Steve Endacott says many high street and homeworking agents are finding that using someone else’s Atol cover is the less risky option when it comes to high-touch customer service and disruption
Guest Post: Is dynamic packaging worth the hassle with ‘hostile’ Ryanair and ‘erratic’ Wizz?
September 2022 is likely to see a further reduction in the number of small Atol holders as balance sheet issues and the continued disruption to summer 22 flying programmes led more agents to question the wisdom of being an Atol holder.
The dynamic packaging (DP) revolution partially caused the collapse of the big four tour operators Thomson, Airtours, Thomas Cook and First Choice, into one in the form of Tui.
This revolution was fuelled by a growth in freely available seats from low-cost carriers.
However, with Jet2holidays now representing 60% plus of sales on Jet2.com flights and easyJet Holidays showing similar ambitions, DP players are left working with a highly hostile Ryanair or an erratic Wizz Air as the sources of cheap flying,
Low-cost airlines are legally allowed to cancel flights outside of 14 days of departure and pay zero compensation, with just the initial payment refunded to the customer.
In effect, this has given airlines like Wizz Air the right to launch speculative programmes out of regional airports such as Doncaster and Cardiff, taking large amounts of customers’ money in advance.
I genuinely believe Wizz hoped for success, but at the first sign of poor load factors or potential losses, they have cut and run with few penalties, leaving tens of thousands disappointed holidaymakers to make alternative plans.
What other industry is allowed to take cash from customers, hold it for long periods and then simply renege on the promised product delivery?
I can’t imagine this happening in the world of beds and sofas or even new cars, which have similar long lead times.
Theoretically, Atol holders have a legal responsibility to replace a cancelled or failed flight, but unless a quick and easy alternative flight is available most large Atol holders will simply cancel the customer’s holiday and offer discounts to encourage them to book a new one.
Dealing with airline cancellations is much harder for high street agents and homeworkers who rely on strong personal relationships with their customers, and they often result in many hours of extra work for no financial gain.
So when the two cheapest airlines to many beach destinations are Ryanair and Wizz, is it worth the risk of running a DP operation as a retailer?
In the case of large OTAs and homeworking networks like Travel Counsellors, the answer is ‘yes’ as the higher margins at their scale more than counterbalance the admin hassles.
Travel Republic has stuck by its principles and refused to work with Ryanair after the refund chaos of the pandemic, but like others it suffered greatly due to the cancellations of British Airways, easyJet and Wizz, while Ryanair has operated the most flights on time.
For many smaller players, the operational risk and customer-service hassle will have put them off dynamic packaging and it’s no surprise to see the rapid expansion of On the Beach-owned Classic Collections trade brand.
Classic provides a fully bonded DP programme featuring all the major low-cost carriers including Ryanair and a wide range of competitive bed stock via its parent’s buying power.
Why bother with your own Atol when you can return to being an agent with none of the disruption and customer service risks, particularly when Jet2 and easyJet Holidays are happy to pay good commissions for holiday sales outside of their online stronghold.
Obviously, these companies will look to drive the highest possible level of direct sales, but they do not own high street shops and compete on the same high streets as the historic big four tour operators did.
The outbound beach holiday market is now dominated online by Jet2 and easyJet holidays, supported by a commercially and brand-savvy On the Beach.
But each now offers fully bonded products sold face to face in shops and through homeworking networks, giving these the ability to return to being travel agents whilst leaving the risks and rewards of being Atol-bonded to the big guys.
The big guys will clearly dominate the online space, but there is ever-increasing space for high-touch, high-service agents as this is an area the new players are keen to avoid.
There may have been better times to be a travel agent, but at least it’s competition based on customer service and operational efficiency, with economies of scale not really applicable outside of the ability to drive an extra 1%-2% in override.
That is why we are seeing so many new entrants in the homeworking sector and a brave few taking advantage of heavily discounted rentals to open new high street shops.
The UK outbound market continues to evolve, but it’s easy to see the volume of Atol-protected holidays increasing next year but the number of Atol licences dropping markedly.
Steve Endacott is a travel industry entrepreneur