Travel industry consultant Andy Cooper predicted a good year for travel in 2015, but warned the more risk-averse firms that hedged currency and fuel could suffer.
The former Thomas Cook director of government and external affairs and Federation of Tour Operators boss was speaking at last week’s McIntyre Hudson and Barclays travel seminar.
Cooper said although he was in a generally positive frame of mind as the number of people travelling overseas is rising, a number of indicators were giving contradictory messages.
Although oil prices have fallen the strong US is offsetting any advantages for those that buy their oil in dollars.
The weak Euro is good news for the sector, said Cooper, but not for the like of the main bed banks that have bought their accommodation in advance.
“Hedging is something that’s actually working against some of the more prudent businesses this year.
“When I wrote this [presentation] I was in a positive frame of mind, but you could turn that on its head.
“If you are well hedged in a fiercely competitive market in which customers know too much about what you have got it could be a difficult year, but I’d like to think it’ll be a good year overall.
“There are broad trends across the different sectors. I think the people who are going to win are all the people who are not risk averse or have been forced not to be risk averse.
“If you are not hedged you are probably going to do pretty well this year, which is pretty bizarre actually.”
Cooper said there remains a threat that Greece will “stumble out of the Euro”, because it “stumbled into it in the first place”.
And he said the situation Ukraine which is curtailing Russian travellers move westwards and deteriorating German market could have an impact on the European travel market.
Political instability is still likely to impact on tourism, said Cooper, including in the UK where Scotland is likely to hold the balance of power after the General Election.
“We have apparently got economic growth in the UK coupled with minimal inflation which ought to make people more inclined to travel,” he said.
Cooper said figures show package travel is growing slightly, visiting friends and relatives (VFR) trips are up – possibly linked to immigration from Eastern Europe – but corporate travel is not growing.
Although airlines in regions governed by Iata suffer from the political backdrop they operate in, Cooper said Ryanair has seen remarkable increased winter capacity.
He said capacity growth by Norwegian means the sector was worth watching closely and Jet2 has taken a big chunk of the market.
The Big Two Thomas Cook and Tui appear to be following the same strategy for their airlines with an increasing focus on long-haul. “It’s interesting to see they can get growth in long-haul,” said Cooper.
The restructure and scrapping of APD for children is unlikely to make a huge difference, believes Cooper, because he doubted there was pent up demand.
He believed the same was true if devolution of APD was to happen in Britain leading to reduced rates in both Wales and Scotland.
“What it does do is it creates a mess and encourages customers to think about which airport they fly from.”
Increasing seat numbers protected by Atol scheme according to CAA – up to 25 million this year - was being driven by dynamic packaging rather than full packages.
Cooper singled out BA Holidays as an example which used to protect a very small number of seats through the FTO but now has 67,000 lodged with the CAA.
The disintermediation trend in the sector is seeing customers happy to buy transport direct from suppliers but not hotels, added Cooper.
“There is a move from what would be a tour operating market to the bed banks and other providers. The problem with this is today you have something resembling perfect consumer knowledge.
“They have the time and they can find the lowest price which ends up lowering margins for everyone. You look at bed banks and think how are they making money?
“You look at Expedia and they seem to be determined to consolidate the sector. There seems to be an increasing move on behalf of the OTAs to become self-packagers.
“Is this where the growth in Atol protected seats is coming from?”Although the signs look good for the Big Two, Cooper said Monarch’s retreat from tour operating is a challenge for other UK operators.
“If you are a UK tour operator you are basically stuffed because there is very little you can do with regards to buying seats unless you use some very unusual carriers.”
Cooper said in general the industry was looking less “peaky” with a trend towards late sales but criticised the industry for the way it measures performance.
“We have a fundamental problem which is our long-term thinking is looking forward one year and back one year.
“People simply compare to last year. Last year we had a particularly good January period. Whether there’s a move to later booking I’m not sure, I have a feeling there is.”
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