I don’t blame Gary David for wanting to form a nucleus of independent operators in order to market through a strong grouping of independent agents. There is not one medium-sized independent operator selling through the multiples which has not had cause to complain about the way the multiples are behaving.
What must really stick in the throat is the fact that the new Advantage/Airtours consortium is now flexing its muscles and demanding greatly increased commission levels.
How can the erstwhile independent agents, now within the franchise, look their independent tour operator friends in the eye? No wonder Justin Fleming sold out – just in the nick of time (no pun intended).
Though Gary’s idea is laudable it faces one or two difficult hurdles. The main stumbling block is that of administration.
Anyone who has run an association will tell you how difficult it is to get consensus from the membership.
At the moment the whole concept is being swept along by euphoria, but sooner or later the hard graft has to begin – and then who will pay? Someone has to organise training. Someone has to circulate all the agents and all the tour operators involved in the scheme on a regular basis. Who will sort out the commission squabbles?
Some operators within STOG will want to hand out more commission than others and some agents will therefore practice directional selling.
As operators have expanded their range of products, so competition between them has intensified. Most tour operators’ products cross over into other companies’ destinations to a greater or lesser extent.
Agents will therefore find themselves selling competing products within STOG. And do we really want yet another body within the industry?
At AITO we’ve already got CARTA and the administration that goes with it. Can’t a way be found to incorporate the new STOG within the existing CARTA? After all, CARTA has hardly been a pressure group , but is a collection of like-minded agents wanting contact with a wider range of independent and innovative tour operators.
Commercial deals between individual agent and tour operator are confidential – and so they should be. CARTA provides a civilised umbrella under which we can all work. Now the chips are down, all CARTA needs is to become more focused.
It will become so anyway because commercial pressures will drive independent tour operators and travel agents closer together. Those of us in the retail trade know the Thomson and Airtours-type packages are no longer purchased from our agencies. Mass-market holidays are so heavily discounted through their in-house retail chains that, in the next year or two, bookings via the independent retail sector will be minimal. Only a client living on another planet could miss the fact that Thomson holidays are cheaper if booked through Lunn Poly.
Some operators who are keen on STOG are not members of AITO. Well, what better time to join AITO? We need an even more powerful and aggressive AITO to fight the cause of the quality independent.
AITO and CARTA may not be the ideal vehicle for everyone but they are there, are well-established with full administrative back-up already in place, and could easily be moved up a gear and used more effectively.
The consolidation of the travel industry into a few major players with smaller companies filling niche markets is by no means unique.
The first reason, of course, is profitability. Acquisition brings rapid returns, which satisfy the hunger of the stock market far quicker than organic growth.
Secondly, controlling your own supply and distribution brings security, allowing greater investment in product quality and customer service.
Finally, a wide range of group products means you can satisfy all your customer’s needs throughout their life, providing better service and research into future requirements.
Does this preclude an individual company within a group from having ‘independence?’ That depends.
If the business is mainstream charter tour operating it is more likely to be consolidated, to realise economies of scale. In specialist markets, consolidation is unlikely, unless the reason for purchase was to acquire another element of that company’s brand, or because it is badly managed but has potential.
Then new management will be brought in and the company may lose its independence.
What of well-managed, profitable specialists which have been acquired?Closer inspection will reveal that most are still run by the individuals who grew them and who understand the business. These people are usually locked-in on long-term contracts.
Such companies will benefit from group buying-power in areas like car hire, currency, or distribution. But the very nature of the business will mean that many bigger economies cannot be realised – charter flying and bulk hotel purchasing is not on the agenda. Their customers demand an individual service which can only be provided by preserving the companies’ independent integrity.
In the Airtours group, far from Cresta being consolidated, the reverse has happened. Smaller brands like Eurosites and Tradewinds have been pulled out of the conglomerate and set up to flourish on their own.
So why all this talk of the evils of integration and how it threatens independence?
The criticism comes from companies which have not been, or are not likely to be purchased – companies which have the most to gain by persuading agents to switch-sell.
Now they are planning specialist groups which ape the very structures against which they rail so much.
Imitation is the sincerest form of flattery and evidence of the real reason for the outcry against integration.
“We needan even morepowerful and aggressive AITO”