Transhotel's Collapse

The website for the Madrid-based Group Transhotel is still up but the company, one of Spain's leading tourist services concerns, a global organisation specialising in online reservations, is to file for bankruptcy. Coming on the back of the collapse of Marsans and Orizonia, Transhotel's failure represents a severe blow to the Spanish travel industry and to its credibility.

This diminishing reputation has not been helped by the way in which Transhotel has conducted itself over the past few months. Last December its employees had been informed by its owners that the company was in financial difficulty. At the Fitur travel fair in Madrid early this year there had been a protest at the Transhotel stand led by various hoteliers with which it was associated. The response was to announce that the sale of the company to Springwater, the Swiss-based investment concern, was imminent. It wasn't. There was a memorandum of understanding with Springwater, but the investment company later announced that it had no interest in making the purchase.

Prior to the statement to employees in December, Transhotel had been in discussions with another reservations company, Hotusa. These discussions broke down but Hotusa were approached again once Springwater's lack of interest became apparent. In August further announcements were made. One said that there was an agreement in principle for the sale of shares to Hotusa; another that Hotusa had actually bought the company. A few days ago any agreement was no more. Transhotel's owners wanted far more than Hotusa were prepared to pay. Transhotel, despite boasting on its website that it has "the latest technology", was considered to have systems that were all but obsolete, something which had deterred Hotusa originally.

Debts that Transhotel have outstanding to hotels are said to be in the region of 30 million euros, though the total debts may be almost double this amount. Travel agencies may also be affected though their exposure through pre-paid bookings is considered to be low. The company's 500 or so employees, left this time to apparently hear the bad news via the media, are also quite clearly affected.

There is some potentially bright news in that Hotusa, despite not going ahead with the purchase, has offered to take over Transhotel reservations. Questions are being raised, however, as to why Transhotel was continuing to accept reservations when it was planning to file for bankruptcy. The company has been given a period of administration for three months, extendable to four, to try and secure its viability and to negotiate with its creditors.

The fallout from this failure will be good news for Hotusa and other reservations companies such as Hotelbeds, but it is bad news for the industry, which is currently having to watch on while legal proceedings involving Marsans are being publicised and made known to an international audience which can only have its faith in the Spanish industry undermined further by the failure of such a well-known brand name.

The Excursions Industry: Mallorca's travel agencies

Thomas Cook, the Mr. Thomas Cook that is, is attributed with having invented the package tour and the excursion. The trip from Leicester to Loughborough - train tickets and food all in - doesn't sound as though it was a barrel of fun, and the barrel most certainly wouldn't have been rolled out and included in the price; not when the excursionists were members of the Temperance Society.

Thomas Cook, today's Thomas Cook, still deals in excursions as well as package tours. The excursion, as far as tour operators are concerned, is a core part of their business. A Mallorcan attraction's business model may not be wholly dependent upon tour operators and their clients, but it does rely greatly on tour operators; you might be surprised to know just how much influence the tour operators wield with attractions, or there again, if you work for an attraction (or indeed a tour operator), you wouldn't be.

Travel agencies belonging to the AVIBA association reckon that the sale of excursions has declined by around a million over the past ten years. The decline is attributed to a number of factors, but economic crisis is the most obvious one. As such, therefore, there is an obvious question to ask. If economic crisis is so significant a factor, which it clearly is, why are the travel agencies referring to the last ten years and not the last five?

Reports of the decline in excursion sales are not new. In August 2009, the travel agencies announced that sales for that summer were down by 20%. What was interesting about the fall in 2009 was that it coincided with a shortage in the car-rental sector. Yet, rather than excursions receiving a boost from the lack of hire cars, they still experienced a fall in sales.

Three years on, there isn't the shortage of hire cars, but economic circumstances are much the same. The travel agencies now attribute the one million loss in part to the competition from hire cars, whereas in 2009 it was less of a factor. There are other issues.

Anecdotally, the evidence where excursion sales are concerned is similar to that with restaurant sales. Whereas a family might once have bought two or three excursions, they now only buy one, rather like they now only eat out once every two or three days and not every day. This is one issue. Another is the demand for certain types of excursion. 2009 is again quite revealing, as the travel agencies were pointing then to a dramatic fall in excursions to evening attractions; sales of these were down in 2009 by over a million compared with ten years before. The numbers sound rather familiar therefore.

Has this trend continued? Consider the experience of "Daddy Cool". How long did this show run this summer before it had to close? Not very long. It failed to meet expectations. I'm not surprised. It isn't the only evening attraction that isn't meeting expectations. Or so I understand.

While there has been a fall in the sale of excursions, the travel agencies are only part of the distribution channel. Which brings you back to the tour operators that have been pushing excursions ever harder as a means of compensating for any fall in margins on holidays. To the tour operators, you can add the independent excursions operators. And when one considers the efforts of one of these - No Frills Excursions - one begins to see another issue: marketing.

No Frills, licensed as a travel agency but not an AVIBA member, markets itself strongly, especially through social media as well as through multiple outlets (in the north of Mallorca). The travel agencies, by comparison, are essentially passive. They are complaining about falls in sales, but one fancies that they haven't moved with the times in confronting competition of different sorts, not just that posed by car-rental firms. There is also the whole issue of pricing; its own little story and not one I intend going into.

The overall picture would still, despite sales being made by other operators, reveal that fewer excursions are being taken than in the good old days. Yet the bread-and-butter excursions, such as to waterparks or the island tour, are holding up, seemingly at the expense of evening excursions which have the additional complication of entertainment that is now commonly available in hotels. It may not be entertainment of the same high standard, but if budgets are tight, one can understand that tourist purchase decisions might favour the day and not the evening out.

The story of the fall in excursion sales is not all it seems, but then such stories very rarely are. The travel agencies may be taking a hit, but theirs is not the only story in Mallorca's excursions industry.


Any comments to andrew@thealcudiaguide.com please.

Realising Potential: All-inclusives

From seven options as to type of holiday, which one would you think would be rated as having most potential in 2012? The magnificent seven are: all-inclusive, singles holidays, adults-only hotels, city breaks, gastronomy/environmental tourism, wellness, sports tourism. Give up? Well, if you are a bar or restaurant owner, you may already have done. The answer is the first: all-inclusive (AI).

Deloitte, in association with "Hosteltur", has conducted its annual survey of Spanish travel agencies, the headliner of which has to do with potential. Rated from very little potential to much potential, AI has so much more potential than the other six that it outstrips the nearest contender in the much potential bracket by a clear 25%.

As those being surveyed are Spanish travel agencies, the clientele to whom they assign all this potential is also Spanish. The finding regarding AI, while hardly that surprising in terms of its attractiveness, is unwelcome news for the complementary offer that has been less affected by a Spanish demand for AI than that from other markets.

A shift in terms of AI's increased potential for the domestic market is easily explained, as the advantage of a set budget that comes with an AI package is as appealing to a Spanish family hammered by recession as it is to a British family (or a German one).

Along with the British and German markets, the domestic tourism market ranks in the top three most important markets for Mallorca. Until now, it has, unlike the other two, been less inclined to go down the AI route. Economics have, however, brought about a change. As far as spend by Spanish tourists in 2012 is concerned, the survey reckons that 94% of the market will seek to spend the same or less. In other words, it is looking for the best value for money. One can argue whether AI always represents this, but for many consumers, it does.

The survey does not signal great news for businesses outside the confines of a hotel complex, and it also doesn't signal particularly great news for the type of niche holiday offer of which Mallorca has had such high hopes for so long. Compared with the 38% much potential of the AI, gastronomy/environment and sports tourism are rated as having only 4% high potential. Indeed, when it comes to sports tourism, the survey suggested that it has little or very little potential.

This finding will come as a blow to resorts where investment is being targeted towards sports tourism; Alcúdia for example, where both the "estación náutica" concept and the "bienestar activo" (active well-being) plan are intended to both raise the reputation of the resort and eat into the negative effect of seasonality.

A survey is of course only a survey, and this is a survey of only one market and one conducted with a population that isn't totally neutral. Like some travel agencies in the UK form part of integrated businesses with airlines and tour operators, so also are some Spanish travel agencies similarly allied. Nevertheless, travel agencies offer as good a barometer as any other part of the tourism industry in indicating where trends are heading. And if the trends of potential are mirrored in other national markets, it is clear enough where they are indeed heading.

What stands out from this survey is that for all that niche attractions, such as sport or gastronomy, are given such prominence, it is the traditional holiday which still holds by far the greatest appeal (and potential for sales by travel agencies). What has changed is that the type of board that is offered is less traditional, i.e. it is all-inclusive.

It is possible to conclude that the holidaymaker, especially at a time when money is tight, goes for the safe option, which means foregoing a holiday that is less traditional. If so, however, and certainly in the short term, investment of the type that hotels are making in wellness facilities (spas, etc.) does not necessarily appear to chime with what the market wants; the survey rates wellness as only having some potential.

But wealthier markets, such as the Russian market, would probably have a different perception of potential or consumer want. Consequently, the investment in spas would be good business as they would facilitate an upgrading of star rating. The four and five-star hotel is increasingly the future for Mallorca, so long, however, as they hold much potential. And for the Russians, far more than the Spanish, this also means all-inclusive.

Nothing will stop the increase in all-inclusive. Nothing. Other than a change in tourist attitude. And this is not going to change.


Any comments to andrew@thealcudiaguide.com please.

Survey Reservations: Hotels and modernisation

If you are a commercial website, there are a number of things you can do in order to attract more interest in and traffic to your site. I'm not referring to the jiggery-pokery of optimisation or rankings, but to simple publicity, and one way of getting publicity is to do a survey and, more importantly, get the press to mention it and write up the findings.

Such surveys come out with regular frequency, monotony even. Some can be quite useful, but one does always have to be slightly wary. Generally speaking, the methodology behind the surveys isn't revealed. Their rigour cannot, therefore, be verified. The headlining findings are what attract the press, always eager for free copy to fill a space or several, and they are presented without comment or question.

There is a Spanish hotel-bookings site called reservahoteles.com. It has conducted a survey, the findings of which have duly found their way into the media. They make good copy for the press as the subject of the survey, Spanish hotels, is found to be lacking in making attempts at modernisation. It is good copy with which to knock the hotels, therefore.

What is this survey, however? It is in fact one of travel agencies, 22 in all. One of the main findings is that more than 50% of Spanish hotels aren't bothered with investing in "fundamental aspects" of their offer which should now be more or less standard, such as providing leisure and entertainment services and activities or attracting the business and incentives market.

The travel agencies are probably in a reasonable position to judge, but the survey smacks a bit of the monkey and the organ grinder. If you really want to know about hotels' attitudes, what they might be planning and what they provide, wouldn't it make more sense to ask them and not the travel agencies?

Nevertheless, let's be kind to the survey, as it does rather reinforce an image of some hotels. A lack of modernisation in Mallorca is an aspect that the Balearic Government's new tourism law is seeking to address, and there are unquestionably hotels that are so past their sell-by dates that no amount of investment, short of pulling them down and starting again, will ever bring them adequately into the modern world. On the other hand, there are plenty of hotels which are very much of the modern day and which do everything the survey suggests they don't; the Iberostar chain is just one.

The survey suggests that a lack of investment can be explained by a concentration on sun-and-beach tourism and on sun-and-beach tourism alone. It's a reasonable point, but, and this applies to most hotels in most Mallorcan resorts, you run up against the inevitable problem of pursuing business that isn't sun and beach, primarily that of the off-season when everywhere, including the hotels, is shut.

When the survey draws attention to a lack of marketing and a lack of internet presence on behalf of many hotels, it again has a point. However, for many hotels, this hasn't been necessary, as they have been used to others doing it all for them, such as travel agencies and tour operators, while contracts with tour operators make more direct marketing irrelevant and indeed potentially open to allegations of breaches of contract.

If the hotels are contracted, if they know there is little or no business when they are not contracted during the dead winter season, then why should they bother making the sorts of investment in marketing or in attempting to attract business when they know full well it won't be forthcoming? Except of course, they should bother, if for no other reason than that hotels are massively under-utilised and totally unproductive for six months of the year. We've reached a point where, if anything is going to happen to resolve problems of the dead season, someone has to make the first move and not just blame everyone else; perhaps that someone should be the hotels.

But on the issue of the travel agencies criticising hotels for a lack of internet presence, the fact is that the wherewithal does exist for hotels to advertise and market directly and bypass the travel agencies completely. Google's different services, Travelzoo, what Microsoft probably has in mind with its global tourism hub all can leave the traditional travel distribution chain minus one of its core constituents, the travel agents: they should be careful who they criticise and what they wish for.

And there are always of course specific websites through which hotels can market themselves. Hotel reservation? Reservahoteles.com. Survey, anyone?


Any comments to andrew@thealcudiaguide.com please.

Needing Sympathy?: Hotels

Hotels full, record numbers of passengers passing through Palma airport. Oh what a summer. A great summer for the numbers-games players, especially the regional government, which loves the numbers more than most.

The hotels bursting at the seams, and so how do the hotels respond? They intend to put their prices up by 6% next year. It's cashing-in, payback time. A few years of keeping prices down and of seeing margins squeezed, the hotels want their money back.

Whether they get it is another matter. The tour operators, as ever, will have something to say about it. This summer of relative fortune has presumably seduced the hotels into believing that 2012 will be a golden summer as well, so they sense the opportunity to harvest some of the gold for themselves; the only problem is that north Africa will probably bite back and will be pricing competitively.

The hoteliers will argue that, having held prices down and despite the high levels of occupancy, their profitability has either plateaued or gone down. They, like bar and restaurant owners, complain about a lack of in-resort spend by tourists. But put prices up, either of direct sales or through a tour operator's package, and what do they think will happen? The tourist mentality is firmly and primarily wedded to the cost of the holiday itself; spend in-resort comes a poor second in the budgeting process, hence the attractions of the all-inclusive.

Should, though, one feel any sympathy for the hotels? They bring a lack of it on themselves. The constant attack on the residential tourism market and the at-times failures to deliver what it says on the tin and contemptuous attitudes make it hard for anyone to be sympathetic.

This is unfair on those hotels that play fair and treat their customers with respect, but as a body the hotels attract little compassion. The bad apples have the bad experiences they give their guests (or those who might have been guests had they not been turned away and sent elsewhere) plastered all over Trip Advisor, giving themselves a bad name together with resorts and the island as a whole.

Yet the bad experiences are not necessarily all down to failures on behalf of hotels; they can be a reflection of arrangements with tour operators, some of which can change in between holidays being booked and being realised.

The hotels, one cannot emphasise enough, form part of a distribution network in which they are independent of tour operators but also highly dependent on them. This network has four heads: the tour operators, the airlines, the travel agencies and the hotels. In certain cases, three of them are one and the same thing. Guess which one isn't.

Common ownership of three of the key elements in the network is all good business integration stuff, facilitating the regular mantra of "customer demand" to be put into good practice. However, there is another side to it.

Let me cite you the example of holidaymakers who wished to book a particular hotel. They went along to their local travel agency which informed them that the hotel in question was fully booked. This was for a holiday in May. The holidaymakers were offered and accepted an alternative hotel, one that is exclusive to the tour operator, the same tour operator that owns the travel agency. Once on holiday they went to the hotel which they had wished to book in the first place and spoke to people there. The hotel had of course been nothing like fully booked.

The point of this example is that, unless the relationship between hotel and tour operator and therefore travel agency is that strong, hotels can find themselves losing out. So what do they do? Put their prices up in order to compensate?

The hotels with the stronger relationships, which usually means exclusivity, have at least been guaranteed their sales and their money. Or have they?

There have been reports this summer of hotels being unable to meet monthly salary payments because they haven't been paid by tour operators. Which could well be hotels that, prepared to take a tour operator's shilling exclusively, have pared back prices to the bone.

It's hardly surprising therefore that the hotels might want to put their prices up. They can try, but whether they succeed is another matter. And even if they do succeed, getting paid on time is another issue entirely.

Do they deserve any sympathy? Through partially gritted teeth, I'm prepared to say that they do.


Any comments to andrew@thealcudiaguide.com please.