In the last twenty years, the travel industry has undergone significant transformation. The holidays we take are changing – bespoke experiences replacing packaged tours – and the way we book them has changed, too. When once Lunn Poly dominated the high street with over 800 stores, now a quarter of Britain’s travel agents have closed since 2012. And in 2019, 81% of all holidays were booked online. This shift towards DIY trips and the proliferation of sites such as Booking.com beg the question: is there still a place for the packaged holiday company and how can it survive in a digital world?
While the Thomas Cook case is only one part of the picture, its high-profile closure is an apt demonstration of the sorts of challenges faced by packaged holiday companies. Like many businesses of its kind, Thomas Cook struggled with increased business rates, rising fuel costs and a significant dip in consumer demand for one-size-fits-all package tours.
The internet has given customers the opportunity to discover holiday destinations and book flights directly without the need for a middleman. The traveller of today is far savvier and more intrepid than ever before and many customers not only find it easier to book their hotels and experiences directly, but often know more about the destinations than the travel companies themselves, making it difficult for travel organisations to maintain relevance.
But despite some of the high-profile failures we have seen in recent years, there are holiday firms that seem to be bucking the trend and performing well. With pressure on the travel business model higher than it’s ever been, these companies have identified structures that work.
“The traveller of today is far savvier and more intrepid than ever before and many customers not only find it easier to book their hotels and experiences directly, but often know more about the destinations than the travel companies themselves.”
Specialist firms, for example, have seen success by catering to the growing consumer need for once-in-a-lifetime experiences. These companies organise luxury breaks for cash-rich and time-poor individuals, or else arrange adventure-focused holidays for which an in-depth knowledge of a certain country or activity is required.
Travelopia, formerly part of TUI, has recognised this trend and is shifting its business model away from catering to the masses and toward serving a niche. The company is trimming its business from 50 brands to 10, renewing its focus on luxury and adventure with its retention of high-end brands Sovereign and Hayes & Jarvis and its disposal of generalist operators Europe Express, Go Today and YMT.
Cookson Adventures, a small but fast-growing operator, has also benefited from the shift to experiences. Cookson provides ‘exploration and wellness-led adventures’ for ultra-high net worth groups and individuals and is redefining what’s possible for a holiday experience: the company recently partnered with European marine scientists to facilitate groundbreaking research dives. Projects such as this are indicators of Cookson’s agile market strategy and its refusal to be limited to the traditional remits of a travel agent.
Moreover, in a market driven by the consumer desire for personalisation, travel companies must commit to optimisation and digitalisation in order to survive. LoveHolidays.com, for example, integrates the services of its partner companies, allowing users to choose everything from their seat on the plane to their travel insurance in one place. Customers can filter listed options by facility availability, Tripadvisor rating, and even destination temperature to ensure a fully personalised experience.
“In a market driven by the consumer desire for personalisation, travel companies must commit to optimisation and digitalisation in order to survive.”
Another model which seems to be responding well to a changing market is the fully integrated one. Instead of going into business with third parties, companies such as Club Med have a hold on their customers’ holiday end to end: from the chartered flights, to care hire, to hotel restaurants. Club Med has evolved beyond its reputation as a go-to option for pleasure seekers, to become a prime example of all-inclusive success. Thanks to its end-to-end control on its package tours and the diversity of its resorts across the world, Club Med saw an impressive 41% profit increase last year.
There are also newly-emerging players in the space. Klook, part activity booking tool, part travel company, has recently entered the UK backed by significant funding from major investment houses such as Goldman Sachs, Sequoia and SoftBank.
Looking abroad, the package holiday model is becoming increasingly popular with Chinese tourists wanting to visit Europe. Semi-self guided and high-end package tours are on the rise in the region, as travellers look for solutions to language and cultural barriers. Cracking Asia as a source market is a critical next step for travel companies wanting to pursue the package holiday model.
Ultimately, successful travel companies are adding value to their offering by providing consumers with something they can’t find elsewhere: specialist knowledge, access to the most high-end experiences or convenient booking systems, to name a few. There is undoubtedly a place for packaged holidays in the UK. But to survive in a world of on-demand travel, companies must be nimble, tech enabled and adopt an agile strategy that allows them to change with a developing market.