We recently took an interest in the business Dart Group plc “DTG”.

My notes on the Package Holiday industry, as the high growing segment of DTG is Jet2holidays:

  • Necessary adjustments – the package holiday industry suffered as new tech competition (e.g. Booking, Expedia and later Airbnb) grew offering customers more choice:
    • Assimilation – One key advantage of online competitors for customers is customization (exact holiday length, start/end date, type of hotel room). The industry adjusted by offering more choice.
    • Consolidation & bankruptcies – TUI and Thomas Cook have increased their market share since the financial crisis. Size has brought some two-sided power on price.
    • Control – Recent strategy has been to increase control over customer experience by expanding assets on the balance sheet (hotels, planes). Large package holiday firms might scoop up a low-cost airline like DTG to increase control. Note: Jet2Holidays is very focused on customer experience (e.g. see news on unique resort check-in).
    • Differentiation – package holidays to remote places where booking websites are not as penetrated yet (First Choice’s strategy as early as 2005). A move away from commoditised package holidays boosts margins. In 2012, 3/4th and 2/3rd of TUI’s Nordic and British customers respectively booked such highly tailored holidays (2/3rd of German customers was “still” buying mass-market packages).
  • Renaissance – In part because of these adjustments, there has been a renaissance since ’08. Mintel forecasts a further 10% rise in demand by 2020. As of 2016 however, total package holiday demand is down 25% since its peak in the early 2000’s.

 

On all-inclusive package holidays:

  • value proposition
    • being spoiled by free lunches
    • peace of mind
      • holiday sorted out
      • no unexpected expenses
      • being looked after if holiday goes wrong (e.g. terrorism)
  • Growth  all-inclusive grew from 8% of worldwide holidays to 12% in the period ’10 – ’13 (PhoCusWright via Economist)

 

One last remark: Booking/Expedia/Airbnb charge quite high commissions (10-20%). This offers leeway for existence to others. It could also be a risk down the road if these commissions fell.

Notes on the European airline industry might follow.

 

 

References

A history of package holidays – Independent

A new package  – Economist

Tour operators are down but not out – Economist

Horrible holidays – Economist

Travelling on the same ticket – Economist

The return of the free lunch – Economist

From satanic mills to sundecks – Economist

Tour operators are down but not out – Economist

Thomson and First Choice to merge – FT.com

Different Towels – FT.com

Travel groups brace for holiday booking decline – FT.com

Tui to sell Hotelbeds Group for €1.2Bn – FT.com