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Comment: Who will be the winners in the Covid-19 evolution?

Steve Endacott assesses the prospects of the big tour operators, high street agencies and OTAs

Covid-19 has hit the travel sector harder than virtually any other, with UK lockdowns followed by the shutting of international borders combined with the imposition of testing and extra paperwork, devastating short term consumer confidence.

However, last week’s UK government announcement of the removal of Covid-19 testing appears to mark the ‘beginning of the end’ for Covid travel restrictions, with the UK leading the way in learning to live with the virus.

The future of travel looks bright but may require a re-think of how things are done.

For example, summer 2022 is set to be driven by last-minute bookings, 4-5 weeks before departure, as customers who have been hit by a barrage of disruption over the last two years remain cautious about booking early.

Low-cost carriers’ yield models will quickly adapt, even without historical comparators, because putting prices up based on the rate of sale has never been rocket science.

However, driving frequency of rotations on routes will be much more of a gamble, often resulting in flight consolidations and further customer disruption.

Leaving aircraft sat on the tarmac is likely to continue to be a requirement this summer, as airlines chase yield over volume. Beach destinations, with their longer average flight times and earlier booking profiles, will look more attractive compared to city routes, leading to holiday capacity returning faster.

Don’t be surprised to see a big expansion of easyJet holidays on the back of increased trade distributions, bought with attractive commission levels.

Letting Jet2holidays dominate trade distribution has been a historic strategic error that current easyJet chief executive Johan Lundgren, with his tour operating background, will not allow to continue.

Tui’s market share is likely to suffer as its airline does not have the same economies of scale as Jet2 or easyJet, giving it a higher cost base in the commodity holiday market it are being forced to enter now Covid-19 has severely disrupted its “differentiated” product.

Tui’s strong brand and reputation for customer service may counter this price disadvantage in the short-term, but its debt mountain is one of the biggest in the sector, meaning long-term decline seems inevitable.

High street agents need to evolve rapidly, as Covid-19 has pushed more shoppers online, reducing footfall and making profitable operations very hard.

This was demonstrated by Hays Travel’s £34 million loss last year. Unprofitable shops need to be shut rapidly, all leases renegotiated, and local councils pushed to accept current business rates are unsustainable.

How quickly all this will occur remains open to doubt, but I believe that within the next two years high street shops, acting as hubs for local homeworkers, will be the model of choice in the ‘personal service’ travel sector.

These hubs will incorporate video conferencing, such as Zoom, as a normal selling process due to its consumer convenience, allowing customers to be walked through online content in the comfort of their own homes and for agents to see consumer reactions, markedly improving conversions.

Personalised travel services don’t have to be delivered face-to-face anymore and, in a post-Covid-19 world why would staff ever again want to sit waiting in a shop for customers to walk through the door when they can drive their own appointment diary and enjoy the benefits of working from home.

However, if – as expected – the cost of high street a presence is reduced dramatically because of the lack of demand, having a high street location still makes a lot of sense.

Combining a local homeworking network with a high street shop could offer the best of both worlds.

The shop could drive brand awareness and therefore consumer trust, while providing a professional administration centre and a point of customer introduction via walk-in traffic. It simply needs to be staffed on a rotational basis and have longer opening hours via homeworkers and video support.

Online travel agents (OTAs) also need to adapt their models,  making ‘amending’ bookings just as easy a process as booking in the first place.

Although OTAs don’t control their flight supply, the increased flexibility offered by airlines can be passed on electronically – and customer portals for self-amendment have never been more important.

OTAs also need to step into resort with customers, providing relevant added-value services while on holiday. These will primarily be delivered via apps, but could also be supported by branded foreign exchange cards offering preferential exchange rates and cashback deals on local products.

Covid-19 has undoubtedly reshaped the travel environment and it’s the businesses which recognise this and adjust the quickest who will be the winners.

Will your business be one of them?

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