Operations

plus

Interview with Andy Cooper, General Manager of the Federation of Tour-Operators: “The industry’s players must re-invent themselves”

8 min reading time

Published on 28/09/05 - Updated on 17/03/22

Based in West Sussex,Andy Cooper worked many years for some of the biggest tour-operators on the British market. He now manages the Federation which regroups the major actors in the United-Kingdom and he often hosts the meetings of the European Federation. He is one of the most accurate observers of the evolutions of the European market

HTR Magazine: Has the consolidation process among European tour-operators come to an end? _ Andy Cooper

: Only three or four years ago, being a large vertical integrated tour-operator was said to be the right road to follow. The general feeling was that there would be only two or three pan-European groups left, namely TUI, My Travel and Thomas Cook. But since then, the shape of the market has changed dramatically. In the last couple of years tour-operators have understood that taking risks is not necessarily the best road to success. In the UK, for example, the most successful companies are specialised long-haul tour-operators, like Kuoni, who take no risks on beds, no risks on flights at all. And because of that they were back on their feet quicker and were more profitable than the big vertical integrated tour-operators which traditionally took bigger risks.HTR: What do you consider to be the major challenge for the industry for the next 5 years? _ A. C.: Apart from the world events I mentioned, on a longer term, the big challenge is how the climate issue will impact the travelling pattern. On a different matter, if there is a great deal of pressure to increase taxes on aviation this may well have a negative impact on the demand. We are probably venturing into a change in the travel industry that is bigger than when packages first came about. At the time, it encouraged people to travel more, creating a whole new market. Now, we are still experiencing growth in the market, but the new environment requires the industry players to re-invent themselves.HTR: Is vertical integration still a model being pursued by large tour-operators? _ A. C.: The concept of vertical integration is at a crossroads. Only TUI, the biggest tour-operator, is pursuing that direction and continues to acquire hotels, airlines, boats... Its managers are still convinced that it is important to control the product they sell. Companies like Thomas Cook or First Choice are trying to reduce their risk-taking. Consolidation is much less attractive than a few years ago. The advantage of it was to strengthen buying positions with respect to the industry’s suppliers. It worked for airlines, but I don’t think it worked particularly well for hotel beds. The other effect of consolidation is that anybody who had a business to sell thought it was a great opportunity to make a fortune and settle for the rest of his life. A lot of businesses were sold at excessively high prices. There are still some opportunities out there and I think the consolidation process will persevere in the industry over the next few years, but at a much slower pace than in the late nineties.HTR: Was one of the justifications to be able to serve a European consumer? _ A. C.: As it turns out, this was not the case. In reality, consumers in individual countries have different needs: Germans, for example, are still avid about buying hotel beds, as for the British, they prefer apartments. Although the gaps between national attitudes have been closed somewhat, these differences are still very much a thing of the present.HTR: Are consumer habits making a significant shift towards less inclusive package tours and more customised holidays? _ A. C.: The answer is no. The size of the entire market is still growing because of the tremendous amount of new supplies on the market. The sheer volume of no-frills flight seats available has dramatically led suppliers in all the other sectors of the market to increase the supply volume. Hopefully customers are buying more, because they are travelling more, but their needs are more diverse now. They are also more promiscuous regarding what they buy. They are not so tight in buying their 14-day package tour to Spain as they used to be. They buy a short package, but then they have short breaks breaks away. The package is a flat product that pretty much holds its own. However, “dynamic packaging” is certainly growing. Travellers are willing to make their arrangements themselves, and traditional tour-operators have been a little bit slow in reacting to customers’ desire to buy individual components to build their own packages.HTR: Would you consider the development of the Internet an opportunity for tour-operators? _ A. C.: It is changing how people go about buying their holidays. The High Street travel agency has lost importance to the Internet. For years travel agents just assumed customers would always come to them, but they did not take into consideration their added value. If you step into one of these travel agencies today, the average age of the staff is barely over 21. In many cases they know less than the customer sitting in front of them about the product they sell. Their major challenge is to provide an added value to the simple act of selling a product. They have an expertise to develop in order to compete with the Internet. If you search on the web for “holidays in Spain” thousands and thousands of offerings come up and a regular customer cannot understand who he should buy from. He is growing very confused and very concerned. On the other hand, this is an area where traditional tour-operators have a huge opportunity. After a period when customers were attracted by what was available and cheap they will eventually return to familiar brands, because choosing on the Internet is terribly complicated.HTR: Will Internet definitely change the traditional pattern of tour-operators selling through travel agent networks? _ A. C.: This is a very controversial question. Yes, there is definitely an increase in the online sales volume for tour-operators, not so much because they have actively driven it, but because of the change in customer behaviour. That might change further in the future. Tour-operators have increasingly changed their distribution pattern with their online business and their own brand of High Street retailers. Yet High Street travel agents have less and less opportunities to take orders for the big touroperators. For example, in Ireland major tour-operators only sell through their own branded network of travel agencies or through franchised travel agents. I would not be surprised if that trend becomes commonplace in the UK and then proceeds further in Europe.HTR: With greater accessibility to the various suppliers via Internet, do you consider High Street travel agencies potential competitors to the tour-operating industry? _ A. C.: Yes, that is happening increasingly. Travel agents are willing to head in that direction. However, there is a potential danger and a source of confusion: travel agents do not realise what they are taking on in every case. Like tour-operators, they are required to have financial protection in place to back their products. They are not fully aware of that, which means if something goes wrong the travel agent can end up with a major liability problem.HTR: Have you seen any evolution in the relations between tour-operators and hoteliers? _ A.C.: In the past, tour-operators were very much committed to long-term contracts with hotels because there was so much pressure to have enough beds available. They felt they needed that kind of guarantee. Now, there is a dramatic move away from that level of commitment, simply because there are so many hotel beds across the Mediterranean belt. Why commit to a 4-star hotel in Spain when you know you can buy the same volume of rooms, with similar standards for the third of the price in Turkey? For tour-operators, flexibility is very much the key now. From the hoteliers’ perspective, the previous system worked very well. They had practically no marketing costs and they had a commitment for the whole season. All of a sudden, hoteliers must think about how they should market their properties, dramatically changing the shape of relations between hotel groups and tour-operators.HTR: After a terrible year 2003, has the industry fully recovered? _ A. C.: I don’t think the industry is as strong as it was because of these radical changes. We spend too much time comparing 2004 to 2003 as opposed to looking back over a five-year period to see where we are, business-wise. Over the last five years, the volume is probably down overall. We are very prone to major catastrophes. For example, sales in the UK for Florida are not good. This is because of the four hurricanes that hit Florida last year. Despite the weakness of the dollar, Britons are reluctant to go because the fear is still present. Our industry is incredibly dominated by world events and whatever breaks out in the news has an enormous impact on customer travelling patterns. Hopefully travel is no longer regarded as a luxury and the desire is still strong, but the destinations to which they will travel may well change.HTR: How did tour-operators react to cope with these changes? _ A. C.: If you look at the large companies, they are almost all specialising their activities. Larger tour-operators, meanwhile, are able to move their products around. The Euro zone is struggling desperately because the Euro is so strong and because the bed supply around the Mediterranean Sea is enormous. There are two reasons why people travel: one is to reach for the sun, but the other is to have a better value for their money where they travel. The process of equalising the economies across the Euro zone has diminished these differences. A German travelling to Greece no longer has the feeling a beer is cheaper there than in Hamburg. Coupled with the increase in bed prices, travelling in Europe is no longer advantageous. If you look at the destinations with strong performances, they are short haul destinations from almost every country in Europe and outside the Euro zone: Turkey, Bulgaria, Egypt, Croatia, Tunisia and Morocco. The second reason is that there is so much competition among Euro zone destinations caused by the no-frills carriers, that touroperators have decided to move their flights to airports where we have no competition.HTR: What do you consider to be the major challenge for the industry for the next 5 years? _ A. C.: Apart from the world events I mentioned, on a longer term, the big challenge is how the climate issue will impact the travelling pattern. On a different matter, if there is a great deal of pressure to increase taxes on aviation this may well have a negative impact on the demand. We are probably venturing into a change in the travel industry that is bigger than when packages first came about. At the time, it encouraged people to travel more, creating a whole new market. Now, we are still experiencing growth in the market, but the new environment requires the industry players to re-invent themselves.

For further

Every week, the HON team brings you an expert look at the world of hospitality. By becoming a member, you will have access to a complete ecosystem: exclusive content, jobs, etc.

BECOME A MEMBER

Sign up to add topics in favorite. Sign up to add categories in favorite. Sign up to add content in favorite. Register for free to vote for the application.

Already signed up? Already signed up? Already signed up? Already registered?