
It also confirmed that a second accommodation provider acquired in the $2.5 million deal, cnghotel.com, would be phased out.
Managing director Dr Stewart Stephens declined to reveal specific details of the growth plans or business review but said expansion would happen "in the near future."
"We are conducting a root and branch review of Placestostay and the short term aim is to have a user-friendly site with customer-focused value and clear booking process," he said. "There will be aggressive growth to put it mildly although I would not like to put a figure on that.
"First of all we need to draw a line between CNG and us. Our suppliers are used to dealing with CNG."
He said it was a logical step to phase out the cnghotels brand but retain Placestostay which he described as a "recognised brand" in the UK trade.
Business development and distribution director Tim Wright said deals are in place, or in the process of being struck, with a host of UK travel companies including Advantage Travel Centres, Worldchoice, Dawson and Sanderson and Lowcostbeds.
"Our aim is to be on every desktop in the UK," said Wright.
Asked if it would seek distribution through the major online travel agencies, Wright said: "We are looking for opportunities all the time. Nothing is off the agenda."
Fexco have just completed a deal to supply the Placestostay inventory through TUI-owned French tour operator Nouvelles Frontieres.

High Court to rule on dynamic packaging dispute

Travel agents should know before the end of the month whether they can safely sell a dynamically packaged holiday following a high court stand-off between the CAA and ABTA.
During a two-day hearing, which ended yesterday, the CAA argued that all retailers selling a flight and one other component of a package must hold an ATOL licence, even if separate booking are made and separate invoices produced.
If the ruling goes in its favour, it could cut off an increasingly lucrative revenue stream for agents.
ABTA, which is challenging guidance issued by the CAA earlier this year, insist booking a flight and hotel independently does not constitute a package and does not require an ATOL.

Online ski operator receives cash boost

A private equity investor has taken a 10% stake in online ski specialist Ski Line after injecting a six-figure sum into the business.
The operator declined to reveal the investor’s identity but described them as ‘high-profile’.
Ski Line is expected to float on the Alternative Investment Market within the next five years and is looking to increase its annual turnover by 75% in 2006m and by a further 50% in 2007. Turnover has risen from £1.5 million in 2003 to £5 million this year.
Managing director Angus Kinloch said: "We have received many offers for investment in Ski Line but this arrangement is the one about which we feel most conformable. The proceeds will be used to accelerate the company’s growth."
He added: "There is a lot of money to be made in online travel. Along with casinos, internet travel companies dominate the short list of dotcoms that are still attracting the attention of city investors. Ski Line hopes to join the ranks of listed travel companies very soon."

International division increases share of Expedia business

Expedia’s non-European operations are playing an increasingly important role in the business as revenues leapt more than 40% in the third quarter.
Its international business, which includes the UK, Germany, France, China, Italy, Canada and Holland accounted for 22% - £73 million – of its total revenues, an increase of 43%. In the third period last year, international business accounted for 18% of revenue.
Gross bookings in the international operation also climbed, by 39% to £508 million. It now accounts for 23% of total gross bookings, up from 19%
Overall gross bookings increased 21% to £2.23 billion with group revenue now at £334 million.
The online agency said worldwide merchant hotel rates, acquisitions and growth in car rental business all contributed to the revenue improvement while hurricanes and terrorist attacks all had an impact.

Advantage relaunch dynamic packaging technology

Advantage Travel Centres has unveiled its remodelled dynamic packaging technology including an expanded range of product and flexible pricing.
The new-look system, Advantage4Holidays, will enable agents to set their own commission levels and package up a greater range of content through XML feeds.
Management, who have been working on the project for six months, described phase 2 of the technology as a “significant step forward” for the consortium.
Speaking to Travolution after showcasing the system to agents at a series of mini-conferences across the country, head of development Ken McLeod said: “It’s a very different animal from the original. We needed to get a system online for the summer 2005 season but it’s relatively limited compared to the upgraded version.
“We are taking far more XML feeds and giving agents, which provides members with far more product, but one of the biggest developments is pricing.
“Prices will default to a certain commission level but agents have the option to adjust either the price or rate of commission.
“If a holiday is £800 and they want to to sell it for £775 to compete with Lunn Poly down the road then they can.
“It give them total flexibility and allows them to more effectively control their margins.”
Agents can also choose the default commission level, said McLeod.
He said the look and speed of the site is also vastly superior while customers will have far greater choice.
“As an example, the first system was restricted to durations of three, five, seven and 14 nights,” said McLeod. “There is now a choice of one to 45 nights.”
He added short it would soon be looking at lifestyle product including football and theatre tickets.

New Cheapflights MD looks to accelerate growth

New Cheapflights group managing director Christopher Cuddy has pledged to expand the business into a “truly international” travel comparison portal as the company prepares to accelerate its growth.
Cuddy described Cheapflights as a “pioneering” business with huge opportunities to expand.
His comments come as the business looks set to drive more than £1 billion of sales in 2005.
“Cheapflights is remarkable in that, apart from pioneering a profitable business model in travel price search and comparison in the UK, it has successfully exported this model to the US,” he said.
“Cheapflights has a scaleable and proven business model. I believe it has the opportunity to build from its current base a truly international travel price search and comparison portal. I very much look forward to achieving this goal.”
Cuddy’s appointment completes a new-look management team for the company and follows the recruitment of David Owczarek as group chief operating officer in August.
Cuddy, whose most recent executive role was as vice president and general manager at Lightbridge, a NASDAQ-quoted provider of real-time transaction management services, will be based in Cheapflights’US headquarters in Boston. He will report to chief executive David Soskin.

Online shoppers will favour supplier sites, study reveals

Online shoppers will increasingly book their travel through supplier websites rather than online agencies, a study from the US has revealed.
Jupiter Research said 56% of customers will book direct through suppliers in 2005 but predicted the figure will climb to 62% by 2010.
The study said online bookings in the US have increased by 25% over the last 12 months with one third of all travel sales likely to be made on the web in four years’ time.
Total online travel spend in the US is expected to reach $68 billion this year and rise to $104 billion by 2010.

Agency chain launches email alerts

Hays Travel has developed technology that will see customers e-mailed daily with special offers specific to their holiday requirements.
The miniple claims E-News4Agents, to be launched at this weekend’s conference of wholly owned subsidiary the Independence Group, will be a first for an agency chain.
The move is designed to retain customers by building up an email database of client preferences and alerting them to offers in the market. People who click on the offers will be directed to individual shop websites.
Hays Travel managing director John Hays said: “If people have not booked we find it useful to email them and let them know if something comes up. The technology scans the criteria of what clients are interested in, along with how many people, where they want to go, how much they want to pay and sends emails to them.”
Customers can choose to receive e-mail alerts daily, weekly or twice a week, he said.
The scheme will be offered to Independence Group agents at one or two pence per email. Hays added the technology could be offered to agents who are not part of the group if it proves successful.

P&O steam ahead of online rivals

P&O Ferries remains the leading online brand with Direct Ferries and Aferry.to vying for second and third place, according to Hitwise UK.
Figures show P&O command a market share of 12.12% followed by Direct with 11.29% and Aferry.to with 11.10%.
Online shoppers spent most time however on Brittany Ferries site which recorded a 8.3% market share but had an average session duration of more than 10 minutes.
Hitwise research revealed that ferry companies “rely heavily” on brand searches followed by generic terms of which ‘ferries’, ‘irish ferries’, ‘ferries to france’ and ‘ferry crossing’ are among the most widely used.