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UK travel sector ripe for consolidation
The UK travel industry is ripe for further mergers and acquisitions, both in the airline and tour operator sector.
This was the prediction of expert Martin Alcock, director at the Travel Trade Consultancy, when he spoke to delegates at this week’s ABTA Convention in the Azores.
Alcock said the recent demise of Monarch highlights the problem of major over capacity in the sector, largely due to the low price of fuel allowing airlines to sustain routes that would not otherwise be sustainable.
"With over capacity and weaker players falling out, the dynamics of the market look like there will be more consolidation," he said.
Speaking to TravelMole at the Convention, he said the collapse of Monarch could potentially lead to other failures as some companies, who sold lots of Monarch seats and holidays, are left with the burden of paying to bring customers home.
Comparing the US airline market with the European market, he said while four airlines – American, United, Delta and SouthWest – hold 70% of market share, in Europe the four largest airlines – Ryanair, Lufthansa Group, IAG and easyJet – hold just 49%.
"There is definitely room for further mergers, acquisitions, or joint ventures in Europe," he said. "Whether it’s good for consumers or not is another question."
But he said the over capacity issue in the short haul market would be partially alleviated by previously off-limit destinations, such as Tunisia, opening up again, and the recovery of Turkey.
Monarch had admitted its yields were down 25% for Spain and Portugal.
"It’s appealing for airlines to go back into Turkey and Egypt as soon as possible," he said.
Another trend to watch, Alcock told ABTA delegates, is how OTAs are acting more like tour operators and vice versa.
On the Beach, for example, now the fifth biggest ATOL holder, is now focusing on differentiated product and 66% of its accommodation is directly contracted.
"They’ve also increased their offline marketing spend, with TV campaigns and adverts in bus shelters," he said.
"They’re starting to behave much more like a tour operator."
Meanwhile Thomas Cook has recently signed a deal with Expedia to widen the distribution of its city and domestic holiday business.
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Bev
Editor in chief Bev Fearis has been a travel journalist for 25 years. She started her career at Travel Weekly, where she became deputy news editor, before joining Business Traveller as deputy editor and launching the magazine’s website. She has also written travel features, news and expert comment for the Guardian, Observer, Times, Telegraph, Boundless and other consumer titles and was named one of the top 50 UK travel journalists by the Press Gazette.
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