TUI’s recent move to harmonise its approach to Flight pricing by making baggage an extra charge on its trade ATOL to ATOL flights shows how ingrained this particular “Bait and Hook” strategy has become in the travel sector, with every airline now playing the baggage game.
The moment I saw Flybe’s move in 2005 to start charging £2.00 per checked baggage, I just knew that this little game would catch on. However, I did not imagine the lengths that commercially focused airlines like Ryanair would take this to.
Looking at the Ryanair site, I can fly to Tenerife for a very reasonable £152 in August, but then I get hit with a £90 charge to check in a 20kg bag later in the booking process.
The average weight of a European suitcase is 70.8 kg – so how many bags equal a person? The answer is 3.5. If airlines simply charged by weight carried, the £90 bag charge equates to a seat charge of £316. So the maths cannot simply be justified, unless of course Ryanair are factoring in that they give a better customer service experience to the bags!!!
I admire many things about Ryanair’s commerciality and could just about live with the checked baggage charge, it if was not combined with a brutal approach to hand luggage. I don’t want to be made to feel like a petty criminal or smuggler when boarding. Do they really have to measure every bag with a cardboard slider, to see if it meets their ever-changing dimensions, and make you stand to one side if they don’t? The answer is clearly yes, when maximising short-term profits, but if it damages customer retention then in the longer term it has to be questioned.
Ironically, the very structure of the standard Dynamic Packaging site rewards Ryanair’s baggage pricing policy. The CAA vs. Travel Republic legal case enshrined the basket approach, where customers choose a flight based on price and flight times, before adding a hotel. However, it’s only after these choices are made that customers are hit with highly varying baggage charges depending on the airline selected. Hence, although the total price of a Ryanair Flight including baggage can be higher than that of a competitor, it is listed as cheaper and hence in effect the OTA’s are pushing customers to Ryanair. Combine this with the fact that Ryanair are actually often the cheapest airline and you start to explain the Dynamic Packaging sectors high level of Ryanair sales, even if Ryanair does hate us.
Baggage costs are so high, that I recently came close to investing in a new start up company called “Fetch my Luggage”. It’s actually cheaper for this company to pick up luggage from customers homes and deliver it to their hotel rooms using DHL’s land based services. I loved the idea of marketing the concept of “Speedy Travel” and cutting 3 hours off the average holiday journey time, since customers can whizz through both departure and arrival airports as they avoid baggage drop off and pick up.
However, a fatal flaw is that DHL do not allow flammable item such as deodorant and perfumes to be transported and how many of our lovely wives would agree to leave them behind! So it works, but not for the mass market in my opinion. However, if you want to send your golf clubs, Ski gear or promotional gear ahead, check them out.
More radically how long will it be before airlines start poaching each other’s customers’ luggage? Flights with Easyjet, but drop your baggage at the Jet2 counter who will deliver it to your hotel? Whacky, but an interesting idea!

It would appear that the major tour operators slowed the growth of Dynamic Packaging in January through to March by using two key early booking advantages.

Differentiated product (which is in demand and can only be bought from TUI or Thomas Cook), usually sells well in the early booking period boosting early sales. Given the big expansion of this product you would therefore expect the major’s early sales to be stronger, which they have duly delivered.
However, unless high load factors are achieved early on this differentiated product, it can quickly become a burden in the price sensitive lates market, since its high cost can cause heavy losses when sold as a perishable product close to departure.
The major’s ownership of in-house airlines, gives them the ability to offer customers a low deposit of £50, which for a family of 4 equates to £200 deposit per booking. Compare this to the £500 required for most Dynamic Packaging bookings and you can see why early booking customers may be willing to pay more or upgrade to a differentiated holiday, since the immediate cash outlay is a lot less.
In the current well-documented recession and reduced access to credit, it should not be surprising that the rampant growth of Dynamic Packaging has slowed a bit. However, the majors should not be complacent, since we have now entered the late booking market, where full balances are required on booking and traditionally customers become more price sensitive and willing to shop around for the best deals.
This year’s early Easter also means that we have 7 low demand weeks before we get to the May half term week, which will drive lates prices low and benefit the Dynamic Packaging retailers who love distressed flight seats to package up. Given the DP’s non-risk model, a tough lates market is not such a bad thing since input costs e.g. flights and hotels go through the floor with little damage to their margins.
Ironically the problem faced by most DP retailers is increased marketing costs as customers are finding it easier to shop around and are increasingly using mobile platforms, which due to the current poor user experience have an even lower conversion rate.
Online Travel Agents selling holidays will soon be faced with a stark choice.
Ignore mobile completely due to the cost of site modification and the low conversion levels, which obviously reduces traffic and risks becoming less relevant to the customer during all stages of their booking journey.
Or spending lots of money to acquire customers in the short term on a less cost effective basis, but secure your long-term market position when mobile matures.
It would appear that even in the OTA world, the majors are set to become bigger as the middle ground is squeezed hard.
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