by Tim Williamson, chief executive, The Travel Department (formerly customer director at Tui Travel)
It’s a great story, differentiation. Higher margins, exclusivity so no one else can get their hands on it and greater customer loyalty.
What’s not to like? It sounds so good that surely we should all be doing it as there can be no better way to make money?
The trouble is it’s never as easy as it sounds, otherwise we really would all be doing it.
Differentiation has two major flaws – firstly the cost.
The large and usually exclusive allocations in hotels come at a cost, which can often mean reverting to the old days of self catering in the Canary Islands and pre-payment.
This advance payment may well drive a discounted rate but it does tie up cash, and the additional cost of the differentiated elements of the holiday (the entertainers, the kids clubs etc) may well cancel out the discount.
This is maybe obvious and if you have the cash then great; away you go and tie up your beds and cash for the future.
I just hope your crystal ball is working and you know that the inevitable future volatility in the market and in specific destinations will not affect any of your chosen resorts where you have committed differentiated product.
The second, and in my opinion the bigger problem with differentiation, is consistency, or lack of it to be more precise.
Any hotelier will tell you that consistency is king. The service and hardware in London must match that delivered in Sydney.
The same is now true for tour operators offering differentiated hotels to their customers – a Holiday Village in the Costa del Sol must match the new Holiday Village in Tunisia for service and hardware.
With different suppliers in different locations this is difficult and it is made increasingly so as the specification for the differentiated product increases with each new addition to the range.
This requires a retro-fit into all existing product as loyal customers move between the various differentiated products looking for a consistently good experience.
So is there a solution to this problem?
I think so, and the key is to drive differentiation in a way that is unique to each country or resort.
Use your suppliers to add unique local flavours to your holidays – things that customers couldn’t easily experience if they booked it themselves.
These could be an insight into real local life with a village tour or an off-the-beaten-track meal in a local restaurant or family home.
With the increasing desire of customers to experience something real and unique on holiday, this sort of differentiation could really drive demand.
More importantly, customers don’t want exactly the same experience in every country and you don’t need to break the bank to deliver them.
Since leaving Tui Travel I still believe differentiated holidays can drive better customer experiences, greater loyalty and superior margins.
But where large investment and exclusivity are required, the older product in out-of-favour destinations bring down the overall averages for these.
At The Travel Department we are trying to learn from this.
Our focus is centered on the unique local valuable additions to our holidays that still drive customer satisfaction, loyalty and good margins but don’t cost the earth, and inconsistency is king.