Magazine article Marketing

News Analysis: Pairing Up for Life

Magazine article Marketing

News Analysis: Pairing Up for Life

Article excerpt

The high street's biggest travel operators are merging to revitalise a stagnant market. Jemima Bokaie reports.

The geological make-up of the travel industry has shifted dramatically in recent years due to seismic shifts brought about, in the main, by the rise of internet-only retailers.

The response of traditional package-holiday specialists to the threat of the web operators' more flexible offering has been to consolidate, as seen in the merger announcements last month of Thomas Cook and MyTravel and last week of TUI and First Choice.

The proportion of the travel market accounted for by package holidays - the staple of the traditional agent - has declined by about 10% over the past five years, according to industry body ABTA, as a rising number of consumers have abandoned the high street in favour of putting together their holidays on sites such as Expedia, Opodo and lastminute.com or buying flights direct from no-frills carriers.

Changes in the nation's travel habits driven by falling airfares and a shift in working patterns have also hit the traditional two-week summer holiday, with consumers now tending to opt for more frequent, but shorter, breaks.

As package-holiday firms sought to find a way of stripping out costs, consolidation was inevitable. 'We were expecting (it) in a stagnant market,' says Richard Cope, senior travel analyst at Mintel.

Mike Greenacre, chief operating officer at the Co-operative Travel Trading Group, which runs more than 600 high-street agencies in the UK as well as internet and call centre-based operations, agrees that the TUI/First Choice merger was an 'inevitable consequence of market pressure'.

The tie-up could prove extremely valuable to both parties. The combined TUI Travel business is targeting pounds 100m a year in pre-tax cost savings through job cuts and the closure of some of its 1100 travel shops in the UK.

The recent mergers will also see the operators invest heavily in their online offerings, according to Kayte Williams, head of holidays at price-comparison site Travelsupermarket.com.

There has already been activity in this area. Last week MyTravel launched seven web TV channels showcasing resorts in a tacit acknowledgement of the growing importance of online video as a marketing tool for the big tour operators.

Nathan Clapton, director of brand distribution at TripAdvisor, a website that offers reviews of resorts and properties written by holidaymakers, believes it will be those operators that come up with the most consumer-focused tools, based around a holiday's price or quality, who will gain a competitive advantage.

However, according to Williams, price will retain its position as the decisive factor. 'Whoever is the cheapest at the time will get the sale,' she says. …

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