Tag: travel industry

It’s happening. The web is destroying the travel industry.

Another long story.

In 2004 I joined First Choice Holidays. Prior to that I had spent a good 8 years doing web agency stuff, a bit of freelancing here and there, riding the wave of bubbles building and bursting. I’d worked with a couple of travel clients. (In 1998 I came in on the end of a project for Direct Holidays which was the first transactional package holiday website in the UK. Ground-breaking stuff!)

Back then, agency people were all about Business 2.0 (remember that mag?) and the New Economy. In fact in the UK most of us were still talking about ‘new’ media. Ho ho ho.

Travel was a poster child for this New Economy because Micro$oft got involved early on with Expedia. Also travel was a sector that was ‘ripe for the taking’ by New Economy proponents because of the mechanics of the industry.

At First Choice for example, I was pretty amazed to find out that even well beyond 2000, the business did not sell many of its own holidays. Instead it paid travel agents to do the ‘dirty work’ of selling to customers. In the time I was there, this all changed pretty quickly.

First Choice launched a transactional flight only website in December 2001. By the time I had joined there was a pretty large high street retail estate too. And by the time the Thomson-First Choice merger happened in 2007, well, travel agents were still part of the picture, but an increasingly dwindling one.

Disintermediation was the word everybody was using to describe what was going on. The larger tour operators – and even a lot of the smaller ones – were going direct to the customer to take cost out of their business, reduce prices for customers, and in the process it seemed, squeeze out the travel agents. But what were the encumbent tour ops doing to protect themselves from the upstart online entrants to the market? Well, not a lot actually.

During my time in the web agency space, we all talked about how “traditional” businesses like tour operators really needed to embrace the web because new entrants would be able to overcome the traditional barriers to entry, using technology, customer insight and general fleet of foot to steal a march on the hoary old traditional players.

Looking back over my last 6 years in the industry, the two things that were talked about have not really happened: travel agents still play an important role in the travel industry – at least the bit I work in, and ‘New Economy’ entrants are not “destroying” the traditional players. Indeed I understand that the tour operator share of the total UK holiday market is larger than it was 3 years ago, as people look to the re-assurance of traditional players for their holidays during the recession and following the ash cloud and whatnot.

At the same time, it’s not new to say that in particular within European short haul destinations, the market has already been decimated by new entrants. But the decimators were not web people. They were low cost airlines like EasyJet and RyanAir. It should be noted that Thomson’s attempt to compete as a low cost proposition didn’t exactly take off. There is not a lot of profit to be had from operating a low cost airline. The model basically prevents it.

The one thing low cost airlines did do differently was “ignore” travel agents by having strong brands and transactional websites. But even today a good deal of low cost business comes through the trade via GDS systems where travel agents can access flight availability through aggregators like Amadeus.

So then thinking about the big web travel players in the UK: Expedia, Lastminute & Opodo. What has happened to them in the last 6 or so years? Well:

  • Expedia now calls itself a ‘media business‘. Its once-shiny web technology is more than 10 years old. Effectively it’s ‘a legacy system’ (ring any bells?) It’s scale across Europe means that development is slow and mired in localisation. Allegedly. (I’m not knocking the media business thing by the way. Certainly profit margins are better. But it’s an admission that they’re not a travel company anymore.)
  • Lastminute weren’t exactly the stock market’s friend during their first 5 years. Bosses were overheard saying that their business was ‘all about low margin city breaks and distressed stock’. The product proposition has diversified to such an extent that like Expedia, it’s really not a travel company anymore. More about “last minute experiences”. Also not a bad thing, but I suggest it’s an admission that the travel industry was harder to crack than perhaps Brent and Martha had once thought.
  • Opodo. Ouch. Once darlings of the web agency space as they seemingly had endless pots of cash to spend, Amadeus have been pimping out Opodo to anyone that would buy them for quite a bit. Looking a bit desperate with a 300m price tag that people are saying is way overvalued.

So things have moved on during the six years I’ve been in the industry. The traditional players have been more resilient than the online players would have possibly expected but they are also carving new niches for themselves. So, on balance, life goes on.

However 4 new developments this year have made me start to think that travel – in a traditional sense – is finally about to be eaten up by the web.

  1. Google’s purchase of ITA. Will Google finally come out of the closet with a specific travel focus? Will that focus solely be on “transactional” travel – flights and hotels? Or will it be more than that?
  2. Two of the big travel distribution companies are not “travel companies” (thanks for the spot, Kevin May!). You’ve got Amadeus and Sabre as major players. Both tech companies fundamentally.
  3. Apple patents travel app functionality. Plenty of space for people to do it properly. And money to be made too. Apple would do it better than most.
  4. I visited some independent travel agents in the South East for the first time a few months back. Summary: I’m afraid they really don’t get it. Plus few have the resources to invest in the web anyway. Agents better work out how to cling on to customers!

The challenge for me now is to ensure that my company does really embrace the web. At First Choice the web team were always a bit of a bolt-on. At Crystal we’ve changed that, I think. Now at Specialist Holidays Group, it’s really time to motor.

Thanks for reading.