Steve Endacott outlines the future of travel as a battle between asset-heavy players and tech-heavy forces
The AI revolution is set to upend social hierarchies, elevating the indispensable manual skills of plumbers and builders, while roles traditionally revered roles like lawyers and accountants may find their prestige challenged.
However, it is less clear whether the asset-heavy airlines or technology-heavy OTAs (online travel agents) will win.
Access to aircraft seats is pivotal, and Ryanair’s recent ‘epiphany’ that selling holidays through OTAs boosts early load factors – which in turn raises average flight yields – has significantly benefited companies like On the Beach and Love Holidays by driving up their sales volumes.
OTAs leverage technology to generate ‘just-in-time’ holidays, compiling databases of available flights for routes like Gatwick to Palma. This enables them to offer a broad selection of flight times and often the lowest prices by pairing the outbound flight from one low-cost airline with the most affordable inbound flight from another, giving them an advantage over ‘asset-heavy’ airlines that can only offer their flights.
However, the airlines can negate this advantage by offering discounted flights to their holiday divisions, which package them into opaque, inclusive holiday prices. This strategy makes OTAs, reliant on higher publicly-available flight prices, less competitive – a situation exacerbated if airlines also impose hefty API fees.
In key source markets like the UK, the delicate balance of power is largely determined by the size of the in-house airline and the annual surplus of flight inventory that needs to be sold, presenting an ever-changing dynamic.
However, the City views the rapid expansion of Jet2 and easyJet holidays as a significant threat to OTAs, as evidenced by the persistently undervalued shares of On the Beach. But how is the AI revolution set to impact this balance?
My AI voice business, Neural Voice, now operates AI customer service and sales agents in 42 languages, providing instant answers to customer queries around the clock. Paired with AI translation tools which convert all site content, international expansion becomes straightforward, making entry into new markets 100 times easier.
Logically, this should allow OTAs to expand more swiftly across multiple European and former Eastern Bloc source markets than companies like Jet2holidays, as they can use third-party carriers and don’t require setting up new airline bases.
Ironically, this positions Wizz Air as a pivotal player in the expansion game. Founded in Budapest, the airline has been expanding rapidly. In 2024, it transported 62 million passengers and is a key partner required to access eastern European markets.
Wizz Air closely mirrors Ryanair in its strategy, utilising a single aircraft type, focusing on secondary airports, and offering low fares at the expense of customer service. To date, it maintains Ryanair’s former ‘anti-OTA’ stance, but I’d expect it to follow the Ryanair example moving forward, potentially opening its eastern Europe heartland.
However, Germany remains the crown jewel of the European holiday market. Following the collapse of low-cost airlines like Air Berlin and Germania, the flight market is now dominated by Lufthansa and its low-cost subsidiary, Eurowings.
Although its holiday division is relatively tiny, Lufthansa is unlikely to prioritise OTA partnerships over its in-house operations. This could hinder OTA expansion unless the third-largest airline, Ryanair, decides to play nicely.
The AI revolution will significantly lower barriers to international expansion, but in a market where access to flight seats is critical, being ‘asset-heavy’ and controlling your own destiny still outweigh the advantages of being ‘tech-heavy’ and being at the mercy of airline partners.
The future of the UK’s OTAs lies in international expansion, but Ryanair and Wizz Air hold the keys to determining where that growth will happen.