Cosmos Holidays has admitted not having its own high-street shop arm remains an “Achilles’ heel” for the company but claimed this has not driven its recent tie-up with The Co-operative Travel Group.
Cosmos is part of the Monarch Travel Group, the third largest UK travel group, which includes brands such as Monarch Airlines, Monarch Holidays, flight consolidator Avro, bed bank Somewhere2stay.com, escorting tours operator Cosmos Tourama, and Archers Direct. Unlike rivals TUI Travel and Thomas Cook, Cosmos does not own a retail chain.
However, Cosmos mainstream holidays managing director Stuart Jackson said the deal to provide product for new tour operator The Co-operative Holidays was a result of retailers coming under pressure from commission cuts in recent years, not Cosmos’ lack of owned agencies.
“This deal is not about Cosmos’ distribution strategy. It’s about the Co-operative Travel Trading Group’s ability to access product,” he said. But he conceded: “Not having a retail arm is still an issue. It’s an Achilles’ heel for Cosmos, but we have strategies to overcome that.”
In June last year Cosmos switched to focus on trade sales and affiliate partnerships, while Monarch now provides its consumer brands.
Jackson said offering different brands for separate markets meant the group was “not as weak as it has been in the past”.
He said: “We are operating a twin brand strategy, which is working very well for us. Previously we had two different marketing departments and there were mixed messages. We have seen good growth because of the joined-up strategy.”
The new approach means Cosmos does not offer cheaper prices direct to consumers, a constant bone of contention between independent agents and tour operators.
Jackson said this has helped the tour operator maintain strong links with the independent trade, despite not having its own retail chain. “It’s helped us not having a web proposition that is competing in price terms with the retailer,” he said.
The operator is keen to grow distribution through agents or more affiliate partnerships, rather than through shop acquisition, he said.
Less than 10% of Cosmos Holidays’ products are now sold direct to consumers, compared to 35% last year.
Meanwhile, Jackson described the product deal with The Co-operative Travel Group as “no different to Volkswagen and Skoda” and stressed it would have no impact on Cosmos Holidays’ relationship with independent agents.
He said: “They will drive the brand, the product and how to sell it. We will provide the pure manufacturing capability. We are keen to make it clear to our retail partners that Cosmos Holidays and Avro are still very much out there as trade products.”
Jackson hopes the deal will also result in a closer working relationship between Cosmos Holidays and The Co-operative Travel, and said Cosmos aimed to maintain its market share of sales despite the launch of the new tour operator. He added: “We would hope to see growth in our Cosmos sales.”
Cosmos Holidays has changed its “manufacturing model” to provide more packages that can compete on price with dynamically packaged holidays, according to Jackson.
Packages are now created dynamically by pulling together flights from its flight-only consolidator Avro or airline Monarch Airlines and hotels from its bed bank Somewhere2stay.com to create packages with up-to-date prices and availability.
This is instead of pre-bundling the holiday components to create a package, said Jackson, and follows a decision by the operator to remove prices from its brochures two years ago.
“We are creating dynamically packaging holidays that we put straight out to the trade and are viewed as static packages. That helps us in terms of presenting real-time prices and competiting with dynamic packages,” he added.
“The agent would say the packages don’t look any different but it gives us the opportunity for greater speed to market. Before it took us longer to change prices; now we can react more quickly and provide keener prices.”
Next year could prove far more of a challenge, particularly if unemployment rises to the three million mark, said Jackson.
“I think next year will be more of a challenge. If around 15% capacity has been taken out of the market this summer based on two million unemployed, what happens when you have over three million unemployed, especially if you have fixed assets and own leases on aircraft?”
He added: “It’s easy to add capacity but it’s not so easy to reduce it. The key question is what will capacity and demand look like next year?”
Cosmos Holidays and Cosmos Tourama are unlikely to launch first-edition summer 2010 brochures until June or July this year.
Jackson said the market was returning to a booking pattern similar to the early 1990s. “People are booking later for next year and there is less of a need to bring brochures forward, particularly where fuel and currency costs are so unpredictable,” he said.
In the last five years tour operators have launched first edition summer brochures in April or May for the following year.
“You cannot carry on doing what you did last year. The whole customer dynamic has changed. An element of the market will wait for the low-cost carrier prices to come out,” he said.
The move could mean operators producing less editions, but not necessarily less brochures.
Specialist businesses managing director Alan Maclean said hoteliers were also not ready to commit to 2010 prices. “It is difficult to get suppliers to commit to their best prices when they don’t know what’s happening this year,” he said.
He added: “We may look to see whether we need to split up our brochures to better reflect the booking pattern.”
* Cosmos Tourama to expand in the river cruise market (February 2009)
* Co-operative Travel to launch tour operator this summer (February 2009)
* Cosmos creates two managing director roles (November 2008)
* Cosmos becomes trade only brand (June 2008)