Last week, travel industry giants rubber-stamped dynamic packaging as the future for the industry.
Thomas Cook said the model would form a cornerstone of its plans for 2007 as it works with the independent sector on its accommodation-only product, while Thomson said it aimed to be the UK’s number one web-based travel company.
Meanwhile, the Civil Aviation Authority issued figures in January estimating 18 million would put together their own holiday components for this summer.
The year has got off to a flying start for dynamic packaging suppliers, with website visitors up 50% year on year in some cases.
Even before the peak selling period took hold, trade-only accommodation suppliers such as Hotels4U were revealing bumper profits and massive hikes in business over a 12-month period.
Dynamic packaging is here to stay and travel agents have to embrace it. They are faced with few or no commission deals from airlines, tour operators, and low-cost airlines, while the Internet has created wider, instantaneous choice for consumers.
But, while bed banks and the low-cost airlines have increased choice, the majority of established independent agents have been tailor-making holidays for years. Dynamic packaging is simply a way of applying new technologies to enhance what agents have always done – develop a trusted relationship with consumers.
Edwin Doran, managing director of Twickenham-based Edwin Doran’s World of Travel, started tailor-making 20 years ago. “The thing about tailor-making is that you control the product and the client sees how hard you work for your money,” he said.
Doran claimed this side of the business is increasing, with some consumers railing against direct Internet bookings. “It is not as good as people thought. If people want to buy on price, they can but in terms of the overall quality it is better to buy from an agent or tour operator. Our figures show that.”
Agents take advantage
Other experienced agents also said the dynamic packaging trend was playing into their hands because there was always a section of the public who didn’t have the time or inclination to use the internet.
John McEwan, managing director of independent travel consortium Advantage, said 15% to 20% of total business was already dynamic packaged and that was likely to increase to 25% this year.
In fact the consortia are so confident of that dynamic packaging is a growth sector that they are equipping members with the technology to put holiday components together. Super-consortium Triton has launched its Triton Search system while Freedom Travel has tools such as its ATOL calculator and partnership with Dolphin Dynamics for access to low-cost flights.
Developing in-house systems is one way to access beds and flights but travel agents can also use third-party technology with links to volumes of suppliers, bed banks from the traditional tour operators and feeds from the newer entrants such as Lastminute.com and Somewhere2stay.com.
These systems allow agents to decide the margin they need to earn and the suppliers they want to work with. Traveltek has built systems for websites including Lowcostsbeds, which give agents the option of controlling their margins.
Traveltek managing director Kenny Picken said: “We can give agents complete control over their margins on a net or a gross basis.”
The technology can allow agents to build in specified margins on package components as well as on the overall package, to allow for credit card handling and other fixed costs. The systems also allow consultants to negotiate discounts within certain limits.
“Our call centre technology has margin tools so agents can offer consumers discounts, but know how low they can go while still making a good margin,” Picken said.
Consumers in control
New software on the market is also helping agents own the relationship with the customers, while offering consumers the control over their holiday.
Such tools are likely to be centred on customer relationship management tools that empower the consumer to book online while keeping them in direct contact with their local travel agent.
For example, travel technology company Vertical Group has built an online version of its Tarsc technology to let an agent’s customers manage their booking via the web. Customers can click on a button on the agent’s website and view their itinerary, check for any messages from the agent and make part or all of the holiday payment.
Although technology can help protect margins and maintain customer relationships, agents should still be aware of the legal implications of packaging up separate components.
More established industry players say agents must act responsibly. ABTA is advising members to seek legal advice through specialist travel lawyers and the association’s legal department. Newman Street plans to launch a health and safety audit tool for accommodation to help members vet properties before booking them.
Advantage’s McEwan said: “We seek to ensure members fully comply with regulations and ATOL. It is a very grey area and our advice is to err on the side of caution. If the products are not bonded then assume the responsibility lies with you.”
With legal issues aside, agents are in a good place to make the most of dynamic packaging. Although it may seem to be a radical departure for the industry, in fact the model takes advantage of the relationship-building skills agents have used for years, while augmenting them with new technologies. Agents who make the most of both should be well positioned for growth this year.
How is dynamic packaging affecting the travel trade?
“Think about the Internet in the past 10 years, then go to the high street. It’s still heaving.”
John McEwan, managing director, Advantage
“There are three groups: firstly, the old-fashioned, vertically integrated agents doing a small amount of dynamic packaging. Secondly, the independent sector doing a combination of package sales and dynamic packaging sales based on their own infrastructure. Lastly, there are the old-fashioned Teletext agents who are now doing 95% to 100% dynamic packaging.”
Stuart Jackson, managing director, Somewhere2stay.com
“Members are coping better than ever – they have so much more choice. I’m hearing more and more about clients coming back to members because they’ve had a bad experience or miss the face-to-face contact.”
Trevor Davies, general manager retail distribution, United Co-op Travel
“The market is growing overall but it’s a sector people are not really considering us for. Thomson is not just about two weeks in Majorca, we have chateaux in France, villas in Tuscany and boutique hotels, but people don’t know that.”
Graham Donoghue, director of new media, TUI UK
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