Steve Endacott.
On the Beach’s move into B2B distribution via independent travel agents, is a highly logical move for the UK’s leading OTA and reflects the changing regulatory environment.
Prior to June’s role out of the new European Package Directive, OTAs operated under the much lighter touch ‘Flight-Plus Atol’ arrangements and therefore avoided B2B trade distribution, because selling via third parties was not possible under flight plus and required a full Atol licence. This required principal status and incurred higher operating costs in the form of higher public liability insurance, duty office and compensatory framework.
However, under the new regulation, Flight-Plus has effectively been scrapped and full Atol licence are required for both B2C and B2B distribution, so why not exploit high street distribution?
From OTB’s point of view, high street agents provide risk free distribution, with commission only being paid on booking, creating a known cost of customer acquisition (CPA). Contrast this with the greater risk from an ever increasing cost per click (CPC) Google advertising model and you can see the attraction, particularly when there is a clear argument that the high street attracts a different customer sector to those who book online.
Significantly, OTB has one of the highest online margins per booking, created by a slick booking process where customers are initially hooked by ultra-low flight prices, derived by mix and matching different low-cost carrier flight option, before booking directly contracted ‘recommended’ hotels and integrated holiday extras, such as transfers.
These high margins will allow OTB to pay attractive commission to the trade, while retaining a small element of profit to cover their administration and bonding costs. Trade distribution will never be a massive profit driver for OTB, but it could easily add a third more volume, boosting its buying power with hoteliers and potentially making it a more attractive channel for airline partners to reach high street agents.
From an agent’s perspective, the key question is: ‘why would high street agents book OTB’s Classic Online packages, rather than packaging the same elements themselves?’
The answer probably boils down to speed and risk. OTB’s booking interface is better than any B2B booking tool I have seen and is provided free of charge. It will also come with full financial protection and public liability insurance, so as long as commission is competitive, it provides a simple and fast booking platform with much reduced risk to the travel agent.
I am sure some travel agents will be worried about supporting a competitor, but holidays will be sold via a separate B2B brand and I’m sure OTB will be providing guarantees about not using email address or mobile numbers, to remarket to these customers in the future.
Interestingly, it may be the low-cost carriers themselves which object to OTB’s move. It is expected that easyJet Holidays will be following Jet2holidays lead and launching its own trade tour operation for summer 2019. How will it feel about competing with OTB for trade distribution, when OTB is often undercutting its prices by combining outbound easyJet flights with inbound Ryanair flights?
You can certainly imagine some friction occurring here, but conversely easyJet may be perfectly happy to take the extra £30 a booking they earn from flight API fees on these trade sales without having any of the hassle of actually selling a holiday!
Adding trade distribution is a logical step for OTB and could easily be a win: win for both them and trade partners, however I would not be surprised to hear some trade consortia saying ‘not on my watch’.