Major operators face a crisis as business drops off

Travel Technology Show 2005: The entire business model behind vertical integration is collapsing as dynamic packaging continues to expand, the Travel Technology Show heard.

Paul Evans, chief executive and founder of accommodation-only website lowcostbeds.com, claimed major operators are facing a crisis as their business “falls of a cliff.”

Mr Evans, former managing director of Going Places and First Choice Holidays, said owning assets such as aircraft and hotels are no longer relevant in today’s rapidly evolving market.

“The traditional package is being blown away. If I was a big operator I would be very, very worried,” he told a seminar on dynamic packaging. “For the first time we don’t need them. If you look at ATOL figures two years ago they had 70% of capacity. It is now less than 50% and decreasing fast. People don’t need reps selling overpriced excursions in short haul beach resorts anymore. They don’t need a coach transfer that stops at 12 hotels.”

He added that the old model of buying hotels and owning dozens of aircraft was outdated.

“Companies don’t need to own assets. The Mediterranean is awash with hotels and there are so many airline seats on the market.

“Whereas operators used to buy hotels, hoteliers are now buying into the operator to ensure distribution. What we are seeing is vertical disintegration.”

Referring to Thomas Cook’s Flexible Trips – which sells dynamic packages using a raft of airlines – Mr Evans said: “You (Thomas Cook) have 32 airlines and yet you are selling your competitors. That demonstrates the way the market is changing.”

Mr Evans, whose operation last night launched flight searches on 13 airlines, said the change is being driven by technology – something the major firms have been slow to develop.

“Change is happening faster than anyone ever imagined and technology is the enabler. It is allowing us to change all the rules,” he went on. “But the large operators are like supertankers. It’s incredible how long it takes [to change].”

Operators have continually refuted claims the traditional package is dying, estimating between 12 million and 16 million packages are still sold each year.

Mr Evans claimed seven million was a more accurate figure.

“Why go into a multiple travel agency and be sold one of their [the parent company’s] flights when you can go to other portals and have a choice of every airline,” he said.