At a time when the travel industry should be focusing on making better margins, everyone seems obsessed with giving profit away.
You only need to look down the high street to see the discounts – and as a consumer myself, I know that’s fantastic.
Retail travel is no different. Today, perhaps more than ever, every sale counts. At a time when retailers should be making more money, they are choosing instead to give most of their income away.
The pressure to win business looms over us all – and it seems we will win that business at any cost.
There’s an argument to say that, if you’re not offering a discount, you won’t get the sale. Customers are so used to getting money off that their expectations, even before they’ve opened a brochure, are to demonstrate the power of the pounds in their pockets.
And what is the ultimate effect? If you refuse to lower your price you can be sure a competitor will see an ideal opportunity to jump in.
The picture varies by sector. In the traditional package market it tends to be the operators actively driving the discounting.
Membership of a consortium can help here, since that’s the best way to secure yourself a price-match guarantee and the chance of keeping the sale. Sadly, though, this won’t apply to all cases.
Cruising tends to be slightly different. Here, responsibility for the size and scale of discounts available sits with the retailers.
Look at the stats – there are more than 71,000 cruise beds under construction, with a further 60,000 beds still planned to come on line between 2011 and 2014. That’s an awful lot of extra capacity.
There’s an argument to say that the attractive payments put in place by the cruiselines actually fuel the discounting conundrum. Cruiselines want volume sales and will pay big overrides to agents hitting targets.
And there are retailers out there who will even sell cruises at a loss, driven by the prospect of a big incentive payout.
Is there any cure to this plague of discounting? UK and EU competition laws do not allow suppliers to control or fix the price that retailers can sell their products at, as this would be price fixing. This also includes discount levels.
The time has come for suppliers and retailers to think of new ways of differentiating their proposition, both in terms of value and service delivery.
Independent agents are better placed to achieve this. Simply focusing on the dynamics that drive margins down is setting us all on a path to disaster.
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