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Analysis: Dynamic packaging here to stay after Thomas Cook and hotels4u.com deal

Dynamic packaging has long been one of the more divisive aspects of the travel industry.


Fans of the practice have hailed it as the agent’s friend, giving them the ability to put together their own packages precisely according to the customers’ needs – and at a highly competitive price.


Importantly, it has been credited with redressing the balance between agents and operators, freeing retailers from only selling packages with commission set at the wishes of the operator.


However, despite the number of fans dynamic packaging has, it also has equally vocal detractors, more often than not among tour operators.


Operators are quick to point out they undertake rigorous inspections of all the product they supply and usually have reps in resort who are there to help pick up the pieces should any problems arise.


Here to stay


While these arguments are likely to rumble on indefinitely, it seems the trade is in agreement over one aspect of the practice. Following the Thomas Cook Group’s £21.8 million acquisition of hotels4u.com earlier this month, dynamic packaging is not only here to stay but is maturing as a practice.


Many rival bed banks also agree that the fact the acquisition was made by as big a name as Thomas Cook is vindication of their own years of hard work and will drive improvements in the sector in the future.


On Holiday Group chief executive Steve Endacott said the acquisition represented a response to the increasingly consumer-led market, as well as an attempt to access the 50%- plus growth predicted in the sector this year.


Youtravel.com sales director Paul Riches agreed. He said: “A bed bank being bought by one of the two major players in the UK is a sign of the maturing of the market and the seriousness with which it is taken.


“However, in terms of the overall market, it won’t have a dramatic immediate effect, you’ve still got the same company and it is operating independently,” Riches added.


‘There will be more consolidation’


Bedswithease.com sales and marketing director Theo Demetriou said the acquisition meant the dynamic packaging model now had the backing of major industry players. He added: “It means the big companies are taking dynamic packaging seriously. There will now be more consolidation.”


But he maintained independent agents liked to deal with independent bed banks.


“I think they like smaller bed banks because of the quality of service – they don’t get lost in the booking process.”


While apartmentsabroad.com managing director Ian Thirlwall said further consolidation was likely to happen in an aggressive market that is increasingly price-led, he added the acquisition was a deal Thomas Cook had to strike to keep up with the competition.


He added: “Thomas Cook is one of the big two and with the way the market is at the moment, it is necessary for it to compete with TUI Travel.


“It is are making sure it matches TUI Travel stride for stride and, with package holidays accounting for less and less of the market, everyone is looking for the extra something to fill the gap.”


Travel giants could raise standards


Thirlwall said Thomas Cook Group’s attempts to break into the market with its own brands had failed, meaning that the next logical solution was an acquisition.


Lowcostbeds.com chief executive Paul Evans added the deal was not just a sign of changing consumer habits, but was also driven by the group’s need to respond to its shareholders following its listing last year on the London Stock Exchange as a result of the merger with MyTravel.


He said: “The big two vertically integrated operators are saying packages are still vital, but the reality is sales of the old-style packages are reducing and will continue to slide.”


While all the bed banks are confident that the involvement of such a major player in the accommodation-only sector will lead to raised standards all round, it seems this improvement cannot come quickly enough for some.


Med Hotels commercial director Carl Burrows said: “The involvement of high-profile organisations brings respectability to the sector, which has at times suffered from a poor reputation.


“One senior accommodation-only leader last year labelled some rivals as cowboys and claimed their practices had taken the industry back 30 years.


“Such claims surely will not be repeated with two leading travel organisations raising the standards of the sector.”

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