Selling holidays used to be pretty straightforward for the big four travel companies, if a little tight on margins. They controlled every part of the transaction - from the tour operation and the shops, through to the airline, the cruise ship and the hotel.
Then came low-cost airlines and the net, and customers became picky.
They don't want 14 nights, just nine thank you very much - and at a lower price. They would rather book the flight themselves and just leave the agent to sort out the accommodation. And instead of joining the usual sun, sand and sangria brigade, they want a bit of adventure - perhaps some canoeing or scuba-diving.
Suddenly the agent looks like a dying breed and package holidays as we know them in rather poor health. There are 4943 agent branches on our high streets, compared with 5092 five years ago. In the past year, 329 UK travel agencies closed down, while 241 opened - a net loss of 88.
While booking through a travel agent remains the most popular means of buying a holiday abroad - a survey of 25,000 adults found 49% used this method - this proportion has fallen by 12% over the past five years. Holidays booked direct through tour operators rose in the past five years from 19% to 24%, according to Mintel figures due out next month. Add to this data from Visa which shows online shopping has more than doubled over the past year, with travel and tourism up 159%, and traditional agents seem to be heading for extinction. So what are they doing to meet the rise of the do-it-yourself holidaymaker?
TUI travel agency Lunn Poly began broadcasting a digital TV channel on 1 June. It forms part of TUI's multi-channel distribution strategy - with mobile phone and hand-held computer technology next on the list.
Thomas Cook is the only other of the 'big four' to have its own TV channel, with rivals TV Travel Shop, Sky Travel and Teletext Holidays competing for the 2% - 400,000 holidays - of the package holiday market sold via TV each year. 'There are PCs in about 50% of homes, but TV is in between 98% and 99% of homes. In addition, the analogue signal will be switched off in about 10 years' time so everyone will convert to digital,' says Jackie Robson, travel and tourism analyst for Mintel.
Hugh Edwards, TUI UK marketing director, says: 'We want to be the annual holiday planner. I think the agent will be more lifestyle-management based. Over the next 10 or 20 years I can see the agent arranging a family's travel plans for a whole year.'
Robson praises Thomson, MyTravel, Thomas Cook and First Choice for their efforts to respond to the demands of the do-it-yourself holidaymaker - not just by offering a range of booking channels, but by providing flexible products that answer consumer needs. She says flexible airline services such as Thomsonfly and MyTravelLite, the greater emphasis placed by First Choice on its specialist brands and activity holidays, and the launch of various accommodation-only offshoots - the most recent being Thomas Cook's roomsandhotels.com in May - are all helping the big four grab a slice of the growing independent market.
First Choice, the smallest of the four, has proved more adept than most in adjusting to the shifts in the dynamics of the holiday business. Earlier this month, it announced interim pre-tax losses of £50.9m against £55.1m the previous year. The group has moved away from traditional short-haul package holidays because it felt the competition was saturating the market. Instead it piled resources into exotic and active breaks for 20- to 30-year-olds and the over-50s.
Peter Long, chief executive, said: 'The mainstream holiday market remains challenging. But our bookings for adventure holidays are 8% ahead of last year, while online bookings have doubled and now represent 10% of the business.'
Mintel claims the use of the web has had a 'profound' effect on bookings, with a quarter of people having used the net to book their last overseas holiday. It also warns that it is only a matter of time before the internet becomes the most popular method of booking.
Online brands threatening the very existence of high-street travel agents include the 'online big four' - ebookers, lastminute.com, Expedia and Travelocity. And these players are even cannibalising their own high-street sales. The growth in online sales encouraged ebookers to close five of its UK shops earlier this year. It was estimated the closures and 270 job cuts would save the company £2.5m.
Meanwhile, Travelocity, which launched in the UK in 1998, claims Cyprus was the most popular destination booked through it in May - not the usual city-break favourites. 'The majority of our customers are web-confident city-dwellers who think it's old-fashioned to be sitting in a travel agency opposite an 18-year-old,' says Travelocity marketing director Charlotte Harper. 'They couldn't think of anything worse than booking travel from a brochure or in a shop where they're shown the product on a screen at a slight angle and then stuck on a coach transfer.'
Only 7% of package holidays were bought online last year according to TUI's Edwards, but he does not believe the market will die. 'What has changed is the rapid growth of people self-packaging, flight-only and the visiting friends and relatives market,' he says. 'Customers are using the net more, if not to book, then to search. But they still want to have face-to-face or phone contact with agents.'
A further threat is 'dynamic packaging' - technology allowing consumers to assemble the separate components of a holiday, such as the flight, the room and the car hire. Ironically, Steve Endacott, former chief operating officer at MyTravel, is one of the new breed leading the way.
Endacott's Holiday Brokers, is just one of many start-ups offering agents access to properties in beach destinations, with flights and transfers. 'The high street is under pressure,' he warns. 'The cost of rent is not justifying the cost of generating sales. All the major multiples have a big problem - they're on prime high-street locations.'
The winners, he predicts, will be web-savvy agents. 'The more that people use the net, the more difficult it is for them to make a choice. The role of the travel agent is going full circle. When they first started out they had to put the package together, so over the past 20 years most of them have become booking agents. What's happening now is that the net is giving them the tools to fight back,' says Endacott.
David Jones, managing director of technology company Travelink, claims half of his tour operator clients are now buying his system to help them respond to changes in the market.
John Donnelly, managing director of independent travel agency The Holiday Factory, says agents should think of alternative revenue streams in the face of dwindling commission. Calling his shop a 'leisure agency' rather than a travel agency, Donnelly acts as a broker, selling cars, loans and properties in Spain. He claims traditional tour operators' brochures will be gone in two years - a prediction which followed the launch of Airtours' first CD-ROM brochure in April.
Unfortunately for the big four, putting comprehensive internet access in every shop is a costly exercise. Simon Robinson, director of retail at Thomas Cook, says it is looking at this as part of an ongoing review.
Agents only have access to its Thomas Cook Signature product and roomsandhotels.com.
'Our agents have to have the tools to do their jobs,' he says.
So while independent agents effectively turn into tour operators themselves, the big four are using anything they can to fight back. The recent collapse of low-cost carrier Duo, which left more than 1000 customers stranded overseas, provided the perfect opportunity for operators to start shouting about the benefits of booking a fully-bonded package, which under package travel regulations, would have seen all the holidaymakers returned home at no extra cost. And as more accommodation-only suppliers arrive on the market, it is unlikely that all the properties will be checked under the same strict regulations adhered to by the package tour operators.
This focus on trust has seen Thomson launch an aggressive £3m TV campaign using the strapline 'Time is too precious'. 'Having been off-air for a while, the budget airlines and countless travel portals entered the market, which caused Thomson to lose a bit of its salience. The TUI campaign is as much about restoring the pre-eminence of Thomson among the big four as competing with its online rivals,' says Jorian Murray, managing director of TUI UK's advertising agency DDB London.
The name game
This new drive to harness brand power has seen First Choice ditch its Bakers Dolphin and Travel Choice shop fascias and the Air 2000 airline name in favour of its First Choice tour-operating brand. First Choice's £1m rebrand was given the thumbs up by industry analysts who agreed that having the same name on the operator's shops and airline would unite the different elements of the holiday. Yet Endacott warns of the 'restrictive' nature of doing this. 'The customer will think just one brand is sold in that shop and independent agents don't want to sell a product that is effectively free advertising for a multiple rival.'
MyTravel's decision in late 2002 to scrap its shop rebrand and leverage the Going Places name on the high street came as no surprise. After disastrous losses of £910.9m in December 2003 and the resulting column inches, having that name above its shop would have hurt sales even more. As it was, holidaymakers were less aware of Going Places' connection to its troubled parent.
The big four are also using in-store theatre. TUI UK splashed out £11m on its biggest and most expensive peak-period marketing campaign in January and encouraged travel agencies to speak to passers-by for the first time.
The 'whispering windows', which were trialled at a dozen high-street and out-of-town shops, saw the entire window converted into a speaker.
Messages such as 'Wouldn't you rather be on a warm, sandy beach?' were designed to tempt customers off cold streets into the warm, sunny environment of a Lunn Poly shop. 'At the end of the day, people just want to go in and buy a holiday. Talking windows and smells in shops are just gimmicks,' says Endacott.
First Choice's attempts to entice customers have seen some of its shops selected to sell its more upmarket brands including Sovereign, Citalia and Meon Villas. So far, First Choice managing director of UK distribution, John Wimbleton, claims these 50 branches are outperforming the rest of its retail network. Bookings for packages from its specialist tour operators, such as Hayes & Jarvis, are up 20% for this summer. 'There's a place for a good high-street travel agent, but no one can afford to stand still,' he says. 'I'm not worried by the trend for do-it-yourself packages, but we do have to demonstrate we can add value.'
Thomas Cook's Robinson says people forget that 16.5m people still take a package holiday every year. The package holiday isn't dying, merely changing in shape. Holidaymakers - of which there are more now than ever - are simply choosing different elements and more often. But as for travel agents, if they can't adapt their strategies to a changing market, many more obituaries could be on their way.
THE BIG FOUR
Shops: 911 (including Lunn Poly, Callers Pegasus, Travel House and
Turnover: TUI Northern Europe (includes TUI UK) reached 4.3bn euros
(£2.8bn) in 2003, compared with 4.8bn euros (£3.1bn) in
Holidays sold in 2003: 4.9m
Share of package holiday market: 17% to 18%
Shops: 670 (including Going Places and Travelworld).
Turnover: £3.8bn for 2003, compared with £3.9bn in 2002.
Holidays sold in 2003: 3.3m
Share of package holiday market: 12% to 13%
Turnover: £4.8bn in 2002-2003 compared with £5.4bn in
Holidays sold in 2003: 2.6m
Share of package holiday market: 14% to 15%
Shops: 314 (including First Choice Travel Shops and First Choice Holiday
Turnover: £2.25bn for 2003, compared with £2.18bn in 2002
Holidays sold in 2003: 2.9m
Share of package holiday market: 7% to 8%
HOLIDAY SALES CHANNELS
How holidays were booked from 1999 to 2003 (%)
2003 2002 2001 2000 1999
Travel agent 49 50 55 59 61
Tour operator (direct) 24 20 19 19 19
Own arrangements 24 22 24 23 22
Internet * 11 3 * *
Source: GB TGI, BMRB 1999-spring 2004/Mintel (*question not asked)
Method of booking holiday by gender, age, socio-economic group and
working status (%)
Internet Travel Family/ Direct
All 33 32 18 12
Men 33 34 15 10
Women 33 30 20 14
15-19 34 33 17 10
20-24 33 44 28 6
25-34 42 28 22 8
35-44 44 32 14 11
45-54 37 31 17 16
55-64 29 32 13 17
65+ 10 32 19 13
AB 55 29 17 12
C1 36 31 16 15
C2 26 36 16 9
D 18 34 21 11
E 10 31 21 8
Full-time 41 34 16 10
Part-time 41 28 17 16
Not working 32 33 23 9
Retired 15 30 18 15
Source: NOP/Mintel April 2004 (Base: 1284 adults aged 15+ who have taken
a holiday in the past 12 months)