Steve Endacott argues it does, up to a point
The industry has seen many travel groups created by acquisition and consolidation over the years.
The big four tour operators – Thomson, First Choice, Thomas Cook, Airtours – become the big two of Tui and Thomas Cook while many independent travel businesses were hoovered up to create specialist groups like Travelopia.
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Given the recent £1.1 billion write off by Thomas Cook of its MyTravel (Airtours) acquisition, it’s clear two plus two did not even make three in this case.
The merger of Thomson and First Choice to create Tui is less clear cut, but the First Choice brand has been downweighed markedly and now only offers a relatively limited range of all-inclusive holidays.
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The basic problem is that it’s hard to create differentiated hotel product and, when you do, it’s natural to want to offer this via your strongest brand which is also displayed on your aircraft and retail divisions.
This leaves little room for secondary brands – hence these start to shrivel and disappear.
Similarly, although there are demonstrable synergies from the use of central IT and finance functions within specialist groups, the process of acquisition often leads to founders leaving which, over a period of years, leads in turn to a loss of brand identity as more junior managers are employed or senior managers asked to manage multiple brands.
Specialist groups like Travelopia can work, but many have not.
Given the above, Thomas Cook’s decision to re-launch Airtours as a dynamic-packaging brand appears sensible, but at the same time challenging.
It certainly makes sense to separate out the differentiated hotel product, operated exclusively on inhouse flying, and have common Thomas Cook branding across the retail shops, airline and tour operation.
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Using the Airtours’ brand to sell the commodity bed-bank hotels combined with a range of low-cost carrier seats within its own retail outlets and online could also work.
However, it will always be a difficult balancing act within the Thomas Cook retail network.
The main tour operation will not want one million dynamically packaged holidays to be sold at relatively low margins via its shop network, as happened previously, while some of its own charter-flight seats are empty.
It also won’t be easy to re-establish the Airtours’ brand in a Google-dominated distribution space against the established, technology-driven OTAs On the Beach and Love Holidays with their slick marketing.
What makes less sense is expecting independent travel agents to sell Airtours’ dynamically packaged holidays, when they can dynamically package at higher margins using their own technology and the same prices from low-cost airlines and bed banks that Airtours has access to.
Jet2Holidays’ and easyJet Holidays’ trade sales are driven by access to exclusive discounted seats from their airlines, which drive their price competitiveness and give independent agents reason to book.
Creating clearly differentiated products between brands is to be applauded, but Thomas Cook will need to be willing to make a major investment in technology and marketing for the Airtours’ relaunch to be a success.
However, as a debt-free tour operation owning historically recognised brands, they are in a better position than most to pull it off.
Steve Endacott is travel and digital non-executive director and entrepreneur, and a former managing director of Airtours/MyTravel
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