Playing Hardball With Tour Operators

In a book published in 2011 entitled The British On Holiday, author Hazel Andrews wrote that in 1998 the head of the Palmanova-Magalluf hoteliers association had told her that the most important relationship in the resorts was that between hotels and tour operators and that the most important tour operator was Thomson.

Earlier this month, a Frontur report concerning international tourist movement into Spain revealed that slightly under 23 million tourists travelled with a tour operator on a holiday package. That is to say that in 2016 the percentage of holidaymakers relying exclusively on a tour operator was just short of 22%. Twenty years before, so a little time before Hazel Andrews spoke to the hoteliers' president, over 80% of holidaymakers booked packages with a tour operator.

A great deal has therefore happened in the past twenty years, one aspect of which is that Thomson, important or not as a provider of Magalluf tourists, is to be consigned to the brand waste bin.

Another obvious development since the late 1990s is the extent to which holidaymaker booking behaviour has altered. The package holiday's obituary has been written often enough, but - and bearing in mind also the significant increase in the number of tourists in the past twenty years - it remains resilient, not least if it is an all-inclusive one. Moreover, these are figures for Spain, to which low-cost airlines fly in abundance and where there is no shortage of alternative accommodation: alternative to hotels, that is. Other destinations aren't necessarily quite as easy as Spain is for the independent traveller.

The package holiday, for all the predictions of its demise, still holds a decent share of the market, decent enough for tour operators like Tui to snaffle up as many hotel beds as they can. There need be no tears being wept for the tour operators in this shifting scenario. They still exert great power and they still have massive offer to sell.

But can it be said, as it was in 1998, that the hotel-tour operator relationship remains the most important one, and not just in Magalluf and Palmanova? The Frontur figure of 22%, one suspects, is a good deal higher in resorts, so arguably it is, even though it won't be anything like the 80% of 1998. Tour operator power has thus been diminished, if only to a degree, and the scramble for beds (along with increased prices) that has been occurring just recently because of the elevated demand for Mallorca holidays demonstrates how the hotel-tour operator relationship has changed.

Historically, tour operators have always held the whip hand. Mallorca was almost solely reliant on foreign companies at the start of the boom, a fact that was dramatically exposed by the oil crisis of the 1970s and by the collapse of Court Line and Clarkson. This shock to the tourism industry was such that there was a determination to assert Mallorca's own power over it, but this never happened. The package holiday and its selling by foreign tour operators  just kept on getting stronger.

Given this strength, tour operators were able to keep control over prices. Although there have long been partnerships with hotel chains - direct ones in certain instances, such as between Tui and Riu - the tour operator was the more powerful partner. It could also dictate the type of offer. Few hotels have genuinely wanted to provide all-inclusive, because of the lower margins and the far lower possibilities for making add-on sales to clients. At the bottom end of the AI market, as a hotel manager once admitted to me, the hotel would have much rather been in a position to provide greater quality. But it couldn't. The quality was crap, and he recognised that it was.

Something else which has significantly altered the scene since the late 1990s is the level of competition, to which can be added the demands of a more critical and sophisticated holidaymaker. It is this context which goes a long way to explaining the apparent abandonment of Mallorca (and the Canaries) by Thomas Cook. While this has been greatly exaggerated, the tour operator is ditching a number of hotels as part of an overall strategy of moving up-market.

Thomas Cook has also taken into account the elevated prices being demanded by hotels. The relationship in terms of power has been disrupted by current circumstances, and while there seems to have been some glee among hoteliers as well as indifference to continuing relationships with certain markets, notably the British, the hoteliers are taking risks. There may not have been such statements in Mallorca, but in the Canaries the president of the hoteliers association has warned against "abuse" of prices. Some hoteliers may believe they can play hardball with tour operators. For the moment maybe they can. In the Canaries at least, there is concern about the harmful effect on the historical relationship.