Steve Endacott assesses the changing shape of the post-Covid UK outbound holiday market

The UK travel industry hopes to re-start its holiday programmes this summer, with optimists hoping for May 17 and realists predicting a July 21 restart.

I’d expect a “three tests to travel” requirement will remain alongside robust plans to deal with further disruption from potential new Covid-19 variants.

Fear of further Covid-19 disruption is also likely to hamper the re-start of dynamic packaging for some time, forcing travel agents to sell holidays from the large integrated tour operators like Tui, Jet2holidays and easyJet holidays for which these giants are Atol-bonded principals and take responsibility for all refunds or amendments if further Covid -19 disruption occurs.

Large OTAs [online travel agents] like On the Beach, Loveholidays and Travel Republic, have the scale required to secure cost-effective public liability insurance – and can afford to self-insure supplier failure cover by using virtual credit cards to pay suppliers, which allow relatively quick and easy reclaims.

However, the dramatic reduction in the public liability market, and the complete disappearance of supplier failure cover, make dynamic packaging by high street shops or retail consortia much more expensive – and higher risk. Given an alternative, retailers would much rather sell packaged holidays from third parties.

Customers who have been hit by the need to cancel, rebook or shift their holidays several times are likely to return in greater numbers to high street agents or other human interaction booking routes, such as homeworkers.

If the major tour operators are sensible, they should benefit from high street agents and homeworkers turning to them this summer, but I fear an ultra-lite booking market and excess seats over demand could easily lead to the major operators blowing their new alliances by undercutting agents with lower online prices.

Holiday prices will have to increase, as a badly-depleted Air Travel Trust Fund looks to reduce risk further via trust funds or charge larger per-passenger fees where it can’t.

The Civil Aviation Authority (CAA) is trying to push Atol holders away from bonds towards trust fund models, with varying degrees of restrictions on how funds can be released before customers return from holiday. The more restrictions an operator accepts, the lower the cost, with rumours flying around of Atol fees of up to £20 per person if operators do not reduce the CAA’s perceived risk via trust funds.

How this will impact low-cost airlines’ holiday divisions is not clear, as the dominant airline division will not be happy if it does not receive payment in full on booking. Like all negotiations, it’s a balance of power, and the CAA would not want the airline to abandon selling packages in favour of encouraging more customers to put together their own DIY unbonded holidays.

I think existing fully-bonded specialist tour operators that survive Covid, and new entrants such as Russian-backed Cyprus specialist Biblio Travel, could grow rapidly if they package a wider range of destinations for agents and remain trade-focused.

There is also the need for a large-scale flight-only operator for the trade, as many agents will now shift to selling unbonded accommodation and then, after a delay of 24 hours, help them book the flight element – to avoid selling a package under Linked Travel Arrangements. Put bluntly, the cost and risk of bonding a package in a Covid-19 disrupted world, outweighs the extra margin, so many agents are asking ‘Why do it?’

Obviously, Gold Medal is best-positioned to continue to dominate the trade flight-only sector, but it may need to start brokering seats on charter aircraft, operated by ‘downstream’ airlines from places like Turkey.

One airline that will definitely see less trade support from dynamic packaging retailers is Ryanair.

The UK travel trade has always had an uneasy relationship with the Irish carrier, but after the refund fiasco – where Ryanair has clearly tried to send many agents bust by refusing to refund agency-made bookings – the relationship is now openly hostile on both sides.

Summer 2022 should see a strong return to early holiday sales, as pent-up demand is finally released, with fully-bonded package operators likely to benefit the most.

They will be led by Jet2holidays and easyJet holidays dominating the mass market beach sector, and supported by a larger range of small to medium-sized specialist tour operators as agents reduce dynamic packaging efforts in favour of lower-risk commissionable business.

Whether Tui can struggle out from under its debt mountain, which looks likely to destroy its ability to operate “differentiated” holidays, is another question altogether.

What is sure, is that the 2022 post-Covid-19 outbound holiday market will look a lot different from the one we entered the crisis with.