The revelation that low-cost airline Go is to pay commission to travel agents for the first time is a rare example of business flowing to agents rather than away from them.
With low-cost operators entering the travel industry and squeezing agents’ margins, Lunn Poly’s incoming marketing and buying director Hugh Edwards says: “One size doesn’t fit all anymore. In this changing environment, successful companies will need to differentiate their offer through branding, and possibly a series of sub-brands.
“My first role will be to determine where we can find a competitive advantage through the Internet, our branches and our call centre Lunn Poly Direct, which launched in August.”
Lunn Poly is working on blueprints for a superstore retail format offering a broader range of products and a consultancy service. It is also understood to be developing a more upmarket retail concept. Both initiatives are thought to examine how new technology can create a better, more efficient, service. At the same time, the company’s Website is being redesigned. It will be able to process transactions some time next year.
These plans come on the back of “Getaway” – a pilot concept in Coventry (MW July 15) in which customers can find holidays by browsing on interactive monitors.
Edwards will join Lunn Poly on January 4 and report to managing director Nigel David (MW last week). As the top marketer, he is one of a handful of people at Lunn Poly with the power to catapult the market leader, which commands 25 per cent of the rapidly consolidating travel agent market, into a super-league of its own. Alternatively, Edwards could find himself presiding over a long-term decline in the 800-strong chain’s fortunes as it is sidelined by direct rivals.
These principally take the form of low-cost airline operations such as easyJet and Go, which favour selling their flights direct to the public, and pure Net travel agents such as Sir Bob Geldof’s Deckchair.com and Microsoft’s Expedia, which use lower operating costs to undercut traditional bricks-and-mortar players.
Tour operators including Lunn Poly parent Thomson Travel are also starting to leapfrog travel agents by stepping up direct operations.
Walt Disney Attractions director of sales and marketing for the UK and Ireland Stephen Park says: “This is a time of incredible change in the travel industry and any agent that doesn’t adapt will be in deep trouble. The Net is going to be key.”
Datamonitor research predicts European online sales of travel products, such as flights, hotels, package holidays, cruises, travel insurance and car rental, will increase 200-fold from $7.7m (£4.8m) in 1997 to $1.7bn (£1.06bn) in 2002.
David Jones, senior vice-president for marketing at travel product and information database Amadeus, says the travel industry is polarising. He says one model will sell simple products, such as cheap flights, over the telephone or Net; the other will provide a consultancy service to help consumers create a customised itinerary. With the latter, consumers will pay a fee for the service and an ongoing relationship will be maintained, such as with financial services advisers, Jones says.
Edwards says that, for now, the main competition is Thomas Cook and Going Places, but he acknowledges the direct operators are becoming increasingly important.
But creating a strong brand is more easily said than done. Jones says: “Customers aren’t loyal to travel agents. Only seven per cent always use the same chain, and only four per cent mostly use the same chain. Fifty-eight per cent have no preference at all. Travel agent brands aren’t strong enough.”
Clive Vaughan, head of consultancy at Corporate Intelligence, says Edwards is well placed to differentiate and strengthen the Lunn Poly brand. Presently business development manager at Curry’s, Edwards was group marketing manager at Dixons’ PC Group, and then the Dixons Group itself, at which time he worked on “Dixons 2000” – the company’s new store concept.
Vaughan says: “The Dixons Group has been very successful at developing strong sub-brands, such as Curry’s, which competes on price, and Link, a one-stop shop for mobile phones, help and advice.
“Both are out-of-town formats, as opposed to Dixons, which is a high-street operation.”
Vaughan adds: “Lunn Poly needs to capture more longhaul holidays and build its travel insurance brand, because these are the areas where the real profit margins are. It is a well-recognised brand at the moment, but it is a bit cheap and cheerful.”
If Lunn Poly can segment its business successfully, it stands to gain a larger share of a growing market. However, a high-quality, customer service-oriented brand will be expensive to operate and costly to set up. Lunn Poly risks pricing itself out of the market if it passes these costs on to the consumer.
There is also a danger that its profits will be squeezed to nothing if it tries to take on the low-cost direct operators.