Discounting in the face of a soft market has already “done the damage” as travel firms looked to stimulate early year bookings, the Barclays Travel Forum was told yesterday.
Martin Alcock, director of the Travel Trade Consultancy, said he feared heavy discounting and zero deposits being offered are just “short-term sticking plasters”.
“When you start the January peak booking period for summer and it’s slow, it’s all about holding your nerve,” he said.
“If you get to February and things are still slow you have to look at your options but you have really very few tools in your armoury.
“The first person that flinches and starts discounting means everyone else has to go with them and it’s sort of trashing the market.”
Alcock said zero discounts are very expensive to fund for travel firms and warned that they place companies at greater risk of consumers who cancel.
“That, to me, dips into the sub-prime credit market, and that’s a very brave place to be in the current climate,” he said.
Alcock added because travel firms recognise the profit on those bookings only when customers depart the financial impact of this will “come home to roost” in September and October.
This is when industry regulators scrutinise travel firm’s accounts ahead of the autumn Atol renewal deadline and if they are concerned could demand increased security.
Alcock said delegates at the recent Advantage Travel Partnership Conference in Cadiz were publicly upbeat but privately admitted the market was struggling for growth.
He said even those in the ultra-luxury end of the market, usually considered to be insulated to a downturn, were saying the market was “really difficult”.
“They were all saying people are not booking and it’s really flat. I hope that these bookings come back, but at what price?” said Alcock.
“To some extent the damage is already done because we have seen a lot of discounting and zero deposit deals and these come back to bite you at season end.”
Paul Carter, chief executive of Inghams parent Hotelplan UK, said he was optimistic of a positive July after a tough Easter period for the ski sector when holidays discounted by up to a half.
He told the forum that the hoped-for “Ketchup” bottle effect of pent-up sales rushing in after Brexit was delayed in March hasn’t happened yet.
Carter said there was a pick-up in May, but operators with committed stock will struggle to hit their figures in June even though discounts of 30% to 40% are available.
“July, I’m more optimistic about, and we still have some way to go for August and September,” Carter said.
Hotelplan is seeing a shift in destination mix with bookings for European countries down a third for its Explore brand, although this has been made up for by other destinations.
Switzerland is also “doing very well”, said Carter.
He added Explore is “courting the trade” as it looks for more business through travel agency partners to offset increasing acquisition costs in its direct channel.
“Those [trade partners] who have good business models have done a good job for us,” said Carter, who added the operator was doing too much business through lower margin deals sites.
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