January sales got off to a flying start, across all channels. People expected that interest rate hikes and general gloom would have slowed sales; as yet they seem to have had little effect on holidays.
In the dynamic packaging bedbank sector, we don’t worry about this. The market is growing too fast for any economic slowdown to affect us, despite all the PR spin that traditional packages are holding up. My view is that if the market drops from 87 million travellers ex-UK to 82 million – then so what? The number of people going online and building a lower-cost alternative to traditional packages will be greater than any fall in travellers deciding to not travel next year.
There is no doubt that charter capacity has reduced, with the main players cutting back on the key low-cost battlegrounds as they move mid-haul and long-haul to keep margins up. If you fly further away, it is logical that the aircraft takes longer to return, and thus less rotations are completed per day, therefore less capacity.
I suspect that short-haul capacity is more level year-on-year than we are told, as low-cost airlines have merely added to those routes that the others are cutting back on.
Fuel and exchange rates are all bouncing around, with significant impacts on costings. The forward currency markets and fuel hedging departments in travel companies will earn their money this year, or else be under serious pressure, depending on the stance they take.
Euro rates have moved from €1.49 last summer, to as low as €1.30 and €1.35 as I write, and the dollar from $1.93 to as high as $2.05. These change prices significantly, but more importantly they change competitive positions.
My stance is, outside of the retail wholesale sector, consumers are less sensitive about price than we tell ourselves.
Frankly, our industry gives too much away, and undersells itself. The trade bodies need to better show the public how efficient an industry we are, and what great value holidays are, if you compare holidays with other disposable spend areas.
Price is important on websites, of course, but not half as important as the technology working properly, the brand and the consumer liking the website. The usability of the experience is as important as the price, if not more. A bold statement I know, but in my business it’s true. We have done a huge study on usability and this will now be the key to our websites in the future.
I enjoy looking at some competitor websites (sometimes over engineered by IT departments and web designers with too much money and time on their hands).
There is no doubt that websites have moved on in the past three years, and we all need to reinvent ourselves regularly to just keep up, let alone stay ahead.
Some of the recent changes we see now as standard are adding value to the customer experience online, such as property videos, better maps, customer feedback, searching by attribute etc.
Good ideas, however, just get copied very quickly, so don’t think that new ‘gizmos’ will give you real competitive advantage for long. What will help more is your own stock allowing for increased margins, and differentiation.
This is our and the big boys’ strategy, as without it there would no real advantage online other than the brand, with the main distribution channel levelled, and possibly to the advantage of the smaller online player with lower fixed costs and uncommitted stock.
We are all seeking the holy grail of natural website visitors who love our site, are not too price sensitive, and find the brand name naturally, not via pay-per-click.
This is why the brand is so important, as potentially your cost of acquisition then drops by £25-£50 per person, and if your website works, they may not even look elsewhere.
Paul Evans is chief executive at LowCostBeds