Online travel firms ‘trashing margins’

IT-led online travel companies have ‘trashed margins’ with their ‘stack ‘em high sell ‘em cheap’ approach to holiday sales, according to rival firms.

Fleetway Travel sales director Ben Braude claimed that companies like Travel Republic had made it difficult for others to make money selling online.

“They are happy to make only £14 a head, but you have to sell a lot of holidays when you are making as little as that,” he told a YouTravel quarterly industry debate in conjunction with TravelMole about the changing world of online travel.

“Our margins are being squeezed by online retailers like Travel Republic. Our margins are rubbish now; gone are the days when you made £80 per head.”

But Travel Republic managing director Kane Pirie denied his company had set out to bring down prices across the board.

“We have to be price competitive because people do shop around, but we are not the only ones who sell on price,” he said. “Our approach is not to get as much money out of the customer as possible but to find them the best holiday. There are online companies who still see the customer as an open wallet.”

But Youtravel.com sales and marketing director Paul Riches agreed with Baude that margins were too low.

“They should be twice what they are and right now the only people benefiting from this situation are the customers.”

He said that margins were shrinking at a time when the cost of online sales was going up.

“Search engines like Google are becoming more expensive and the cost of pay-per-click is going up – we are having to spend a lot of money to try to get customers. To survive you have to have exclusivity, to offer the customer something they can’t get elsewhere.”

A2Btransfers.com chief executive Renaldo Scheepers predicted the survivors would be those with IT expertise, rather than knowledge of the travel industry.

“The IT people are the ones who will be successful; they don’t know anything about holidays but they know how to drive sales online,” he said.

Scheepers added that further technological developments would wipe out the middle men altogether.

“Suppliers will find a way to reach the customer direct so they won’t need tour operators, bed banks or even transfer companies like ours – they will sell direct to the consumer.”

by Linsey McNeill