Michael O’Leary has a reputation for being outspoken. The boss of Ryan Air has repeatedly fed the media outrageous statements in return for publicity – a setup which works surprisingly well for both sides.
His latest statement came in the wake of the dramatic collapse of Thomas Cook. One of the biggest and best sellers of package holidays went bankrupt the same way everyone does…. Slowly at first, then all at once.
With 150,000 UK holidaymakers stranded, this was no small matter. The government set up a repatriation drive to get everyone home, along with an enquiry looking for any mismanagement by the (admittedly well paid) executive team.
One of the reasons given for Thomas Cook collapsing was changing holiday habits. More people are now booking their flights, accommodation and transfers / tours separately. O’Leary thinks that the package is dead, though it seems millions of people, especially those with children, disagree.
Definition of a Package Holiday
The concept is simple. Tour operators combine hotels, activities, flights and transfers into one bundle. Prices vary according to demand. School summer holiday package holidays go for a premium.
Over time, the bigger operators built fleets of aircraft. They negotiated hard with the hotels and added on tours (a big profit driver). This gave an advantage to the bigger operators. Economies of scale, combined with big negotiating power boosted their profits, while making packages attractive to their customers.
The number of destinations has increased with each decade. Spain and Greece are perennial favourites. Turkey, Croatia, Tunisia and many more are now on the radar for ordinary families. At the same time specialists appeared. SAGA offer package holidays aimed at older travellers, other companies offer adventure holidays, fly-drive or smaller city-break deals.
Pros and Cons of Package Holidays
Before looking at what happened to the big firms, here is an overview of the key benefits and drawbacks:
- Easy: Booking holidays can be stressful, packages take the worries away.
- Value: For many destinations, the huge scale of the companies mean packages are cheaper than prices available if you book separately.
- Trust: You know you’ll get a reasonable standard of accommodation, booking independently has a higher risk of the photo’s online not telling the complete picture.
- ATOL: The agencies offering packages are part of the national insurance scheme which provides protection in the event of problems / cancellation / bankruptcy.
And the Drawbacks:
- Fixed Dates: Your week / 10 days needs to match with the families coming out.
- Hidden Charges: Often the headline price shoots up when you get close to the check out. This includes everything from meals on the plane to extra insurance.
- Limited Destinations: Step outside of the popular hotspots and you’ll find very few package options.
So, What Went Wrong for Packages?
Millions of people still book package holidays every year. What is more, there are new and successful companies breaking into this niche all the time. Some are brokers, working with a diverse set of companies, others are companies like Virgin, who are bundling their hotel and transfer deals with their transatlantic flights.
Yes, there are now millions more people booking their own holidays. This applies to city breaks, beach holidays and more. At the same time the number of breaks people are taking, and the appetite for travel as increased over the years.
My view is that package holidays are alive and well. There is still a core of travellers who look forward to their easy break each year. Even those who book other holidays independently are mostly ok with package deals that work for their tastes.
Here is what changed:
- Last Minute Awareness: You used to get the bargains for booking super-early at one point. These days, you get them at the last minute. As more people become aware of this, more people wait, squeezing the margins of the operators.
- Tastes Have Changed: More people are going to Asia, India and the Caribbean these days (and many more places), Spain or Greece as a destination has become a commodity, not the ‘foreign’ break it once way.
- Airbnb and Low-Cost Carriers: In the heyday of companies like Thomas Cook, the alternatives for flights were expensive ‘flag carriers’. These days EasyJet, Wizz Air, Ryan Air and others can get you to a lot of destinations – often from your local airport. Airbnb is providing extra capacity for hotels, providing yet more options for independent travellers.
- Not So Cool: While ‘stigma’ is way too strong a word, there is a sense that packages are a relic of an older generation… while 30 years ago you might have been proud to announce your package holiday to Spain at work, now it does not compare to the more interesting adventures of the independent travellers.
And Thomas Cook?
They knew there were financial worries for a long time. It looks like they continued taking money from holidaymakers long after suspecting their company might collapse.
While only a government enquiry and full audit will show what was really known by senior managers, incompetence and a failure to change with the times looks to be the root cause of this company’s demise.
Package holidays might not have the allure they once did – though a good deal, to a destination that people want to visit is a formula that will never get old.
Mr O’Leary, I admire the skillful way you play the media for publicity… on this topic, I think you are wrong.
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