Recent Phocus Wire research showed that the top 4 global travel brands spent an astounding $16.8 billion in 2023 on sales and marketing, up 20% from 2022. An estimated 70% of this, or $11.8, was handed over to Google in the form of search advertising.

The Monopolies and Mergers Commission would swiftly initiate an investigation if a merger proposal arose among major low-cost carriers or if an acquisition attempt was made on an Online Travel Agency (OTA) such as On the Beach or Love Holidays. However, they ignore entirely Google’s dominant market position, which holds 93.5% of the UK’s online search market share.

How can one business be allowed such a dominant position, with virtually total control over how UK customers access online holidays? Particularly when Google does not even pay a fair level of UK tax, siphoning off its UK profits to a lower-tax Southern Ireland office.

However, a quick review of the table below highlights how Airbnb is bucking this trend.

Airbnb is proud that it spends relatively little on Google marketing and drives 90% of traffic on a non-paid basis directly to its website.

It helps that they have such a clearly defined product proposition and loyal repeat booking customer base, but they also focus heavily on creative social media and PR stunts, such as collaborating with Martell to turn a Malibu mansion into the “Malibu Barbie Dream House” listing on Airbnb. This alone generated millions of site visits.

Airbnb is also investing heavily in influencer marketing, providing tools to its owners to carry out their own marketing, and driving app usage by ensuring that all communication with the host goes through this channel.

In the UK, On the Beach (OTB) still spends 51% of its revenues on marketing, but unlike direct competitors Love Holidays, it is spending increasing amounts on “Above the Line” on TV and Radio to create brand awareness and drive more direct traffic. The benefits of this brand building may take years to develop, and Love Holidays has rapidly caught OTB in terms of turnover and exceeding its profit performance in 2022.

Love Holidays’ recent accounts to October 31st, 2022, showed a turnover of £ 1.35 billion, just behind OTB £1.44 billion but with an impressive EBITDA of £36.3m. Clearly, their excellent technology is driving conversion and customer retention levels that allow them to pay high Google acquisition costs and scale rapidly, making Google an effective traffic source.

If you’re not one of the major players, reliance on Google is probably a deferred death sentence waiting to happen. So, what alternatives are emerging?

1. Perplexity Search. Playing with this tool by visiting www.perplexity.ai/ will demonstrate how quickly it delivers “answers” and should move you away from Google search. Although the tool has 10 million uses across Asia, India, and the USA and is valued at $520m, it’s relatively new to the UK, having only launched in August 2022.

Why would the customer continue to spend 24 hours researching and clicking on 50 Google links when they can get an answer in an instant from Perplexity or ChatGPT? As my recent blog outlined, Open AI’s CEO Sam Altman is opposed to advertising, which he believes will add “bias” to results. He prefers to offer a premium subscription model, and this is indeed the model Perplexity operates.

However, history has shown us that although new online tools initially shun advertising during their user growth period, it always creeps in. In the meantime, travel SEO plays like little-known www.cheekytrip.com/ , is ranking well and harvesting lots of free traffic.

2. Database Marketing. Most users now ignore millions of emails, with opening rates and click-throughs for travel emails falling rapidly. However, new AI technology offers a potential solution for re-invigorating this approach.

Customers can now be emailed a link to an AI Travel Agent such as Emily www.neural-voice.ai/characters/emily/, who can have a conversation informed by their previous travels to establish their requirements for this year’s trip. The conversation is automatically transcribed, summarised, and posted into the business CRM to contextualise future advertising or for the lead to be followed up with online booking links or a call from a human agent to close the sale.

3. Influencers. If you are not an Instagram user, you will not comprehend the power that influencers can yield over the “Dream Stage” of a holiday. This medium is compelling for tourist boards and upmarket hotels and is increasingly becoming a proven traffic generator. Recruiting your own team of influencers or working with influence aggregators like Trending Travel www.trendingtravel.co.uk/ should be considered.

4. Homeworkers. This is the ultimate low-cost route to market, with localised marketing via sports clubs and businesses supported by targeted social media activity controlled by the homeworker who understands their local market dynamics. However, companies like Travel Solutions Network www.travelsolutionsnetwork.co.uk/ are now offering business access to “Virtual Call centres staffed by commission-only homeworkers, to offer high converting “Human agents” to complement their online booking path. Research has shown that showing that a business is “Contactable” in the case issues emerge increases “online conversion”, making the phone bookings 100% incremental, even after booking route substitution.

As Love Holidays has proven, Google search as a customer acquisition route can still work if you have great technology that converts these leads. However, for the rest of us, it’s probably time to focus on exploring some of the new routes to market listed.

As a child, I often kept score at the Darts Board for the adults, which considerably sharpened my mental arithmetic and may have led to my early career as an accountant. However, the advent of hand-held calculators and spreadsheets made these skills semi-redundant so that I would now avoid the darts chalkboard like the plague.

Does this make me less intelligent?

Today, we have numerous examples of where technology has killed the use of elements of our brain, ranging from day-to-day Navigation (Who doesn’t use their phone) to the ability to follow a set of instructions without a supporting YouTube “How to video”.

Again, does this make us less intelligent or more productive because we have co-pilots that make us more efficient?

The advent of the internet has had a massively positive impact on our efficiency and day-to-day lives, but it has also made us lazier.

Why bother walking around high-street shops when you can pop online, read reviews, choose items, have them delivered, and send them back if they don’t suit you?

In the same way, why not use previous online baskets to repeat supermarket orders delivered to your doorstep?

However, the critical question is, what are people doing with the extra time created?

The good news is that many use it to get fitter by riding bikes, going on long hikes, or enjoying team sports; however, just as many use it to spend more time on social media, gaming, or watching on-demand TV often making them unfit “couch potatoes”.

In a recent interview, Sam Altman, CEO of Open AI, said that ChatGPT should be viewed as announcing what is coming rather than the start of the AI Revolution.  He believes the start will occur within the next ten years, when AI enables scientists to produce 1,000s of new cures for human diseases, considerably lengthening life expectancy.

Science has long proven that Humans use only a fraction of their brains, which gives me hope that AI will be a co-pilot that will make many humans much more intelligent and able to make significant scientific breakthroughs that will benefit us all.

The race for AGI or “Artificial General Intelligence” concerns me more. AGI is when artificial intelligence encompasses the ability to understand, learn, and apply knowledge in a way that is not limited to a specific task, domain, or discipline”. In other words, machines are capable of independent thought.

Sorry, but why would a computer that is smarter than a human need a human as a Co-pilot?

If AI and robotics replace relatively dull human labour in factories and call centres, it might not be such a bad thing, but AGI will replace lawyers, accountants and doctors, the realm of our most intelligent humans.

The significant danger is that 80% of humans will have less work stimulating their brains and multiple tools to make their daily lives easier. Therefore, their intelligence is likely to decline and not increase.

Conversely, the 20% of humans who increase their intelligence will likely become a “Super Wealthy Elite”, creating even bigger gaps between rich and poor increases, causing social unrest.

How we manage the implementation of AI and AGI will ultimately determine the future of the human race, and the debate needs to start now.

What do you think?

Alphabet, Google’s owner, will never disappear from our lives as it has the power and wealth to “buy” the next internet sensation or solution, as it did with YouTube. But are we about to see a seismic shift away from Google’s 95% dominance over internet search?

For a generation, Google has held a monopoly over travel searches. However, this dominance comes at the cost of a relatively poor customer experience. Research reveals a staggering truth: the average customer is forced to visit 48 travel sites and invest a whopping 26 hours in research before finally booking a holiday. Imagine the frustration level out there!

Google’s search services are monetised through a “Cost per Click” (CPC) or CPA model. The more clicks it generates, the higher its profits. But have you ever noticed that the longer the search you type into Google, the less likely you are to find the result you want?

Google encourages shorter search terms and returns pages of links for customers to click on to research further to find the answers they need to take the “Action” they require, e.g. booking a holiday. These results are further distorted by “paid bias”, with advertisers bidding to be placed in the most prominent positions.

Commercialisation has become so bad that 28% of the UK population actively uses Adblockers, which, for Google searches, may indicate a desire to get the right answer quicker.

Large Language models (LLMs) are exploding in popularity as they appear to offer a much faster route to the “right” answer.

LLMs are trained on the entire knowledge of the internet and are much better positioned to interpret long and complex enquiries by focusing on the “intent” of the keywords used to reach a better understanding of the customer’s question.

They also allow a query to be “built” by considering what the user has said previously in the same query stream, allowing customers to refine their requirements based on the results returned at each stage.

This has allowed Neural Voice, one of my AI start-ups, to create a “Voice” overlay where customers can talk to an AI character, in a conversational format to discuss options for where they want to go on holiday next year (Dream Stage). Check it out; the sophistication of the tech, even at this early stage, will amaze you https://www.neural-voice.ai/

Links to Emily, our AI agent, can then be emailed out to previous bookers to qualify their requirements for their next holiday, with a summary and transcript automatically passed to the customer’s CRM to influence further marketing or for follow-up by a human agent.

LLMs and voice interaction promise to offer a much better customer experience, allowing them to find the information they need for “action” much faster. This could quickly erode Google search volumes while providing a new route to market for the travel business. However, the model is radically different, and the LLM’s commercial model will quickly evolve.

Here are a few things for travel businesses to start thinking about:

Commercial model.

Like most people, I am currently happy to pay my $20 monthly licence fee to use ChatGPT. However, this subscription revenue will quickly get eroded by competition from other LLMs, and inevitably, these models will seek to add transactional revenues.

However, adding bias to direct customers to partners paying higher advertising fees, in the same way, Google does, would be diametrically opposed to the ethos of providing the best answers without bias and would create a clunky endpoint.

I personally think LLMs will follow the Amazon model.

Amazon is, in effect, a massive “retail” search engine, where the customer chooses from a huge range of suppliers’ products but transacts with and pays Amazon. Travel comparison sites like Trivago have also evolved to transact this way as it increased conversions by removing friction created when customers clicked out to partner sites.

So, if LLM delivers an “end-to-end” booking service, what are the other knock-on impacts?

Will SEO and quality of content matter in the longer term?

Many travel businesses are rushing to use AI technology to create new SEO content, to drive them up the SEO rankings. However, although some LLMs integrate with Google content, most models are based on online data-rich sites like Wikipedia rather than individual website pages, making them inaccessible via traditional SEO optimisation.  Getting LLMs to prefer your travel products will be a key battle, but it’s very unclear how this will be done yet.

Secondly, if LLMs are transactional, they will likely use their content database and differentiate between suppliers based on price rather than content quality.

Creating and protecting travel “brands”.

The large airline-owned tour operations of Easyjet and Jet2 holidays have natural protection in that customers travel on branded flights and are serviced by branded ground staff delivering in-resort services.

However, OTAs like Love Holidays and On the Beach’s main role is to provide a wide range of products and a simple booking process. What is their added value if the LLMs replace this booking process?

Obviously, there is an opportunity for these brands to use LLM technology to become the next Amazon of travel, but this does seem like a big ask and although not all travel traffic will flow through LLMs, it does seem like these players could be long-term losers.

Google Search, like the Dinosaurs of yesteryear, may quickly become extinct, but what replaces it and how the travel industry integrates into this new search model is far from clear.

However, the more dependent your business is on Google search traffic today the faster you need to act.

Alphabet, Google’s owner, will never disappear from our lives as it has the power and wealth to “buy” the next internet sensation or solution, as it did with YouTube. But are we about to see a seismic shift away from Google’s 95% dominance over internet search?

For a generation, Google has held a monopoly over travel searches. However, this dominance comes at the cost of a relatively poor customer experience. Research reveals a staggering truth: the average customer is forced to visit 48 travel sites and invest a whopping 26 hours in research before finally booking a holiday. Imagine the frustration level out there!

Google’s search services are monetised through a “Cost per Click” (CPC) or CPA model. The more clicks it generates, the higher its profits. But have you ever noticed that the longer the search you type into Google, the less likely you are to find the result you want?

Google encourages shorter search terms and returns pages of links for customers to click on to research further to find the answers they need to take the “Action” they require, e.g. booking a holiday. These results are further distorted by “paid bias”, with advertisers bidding to be placed in the most prominent positions.

Commercialisation has become so bad that 28% of the UK population actively uses Adblockers, which, for Google searches, may indicate a desire to get the right answer quicker.

Large Language models (LLMs) are exploding in popularity as they appear to offer a much faster route to the “right” answer.

LLMs are trained on the entire knowledge of the internet and are much better positioned to interpret long and complex enquiries by focusing on the “intent” of the keywords used to reach a better understanding of the customer’s question.

They also allow a query to be “built” by considering what the user has said previously in the same query stream, allowing customers to refine their requirements based on the results returned at each stage.

This has allowed Neural Voice, one of my AI start-ups, to create a “Voice” overlay where customers can talk to an AI character, in a conversational format to discuss options for where they want to go on holiday next year (Dream Stage). Check it out; the sophistication of the tech, even at this early stage, will amaze you https://www.neural-voice.ai/

Links to Emily, our AI agent, can then be emailed out to previous bookers to qualify their requirements for their next holiday, with a summary and transcript automatically passed to the customer’s CRM to influence further marketing or for follow-up by a human agent.

LLMs and voice interaction promise to offer a much better customer experience, allowing them to find the information they need for “action” much faster. This could quickly erode Google search volumes while providing a new route to market for the travel business. However, the model is radically different, and the LLM’s commercial model will quickly evolve.

Here are a few things for travel businesses to start thinking about:

Commercial model.

Like most people, I am currently happy to pay my $20 monthly licence fee to use ChatGPT. However, this subscription revenue will quickly get eroded by competition from other LLMs, and inevitably, these models will seek to add transactional revenues.

However, adding bias to direct customers to partners paying higher advertising fees, in the same way, Google does, would be diametrically opposed to the ethos of providing the best answers without bias and would create a clunky endpoint.

I personally think LLMs will follow the Amazon model.

Amazon is, in effect, a massive “retail” search engine, where the customer chooses from a huge range of suppliers’ products but transacts with and pays Amazon. Travel comparison sites like Trivago have also evolved to transact this way as it increased conversions by removing friction created when customers clicked out to partner sites.

So, if LLM delivers an “end-to-end” booking service, what are the other knock-on impacts?

Will SEO and quality of content matter in the longer term?

Many travel businesses are rushing to use AI technology to create new SEO content, to drive them up the SEO rankings. However, although some LLMs integrate with Google content, most models are based on online data-rich sites like Wikipedia rather than individual website pages, making them inaccessible via traditional SEO optimisation.  Getting LLMs to prefer your travel products will be a key battle, but it’s very unclear how this will be done yet.

Secondly, if LLMs are transactional, they will likely use their content database and differentiate between suppliers based on price rather than content quality.

Creating and protecting travel “brands”.

The large airline-owned tour operations of Easyjet and Jet2 holidays have natural protection in that customers travel on branded flights and are serviced by branded ground staff delivering in-resort services.

However, OTAs like Love Holidays and On the Beach’s main role is to provide a wide range of products and a simple booking process. What is their added value if the LLMs replace this booking process?

Obviously, there is an opportunity for these brands to use LLM technology to become the next Amazon of travel, but this does seem like a big ask and although not all travel traffic will flow through LLMs, it does seem like these players could be long-term losers.

Google Search, like the Dinosaurs of yesteryear, may quickly become extinct, but what replaces it and how the travel industry integrates into this new search model is far from clear.

However, the more dependent your business is on Google search traffic today the faster you need to act.

Ryanair’s recent shift in perspective, from being anti-OTA, a stance they often referred to as battling ‘Pirates,’ to now viewing OTAs as strategic distribution partners, has pleasantly surprised many in the travel industry.

Love Holidays deserves recognition for being the trailblazer in bringing Ryanair to the table. However, the initial deal, with variable booking fees of between £30-50 per couple, seemed steep and posed a potential price disadvantage against other OTAs, such as On the Beach (OTB), if they continued to ‘screen scrape’ and avoid these fees. Strategically, Love needed the deal to prove to potential new investors that they had long-term access to cheap flight seats departing the UK, which is the lifeblood of their business.

On the Beach then entered negotiations and would appear to have improved the terms of the deal.

On the Beach’s site boldly tells customers that their Ryanair flight prices now include pre-booked seats with Ryanair and, at the same time, having monitored Love’s Ryanair prices since January, in March, Ryanair’s extra fees on the Love site suddenly changed to a fixed £32.00 return per couple or £8.00 per flight sector to match those on the On the Beach site.

Connecting these two pieces of information, it is now clear that Ryanair is not charging an API fee but is making it compulsory for people booking holidays to pre-book their seats at a fixed cost of £8.00 per flight, which is probably the average pre-booked seat price across their network.

This compulsory addition seems odd for a business that prides itself on breaking down the price to create the cheapest possible lead price and then charging separately for extras, as it makes their prices appear less competitive. However, suppose you had not planned for a massive increase in third-party trade distribution. In that case, it is unlikely that your third-party APIs would be geared up for complexities such as allowing customers to choose and pre-book individual seats.

I would expect Ryanair to resolve this over the next few months, allowing them to return to supplying stripped-down prices with no booking fees that will dominate the OTA’s search results. This will boost volumes further and put pressure on EasyJet and Jet2.com to consider the size of their API fees.

EasyJet currently charges around £6.00 per sector or £24 per couple, while Jet2.com takes a much more tactical approach, charging zero fees on weaker selling routes.

As I said when the deal was announced, “On the Beach are no mugs,” but their Ryanair deal looks better by the day because it not only delivers a guaranteed supply of cheap seats but also puts pressure on other low-cost airlines to become more OTA-friendly.

The deal will also remove a massive element of back-office cost because OTB will no longer have to hide from Ryanair using virtual credit cards, roving IP addresses, and doing lots of manual work to notify customers of Ryanair schedule changes and cancellations. I’d estimate this cost saving will run into the millions and could lead to a substantial profit boost.

The “Ryanair War on OTA’s” is over, and the only question is, why did it take so long?  

Nobody outside of Ryanair’s inner circle will ever know, but ironically, the change of heart seems to have stemmed from Ryanair’s success in the Irish courts in declaring the “screen scraping” of their flights illegal. Although technically unenforceable in other source markets, this emboldened them to massively tighten up all their tools to stop OTA sales in November 2023, including the highly contentious extra facial recognition steps for “illegal” OTA customers.

This suddenly closed all their OTA distribution and forced Ryanair to announce to the city that this was impacting their load factors by 1-2% and reducing average flight prices. It does not take a genius to guess that the city might have asked, “What on earth are you doing?”

We will never know the answer, but the attitude reversal has been dramatic. Now that all parties see the benefits of working together, it’s hard to see why this would ever reverse for packaging OTAs’, but I am far less convinced Ryanair will embrace flight-focused OTAs as they have never liked direct pricing comparisons and will question their added value over customers booking on their own website.

For homeworkers and high street agents, dynamic packaging fell out of favour during COVID-19 because of the heavy administration burden caused by flight disruption. Many agents preferred to take lower margins but less hassle from selling third-party bonded agents. Still, it will be interesting to see what impact a trade-friendly Ryanair could have on reviving this market if, as expected, Ryanair look for further trade deals on the back of its early success with OTAs.

We may never like Ryanair, but a peaceful coexistence offers many upsides and will increase price competition for the benefit of all holidaymakers.

The War is over and long may it remain that way.

In recent blogs, I have looked at the strategic options of some of the UK’s largest travel companies, and it would be remiss not to comment on Jet2holidays, the UK’s most successful tour operator, over the last ten years.

I was involved in the set-up of Jet2holidays in 2007, having pitched Philip Meeson, the CEO and owner of Jet2.com, the opportunity to leverage its strong northern branding to step into the gap left when Thomas Cooks dismantled the  MyTravel / Airtours operation in the North of England, as part of the supposed “Merger” between the two business.

On Holiday Group business initially provided the booking platform and hotel purchasing for Jet2holidays, but Meeson quickly realised the strategic importance of the tour operation and quickly recruited an experienced management team headed by Steve Heapy and other ex-Airtours staff.

As they say, the rest is history, with Jet2holidays creating a market-leading short-haul tour operation, carrying 6.7m passengers.

However, the success of their unwavering focus on the UK market may now be a strategic weakness.

How much bigger can they become in a market where Easyjet Holidays and Tui also seek to expand rapidly?

Here are a few of the moves that could come next:

New London Gatwick base.

Jet2 operates out of all the major UK departure airports, except Gatwick, having chosen initially to access the lucrative London market via a large base at Stanstead.

Easyjet dominates Gatwick departures with over 50% of outbound flights, and even Ryanair failed to make a dent, so Jet2 would face heavy competition entering this marketplace as an airline. However, EasyJet Holidays is less established, potentially leaving the door open for a Summer 2025 entry for Jet2holidays.  

I know slots are tight at Gatwick, but any airport commercial department with one airline with a 50% share will want to encourage its major competitor to arrive to balance the economic power. A heavy branding investment would be required to convince southern customers brought up on EasyJet flights to switch, but Jet2 ‘s low-cost and high-quality holiday packages should be attractive enough to allow them to gain a foothold.

More Exclusive Hotel Stock.

The strength of Jet2’s balance sheet means that, unlike Tui, they can strike multi-year exclusive guarantee deals with beach hotels in prime locations to create a branded and high-margin “differentiated” product. However, after the collapse of Thomas Cook and the dismantling of Tui’s relationships, many hotel groups now prefer multiple suppliers rather than having all their eggs in one basket, making the development of differentiated products harder.

Long-haul Expansion.

Jet2holidays grew out of the ethos of a short-haul low-cost carrier, and neither Jet2’s current 737 Aircraft nor A321 Neo replacements  (25% more capacity per plane) can operate long-haul routes. However, many third-party airlines with long-haul aircraft would love to cooperate with Jet2holiday to access their established online and retail trade distribution networks.

A strategic partnership or the direct leasing of long-haul aircraft would facilitate introducing a long-haul tour operating program to Jet2holidays’ existing 6m customer base.  A definite no-brainer, in my opinion.

Cruise Division.

MyTravel and Tui developed profitable cruise divisions by repurposing older, smaller cruise ships as the major cruise lines replaced them with new mega-ships.  A strategic alliance with one of the major cruise lines to use their existing capacity would be lower risk and make more sense, so watch up for a tie-up with MSC or Royal Caribbean for more mass-market products.

UK acquisitions.

Given Jet2’s healthy £390m 2023 profit and £1 billion of cash in the bank, they could afford most UK travel businesses, but is there much worth buying?  Strategically, it makes little sense to acquire a UK OTA that would compete with its online holiday sales, and owning high street shops would find little favour with the city. However, purchasing a strategic stake in one of the retail consortia to take greater control of third-party shop distribution to slow the trade growth of EasyJet holidays could be effective and relatively cheap.

International Expansion.

After Brexit, obtaining European AOCs is more complicated; however, it should be easy for an established airline like Jet2.

Extending its operations from Northern Ireland into the South seems logical, with Ryanair lacking a tour operation to compete with them.

Expansion into larger European source markets, like Germany, will likely be on the back of acquiring existing tour operations with an established customer base and distribution, as it’s much easier to swap out flight providers than to establish the Jet2holidays brand in new markets.

Jet2 as an acquisition target.

As a publicly quoted, cash-rich business, Jet2 can acquire but also represents an attractive proposition for a business wishing to enter the European tour operating market.

However, the American super brands of Expedia, Booking.com and Tripadvisor have shown little interest in the package holiday market, and with the slowdown in the Chinese market, the likes of trip.com appear much less likely to splash the cash in Europe, particularly on a business that is so UK-centric.

Conclusion.

My overall conclusion is that Jet2 Holidays will spend the next few years defending its position as the UK’s largest holiday business by continuing to focus on a quality lead business with a high level of repeat customers rather than radically re-inventing its model. As its fleet replacement scheme rolls through, it will naturally increase capacity on each route as the A321 Neo has 25% more seats than the A737 800s they are replacing, so more of the same seems likely.

 There is nothing wrong with more of the same if you are making £390m profit a year!

Gaining an accurate view of the volume of “late availability” holidays has become much more complex since the evolution of the holiday market away from the major integrated tour operators, whose ownership of charter airlines dictated a relatively fixed capacity of “pre-manufactured” holidays.

Traditional tour operators like Airtours would sell Holidays at “Brochure” prices, based on the customer choosing a specifically named hotel, before switching to heavily discounted unnamed “late Availability” deals graded by star rating. With budgeted load factors of 99.8%, we would discount these holidays to as low as £99 to fill seats at the last minute.

No tour operator entered the “lates” market, defined as holidays sold after April 1^st within the Summer season, better than 54% loaded. It was, therefore, relatively easy to estimate the number of holidays left to be sold, and we also knew that 80% of these would be sold at a loss. Still, the size of this loss varied massively depending on the UK weather, the availability of cheap hotel beds and how the remaining capacity was balanced across the big four tour operators.

This yield model was also sub-optimal because it encouraged customers to wait for last-minute bargains rather than committing early, eroding early brochure sales and, as a quoted PLC, made it impossible to give the city any certainty about profitability ahead of the summer late market.

Not surprisingly, the city preferred the yield model of low-cost airlines, with their ultra-low initial prices that moved up in buckets of 4 seats based on historical yield curves and current sale rates. Low-cost carriers try to reward early bookers and do their discounting early, using “below costs” seats to create sufficient base load factors that then allow them to increase prices closer to departure.

However, this yield model works best when demand exceeds supply and can easily become unstuck if excess seats close to departure still need filling.

Overall flight capacity from the UK is forecast to remain at 98% of 2019 levels in 2024, primarily due to weaker demand for business travel post-COVID-19’s mass adoption of video conferencing as a feasible alternative to face-to-face meetings and a reduction in demand for city breaks.

Low-cost carriers have instead shifted large amounts of capacity onto leisure routes. Exactly how much capacity has been added is hard to estimate, but with bonded ATOL carryings having increased by 5.32M or 20% since 2019 to 31.6m in 2024, the overall increase will likely be more than 10m seats.

Fortunately, during the COVID-19 lockdown, the UK public experienced a “life” shock that made them appreciate more the time they spend with loved ones, and this has been reflected in a marked increase in holiday demand, with the average spend on holidays increasing by 30%.

The outbound holiday market continues to ride this wave of demand, with early sales for Summer 2024 remaining strong; however, with the UK set to enter a technical recession this week, inflation remaining stubbornly high and interest rates still at 5.25%, consumer spending power is weakening.

I have long talked about the “Have’s” and the “Have Nots”, with the latter group dominating the lates market. These customers are forced to book late based on financial circumstances and often use credit cards to fund holiday expenditures. It is this group of customers that will be hit hardest by the current financial squeeze, indicating that demand could be weakened in the late market when low-cost carriers have record seats still to sell on leisure routes.

Jet2 Holidays invented the game of disposing of “distressed” seats on routes not performing to their desired “price curve” by dumping them into “opaque” holiday packages, making them invisible to competitor airlines monitoring their prices or early booking flight customers.  But, with package holiday sales representing 80% of most leisure routes, Jet2 is now more of a tour operator than an airline and has limited access to this useful yield tool.

However, Easyjet Holidays’ passengers, at 1.9 million, are a small fraction of EasyJet’s 93 million seats, making it much easier for them to dispose of excess seats as opaque holiday packages.

Given the airline’s sophisticated yield management, this decision will be made well ahead of departure. As we approach the summer, these discounted prices are likely to give Easyjet Holidays a unique price advantage over both OTA competitors, who will be paying the full published seat price plus API booking fees and its biggest holiday competitor Jet2 Holidays.

The most interesting airline to watch is Ryanair, now that they have finally started cooperating with OTAs like Love Holidays.

I have been very critical of Ryanair, charging customers massive marks up’s of up to £50 per couple for the privilege of booking their flights as part of OTA’s holiday packages, but it’s interesting that since my last blog, these fees have started to drop by £5 on average as we come closure to departure.

It will be fascinating to see if Ryanair realises the benefit of this new sales channel and starts dumping excess seats with no markup or even negative markups.

This would be a very smart move, but I just can’t see Michael O’Leary eating humble pie just yet, and as such, it’s my prediction that it will be Easyjet Holiday that will turn the late market “Orange” this summer with the best late deals in the market.

Tui won the battle of the “Vertically Integrated” tour operators with the collapse of Thomas Cook in September 2019, but had the spoils stolen from them by the Covid-19 outbreak shortly thereafter that brought the UK travel industry to a halt.

Unlike Thomas Cook, the management of Tui had protected themselves from the growth of OTAs and the expansion of low-cost airlines by securing exclusive access to the best-located large beach hotels around the Mediterranean, allowing them to create holiday concepts such as Holiday Villages and Sensatori Hotels. This “Exclusive” hotel stock, combined with a fleet of 13 “Dreamliners”, created a high-quality “Package Holiday” product that built strong brand loyalty and relatively high margins.

However, the “bigger you are”, the “harder you feel” during the Covid-19 closure and Tui’s high level of hotel commitments and empty aircraft quickly created a “debt mountain” that required a major intervention from the German Government to secure Tui’s survival.

Post Covid-19, the impact of this debt mountain meant that Tui could not afford the massive hotel pre-payments and guarantees required to retain their “exclusive” access to their hotel stock, allowing newcomers like Jet2 Holidays to gain access and pick up much of the Thomas Cook former capacity as the holiday market rebounded in 2022 and 23 seasons.

At one point, it looked like Tui would “run away” from their short-haul beach heritage and use their Dreamliner aircrafts range advantage to  focus on long-haul and mid-haul destinations like Mexico, the Dominican Republic and Cape Verde, which their narrowed-bodied low-cost carrier competitors could not reach.

However, in Summer of 2024, due to the arrival of a new fleet of the replacement 737 Max short-haul aircraft, Tui is now attacking Jet2 Holiday’s market leadership by adding a whopping 12% or 1.1m more ATOL bonded packages to their short-haul program.  

This, combined with 1,500 new hotels, clearly indicates that Tui intends to remain a volume short-haul beach player, and means it will have its hands full, filling this capacity in a Summer 2024 lates market that has seen an increase of 10,000 million holidays to sell.

Whether the lates market becomes a “blood bath” or not remains to be seen, but the timing of signing a deal with Ryanair to add even more capacity seems very odd and probably indicates that it is based more on the convenience of PR timing for Ryanair than a major new strategic alliance.

Cleverly, Tui will protect itself from Ryanair’s poor customer service ethos by selling its flights under its secondary “First Choice” holidays brand, keeping  the Tui brand based on its in-house airlines flying. Tui intends to increase its relatively low mix of Dynamically packaged holidays from its current 2.5m passengers and could easily sell 1m Ryanair seats by boosting its city break offering or adding more duration flexibility to its beach holidays.

Out of small Dynamic Packaging “Acorns”, major strategic alliances can be grown, and competitors will rightly fear the coming together of Europe’s strongest tour operating brand and cheapest airline, Ryanair.

Once Tui gets to 1m plus seats, Ryanair is bound to wonder what a full-fledged strategic alliance could add to their passenger volumes as it seeks to increase market share dramatically to fill its large orders of new aircraft. At the same time, the Tui commercial team will have become addicted to Ryanair’s cheap early fairs to create early demand and the ability it gives them to put on their own internal airline’s transfer pricing seat rates.

Therefore, although in the short term, I think the relationship will be more “huff than puff”, in the longer term, we could see the next evolution of the Tui brand if, by default, it becomes the tour operating arm of Ryanair.

This factor could keep Tui in the fight for UK market leadership. However, the future will still be Orange and dominated by EasyJet Holidays, as most partnership deals with Ryanair fall away due to their excessive demands.

The evolution of the UK holiday market is happening fast, and it will be a fascinating watch for the next few years.

Love Holidays are proudly claiming to be the “World first Ryanair-verified package holiday provider” but fail to mention the whopping premium customers are required to pay Ryanair for the privilege of booking “officially”.

In their joint press release with Ryanair, Love Holidays misleadingly state “Loveholidays has agreed to only display Ryanair’s real prices, without mark-ups and will only pass accurate customer contact and payment details to the airline.”

However, it appears that Ryanair’s “Real Prices” are not the ones stated on their direct website, but ones that contain a considerable Ryanair booking premium. As illustrated in the three examples below for departures on the 1^{st of} Oct 2024, a couple of 2 adults must pay a “whopping” premium for the privilege of an “official” package

• Bournemouth to Majorca = £50.90 Extra per booking
• Manchester to Tenerife = £36.78 Extra per booking
• Liverpool to Ibiza = £47.60 Extra per booking.

Unlike other low-cost carriers who charge OTA’s a fixed API fee per flight sector, Ryanair seem to be yielding the charge depending on the competitiveness of the route and charging fees far in excess of any possible cost of operating the service.

Although I have no insider knowledge of Ryanair’s costs, it is generally accepted that distributing fairs via API to third parties, costs a maximum of £2.00-£3.00 per return flight, meaning that Ryanair are clearly “profiteering” at the expense of their customers.

Ironically, the Love Holidays deal and Ryanair’s ridiculous booking premiums, will strengthen the legal and moral arguments of other OTAs who continue to “Screen Scape” Ryanair’s fairs from its website.

Judges often base their decisions on preventing “Customer Harm”.

Ryanair has always accused OTAs of acting as “Pirates” illegally marking up the fair’s customers would pay on their direct website, to the detriment of customers. However, Ryanair has taken these fees to never-seen-before levels, charging Love Holidays customers a massive £50 premium to book their flights as part of an OTA package compared to their website.

In my opinion, few Judges will look upon this kindly!

However, it is the Competition and Markets Authority (CMA) that needs to wake up and fulfil its stated remit of “promoting competitive markets and tackling unfair behaviour”.

Ryanair has bullied the OTA market for many years, introducing extra “Facial Recognition” check-in steps to disadvantage customers booking via OTAs and blocking thousands of attempted bookings from OTAs. I believe this to be an “abuse” by a dominant market player, who is using these tactics to enforce unreasonable contractual terms for selling their flights via their official XML API’s.

I have today written to the CMA providing evidence of these unreasonable fees and hopefully will find support for this stance, within the remaining OTA community who are yet to buckle to Ryanair’s terms.

As stated previously, I completely understand that Love Holidays needed to secure guaranteed access to Ryanair’s flights ahead of their impending sale, but I do fear that unless Ryanair is successful in bringing other OTA’s like On the Beach to the table, that their price competitiveness will be badly damaged.

Historically, Ryanair was often provided the lowest fare lead prices for OTA’s, specifically, because the OTA’s where screen scraping and avoiding API fees. This led to 50% of many OTA’s holiday sales being based on Ryanair flights, making any sudden price increase in price due to API fees either highly damaging to price competitiveness or a massive opportunity if you continue to screen scrape.

The Ryanair V OTA battle is therefore like to escalate further, rather than be resolved by this API booking option.

Who will win remains to be seen, but a CMA investigation seems inevitable.

Initially, I was pleased to see that Ryanair has finally succumbed to common sense and decided to work in conjunction with Love Holidays to create “officially” authorised Ryanair Holidays.

Seats are being provided via an API integration, with Love passing all customer details to Ryanair so that customers can login to “My Ryanair” to check in, download boarding passes or amend flights.

Love Holidays, which has been looking for new owners for the last 18 months, needed this deal urgently to reassure potential buyers that they will have access to airline flight seats moving forward.

With Easyjet Holidays rapidly expanding its Holiday division, Love suffered from a strategic risk regarding how many seats Easyjet will allow OTA’s to access when the OTA is effectively creating a package to compete with the airline’s in-house tour operation. Combine this with Jet2, now selling 80% of seats as packages on many leisure routes, and you quickly see how important access to Ryanair seats is.

However, what cost is this access coming at?

The Love Holiday site now explicitly tells the customer how much of the package is being paid to Ryanair, so comparing these prices with the equivalent flight-only prices on the Ryanair site is relatively simple.

Amazingly, unlike Easyjet, which charges a fixed per passenger per sector API fee, Ryanair appears free to yield the fee as it sees fit.

For example, the fee is £27.00 on many flights, but on routes with little competition, like Bournemouth to Majorca, it jumps to £50.90 for a booking of 2 adults. Knowing Ryanair, these “Surcharges” will only get bigger.

The fee is also highly hypercritical, given that Ryanair has been campaigning against OTAs, accusing them of being “pirates”, marking up prices and charging customers more than they would have paid if they booked on the Ryanair site. However, it’s OK for this to happen if Ryanair receives the surcharge in their pockets!! 100% typical Ryanair customer service attitude.

I have long thought that Ryanair’s anti-OTA stance was nothing more than a tactic to push agents into a corner so that Ryanair could impose terms of their choice to allow agents to package their flights.

Love’s need to find a new owner has clearly forced them to do a deal with the Ryanair Devil on the Devil’s terms.

I must confess that I would have done the same in Love’s situation, but the winner is clearly Ryanair and the other low-cost carriers’ holiday divisions, whose packages suddenly look better value. 

Unfortunately, as usual, the biggest loser is the customer, who will end up paying more for their Love Holiday packages.