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Funding the travel industry
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Nebulous2
Posts: 5,673 Forumite


I've said before this crisis has shown the unsuitability of the current funding model.
We pay huge sums of money often a year in advance and the industry uses much of it as working capital. When diaster strikes and we need it back - it has gone.
Contrast that with what for many people is an even bigger purchase, a car. We pay a modest deposit on ordering and the rest on delivery.
Seems like the industry agrees the funding model needs fixed.
https://www.travelweekly.co.uk/articles/386393/tour-operators-consider-insisting-travel-agent-customers-pay-them-direct
We pay huge sums of money often a year in advance and the industry uses much of it as working capital. When diaster strikes and we need it back - it has gone.
Contrast that with what for many people is an even bigger purchase, a car. We pay a modest deposit on ordering and the rest on delivery.
Seems like the industry agrees the funding model needs fixed.
https://www.travelweekly.co.uk/articles/386393/tour-operators-consider-insisting-travel-agent-customers-pay-them-direct
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Comments
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Valid point and worthy of discussion in the New World. Equally I think the margins in travel are wafer thin as customers seek "Cheap" holidays.
Few probably look to buy a cheap new Volvo or BMW from the dealership, instead will look for a car that suits their needs or from a car manufacture they trust or aspire to buy from. For holidays there seems to still be a sizeable proportion of people who consider their holiday needs as secondary with cheap price being the main search criteria. They then buy on price with little or no research on who they are giving money to, only afterwards complaining that the holiday purchased doesn't meet expectations. To feed these cheap seekers lots of online companies entered the market, often trading from overseas and many having very limited staffing and resources to reduce operating costs. When things fall out of the ordinary operation, chaos often follows with customers left trying to sort out a mess.
Like you I would like to think that the way the industry operates will change - but also hope so will customer behaviours. Possibly licencing will be different, bonding, rules on working capital. Who knows. I suspect however despite the current examples reported on these boards that the main issue will be consumers behaviour. People have short memories and price often sways - even £1 cheaper. Wishful thinking?2 -
We had better ignore who it was who made the comment.....
This crisis has really made everyone think of the best way forward. No one should be in the business of losing money, either as a consumer or supplier, but many of the problems have been caused by airlines unwilling or unable to refund to either direct customers or to agents and operators who made the reservation in the first place. There is a very interesting proposal to prevent that happening again, payment for the ticket would be made, as usual, so the airline is guaranteed to be paid but not made available to the airline until the date of travel, so that the funds could be returned if the flight fails to take off, for whatever reason. There is only one fly in the ointment, the airlines won't agree as they have been living on 'unflown revenue' for years.
There is however a big difference between buying a car and a holiday. In fact, I bought a new car about 6 weeks ago, the dealer probably made a profit of £2000 and the manufacturer considerably more. But if my bank transfer (they refused to accept payment by debit or credit card) had failed, the car could have been sold to someone else at a later date. A holiday is perishable when check-in closes and the seat isn't sold, the holiday is lost and the tour operator may still have to pay for the seat and the accommodation. Two weeks ago a small operator sent an email out on Friday desperate to sell holidays departing on Monday to a Greek island at half the usual price because clearly he had committed himself to pay the airline for the seats and the owner of the apartments for the accommodation. If he didn't sell them, he still had to pay.
On average holidays sold in the UK are cheaper than the same holidays sold in Holland, Germany or France. We are used to getting a bargain and as Westin says, even though you will find hundreds of complaints about the failure of some online agents to communicate or even refund, next year people will still search for 'cheap holidays to Spain' and book with the same or similar company because they are a pound cheaper than the next company. If we want things to change the cost of holidays has got to change too...
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Nebulous2 said:We pay huge sums of money often a year in advance and the industry uses much of it as working capital. When diaster strikes and we need it back - it has gone.
The sheer scale of the redundancies in the travel sector illustrates how fragile and low profit margins are. There's little fat in product pricing. RyanAir made a pre tax profit of around £5.70p per passenger in 2019.0 -
Agree with all. I think the day’s of budget holidays are numbered along with budget airlines and all the numerous “agents”. People will book direct with the airline and I can see a reversal to when only the rich could afford a holiday abroad. Hope not but...
as any flight prices are reliant on supply and demand, maybe there will still be bargain flights to be had?
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Flying now is cheaper than it's ever been.
Much of the reason for that is the dynamic pricing system. You could be sat on a plane having paid £25.99 and the person next to you could have paid £125.99. You don't see those % swings in new car prices. It would be very hard to implement dynamic pricing without upfront payment.
I'm not saying the current system is perfect, but be careful what you wish for. Regulated flying with fixed airfares was what made it so expensive in the past when foreign travel was exclusively for the rich.
Nobody has to pay for a holiday a year in advance of course. You choose to. You could leave it until a few weeks before you travel, obviously running the risk of less choice etc1 -
bagand96 said:Flying now is cheaper than it's ever been.
Then if you consider how budget airlines operate it's on the basis that their planes are in the skies as much as possible as airports charge them for the time their planes are out-of-use and they make money from when their planes are in use.0 -
Nebulous2 said:We pay huge sums of money often a year in advance and the industry uses much of it as working capital. When diaster strikes and we need it back - it has gone.0
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epm-84 said:bagand96 said:Flying now is cheaper than it's ever been.
You're absolutely right abut the unforeseen and completely unprecedented nature of the 2020 Covid-19 problem. Nobody could have foreseen the virtual complete stop of international aviation for a prolonged period. Be they an airline, a tour operator, a travel agent, or a consumer. The entire industry just was not prepared for it and ground to a halt on many levels.
There has been some talk in Germany of airline's not receiving funds until a flight is flown, with some groups calling for it. Whether it could work or not with the way the industry currently works I don't know.0 -
bagand96 said:epm-84 said:bagand96 said:Flying now is cheaper than it's ever been.
You're absolutely right abut the unforeseen and completely unprecedented nature of the 2020 Covid-19 problem. Nobody could have foreseen the virtual complete stop of international aviation for a prolonged period. Be they an airline, a tour operator, a travel agent, or a consumer. The entire industry just was not prepared for it and ground to a halt on many levels.
There has been some talk in Germany of airline's not receiving funds until a flight is flown, with some groups calling for it. Whether it could work or not with the way the industry currently works I don't know.0 -
epm-84 said:bagand96 said:epm-84 said:bagand96 said:Flying now is cheaper than it's ever been.
You're absolutely right abut the unforeseen and completely unprecedented nature of the 2020 Covid-19 problem. Nobody could have foreseen the virtual complete stop of international aviation for a prolonged period. Be they an airline, a tour operator, a travel agent, or a consumer. The entire industry just was not prepared for it and ground to a halt on many levels.
There has been some talk in Germany of airline's not receiving funds until a flight is flown, with some groups calling for it. Whether it could work or not with the way the industry currently works I don't know.
Not only do you have the customer promise but also a small deposit and the balance due three weeks before you travel.0
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