next big merger - 1st choice and TUI

[carolfoy]

The TUI group (thomson travel) and First Choice have now merged making the big 5 the big 3 - first choice/TUI are now TUI travel, thomas cook/mytravel are now 1 and then theres Cosmos still by themselves.

don't expect any major changes immediately and any bookings made with first choice and/or Thomsons will stay the same, they are both fully bonded. Whether this may mean a pool of aircraft waits to be seen.
It poses good and bad for both companies, obviously Thomson have been the charter leader for years but have recently been over taken in customer survey by First Choice, so it means a really good range of destinations, aircraft and customer service. It will almost certainly mean a rebrand and many shops and call centres shutting. Thomsons have cut call centre staff numbers practically in half recently.
Also if First Choice follow Thomsons down the route of not paying independant travel agents any commission then they will be destocked and may join Mytravels near demise when they did the same.

any questions fire away, I may not be able to answer all of them but can try and find out any info you need

 

[Cochise]

Carol,

In the long term do you think this is bad news, surely the lower amount of major players means the choice goes down and the price goes up. Is this more case of the FC group being swallowed up by TUI as worldwide it is surely a bigger company?

 

[carolfoy]

Rob, I think you're right, in the long term this probably will mean a higher price but hopefully we'll get better value for money. Thomson group were the first major charter into an awful lot of european destinations, their loyalty to those airports often mean they have the best flight timings, their european holdings could mean that the average price of the med holidays go up to match the price the German and Italian markets pay (a lot more than the UK!!! believe it or not).
What difference it'll make to mid and long haul waits to be seen. I hope it'll double the number of flights into a lot of places which could mean a higher market for low cost/ no frills style flights but more than likely will mean a cutting of number of flights to those routes.
First choice though have more regional flights than Thomsons and operate a larger Irish market too.
Waiting for trade news and opinions at the mo. I'll keep you updated

 

[carolfoy]

just adding that thomsons Tui are now a 51% holder so its likely to First Choice flights that will be cut on doubled up routes. My guess is that TUi will want your average spend to go up in accordance with your German French and Italian counterparts.

 

[Obi Wan Kenobi]

here is the official press release

http://www.firstchoiceholidaysplc.com/fchplc/uploads/mediapress/1FC_TUIFinal19307.pdf

 

[Cochise]

I would like to think that the room to hike the prices is not there especially with the higher taxation of this area recently but again i think the UK will just put up with it instead of voting with their pocket, also if the tories plan to tax holidays VAT style i think you are looking at a possibly collapse of it all. I refuse to pay package prices 100%, why i would pay the prices they want me to pay to sit on a med beach!! astounds me.

 

[Obi Wan Kenobi]

Is there now not a concern within the Travel agencies Carol, that we are seeing the end of travel shops?
Will the removal of more choice and probably (as within scheduled airlines costs,) a levelling of the prices and amount of places available force the more savvy into DIY holidays and the rest into longer gaps between the big holidays?

When you add this to the pressure from Government on only taking holidays in school breaks and the anti-flight environmentalists, are you going to be a dying trade?

 

[carolfoy]

yes, Obi, travel shops are certainly a dying trade but again, there will always be a demand for quality, over the past few years many independant shops have done things like charged for people to take brochures (after all why should we be just a library for people to choose from when we have rates wages etc to pay?) but also there are many people who book through agents because there is no experience like someones real experience, many package style shops may close but more and more companies that go through agents only are on the up.
If you just go to a specific destination and don't require any advice or local knowledge (usually cos you've been before) then why not book direct over the internet? I do, after all. But there are many places that people want to venture to where its really good to get honest impartial advice.
Also judging by the increasing amount of fraud and people who now come into our office sheepishly explaining that they they've just had stuff cancel on them/got somewhere to find their holiday didn't exist/got ripped off and left without a component I think theres still a trade out there, but like all high street retail you have to really earn your booking.
Music shops/Book shops/electrical goods suppliers these are all companies that are now going down the hole due to increased internet shopping.
the High Street is changing everywhere as we become a lazy nation of no personal interaction!

 

[wils]

Thanks for posting this Carol - facinating stuff! It will be interesting to see how it all works out

WRT ask me anything thread on reflection if I could retrain I think being a rebranding consultant would be lucritive! I was involved in a rebranding exercise once and it was facinating.

 

[Minniespal]

Thanx for posting this Carol

 

[carolfoy]

I was just thinking, if anyones considering booking a holiday with either one of these two companies haggle for a major bargain! the own brand shops will be desperate to get their head count bookings up despite revenue and profit just to prove they should out stay their opposite number when it comes to shop closures.

 

[carolfoy]

**bumped** in case anyone has any queries

 

[Hilary]

I'm hoping this will be good news for regional long-haul departures (okay, I just mean Florida, really! )

We arrived home this morning after trying First Choice from Bristol for the first time - and we were really pleased with the price / service and SPACE! Their advertised long-haul leg-room lived up to expectations and is definitely more spacious than Virgin or BA economy . We haven't flown long-haul with Thomson for a few years, so they may have caught up with First Choice on leg-room now, but I wouldn't like to go back to their old seat pitch if they share aircraft on First Choice routes after the merger.

I'll be disappointed if the merger leads to any cut back in regional routes.

 

[carolfoy]

thanks Hilary, I was just asking you on your thread what you thought of them.
thomson will be catching first choice up this year and next with their plane refits, i hope it'll mean an increase in regional routes as passenger numbers should soar for the combined routes. their leg room and service now does out weigh virgin economy - a point mr branson should be trying to resolve.

 

[SimonV]

Some great thoughts and insight here, Carol. My own opinion is that the big TO's have a lot to do in future to compete with the low-cost carriers as it is so easy these days to book DIY holidays, even to the mass market destinations where the TO's have ruled in the past. I can see some of them becoming glorified low-cost carriers themselves in some instances as, increasingly, people just want the flights and will sort out the rest on their own. Companies need a really good online presence nowadays and, if they can back it up with good res staff (as Attraction Tickets Direct do, for instance), they ought to become the dominant players in future. The internet is changing things for everyone, and I don't know that many people can really see where some businesses are going yet. I'd like to think the growth of the low-cost airlines will ensure the TO's can't raise their prices very much, even if they are reduced to 3 main players (plus the revamped XL Travel Group and Virgin), but it's probably a bit too early to say for sure.

Watch this space, as they say. But please keep us up to date from the front line, as it were!

 

[terrynewpack]

It can only mean one result. Fewer flights and higher prices. Generally bad news for the consumer and for some of the employees of these companies. 4 charter companies reduced to 2 in a few short weeks is not good news. These charter companies are basically the 'low cost' airlines on this route and they are showing that individually they can't compete.
Regretfully the current state of declining travel between the UK and Florida means that the chances of anyone else entering this market is nil and likely to remain so for a number of years.


Terry

 

[Obi Wan Kenobi]

I wouldn't be so pessimistic Terry.
The greater problem for these holiday companies as I see it has been the effect of Low Cost airlines into European destinations and the generations coming up who prefer to DIY it than a package trip to spain, portigal even Eastern europe etc...
Florida has already seen a greater amount of DIYers, and the flight prices with major carriers and charter airlines has shown this.
There will be the same amount of hotel rooms available in Orlando/Kissimmee area and the owners will be more prepared to do deals direct to fill the rooms that the holiday companies would have once taken up.
We have seen the over capacity of vacation rental homes, which in turn is bring these prices down.

 

[carolfoy]

I agree Obi - it certainly doesn't mean the flights will be halved, it may mean that extras like overseas reps may be redundant but as more and more people are travelling and with rumours low costs like easyjet are going to be starting long hauls soon it may be good news for passengers who want a cheap charter but don't necessarily want a package or the real basic travel of the low costs. After all when Thomson have refitted their entire existing fleet then both them and first choice will be hosting better legroom then Virgin in economy.
They have maintained customer loyalty quite strongly over things like their refusal to charge the passenger the extra APD and passengers do remember such things.
The biggest change will be the number of high street shops that go, and I doubt that will happen for around 2 years. The rebranding hasn't even started yet and it takes ages.

 

[SimonV]

Jeremy Skidmore, a well-informed travel industry commentator, has just published an opinion piece in the Travel Mole news pages, which is worth reading. It is rather a long and rambling piece, with a lot of 'insider' detail, but he makes some interesting points about the deal as it pertains to pricing. The full story can be seen on www.travelmole.com. But here are his main comments:

"The TUI/First Choice merger will be of little benefit to holidaymakers and is a disaster for the staff who will lose their jobs. But it is an excellent move for the companies and, interestingly, their rivals.

For years, holidaymakers have benefited from overcapacity in the market, with four giants slugging it out and discounting until their hearts' content.

Co-operative Travel Trading Group chief operating officer Mike Greenacre predicts cheaper package holidays from the deal. Is he having a laugh? They could hardly be any cheaper.

These two will consolidate in popular resorts and reduce capacity in certain areas. Of course they're not talking about pushing up prices, because the competition authorities are watching closely. But it's a natural market condition following consolidation. They're doing the deal to make money, not give it away.

Holidaymakers may even have to pay a realistic price for packages for a change, but it shouldn't give them too many sleepless nights. Competition is so intense, they'll still be able to fly abroad for a relative pittance. That, incidentally, is why I expect the deal to get the green light. A merger of such big players would have been laughed out of court ten years ago, but times have changed. It's also a lot of nonsense to say that customers will benefit from the combined companies offering better quality holidays. You can already buy quality holidays from these operators and their subsidiaries. I can't see much changing in that area.

Many staff will lose out because there are bound to be massive job cuts. The main reason for crunching together two companies is to take out costs and cut out duplication. The two companies believe they can achieve pre-tax cost benefits of at least £100 million per annum by merging.

But it's a great deal for the two operators, particularly as TUI has focused on beach operations and First Choice has concentrated on building up their portfolio of specialist businesses. And, of course, because of those cost savings that will be achieved.

The deal was also very necessary. You may have noticed that TUI Northern Europe, which includes TUI UK, saw 2006 profits fall to 81 million euros from 103 million euros the previous year. Without consolidation, increasing profits would become ever more difficult to achieve.

So, the two companies' bank managers must be putting on their mickey mouse ties and dancing around their offices.

I also think there are great opportunities for others in the market. These two companies will be inwardly focussed while they sort out their merger and may well take their eyes off the ball in mainstream tour operating. Also, any reduction in capacity is good for all players.

Furthermore, they are talking about Expedia and Travelocity as the new competition – a comment that sounded weirdly like something from a 1999 ABTA Convention – rather than any other operators.

Meanwhile, hundreds of agents will disappear off the high street, easing the pressure on those that remain.

Yes, TUI/First Choice will be a formidable monster. But if I was a competitor I would be secretly delighted by the merger.

 

[carolfoy]

It's also a lot of nonsense to say that customers will benefit from the combined companies offering better quality holidays. You can
already buy quality holidays from these operators and their subsidiaries. I can't see much changing in that area.

I don't agree with that statement, I think the two biggies will now be fighting hard against each other to give a much better customer service
and quality level, the new TUI group won't stand for being known as cheap and no frills against the MY/TC group, for instance.

But it's a great deal for the two operators, particularly as TUI has focused on beach operations and First Choice has concentrated on
building up their portfolio of specialist businesses. And, of course, because of those cost savings that will be achieved.

Thomson (TUI's biggest known operator in the UK) has had a much bigger reach than just beach holidays, true, its stupidly scrapped specialist
ops like The Magic group but has really reached into the cruise and city break market

I also think there are great opportunities for others in the market. These two companies will be inwardly focussed while they sort out
their merger and may well take their eyes off the ball in mainstream tour operating. Also, any reduction in capacity is good for all players.

Now this is a totally true point - excel group and cosmos group are going to be laughing, rebranding totally throws customers out of sync and
they really turn towrds a name they've seen before, also cosmos are pretty competitive on long haul so have a real chance to get a foothold in
the market.
I still reckon anyone looking to get a deal NOW! should battle their local TAs against each other as each shop will be wanting to prove their
headcount before the battle of 'which branches get closed'.