There will be winners and losers as the result of this year’s ‘deposit war’ that has seen OTAs offering consumers low upfront booking payments to secure deals for the first time.
As Travolution’s sister title Travel Weekly reported in January, new short-term financing with lenders has enabled OTAs to start offering deposit holiday deals from as low as £49 per person this year.
But Barclays head of travel, Chris Lee, said this has seen OTAs forced to seek borrowing for the first time in their existence while they cannot be sure what level of cancellations they will get.
Speaking ahead of today’s 11th annual Barclays Travel Forum, Lee said: “One interesting aspect of this year’s market will be the deposit war, where OTAs are not just competing on price, but on how low they can get their deposits.
“OTAs traditionally did not need to borrow any money because they were paid in advance. A number of online agents who never needed to approach banks for lending now do.
“The question is if [as a customer] you are paying a very low deposit are you more likely to cancel the holiday. There will be winners and losers.”
OTA deposit deals have allowed them to compete head on with operators who have traditionally always taken deposits.
This is particularly important in the family holiday sector where early bookings this year have been essential due to the popularity of destinations like Spain that are considered safe.
The OTAs are being cautious with their deposits, however, not offering them for certain destinations like Turkey about which there are security concerns.
Lee said without the security threat the travel sector would be having a “brilliant year” in 2016. “The market is strong,” he said. “We see a lot of fundamental optimism.”