Crystal Balls and Mince Pies

Look into my eyes…..
Look into my eyes…..

The future of the travel industry.  I’ve been thinking about that statement.  I don’t have any certainties although I do have some predictions for 2015, here goes

1.  Asset heavy businesses will do well (typically those that own airlines, hotels etc..) and the ‘package’ will be fine (I hate the term ‘package’)

2.  Those with differentiation will do well.  Beware of the middle ground, the mass market is going to get tougher as a result of marketing costs, user behaviour and little differentiation

3.  The Peer to peer business will grow (like AirBnB, HouseTrip etc…)

4.  We shall see a much faster rise of the independent holiday, without hotels.  More and more customers will stay in accommodation that is not a mainstream hotel.  This is a very exciting sector.

5.  Flight prices will come down a little meaning more people will travel

6.  Everyone will talk about the importance of mobile.  Again.

Only 6.  None of them are particularly exciting nor insightful as they’re trends we’ve seen over some time now.  I just expect these trends to continue.  I do hope we see some new entrants though.

On a different note I’ve been thinking about ‘Luxury’ travel.  Not so much the actual product but the price tag.  Lets say I am a travel agent and sell a beach holiday for £1,000 which makes me 15% commission, so £150.  Good!  However, my cost of acquisition was £80 (boo) leaving me £70.  My operational costs are £40 (boo! boo!!) so I am left with £30.  3% from £1,000.  Hmmmm

Mmmmmmm
Mmmmmmm

Now lets say I sell a luxury holiday for £6,000 on which I earn 15% commission.  £900!!!  So even if my acquisition costs are £400 per booking and my operation costs well, lets say they’re £300. I have total costs of £700 leaving me £200.  Thats only 3.3% but its £200.

Its over x6 more than selling one beach holiday and means I can buy more mince pies. This is basic maths but when thinking about business, starting out etc there is a good case to go into luxury.  The beach market though is huge, easier to get share maybe than the luxury market but it’s tougher on cash due to lower booking values.  You’ve got to sell a lot of holidays to get enough scale to make it a viable proposition.  Not so with luxury.  The thing is, the luxury market is smaller, much,much smaller and so more difficult to gain share, however, it is growing in size.

The recent Travel Weekly Insights report has a small note on page 42 which summarises huge investments in the luxury hotel sector.  Tempting, almost as much as a mince pie.

Heres a quick poll to end the year on:

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