The name Lowcost has been synonymous with the rise of dynamic packaging since it was set up in 2004. Founder and chief executive Paul Evans assesses what its story says about how the travel industry has evolved. By Lee Hayhurst.
When Lowcostbeds.com was born the budget flying revolution was in full swing, apparently testing the traditional holiday booking model to destruction.
Travel had its ‘big four’, but after a difficult 2003, during which MyTravel announced an unprecedented second-half loss, there were predictions one was poised to fail.
The companies that had been established in the first dot‑com boom and had survived were recording what Travel Weekly reported at the time as “astounding growth”.
Civil Aviation Authority figures in 2004 revealed the overall size of the market was unchanged at 31 million passengers, but that the share enjoyed by the major operators was dwindling.
After that year’s September Atol renewal it was reported that the big four held a 48% share, down from 52% the previous year and well down on the peak of 57% in 2000.
And lastminute.com had just entered the top 10 Atol-holders, leapfrogging Expedia, which had broken into it the previous January.
It was into this fast-changing market that Lowcostbeds launched as a business-to-business bed bank supplier, later also becoming online travel agent Lowcostholidays.
At about the same time, rival Medhotels was established; it was destined for a starkly contrasting future that would see it first bought by lastminute.com before being sold to Thomas Cook.
Lowcost founder Paul Evans, at the time a self-confessed cog in the corporate wheel based on his time at MyTravel and First Choice, recalls how archaic the industry was.
“People used to communicate with text. There was no email and you had telex overseas,” he recalls.
“Reservations used to be printed on paper, and company mail boxes would arrive on the carousel at Gatwick. That was how the large guys were working.”
The advance of technology has allowed new entrants not weighed down by legacy systems to steal a march on established rivals whose best days were said to be behind them.
Empowering the customer
But Evans says there was something more fundamental going on than just the changing of the corporate guard.
“What Lowcost is all about, and I repeat this to my team all the time, is putting the customer in control.
“It’s about being neutral, offering two to five-star properties and letting the customer choose the dates, departure airport and be totally flexible. Really it’s about independence.”
This is why Evans says he has pictures of the Statue of Liberty and Che Guevara on his office wall – not obvious bedfellows.
It’s an attitude that has brought him into conflict with powers that be, particularly in 2013 when he relocated Lowcostholidays to Palma, Majorca, and left the Atol scheme.
“I’m not very keen on being told what to do,” explains Evans. “I believe the UK is over-regulated, with too large an influence from regulators, stemming creativity.”
The empowering of the customer – Expedia’s turning around of the travel agent screen – was despised as much as it was feared by traditional agents who felt their USP was gone.
What many regarded as job‑jeopardising technology has also served to empower suppliers and their move to sell direct and cut out the middleman.
Independence for all
However, Evans says this technological pincer movement is not a threat. He is optimistic about the prospects for firms, like his, that sit between the supplier and the consumer, supplying others in the same position.
“The really interesting thing is we talk about the consumer being independent, but it’s actually the supplier becoming independent as well and taking control of their distribution,” he says.
“It’s no longer the man from Del Monte turning up and telling the supplier this is how it will be.”
Evans says that while more than 50% of traffic to the company’s consumer sites come from mobile and tablet, the march of technology has not progressed as quickly as many predicted over the last decade due to the complexity in areas such as scheduled flying.
So this bodes well for firms that cut through this complexity by providing customers with a great place to shop while helping suppliers constantly yield-manage rates and capacity.
But Evans says new digital channels to market have not broken older tried-and-tested strategies and, in fact, the big web-based newcomers never over‑relied on those.
While there was once significant first-mover advantage exploiting Google to access online customers, even 10 years ago the likes of Expedia understood the value of branding.
Evans’ various stunts and advertising campaigns have sought to emulate this for Lowcost – the favourable cost of customer acquisition, as people become loyal to brand, the prize.
Lowcost’s development over the past decade is analogous to the way the budget airlines, which spawned the dynamic packaging revolution, have evolved, says Evans.
“Lowcost originally was closer to Ryanair – offer a low upfront price and then upsell and cross-sell.
“Ten years ago I modelled myself on Ryanair: we did not have PAs, we did not have business cards, we ruthlessly took costs out.
“That was a fundamental driver to keep costs of sale down, but over time people have come to know we are Lowcost – now I don’t have to tell people we offer value.
“We sell more four and five-star accommodation than anything else. Smart people have worked it out – it is easier, with such a huge range, to be neutral, and deliver exactly what we say.
“People seemed to have actually worked it out that this is a smart place to book your holiday – but over time we have probably become closer to easyJet.”
A decade of change
Although over the past 10 years the UK has lost 3,000 travel agency businesses, Evans admits to being amazed at how resilient the sector has been, particularly in overseas markets.
He admits tough competition in the UK, and the market’s relatively homogenised, organised nature and small size geographically, has seen new ways of trading quickly assimilated.
But still the trade remains an important part of Lowcost’s drive to become a £1 billion accommodation business. Today, Lowcost offers the trade more hotels (239,000) than ever before, with total transaction value on accommodation-only this year at €700 million.
“Certain organisations are incredibly efficient at lowering cost of sale, such as Booking.com and Ryanair. They are businesses for their shareholders.
“You have to build scale or build a niche. What we are trying to do is build scale. I’m in the billion‑pound business, make no mistake. I’ve always worked with scale. It’s not an ego thing; I don’t know how to do niche – it’s just not in my psyche.”