David Weston is a fellow of the Tourism Society, a member of the government’s Tourism Industry Council, and chief executive of the trade association for the UK’s £2 billion B&B and guest house sector. In the 1990s and 2000s he was an outbound tour operator and a director of Aito
The failure of the £500-million Lowcost Travel Group is a disaster for its 110,000 customers, who risk losing their holidays or paying twice.
It made me reflect on the bigger picture – how our industry has developed over the past 30 years – and whether all the changes can be called progress.
In the 1980s when I became a tour operator, the industry was beginning to reform itself into a more mature and responsible sector, and to take things like quality, safety and financial protection as seriously as other sectors did.
It was moving away from its buccaneering ‘Wild West’ beginnings in the 1960s and 1970s when there were no rules, towards being more grown-up and respectable.
Crashes like those of Court Line, and headlines about holidaymakers “stranded” abroad had prompted a new era of bonding and regulation by Abta and the CAA.
So it is dismaying to see the latest headlines about Lowcost. Have we not progressed in 30 years?
Lowcost exemplified many new business practices that have been growing inexorably in travel and have been eclipsing the ‘old’ ways of business, which had in their day been the ‘new’, responsible ways of dealing with customers and suppliers.
What do I mean? Well, the new, exponentially growing trends are:
• Online business models;
• Globalised businesses (which can play regulators off against each other, and move HQs to the lowest-cost and lightest-touch jurisdictions);
• Regulation avoidance embedded in business models;
• Replacing risk and commitment with a transactional approach enabled by new technology;
• Eliminating the costs of inspection and due diligence;
• Eliminating the costs of a destination presence and infrastructure.
These “new virtues” owe much to Silicon Valley disruptive thinking. We see their success in the exponential rise of the biggest OTAs and of Airbnb, even though they could not guarantee the success of Lowcost (no doubt that story will be told in due course).
The “old virtues”, exemplified by the ‘traditional’ bonded tour operator (how quaint that sounds), look like financial shackles by comparison:
• A heavy and risky commitment to pre-contracted accommodation, and hence to destinations and suppliers;
• Acceptance of regulation and consumer protection as a price of doing business responsibly (and inevitably reflected in higher prices which can be undercut by those whose business model avoids those costs);
• A strong incentive to ensure quality and safety because ‘traditional’ operators carry 100% liability for package elements – again, at a (high) cost that those avoiding liability can undercut.
When you compare the two models, it is no wonder that the low-risk, low-cost new players are trouncing the high-risk, high-cost ‘old guard’. No wonder Airbnb is eclipsing hotels and B&Bs, and OTAs are eclipsing tour operators.
It is a brave new world where a global ‘travel’ company can be run by a handful of IT geeks, lawyers and accountants.
The new players are technology platforms, with no stake in any destination – so there is no need for contractors or country specialists, or friendly local reps with clipboards.
Such things are excess overheads to be avoided – as is regulatory compliance in the Silicon Valley playbook.
Luckily for these new players, our regulators are largely sleepy and complacent, so the new business models are winning and the world of travel has changed.
But I come back to my question: is this progress? Yes, the shareholders of winning businesses have done very well – the “privileged few” as our new prime minister would call them.
Yet fewer people are employed in our industry (including in destinations); destinations no longer have partners with a real stake in their future; resorts and governments have lost revenue; and consumers are often left (as by Lowcost’s failure) without the protection they probably thought they still had.
It seems that consumers don’t understand this – or, a worse thought, perhaps they don’t care?
Destination governments are obsessed with visitor numbers rather than other more sustainable (in every sense) aspects of tourism. So platforms and low cost carriers are welcomed while they seem to deliver volume.
The fact that these new players can move elsewhere fast, and meanwhile generate much less local income, is not always understood.
Meanwhile our own government, whilst welcoming new disruptive businesses, has not woken up to any need for a disruption in regulation or enforcement – or thought how ‘new travel’ will protect consumers.
I am left with the depressing thought that our industry has become commodified and de-professionalised. If consumers are just as happy doing business with a no-liability web platform as they used to be with a full-service tour operator who stood behind his or her product, what use is my professional experience or yours?
It seems to me that the Lowcost failure should be a jolt, to prompt our government and regulators to take a clear look at the downsides of ‘new travel’.
Will they decide that our future is to be the unfettered free-for-all of the Wild West – just as, 30 years ago, was our past?