Putting a price on something that customers previously got for free has become a key part of the airline business model and it seems other parts of the travel industry are catching on.
European tour operator Thomas Cook says in its UK market it now makes an additional $13.50 (£10) per person in sales of personalized vacation services.
In years gone by the company would have simply allocated customers a hotel room; now in some of its hotels they can pay to select their own. Similarly, Thomas Cook has realized people are willing to part with their cash to secure a sunbed.
And just like an airline, Thomas Cook will adopt a fleixible pricing strategy to manage these products, meaning their price will rise and fall depending on demand.
Across its group-wide tour operating business, Thomas Cook said sales of these personalized holiday products were up 6 percent in reporting its quarterly earnings on Thursday.
“The improvements in customer satisfaction have come from our focus on fewer, better hotels and our holiday program for summer 2018 is in great shape. Two-thirds of our customers tell us they want to personalize their holidays and we are innovating to satisfy this demand. This includes the successful introduction of ‘Choose Your Room’ across 300 hotels for the summer and, more recently, ‘Choose Your Favorite Sunbed’ which we are rolling out to 50 hotels,” CEO Peter Fankhauser said.
When asked about any future initiatives on a media call after the release of the company’s first-half results, Fankhauser was coy, but we should expect further developments, especially as they have proved to be good revenue generators.
The key to all any aspect of personalization is giving customers more control without them thinking they are getting ripped off paying for something that they used to get for free — something that airlines have had to battle, particularly those at the premium end.
“Of course we make money because the additional service the customer is prepared to pay for that. And with the sunbeds we have, for one week we charge £20 [$27] that is such a favorable deal if you compare that with Italy you pay €20 [$23.60] for one umbrella for one day so you can have our sunbed with an umbrella for £20 [$27] for the whole stay. So it’s extremely attractive for the customer as well with our pricing,” Fankhauser said.
Expedia Partnership Update
Part of Thomas Cook’s plan in recent years to improve profitability has been to focus on the things that it does best. This has meant bringing in other companies to run certain operations.
Getaways and domestic tourism were never big earners and last year Thomas Cook agreed on a deal with Expedia, which effectively outsourced these operations. The partnership in the U.K. and Belgian markets will begin this summer.
Fankhauser was keen to stress that the Expedia tie-up is not all one-way traffic.
“Our strength is our beach holiday offering and our strength is our own branded hotels and we are going to give them [Expedia] selectively and [in a] controlled [way] our capacity in certain branded hotels at certain periods,” he said.
It will be interesting to see what Expedia does with Thomas Cook’s product and whether the partnership deepens over time.
European tour operators like Thomas Cook make most of their money in the second half of the year when their customers actually go on their holidays. As such, the winter and spring months tend to be without profits.
Revenue in the six months ending March 31 grew 7.8 percent to (£3.2 billion), while the pre-tax loss fell 3.5 percent to (£303 million).
Bookings for summer 2018 across the group are up 13 percent compared with this time last year, with particularly strong demand for Turkey, Greece and Egypt. Spain is still a problem, particularly out of the UK, due to price rises and increased competition.
Analysts at Morgan Stanley called the results “encouraging”, while Barclays called them “solid”.