Can dynamic packaging survive the economic crisis?

With the economic crisis biting, several airline collapses behind us and bed banks dropping their principal status, it would come as no surprise if travel agnets who practice dynamic packaging were bracing themselves for a gloom-ridden 2009.

Not only do consumers now have to weight their desires for a holiday against the fear of unemployment and higher mortgage repayments, they also have to think twice about spending on a trip that could see them stranded abroad or failing to leave the country in the first place.

All of this is bad enough for bonded travel agencies selling conventional packages, but how will the dynamically packaging market face an increasingly sceptical customer base, dwindling airline capacity and a shrinking pool of reliable bed banks?

For Flyglobespan chief executive Rick Green some of the sector’s aches and pains are more market correction than market meltdown. “The unfortunate demise of suppliers will help offset the reduction in demand for the remainder of suppliers. The hope is that there will be a rebalancing of supply and demand,” he said.

The key issue for agents is transparency. Green said: “The customer needs to be aware of risks. Most dynamic packagers operate with diligence. Getting an ATOL is key, I guess, and the consumer needs to be aware of the need for protection.”

Flights

Phil Bird, director of technology company Red2, has already noted a reduction in flight inventory and, consequently, in agent and consumer choice. He suggested the pain could be eased by a loosening of the policies of some low-cost airlines.

“It’s obviously beneficial to the agent to be able to offer low-cost carrier fares. But diversity of choice has been reduced, which has a knock-on effect of strengthening the position of mainstream operators.

“It would seem to make sense for the industry to react, but it also would seem to be reasonable justification for that change to come from the low-cost operators as a means of strengthening their business model.”

Hotels4u.com sales and marketing director John Harding would also like to see the low-cost carriers open up their inventories. “We have noticed a decrease, not only in flight availability, but flight availability at the right price.

"Now is a great opportunity for airlines such as Ryanair and easyJet to work more closely with the trade. This will not only aid agents, but will help these airlines to expand their offerings to benefit from the obvious demands that are there,” he said.

Joining the chorus is Traveltek managing director Kenny Picken. “Ryanair would be a great partner with all the routes it has and if a way could be

found to make it agent friendly, it’s an ideal solution. However, personally, I’d buy a ticket in the Euromillions as there’s more chance of success,” he said.

The contraction in flight availability will hit some regions and destinations more than others. But while the industry’s current travails will have a major impact on some agents’ ability to dynamically package holidays exactly to their customers’ choice, there is still every faith airlines will fill the void created by the likes of XL Leisure Group, although the nature of the demand will change.

Somewhere2stay.com general manager Kevin Currie said: “Sales of short-haul destinations are increasing, such as to the Costas and the Algarve, due to cheaper flights. Also there is a marked increase of forward sales to Florida and Cancun. Anecdotal evidence suggests some customers are choosing one upgraded holiday over two normal holidays.

“At the same time, sales of all-inclusive holidays are growing as more people choose to fix their total holiday spend in advance, making budgeting easier and gaining the best value from their holiday spend,” Currie added.

Youtravel sales and marketing director Paul Riches agreed dynamic packaging is a late-driven market, but believes technology is a mitigating factor. “As for forward bookings, due to technical advances, more have been secured than at this time last year. “This might level off, but dynamic packaging will still play a significant part in the overall marketplace.

“For summer 2009 flying programmes will improve. However, Greece has been impacted but we foresee other airlines taking advantage of this shortfall by the time the summer season is upon us,” he predicted.

As for Ryanair, Riches pointed out the airline has its own issues to contend with as its financial results recently showed. “Agents should do everything they can to sell away from [Ryanair] and use charter products that will pay a commission and work with them rather than against them – agents should work with partners that appreciate their booking rather than those who throw it back in their faces.”

Accommodation

Accommodation suppliers have their own issues, as demonstrated by the number of bed banks that have given up principal status.

But it’s not all doom and gloom. In a recent article in TW’s sister publication, Travolution, Dolphin Dynamics founder and president, Roberto Da Re said he foresaw the growth of destination management ­organisations and property ­management system suppliers as a possible benefit to agents.

Da Re said: “Brokers may come up against new competition from DMOs and suppliers of PMSs because, as they develop their technology, they create new distribution channels and can enable hotels to connect directly with consumers or travel agents – and bypass the brokers.

“The implication for agents is that they will be able to source accommodation more directly, not via a broker or an intermediary, which may reduce the cost to consumers and enable agents to strike commercial deals directly with hotels and improve their margins,” he said.

Traveltek managing director Kenny Picken agreed there will be a bed bank shakedown. “Some of the bed banks will have to disappear through inability to compete or by acquisition, but there is no doubt technology and opportunity also threaten their existence.

"The opportunity the DMCs are seizing just creates a new player, as they will need distribution and therefore become part of the supplier chain. However, technology also makes it easier for hotels to offer inventory direct. Bed banks are here to stay, but we will see some dramatic changes in 2009,” he predicted.

When agents are looking for ways to stay afloat and consumers are looking for value, the internet can still offer the best deals while making the agent a decent margin.

Picken said: “Our HolidayMaker dynamic packaging system can still find the best deals at the best prices and, in hard times, consumers want value more than ever before, but dynamic packaging alone will not resolve the economic issues.

“Agents need to think positively and be proactive; be creative in every aspect of what they offer clients and make themselves different. Offer quality service, good value and easy access to your product.

“There are opportunities to usurp your competitors while they fall in to the complacency of blaming a poor economic climate.”

Hotels4u.com sales and marketing director John Harding agreed dynamic packaging is just one component in a travel agent’s armoury. “Dynamic packaging is part of an array of products that all agents need in order to offer today’s holidaymakers the flexibility and choice they need.

"Multi-channel and multi-product distribution is therefore the only way for agents to expand their proposition in the present climate and dynamic packaging is a major part of that.”

The key is to remember dynamic packaging is a tool to enable the agent to be more responsive to consumer demand and to supply to specific demands.

“Those who are more resilient to the economic uncertainty (retired or older travellers) need to be better catered for and their needs more closely aligned with available offerings,” said Bird.

Da Re points to the growth of mobile services, from booking services to the delivery of a variety of travel-related content, which he said remain “largely untapped”.

“Mobile services will enable travel agents to offer added value to consumers and differentiate their service, supported by powerful, flexible, technology,” he said.

Related link at TravelWeekly