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Does size matter for travel companies? – 17 Nov 2006

Contradictory as it might sound, delegates at a Does Size Matter seminar at World Travel Market last week were told that being at once large and small may be the future for travel firms that want to survive in an increasingly competitive market.

Echoing the recent “big-small” advertising campaign for the Toyota Yaris, the seminar argued that the most successful firms will blend the power and influence of large players with the manoeuvrability of small independents.

Advantage director of sales and marketing Colin O’Neill said there are obvious advantages of being big. Citing Tesco in the grocery sector, he said: “There’s that horrible statistic that £1 in every £8 spent in the UK is at Tesco.”

Whatever you want

In world politics the US “can do whatever it likes”, he said, and Madonna “clearly seems to do whatever she wants and gets away with it”.

“Size allows you to control your own destiny, to be the boot, rather than the butt,” he added. But he warned against becoming arrogant, forgetting what the consumer wants and falling into the trap of trying to please everyone by offering a one-size-fits-all product.

Advantage director of sales and marketing Colin O’NeillO’Neill said consortium superpower Triton represents the agent community trying to get the best of both worlds by offering small agents the security blanket and buying power of a large organisation, while encouraging the specialisation and focus on niche products of its members.

It is just this philosophy online retailer and tour operator group Travelzest is following, according to group distribution director Nishma Robb.

Established in 2005, Travelzest is pursuing aggressive expansion through acquisition, buying small operators such as Best of Morocco and naturist specialist Peng Travel and aligning them with its online portals, flight.co.uk, holiday.co.uk and recently-bought Canadian online retailer itravel2000.co.uk.

She said this was not consolidation. The firms bought by Travelzest, where possible, have retained their management, who are offered cash and share deals giving them the incentive of additional benefits if they prosper.

The benefit of being big

“Our intention is not to take these small independent operators and integrate them, our intention is to keep them separate but give them the benefits and support of a larger group,” she said.

Robb said Travelzest was an asset-light, online tour operator interested in businesses with year-round revenue streams offering a “diversified mix of destinations, which reduces our vulnerability”.

This, she said, ensures it can react quickly to changing demand and circumstances because it is not over-committed on bed stock, but at the same time means it has the buying power and back-office support of a big player.

A recipe for disaster

Sunvil Holidays managing director Noel Josephides agreed over-commitment to a particular destination was a recipe for disaster. His company spent six years recovering after Cyprus was invaded in the 1970s when Sunvil operated exclusively to the Mediterranean island.

Josephides said small operators can derive success from a managing director who is committed and passionate about a destination. In the current market, he would rather work for a small player than a large operator that is reliant on chasing volumes, such as TUI.

“The risk is not in the size but if you become a one- destination tour operator. How do you measure your success? The money or reputation your company creates do not necessarily go hand in hand. For many of us, reputation and quality are very much at the forefront.”

Josephides said smaller companies swallowed up by larger corporations are often doomed as soon as control is taken away from the people who set them up and put into the hands of accountants who hate duplication of roles, contracts or technologies.

Passion is essential

The way TUI has managed its specialist collection was held up as an example of this. “It’s passion that counts. You have to think of nothing else if you want to make it work. This is what you created and it has to absorb you completely,” Josephides said.

The jury is still out on whether the likes of Triton on the agent side or Travelzest on the operator side can become the Toyota Yaris of the travel industry.

“Travelzest has just started, let’s give it a year or two,” Josephides said. “We are all very interested because sooner or later there are a few of us who would like to sell up when we run out of energy. Let’s hope this works because we will all have an exit strategy.”

What do you think? E-mail travel.weekly@rbi.co.uk or post your comments on the forum.

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