Bedbank consolidation has changed the landscape

Consolidation finally came to the bedbank sector last week week and in one fell swoop the sector has reached maturity, with a dominant market leader and a small number of large secondary players.

The logic behind Thomas Cooks’ move is compelling as they now have market leadership in the sector with passenger volumes of around 1.5 million and a market share in excess of 40%.

This will enable them to lead the end of the current price war with every 1% price increase dropping a whopping £2.5 million to the bottom line.

This combined with substantial overhead savings from a merged business will soon repay the purchase price.

The deal dramatically changes the landscape of the independent retail sector, which has grown rapidly on the back of independent bed banks fuelling their dynamic packaging engines.

When you add in the TUI Travel-owned HotelBeds 10% market share the traditional integrated tour operators now control 50% of the bedbank sector and have a much greater control over the threat posed by dynamic packaging to their core tour operating business – although the move is, in reality, a recognition that the sector is set to continue to grow and they should be strongly represented.

I was surprised by some comments last week that independent agents will switch away from the combined group just because it is now owned by Thomas Cook.

I simply do not buy this and believe the bedbank battle will continue to be based on the right price, product quality and service level – and none of us should take increased support for granted.

However, the majors’ dominance poses some serious problems for the independent player they supply.

Two years ago all the major bedbanks were primarily trade-only businesses with small consumer direct divisions.

However, fast forward to 2009 and 50% of stock is available directly to customers via thomascook.com or in HotelBeds case, Easyjet Holidays.

These are obviously direct competitors and major threats to the continued growth and health of the independent online players that the bedbanks divisions supply stock to.

A reliance on a major competitor for both flight seats and beds also puts a rather large cloud over any exit value for the likes of TravelRepublic or OnTheBeach, since would you spend millions on a business that a competitor could make uncompetitive at the stoke of a pricing adjustment?

Therefore the acquisition of MedHotels could look like strategic genius if it allowed the majors to also gobble up successful dynamic packaging retailers at discounted prices.


Steve Endacott is chief executive of On Holiday Group

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