Travel companies are reporting surging demand and a 30% increase in average prices for Summer 22 sales. The dam of pent-up holiday demand has clearly broken and its vital that travel companies hold these higher prices, rather than chase volume and compete them away.

 Customers are clearly upgrading their holidays using “Covid Savings” and spending more after a long absence of holidays from their lives.

 Fortunately, this results in better quality hotels and “safer” destinations being selected, with Spain bouncing back much faster than value destinations like Turkey. This is good news as I expect much higher complaint levels, from the “cheaper” end of the hotel market, which has seen zero investment over the last 2 years and will be even more tired.

 Covid-19 disruption could reappear from nowhere as we saw with the Omicron Variant, so expectation as to what is an acceptable margin needs to increase for both retailers and tour operators alike.

 The best insurance policy a holidaymaker can take is using the expertise of travel agents to find suppliers with flexible covid terms and/or booking an Atol bonded package where the operator is taking responsibility for all disruption. This has value and must come at a cost, so agents just need to look the customer in the eye and say, “No discount”.

 OTA’s may not be able to look the customer in the eye, but customer “intent” can still be read from how they progress through a site and used to yield prices to maximise returns.

 Travel does not have “Magic Circle” rules banning its members from revealing its yield tricks, so here are my top 10 favourites.

 1. Price by source of traffic.

Customers naively believe that the price they see on a website is the price everybody sees. This is not the case with modern websites, which cache basic prices and then overlay different markup levels depending on the source of traffic. The OTA then cookies the individual computer to maintain these prices if the customer then returns from a different source to make these games invisible to the individual unless they change device.

o  Price comparison sites. A few pence make a difference in the display order here and so OTA’s apply their lowest markups. However, as soon as customers move away from the selected hotel they have clicked through to, margins jump back up on alternate hotels. If the customer adds flights these also carry a higher-than-normal margin as the OTA seeks to regain the reduced margin needed to attract clients from price comparison sites.

o  Hotel name on google. Less competitive than price comparisons, but margins are lower than if the customers enter the site at a destination level, as they are deemed to be closer to booking and more price-sensitive having done extensive research.

o  Destination level. Here the OTA boosts margins via “Merchandising” best-selling hotels to the top of the search results, controlling what is sold to a greater degree.

 2. Lead Flight prices.

Flight prices are much easier for customers to cross-check than 100’s of individual hotels. Lead flight prices set customers impression of price competitiveness and carry the lowest markup, however, these flights tend to have the worst flight times and customers often chose better flight times, so monitoring clicks and applying higher margins to these popular flights is vital.

 3. 60% off messages.

UK trading standards rules state that prices must have been valid for 30 days ahead of the start of any discounts and must apply to a “reasonable” volume of holidays. To create headline discount messages OTA’s simply raised prices on hotels they don’t often sell by 60% for 30 days and then discount them, allowing headline-grabbing messages, that drive the sales of better selling hotels where the price has never moved.

 4. Split flights.

Combining an outbound flight from one airline with an inbound from another is key in keeping OTA’s competitive against low-cost carriers in house tour operations like Jet2. It gives the OTA a better range of flight times and allows them to break the yield management of airlines, who know that 80% plus of customers choose 7night durations and apply a higher flight markup to these combinations via higher inbound flight pricing.

 5. Buying inbound flights in Euros.

UK based low-cost carriers’ price in sterling and convert to Euros, apply 2-3% currency buffer. It is often £3-4 cheaper per flight for OTA’s to buy seats on the airline’s euro site and combine them with sterling outbounds.

 6. Admin fees on deferred payment schemes.

Most OTA’s prices are based on paying a deposit and balance 4 weeks before departure on booking. However, many now offer monthly payment options that attract “admin fees” of £2.50 per payment, that are cleverly hidden and often remain unnoticed by customers but boost booking markings by £15.00 per booking. The key here is that this extra £15 never appears in the lead advertised price on the site and it sometimes allows OTA’s to cut margins even further based on the percentage of customers taking these schemes.

 7. Repeat visits/booking.

Ryanair over 10 years ago started dropping cookies on customers computers that added £10 to flight prices if the customer repeated a search within 24 hours, as this indicated strong purchasing intent. Few customers ever noticed, but even today I still search on a laptop but book on a phone to stop airlines playing this game.

Insurance companies have been banned by “treating customers fairly” FSA rules, from charging loyal customers more than new customers. Interestingly these rules do not apply to travel yet and many OTA’s apply higher margins if customers are entering their site from email marketing to previous customers, as these are deemed more likely to book having booked previously with the brand.

  8. Misleading competitor price checks.

Bed banks and hotel only OTA’s, deploy considerable resources to scanning competitor prices to adjust their own margins to fractionally undercut them, in a penny matters XML supply marketplace.

Historically, these price checks tended to be overnight scans and could be “cheated” by reducing price for the peak evening booking period between 6 pm-9 pm and then reverting to higher prices at night when scanning occurred. Monitoring usage activity by account login to look for tell-tale signs of scanning, also allowed competitors scanners to be “fed” false higher prices, but these needed to be randomised by hotel to avoid detection by manual checks.

Both have now been stopped by countermeasures, but it remains a game of chess, but with big volume gains if you can successfully fool competitors’ price scanners.

 9.  Ignoring competitor prices

The most profitable UK OTA completely ignores competitor pricing and focuses purely on its own conversion levels.

When the conversion levels drop for a destination below the site’s historical average, this is deemed to indicate that its prices are uncompetitive, and margins overall are reduced. This sounds extremely simple but is operated at a micro-level, with adjustments by flight route, destination, resort, hotel, and date range being constantly made. Pricing your customer pipe “live” using click intent is the closest any OTA has got to looking a customer in the eye and knowing what they will pay.

 10. Ancillary sales.

It amazes me and frustrates me as an investor in the CannyApp FX product how little focus travel agents or OTA’s put on upselling their customers with ancillaries such as Foreign Exchange, where they can earn an Extra £35 per customer or other lower margin extras such as car parking, car hire, lounges, or fast pass security/customers vouchers. Having, already covered their marketing costs with the core holiday sale the profit, from sales of these items falls straight to the bottom line and in a marketplace where margins are always under pressure, they must be the future.

 As an industry, we have a once in a lifetime chance to reset the bar or what is acceptable margin for our labour, so let’s please take it.

Visiting Cuba this week was a massive reminder of how important Tourism can be to many holiday destinations.

 Cuba is clearly on the brink of economic oblivion.

 The Trump administration back in June 2019, cut the lifeline of American Cruise lines depositing 6,000 trophy hunting Americans, that had been banned from visiting Cuban for 50 years, on its shores each day. Nobody in Cuba understands why their communist ethos, suddenly became unacceptable to the USA again or what would need to occur to earn a reprieve.

 As with many Cruise ship destinations, some locals regarded Cruise tourists as low value “ice-cream” eaters, who did not stay in local hotels and returned to the giant cruise ships each night to eat their meals. Crucially, however, the cruise tourist kept local clothes retailers and supermarkets well stocked, with the hard currencies they spent, used to fund Cuban food imports, given few people outside Cuba will accept the currency.

 Remove the Cruise customers and three years later virtually every cloth shop and tourist venue in Havana has closed making it a shopping ghost town, with few places to eat and drink. The lack of hard currency to buy imports is also causing major food shortages, with locals having to queue 6 hours a day to just secure the basics required for living.

 Although Cuba still feels relatively safe, it’s clearly teetering on the edge and its uncomfortable for well feed tourists to be constantly passing long queues of locals gathered outside every open shop in town. What was a must-do 2–3-day visit to Havana has now shrunk to a 1-day culture vulture tour, for some of the UK tourists visiting the beaches of Varadero.

 The lack of hard currency has also left an uncomfortable situation for tourists, where the back market exchange rate for the Cuban Peso is 120:1 pound, but the official tourism rate set by the Government is 30:1. So exchanging paper money gives 4 times the power of using a credit or debit card. So for once, my CannyApp FX card was left in the wallet as even I could not “Canny it” and save money.

 Not surprisingly, the biggest money local earner is exchanging tourist money. The first thing the Tui rep focused on during the inbound coach trip to the resort was getting their newly arrived guest to change £20 each into Pesos at a 1:60 rate. Potentially a good deal for the tourist compared to hotel prices, but clearly a better deal for the rep.

 This same sense of constant manipulation follows tourists everywhere in Cuba, with only the brave being willing to exchange cash on the streets and most looking for trusted intermeddles which are few and far between, as even most respectable Cubans are looking to grab as much hard currencies as possible ahead of an imminent economic collapse, they all seem to be expecting.

 Our Tui Dream liner was completely full of happy inbound tourists, and many will have had great holidays in Varadero having not left their All-Inclusive complex’s but is this sustainable or responsible tourism?

 The hard currency they deliver to the Cuban economy is vital to its economic survival, but questions remain over how long this can continue, as the average occupancy hotel is 12% or lower, making staffing and maintenance of hotels a real challenge.

 The impact of the Covid-19 shut down is everywhere, with even supposedly 5-star hotels looking tired and in need of repair, reducing them to 3-star equivalents. Unfortunately, as the tourism world emerges from Covid-19, I’d expect the same situation to exist in numerous previously popular destinations, such as Egypt, Gambia, and Morocco to name a few, which brings into question exactly how we define responsible tourism.

 Personally, I think it’s vital that we support countries like Cuba and help them through their crisis, but this will require travel businesses to remove the rose-tinted photos from websites and fully educate their customers on what they can expect for their hard-earned holiday money. It clearly goes further in places like Cuba but comes with some caveats.

 Customers also need to take a hard look at review sites, since average hotel scores, including pre-covid ratings, may often be misleading about the current situation. Even travel powerhouses like Spain are finding it difficult to persuade their population to return to hospitality jobs, making maintaining service levels hard as tourism returns. The travel agent “knowledge” network has never been more important to recommend the right destinations to customers.

 The future of travel is clearly bright again, but we will be faced by many new obstacles as travel re-emerges with short-term travel likely to be dominated by those destinations who can get their infrastructure working normally the quickest.

 In my opinion, this is likely to be Spain, Greece and potentially Turkey although it also has its own economic challenges.

 I love to travel but maybe more cautious in my choices for a while.