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Industry experts reveal sector’s prospects for 2018 at launch of Travel Weekly Insight Report 2017-18. Ian Taylor reports
Abta chief Tanzer urges progress in Brexit talks
There is reason to be “more concerned” about Brexit than a year ago, Abta chief executive Mark Tanzer warned, saying: “We’re closer to people making business decisions and booking decisions.”
Tanzer told a Travel Weekly Business Breakfast: “The clock is ticking – we need to see some movement. If it were just a business decision, nothing would change, but there is a political dimension that runs alongside the business logic and I don’t think we’ve made any progress in moving the political debate.
“The core message that we want to keep aircraft flying and be able to move key staff is the one we’ve been carrying to [the UK] government and to European governments.
“I do think there will be an aviation agreement. Whether we’ll be able to fly to all the places we fly to at the moment is up for negotiation. The sooner we get clarity, the better for the industry and for travellers.”
He added: “We’re trying to ensure customers don’t lose confidence [and] feel they can book and be able to travel with all the freedoms they have [now].”
Miles Morgan Travel managing director Miles Morgan warned: “Uncertainty cripples any sector. A lack of clarity causes businesses to slow decision-making. People want to know what’s happening.
“The quicker decisions can be made the better, but there seems no likelihood of that.”
Freedom of movement of labour remains a major concern, particularly for pan-European businesses. EasyJet UK country director Sophie Dekkers said: “We’re starting to see European crew wanting to be based in Europe and UK crew requesting to come back to the UK because they don’t know what will happen.”
Tui UK and Ireland distribution and cruise director Helen Caron said: “Freedom of movement for our representatives and for our ships’ crews is important. We’re considering all scenarios.”
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EasyJet to add capacity despite big drop in yields
EasyJet has increased load factors at the expense of yield in the past year, but will continue to add capacity in 2018.
Sophie Dekkers, easyJet UK country director, told the Travel Weekly Business Breakfast: “We reported a record [annual] load factor of 92.6% at the end of September, which is incredible given what has happened with sterling, with the Paris attacks, Nice and so on. However, it has been at the expense of yield.
“On some key routes our yield has come down 30%. We’ve had too much capacity. We had to slash fares, particularly on beach routes into Europe.”
Yet Dekkers insisted: “We would rather be a problem to ourselves than let someone else do it. Demand is still there.”
She described Monarch’s failure in October as “not surprising” and said: “We certainly benefited from capacity coming out of the market. Over half of Monarch’s capacity was on five routes – Malaga, Alicante, Palma, Faro and Tenerife. We had 15% of our capacity on those routes and yields down 30%. Given Monarch’s massive exposure, the impact wasn’t surprising.
“Some capacity will be backfilled, but I don’t think it will be like for like. In destinations such as Tenerife and Palma there wasn’t enough accommodation for the number of flights going in.”
Dekkers told the breakfast: “We’ve seen a switch away from Turkey and Egypt towards safer destinations, with people flooding into Spain and Portugal. We’ve tried to find new destinations, so Seville is really popular now. Granada and Croatia have performed well. Split airport is pretty well full next summer.”
But she insisted: “When destinations go through political disruption or terrorist activity, the UK bounces back quickly. As soon as Egypt [Sharm el-Sheikh] reopens we expect demand. Hotels will be cheap and UK consumers are open to that. Other markets take a lot longer to recover.”
Carrier trumpets new retail system as ’game changer’
EasyJet believes its new retail platform, due to launch this year, will prove “a game changer”.
UK country director Sophie Dekkers described the existing platform as “really old”, saying: “It’s unique to us, created when easyJet first set up, and we’ve had to tack things on around the edges. When we introduced allocated seating, it took us 18 months.”
EasyJet has worked with German technology firm SAP Hybris on the new platform. Dekkers said: “We’re going back to what some retailers do. Relevance is one of the key things. For us, that is being able to tailor the package offered as a customer goes through the booking process.
“We want to offer people a bundle of things relevant to the booking [and] trip type and be able to recognise patterns of behaviour. We had 80 million passengers last year [and] 60 million had flown with us before, so we can start to learn about their behaviour. That will be a game changer.”
Industry figures demand honesty over EU outcomes
The government “needs to start an honest discussion” about the consequences of Brexit, according to Abta chief Mark Tanzer, who insisted this has “not happened yet”.
Tanzer said: “We need people to be able to come to this country from the EU to support the tourist economy and businesses.
“But it’s not just that. When you’re in Brussels, people say, ‘You won’t have access to markets without regulatory convergence. Tell us what you want.’ The government is still saying, ‘We can have everything’. At a certain point they have to say, ‘OK, we can’t have it’. We’re in this Pollyanna world where ‘everything will be fine’.”
Tui UK and Ireland distribution and cruise director Helen Caron agreed: “Customers aren’t aware of some impacts that may come.”
However, she warned: “Having that conversation might work against us in the short term.
“We need to make sure we don’t create more uncertainty.”
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Tui predicts rise in all-inclusive and cruise
Tui foresees all-inclusive and cruise demand growing this year after strong growth in both sectors in 2017.
Helen Caron, Tui UK and Ireland distribution and cruise director, told the Travel Weekly Breakfast:
“We’re seeing a much stronger demand for all-inclusive – 60% of the holidays we sold [in the UK] in 2017 were all-inclusive packages. We’re also seeing strong demand for all-inclusive cruising. We decided two years ago to offer an all-inclusive product, with drinks included, on new ships coming into the Tui fleet [and] we’ve seen really strong demand for that.”
She described cruise as “one of the best-kept secrets in the UK market for the Tui Group”, saying: “We see demand for cruise growing in 2018.”
Caron added: “We want to focus attention where we believe we can drive strong margins. We see continued demand for our differentiated hotels – holidays available exclusively to Tui. Our fixed air capacity [for 2018] is broadly in line with 2017, but we’re using other airlines to offer destinations we don’t serve on our own aircraft, or departures from regional airports where we don’t have a flying programme.
“We see strong growth for Croatia, Montenegro and Bulgaria. We have significant capacity going into Spain, the Balearics and Tenerife. There is pressure on beds and in some cases that drives up the price. So we’re seeing some consumers look at value destinations such as Bulgaria, and we’ll start to grow in those.
“We’re looking at where we can open dedicated Tui hotels in some of those destinations.”