Sunday, January 14, 2018

The Missing Link: Independent Travel

When we are fed the constant diet of information regarding holiday bookings, there needs to be a touch of caution with some of the figures. With the likes of, say, Abta, the information is Abta-specific. In other words, it comes from its members - the travel agencies and tour operators. But this is only part of the story. There is that huge market out there for tourists bundling their own holidays together. While agencies have got in on this act, the scale of the independent market means that that bookings information is incomplete or even misleading.

DRV is the German equivalent of Abta. It has reported on how holiday bookings went in 2017. It pointed to the growth in bookings to Egypt and Greece; these destinations were the real "winners". Greece was second only to the Balearics; where the agencies were concerned. The report then goes on to say that the Balearics represented a decrease in revenue; for the agencies. Holidaymakers were looking for alternatives to Mallorca because of an increase in prices and the "over-occupancy". So, curiously enough, the actual demand for Mallorca was acting as some form of deterrence. This was the agencies' experience. But DRV then adds that agency business (for Mallorca) going down was also related to a significant increase in holidays being booked individually, i.e. the independent market. There is a further curiosity in that only Mallorca was mentioned in this regard.

In relative terms, the package holiday - the core of travel agency operations - has been in decline for years. It still of course represents a very major part of the holiday business, and as tourism demand has increased, so the demand for packages also rises. But the independent sector has risen and continues to rise with greater strength.

A more representative source of bookings information is therefore travel reservation data, most obviously airlines. The increase in flights to Mallorca last summer, the creation of bases by airlines in Palma were a reflection of the total demand. But as we head towards the next season, there are some clouds gathering, and one in particular doesn't just affect Mallorca. This is the EU package travel directive.

Member states (and the UK is adopting the directive irrespective of Brexit) now have to transpose the new EU directive into national law. The Spanish government has yet to do so, and it isn't alone. For the moment, it seems that the subject of the directive is only being discussed by the travel industry. It is not one that has made a leap into the wider public consciousness. But it is going to have an impact, and that's because it's going to push prices up.

The directive deals with so-called linked holidays. As an example, if a traveller makes bookings for travel, accommodation, car rental with separate companies and the traveller's information is transferred between these companies, this will constitute the equivalent of a package holiday. And as with the conventional package, there is now a liability if anything goes wrong. This is what the directive is addressing; there previously hasn't been adequate liability.

Typically, these bookings go via airlines. The traveller books flights, then uses the airline's website to reserve other elements of the trip, such as accommodation. If this is all done within 24 hours, which it normally is, then there is a "linked" trip. And there have to be consumer guarantees for all parts of the chain. The basic cost of this will be around 12 or 13 euros per traveller. This is the cost to the organiser of the linked trip, and that organiser will for the most part be the airline, which will have to provide the consumer protection. Either that, or the airline decides to no longer offer the add-on services. And this is unlikely. It is estimated that last year airlines globally took in 82,200 million dollars worth of revenue from "complementary" bookings.

A problem with the directive, and the Spanish competition commission has highlighted this, is a lack of clarity. The commission also believes that the directive may constitute risks to competition because of the guarantees being demanded. And if the Spanish think this, then one can assume other member states will think likewise.

The bottom line is the extent to which the cost of guarantees is passed on. This cost will of course apply across the EU board, but for Mallorca it represents another potential increase for the holidaymaker to go with, for instance, the tourist tax. The cost will no doubt be hidden, but it will be there nevertheless.

So, the cost of independent travel is destined to go up, and this brings us back to what DRV has reported about independent bookings for Mallorca. Was it the case that the abundance of holiday rental accommodation was contributing to the increase? It probably was. But this source is being closed off; or part of it anyway. The rentals legislation is one of the other clouds, and it is very much a cloud that hovers over the independent traveller. One wonders what DRV might have to report about 2018.

Still, there is always the conventional package holiday, and DRV's UK counterpart, Abta, has itself provided a report for 2017. Sales of packages through its members for the Balearics were up by around eleven per cent. So, happy days, but will they continue? Be prepared for ever more information about bookings, however incomplete this may be.

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