Covid has really highlighted why the Travel Industry Needs a Different Business Model – a Message from a Marketor

I started to write this Comment in May 2020, when there were many thousands of people all over the country who were either waiting for illegally retained refunds due on holidays, hotels or flights etc., or else being coerced into accepting vouchers for same. I waited to see what would transpire, and have decided now is a good time to finish it off!

The reason being given by all these organisations at the time was that if they paid everyone they owed money to then they would go out of business – which is actually true! (all except for BA who had billions in hand!)

However, this sob story, although mostly true and none of us would want to see that,  does have some exemplars wherein, for example, there are those owning and running such businesses who are actually trying their hardest to liquidate their personal assets in order to stay up and running – thank you and well done once again for showing bold leadership, Sir Richard Branson and Virgin!

But please can I offer a thought here, which is likely to get me some ripe comments and response from the industry, but is also grounded in a practical reality, usually called Marketing?!!

When we go to a store to buy a product we take our money (in whatever form we wish) and we hand it over in return for the goods. Sometimes what we want has to be put on order by the supplier so we typically handover a goodwill 10% to prove we do want it, and then pay the balance on delivery of what we bought.

This is the same with services. If we book a plumber, electrician or other tradespeople, they turn up, complete the job and then get paid.

All very simple, reasonable and fair.

Even high value items like houses and cars, the same rules apply – deposit then balance on delivery of product / service.

I know there will be those who will throw exceptions at my observations here but please ride with me – I’m not charging!

Why then, is it very common practice in holiday and hotel bookings (not all) to bill you for the full amount well ahead of the delivery of any product or service??!! Some of the big and quality hotels will always allow you to cancel up to 24 hours ahead at no charge – which is great – well done and praise for them. However, there are others, some big names who I won’t shame here, who charge a non-refundable full payment.

The airlines, all of them, bill you for the whole fare up front when you book and have various cancellation policies in place – none of which work when we get crisis time arrive as we have this year. Then we just have to live with games and delays, like being made to call if we want a refund, in many cases not even being told a refund is an option, although legally a must, and when we do call finding that phones are simply not being answered! Thank you BA! I must say that Easyjet have been an exemplar – living up to their name by making it very easy to choose a refund or move the booking, and delivering on their promise – I am impressed and take my hat off to them.

I won’t go on any more about the hundreds of examples out there…..but after the last two days (Aug14/15 2020)will add this.

Tens of thousands of British tourists in France joined a desperate scramble to return in time to avoid 14-day self-isolation rules which took effect from 4am on 15th.

People snapped up the last available tickets for planes, trains and ferries back to the UK, with some airlines facing heavy criticism over significant price rises. Allow me to use a quote from Sky News:

"We've seen some airlines hiking prices for people scrambling to get home from France, while also refusing to refund or offer flexibility to those in the UK who can no longer take their holiday by claiming schedules are operating as normal - despite government advice against all but essential travel…… The impact on trust in the travel industry has been devastating.” (travel editor of Which? Magazine)

That last sentence, whilst worth repeating, is way too late…..trust has already been decimated.

At a very simple level, without getting into financial technicalities, most businesses that we all deal with daily operate a model where they sell you something, you pay them money and take it away / receive it, and then they can use that money to run their own business. Like you and I, the money they have is theirs to use for cash flow –  essentially they have no remaining liability to you.

When the travel industry takes your entire sum off you for a flight, or holiday / hotel booking, they often actually use that to fund the cash flow needed to run their business. This is a dangerous model ordinarily, but when things like Covid19 arrives (and I know it is an extreme situation) then it is absolute disaster! In practice, they have already spent the money they need to deliver yours and my “product” so when the income dries up – a huge black hole appears and you and I end up where we are now. The industry breaking the law, with Government looking the other way because of the enormity of what an industry meltdown would do, whilst we all see our plans not delivered and our money out there as a loan to the industry whilst they sort themselves out!

Now before al the cries of angst start coming in as to how impossible an alternative might be, let me use a couple of examples of other exemplars of the travel industry.

Trailfinders, one of the biggest holiday organisers in the world, don’t use your money until after you go away. They operate a similar process to solicitors, and have an equivalent to “client accounts” in which they deposit your paid funds and do not use them to run the business until AFTER you have gone away. As a result, if you need or qualify for a refund it is no problem at all – they give you back your own money which they haven’t touched!

Another way of doing this in a legal sense is keeping the money in escrow – basically a neutral account which neither side can touch until after an agreed date / point.

And then there is One Traveller, a well-established provider of Mature Singles holidays. They have been offering an easy option to refund, repeat book for next year or else, uniquely I think, leave the money with them and take up to two years to decide how to use it. On its own that is remarkable, but setting it totally apart is the fact that those who choose to do that receive a 25% bonus on that money! Well Done indeed!

In summary, during this pandemic, the Travel Industry, in particular, has shown itself to be woefully inadequate and unfit for purpose. ABTA, a useless, toothless posturing organisation, and the Government both need to bear some responsibility for the complete “train wreck” that this industry’s operating model has left behind it. Including breaking the law and getting away with it.

If they all stuck to basic marketing principles and put the Customer first, and built their operating model around that, then we would ALL be in a much better place…maybe even in that sun we had booked!

Who knows how much more pain and financial misery will have to be endured by the general public before all this is finally resolved??

 

This Thought Leadership blog is one of a series written by Marketors to provoke debate and help make marketing more relevant to businesses and society. If you would like to share your wisdom, please click here for details and how to get in touch.

Share this post

About Us

The Worshipful Company of Marketors is a City Livery Company. Members of the Company are on the way to achieving, or have achieved, mastery and excellence within the Marketing profession.