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French tour-operating faces strategic choices

The tour-operating sector in France is very vulnerable, weakened by distribution costs that are considered excessive, at the mercy of exogenous shocks, to which it can only respond through emergency strategies (promotions and rock-bottom prices) with dangerous secondary effects (market deregulation). Its development implies to choose between specialisation or acquisition to reach the critical size.

To continue to grow, two approaches have become available to French touroperators. On the one hand, diehard industrialisation based on the model of the great English and German competitors, with its corollary of acquisitions, integrations, mass destinations… On the other, the exploration of “market niches,” or a hyperspecialisation on new destinations (Mali, Nepal, Iran…) or very specific clientele (trips for music lovers, pilgrims, people with disabilities, students, singles, single women, homosexuals or other circuits with precise athletic or cultural vocations…). This is the famous sector segmentation, which some designate today as “THE” main trend. In addition niches are not the reserved hunting ground for small TOs. Major tour-operators see there a means for completing their supply, capturing new publics that are discarded by “mass market”. “Nouvelles Frontières has long developed offers based on hiking, diving and trekking,” reminds Christian Rochette. “Thalasso holidays also work very well. They correspond to a real need rather than a simple trend. Many people would like to start using these, but don’t know what centre to chose when they are faced with the profusion of the supply. This is where TOs have a real role to play”. Another niche that is exploding: the over 55 group known as “seniors” or “goldies”. “ All this generation resulting from the baby boom has free time, is in good health and has comfortable revenues,” explains Christian Rochette. “Some travel several times a year and a good share subscribe to organised tours, which are therefore seeing good growth.”On the French market, they partially ran up against local cultural behaviour that was unbending with respect to their usual models. But their knowledge of local particularities is getting increasingly refined, while at the same moment these specifics tend to blur. “In ten years, the physionomy of the French market will be the same as that of our neighbours,” assumes René-Marc Chikli, for whom the scenario of a massive industrialisation of the sector is the only one that holds up. “Tour-operating is no longer a family business, it is a major industry. And it will grow increasingly structured, with new responsibilities. There will only be room for those who hold extremely wellthought- out strategic positions.”Everything is happening as if the trade were evolving towards more personalised packages, towards an approach that is more “travel oriented” than simply “vacation oriented”. It must be said: touroperating is entering the “unpackaging” era! The 8-day “plane + hotel” week package is losing speed to the benefit of “trips in a kit” that are much more flexible, organised according to the client’s wishes. Today, it is no more question to impose. Inversely, the entire challenge lies in making the offer as diversified as possible, so the traveller may pick and choose to organise the dates and services as he pleases. “37% of our sales of packages are à la carte. It is a powerful trend,” confirms Christian Rochette. This is perhaps where the French exception truly lies.It remains to be seen continuing this approach is a viable strategy in regards of the appetite of the Northern European conglomerates. This appetite encourages them to multiply their entries into the French market and to upset the division of roles a bit more. The award for the most spectacular incursion goes to the buyout of Havas Voyages by the German C&N, in June 2000, since rebaptised Thomas Cook. Essentially a distribution network, further to pressure from its new shareholder, today Thomas Cook is developing its own production that will enter into direct competition with touroperators that are sold through its network of agencies.Two years later, Nouvelles Frontières will pass entirely under the guidance of World of TUI. This acquisition has been supported at the end of 2003 by the launch of a new complementary subsidiary, TUI France. This is one way for the German group to compare itself to the sector’s national leaders, and that regarding forty or so destinations. The brand TUI France wants above all to stand out by its “allincluded” policy, backed by reimbursement if the client finds a better price elsewhere. Its arrival shook up French operators who had to differentiate themselves or follow the trend at the loss-leader price. A commercialisation agreement was signed with Alliance that includes the networks Carlson Wagonlit and Selectour, with, in the end, an emphasis on Accor hotels in TUI France’s brochure. The development of the partnership between Club Med and Accor could lead to changes in the distribution strategies if there are conflicts of interest.Europe-wide, the biggest operators have succeeded in growing their position without arousing the wrath of Brussels, whose interventionist policy on certain national markets encouraged cross-border operations. In the United Kingdom, two of the most powerful brands on the island, Thomas Cook and Thomson Travel, have entered into German control. The first was bought by C&N in 2001 (which extended the name Thomas Cook to the entire group), the second is now the property of World of TUI. In Belgium, it took ten years for Thomas Cook and Preussag to arrive at near total control…In keeping with this conquering logic, will we see a foreign conglomerate take control over the French market? It must not be forgotten that in the face of crises, the giants suffered as much, or even more, than the others. The major corporate operated groups, because of their less flexible structures, underwent major losses during the recession.

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