Hearts & Minds In The Travel Agent Sector
Nov 2007
On Boxing Day, travel agents start to set out their stall for the coming year - typically kicking off with an ATL campaign for families glued to the TV in the festive season. 2007 has seen some dramatic changes in the architecture of the travel industry - in terms of consolidation and approach to market - and Pearlfinders has been in regular contact with top marketing decision-makers across the sector to find out what issues will be pivotal in the coming year. This briefing will focus on issues facing the two key players: TUI Travel - the tourism division of TUI created by the merger between First Choice and Thomson (see Pearlfinders UK 19.03.07) and Thomas Cook, which of course merged with MyTravel (see Pearlfinders UK 12.02.07).
We recently spoke with TUI Travel's Marketing Director who has overall responsibility for the company's UK brands, Thomson and First Choice, as well as sub-brands such as Portland Holidays Direct (see Pearlfinders UK 05.09.07). He told us that drawing attention to his brands in the marketplace is increasingly difficult due to the amount of commoditised product on the market. He feels consumers have very little loyalty to one particular travel brand and are instead much more sensitive to price and promotional offers, irrespective of the company selling to them. His main objective is to distinguish TUI's brands and "make them matter" to consumers.
He'd certainly like to inject more creative flair into travel marketing and to work out the most effective way of balancing online and offline campaigns. The thrust of current online activity tends to be more direct response, driving traffic to a transactional destination, while offline has a stronger brand building emphasis - planting the seeds of desire for a holiday and associating the brand with a positive emotional response through seductive TV and outdoor images. If you're looking to make a good impression here, the key is showing you know the market he's interested in: First Choice is middle-to-upmarket families and ABC1 adults. For Thomson, it's older adults, less geared towards families. The grey market is growing for First Choice, and TUI also targets students through the sub-brands and budget brands. One way of improving targeting and relevance of media spend is local marketing, focusing on regional airports and large, out-of-town locations to engage target audiences when they are most receptive. From a consumer marketing perspective, there are some clear objectives for TUI, but our most recent conversations with decision-makers indicate a more pressing issue is to fully realise the integration of First Choice.
When Pearlfinders spoke to Thomas Cook's Executive Marketing Director, he told us about his work with its Head of Channel Marketing to find the right mix of creative support to keep growing the Thomas Cook brand in 2008 (see Pearlfinders UK 28.09.07). He's currently presiding over a period of rapid growth due to the decline of online travel companies such as Expedia and lastminute.com and the success of its own digital presence. Research by PwC has shown many online travel agencies are losing market share as airlines and hotels control the sale of their own content - and prices - directly. Direct suppliers can also offer schemes such as loyalty reward points at marginal cost, whereas agents' promotions are mainly confined to discounts which cut into their margins (see Pearlfinders UK 21.11.07). We're told Thomas Cook has not suffered due to the familiarity of the brand, and the stronger synergies with airlines and hotels - by being more than just a broker. Also customers are more comfortable with buying more expensive holidays online in the knowledge they can get support from a local branch or over the phone if something goes wrong.
He told us he is currently fighting a battle to acquire customers from TUI Travel and win over those brand-loyal to MyTravel, who are now up for grabs following the integration of the brand. The other key to maximize profitability is upselling on items such as car hire, greater baggage allowances, hotels at the airport and the company's suite of financial services. By strengthening the company's website in terms of usability making it a better platform for all travel needs, he aims to develop the brand online to a market leader status.
Despite the large market share the two companies have, agencies should not assume that budgets are huge, or larger agencies preferred - in fact the new ATL campaign for Thomas Cook is being delivered by a small agency. More important is that external marketing support is streamlined: fast moving in responding to market conditions. Often, a concept needs to be executed within days of identifying the need to take advantage of a small window of opportunity.
Pearlfinders thinks TUI and Thomas Cook will need to work hard to preserve their relevance in the sector. The marketing directors of both companies identified the importance of extending customers' engagement with their brands - making them matter, but also developing the personalized aspects of their online portals. We think this will become even more important in 2008 as smaller travel service providers cut out the middlemen and improve the usability and marketing for their own transactional websites. While major companies such as British Airways and Intercontinental Hotels are already taking full advantage of this trend, other airlines, hoteliers and tour organisers will continue to nibble away at Thomas Cook and TUI's profits if they can't keep hearts and minds of consumers via coherent and emotive brand messaging.