For those who have been in the industry for a few years, it seems like yesterday: yield management was a newfangled word, last minute was still modern, and travel sales traditionally took place between 4 and 6 weeks before departure. In January, tour operators had already filled well over half of their summer capacity.
However, this narrow time frame was neither intended nor controlled. The application period for residual seats was closely linked to the technical possibilities. The organisers’ computers at the time simply could not calculate larger periods with prices updated daily.
Then came new data formats and much more powerful mainframes. This meant that the control period could be extended further and further. Initially, ‘medium-term control’ became the norm. There was a growing realisation that margins could be improved by marketing the product outside of the ultra-short-term competitive battles.
At that time, the market was not yet transparent. Bookings were mostly made directly with the organiser via Toma.
Then came the big time of price comparison systems LMplus and especially Bistro made the market instantly transparent. New data delivery techniques made data volumes possible that would have been unimaginable before. The amount was no longer based on millions, but on billions of data records from an organiser per night.
At this point, if not before, the competition became a ‘price-cutting spiral’. Competitors eyed every price movement in the market and reacted immediately. The market became increasingly price-driven. In some cases, brand loyalty ceased to exist at price differences of just €5.
At the same time, the portals became more and more important. The market became faster, more differentiated and increasingly transparent. The organisers tried to escape from comparability as far as possible. The results were holidays without transfers, long-haul holidays with 3 or 5 days’ stay, etc. All possibilities were used to be represented as far as possible in the top positions when searching for price comparisons.
The question of who has got the cheapest bargain still seems to be a central topic when it comes to holiday travel. While when it comes to cars, buyers are bragging about expensive options, when it comes to holidays, ‘stinginess is cool’ still seems to apply to many customers. This then results in operator yields of one per cent and travel agency yields of less than one per cent – despite fair commission regulations.
The latest evolutionary step in the market is now the automation of yields. Machines and artificial intelligence are taking over the control of parts of the portfolio. Demand-driven and competition-oriented, the price is adjusted like a stock market price. Dates with high demand can quickly rise by a few hundred euros, while dates with low demand can fall dramatically. Price changes no longer feel like they happen on a daily basis, but rather by the minute. And along the way, an important aspect of package holidays is lost: the ability for customers to calculate the price.
There is no easy way out of this price spiral. But rising revenues per booking after Corona make you sit up and take notice. The trend towards better, more expensive, more valuable, more individual and more sustainable holidays seems to have finally arrived – provided it is not a short-term trend caused by the loss of holiday enjoyment due to Corona.
Whether this is good or bad news depends on your perspective. From a travel agency perspective, the news means more money for the same work under existing commission rules. From a tour operator perspective, the news means rising commission costs and the need to adjust commission rules.
The organisers are working hard on products that are not in competition but are exclusive. There are also ambitions to sell these products, if necessary, through exclusive distribution channels – the keyword here is ‘closed shop’.
Controlling sales in distribution channels is also experiencing a revival. No wonder, when sales commission ranges from 6% to over 15%. It should also be borne in mind that sales in one’s own value chain are more attractive than in external value chains.
It is not easy to predict how the market will develop. However, we can safely assume that automated price interventions will increasingly replace the personnel-intensive control processes in yield management. At the same time, operators will continue to work hard to find solutions to escape comparability and to find ways to sell their products without resorting to ruinous price wars and expensive distribution channels.