The next 12 months will be the toughest ever for new companies to enter the travel market, according to Harry Goodman, chairman of Totally Travel and founder of International Leisure Group.
ILG, the parent group of Air Europe and Intasun Leisure, grew during the 1980s to became the UK’s second-largest tour operator, behind Thomson Holidays. But Goodman saw his empire crumble in 1991 as a result of the impact of the first Gulf war.
Twenty years on, Goodman warned that only well-funded start-ups with strong management teams would be able to establish themselves in the current market.
With new Atol regulations due to be in place from early 2012, the industry would no longer have an “open-door policy” to new entrants, he said.
“Life for new entrants will be almost impossible,” he added. “There is no bonding market out there and you have got to have merchant facilities. If you are looking at barriers to entry, the next 12 months will be the hardest they have ever been.”
The failure of XL Leisure Group in 2008 – the biggest collapse since that of ILG – has sparked reform of consumer protection.
Goodman said he welcomed the reform’s attempt to tackle a major loophole. “It is currently possible for a major internet company to go bust and you could have tens of thousands of people stranded with no cover,” he said. “We need a level playing field.”
The rapid growth of the internet allowed companies to establish online businesses, often selling unprotected holidays, he added. “No one could have conceived how the internet would take such a huge slice of the market,” said Goodman.
He said the “slow reaction” of Tui Travel and Thomas Cook to the growth of Ryanair and easyJet had brought back memories.
“It reminds me of when I started. Clarksons, Horizon and Thomson sat back and watched me in the same way as the big boys have allowed Expedia and lastminute to grow,” said Goodman.
He recalled the difficulty setting up his own tour operation. “To become an operator you had to go to a public hearing to get a licence in front of the CAA. You had to prove you could create the demand.”
ILG used its successful tour operating businesses to prop up its airline Air Europe. “We were the first of the low-cost airlines and the intention would have been to increase that in a big way,” said Goodman.
Former ILG marketing services director Richard Carrick believes history could have been very different. “If the Gulf war hadn’t happened we probably would not have seen low-cost airlines emerge as they did,” he said.
“EasyJet and Ryanair would not have had it all their own way. After ILG went down, no one touched scheduled airlines with a barge pole.”
ILG’s collapse prompted other operators to step in to fill the void. John Cooper, a former ILG area manager for Florida who joined Sunset Holidays (later part of Thomas Cook) two months before ILG’s demise, recalls: “ILG’s collapse was the making of Sunset. We had calls from agents at midnight to rebook clients. When I started at Sunset, there were seven overseas reps, by 1996 there were 300.”
The way it was in 1991
- Operators sold 60,000-70,000 holidays the day brochures came out, and stood to lose “hundreds of thousands of pounds” if not on sale. Holidaymakers queued at agents’ doors to book on the day.
- Holidaymakers in the late 1980s paid up to £250 for a 14-night package in Europe and about £360 for a Florida package.
- Communication with overseas resorts was often by Telex, with international phone lines not always available in resorts such as Hammamet, Tunisia. In the 1980s, the fax was the “next big thing”.