The dynamic packaging sector will have a lot to contend with in the next 12 months.
A slowdown in the economy will affect the market in general, the impact of the mergers of TUI and First Choice and Thomas Cook and MyTravel will be felt as we move towards the first anniversary of the consolidation deals and some rationalisation in the number of suppliers is likely.
Even before Christmas there were reports of decreased spending on the high street and a dip in consumer confidence because of mounting debt.
Cosmos commercial and product director Stuart Jackson said: “When money gets tight people look for cheap holidays and go to a well- known brand because they are less likely to take a risk.”
The big brands have already been bullish about the market, with TUI Travel stripping out short-haul capacity for summer 2008, meaning less seat-only availability to some destinations.
Big operators are ramping up their component building capability and Thomas Cook has just launched its own trade accommodation arm, thomascookhotels.com.
These operators will become more flexible by offering traditional packages and component-based travel by combining their owned properties and in-house flights and becoming specialists in some areas.
The big two intend to take on the low-cost short-haul market where it makes commercial sense, but are also determined to keep the traditional package alive by introducing long-haul destinations such as China and Costa Rica. Economic trends as well as the moves from TUI Travel and Thomas Cook will affect the dynamic packaging sector sooner or later.
The accommodation-only market is likely to see a shake-up as suppliers struggle to differentiate themselves and find ways to add value. The cost of maintaining an online presence is also rising and newer entrants may struggle against the big brands.
Holiday Taxis sales and marketing director Russell Parr said: “There has to be consolidation. Nobody commits to hotel stock and they are all essentially selling the same rooms in the same hotels. At some point the low margins will take their toll.”
It’s not all doom and gloom, however, as most believe there is still room for growth in the dynamic packaging market as agents get more familiar with the suppliers and technology and customers seek alternatives to traditional packages.
Growth could also come through the dynamic packaging of other industry segments such as ski, cruise and long haul.
Predictions for 2008
- There is still room for growth in the dynamic packaging market with better technology, travel agents becoming more familiar with the market, and the move away from traditional packages.
- Dynamic packaging is likely to be much more focused on the short-haul market where there will be access to flights.
- A downturn in the economy could drive consumers back to traditional package holidays.
- Consolidation is likely, especially in accommodation-only, but could involve mergers of existing suppliers or a non-dynamic packaging company buying in.
- Traditional tour operators will continue to build their own dynamic packaging offering with unique and owned product.
- Dynamic packaging suppliers will seek to differentiate themselves through exclusive product, website functionality, destinations or price.