Cost-cutting is the buzz word at Airtours as the travel company prepares to close 120 of its high street shops and embarks on a cull of its senior management.
In the same week that Airtours announced that it was axing 82 Going Places and 38 Travelworld shops, cutting its total number of retail outlets to 720, seven senior Going Places managers, including marketing chief David Chambers, were ousted by new managing director Dave Harris (MW last week).
There is fierce competition between Airtours and its rivals, with retail operations instigating and responding to repeated rounds of discounting. On the face of it, shops and management are being axed to make way for more cost-effective organisations backed by call centres, the Internet and interactive television. But Airtours claims traditional retailing still has a role to play.
Airtours’ two retail chains have been through turmoil, with two rounds of job cuts and two managing directors in the past year.
The period of relentless change began in December 1998, when Airtours bought Travelworld – at the time the largest remaining independent chain of travel agents in the UK.
Travelworld’s founder Terry Fisher was retained by Airtours and given the job of managing director at Going Places. He oversaw the relocation of Going Places’ Surrey head office to Rochdale, and brought in friend and former colleague Chambers as a marketing consultant at the end of 1999 after marketing director Alison Flint was made redundant.
While working as a consultant, Chambers ended ad agency CDP’s relationship with Going Places and used Portsmouth-based agency Clear to create a new &£4m post-Christmas campaign.
An Airtours spokeswoman said that the company decided not to renew Chambers’ contract and that it wants to appoint a new marketing director “imminently”.
Fisher was promoted to retail managing director in May last year, in charge of both Going Places and Travelworld, and he made another close ally, Travelworld’s managing director Trevor Davis, sales director for the two chains. Fisher also appointed two heads of regional sales, Cathy Jackson-Spencer and Lee Price, at the same time. All three were ousted along with Chambers last week.
Not long after his promotion, Fisher went on extended sick leave and never returned. In January this year Airtours new chief executive Richard Carrick brought in a travel industry outsider – UCI Cinemas’ UK and Ireland managing director Dave Harris – to replace Fisher.
At the time, company bosses said Harris’s lack of experience in the holiday market was a positive quality and that he would be able to bring a fresh perspective to the group. Also in his favour was the work Harris did to help turn UCI – a loss-making company when he joined more than ten years ago – into a business which makes annual profits of &£35m.
In February, Airtours announced first-quarter pre-tax losses of &£64m, compared with &£50.4m for the same period a year earlier. The latest shop cull is expected to cost the company about &£15m this year.
Harris is taking on his new role at a time of rapid and extreme change for retail-based travel agents, who fear they may be cut out of sales transactions which can now be conducted direct, either through printed brochures and call centres, or online.
Recognising this, Airtours launched a multi-channel e-commerce strategy last May , featuring the global travel service Mytravelco, which enables Airtours’ products to be sold through the Internet, mobile phones, call centres, interactive TV and the high street.
Although travel agents still control the lion’s share of the holiday market, there has been a marked growth in the number of holidays sold through other routes. According to Mintel, travel agents accounted for 54 per cent of all holidays bought last year. The Internet accounts for about 23 per cent, and of this figure, 41 per cent of customers are independent travellers, who would not naturally go to a travel agent anyway.
While Harris admits that there has been substantial growth in holiday bookings through these new channels, he maintains that retail will still have a place, provided it offers customers extra services which they are unable get over the telephone or Internet.
“The love affair with shopping on the high street, in the mall or at an out-of-town retail park continues. That’s why the number of shoppers in most major town and city centres is growing rather than shrinking,” says Harris. “As in other sectors, the challenge for us is to provide something the customers can’t buy over the phone or on the Web,” he adds. “That means making the holiday buying experience unique. Our service, the environment in which we provide it, the uniqueness of our individual products and services and the security people get from face-to-face, human contact with a travel expert are areas in which we can, and must, excel.”
Harris also thinks that competing on price against retail rivals such as Thomas Cook and Lunn Poly is not the way forward, as other routes to market can do so more effectively.
One area of possible growth for Airtours is its expanding chain of out-of-town giant retail centres called Holiday Store.
With Chambers gone and a replacement being sought, Airtours is not forthcoming about its marketing strategy for Going Places and Travelworld, although a spokeswoman says the chains will continue as separate brands. Advertising for the brands, created in house or through agencies on a project-by-project basis, is likely to be reviewed.
Industry observers are interested to see if Harris will follow the formula of his boss, Carrick, and bring in someone from outside the industry to head marketing. Some speculate that there will be a combined sales and marketing role and it will take months for any marketing changes to be implemented.
Harris, three months into the job, will have realised by now that discounting is unstoppable and more retail cuts may well be needed to turn the tide.