Article previously published in issue 452 of Tecnohotel Magazine:
The evolution of tourism agencies in Spain in the past two years has been marked by two major external elements: on the one hand, the negative evolution of the economic crisis and progressive contraction of tourism demand and, on the other hand, the bankruptcy of the Marsans group and the subsequent capture of its customer base by other large groups.
In addition to these two major disruptive factors, there are fundamental tensions in two directions in search of a rebalancing: the definition of business models and services in the light of new client behavior, and the readjustments to actual demand among the physical points of sale.
As a result of all the above, 3,800 point-of-sale of travel agencies have closed in Spain in the last four years, cutting the total to 6,300 from more than 10,000 in 2007 (also particularly interesting in this process is that more than half of the closures came in the large tourist distribution groups).
The factors that gradually will be redrawing the distribution map in Spain over the next two or three years are the development of technological capabilities, in both distribution and online sales; access to in-house or more specialized product; the potential for bulk purchase to maximize buying power and operational leverages in environments of maximum pressure on margins.
A new map, although still full of uncertainties, points to very specific trends that are highlighted in the attached infographic.
It is worthwhile to highlight a series of macro business dynamics that help us contextualize the final picture we present here – based on total sales volumes in 2010 – and that in some way provide the infograph with various perspectives.
1. The growth and opportunity is located largely in a combination of offline to online migration and the organization of specialized product for the end user. Large traditional tourist distribution groups still have a marginal online presence in Spain and focus their strategies mostly in defense of their dwindling offline share.
The total volume of business generated in tourism booking in 2010 was about 13.1 billion euros (*), of which only 20% was generated online (2.55 billion) and of that, 73% was generated by the seven main OTAs (eDreams, Rumbo.es, lastminute.com, Logitravel, Atrapalo, Muchoviaje and Destinia).
It should be stressed that the leader of the OTAs in Spain, if we consider its international dimension, is ODIGEO, with sales of over 3.5 million euros in 2011 (encompassing brands members eDreams, Opodo, GoVoyages and Industry), while maintaining growth expectations higher than 25% per year for 2012.
2. The offline sales continue to represent 80% of business volume in tourism booking. More than 10.6 billion euros were generated by travel agencies, implants and call centers in 2010. Of that total, 40% were generated through the large groups and 60% by independent agencies and management groups.
From this perspective, the management groups have the opportunity and the pressure to evolve their business models, from the consolidation of buying power to the development of its management capacities and access to technology, product, high-value marketing – above all customer relations management, branding and online presence and identity – as well as online distribution capacities.
Thus it would look more like the British “consortia” models, and they might be much more effective in improving business volume and associated margins.
In addition, it should be kept in mind that the large management groups that have already gone through a process of consolidation now claim more than 40% of the points of sale and occupy positions two and three out of the top five distribution groups.
Tour Operators: Source of Opportunities
3. Tour operations continue to be an important stimulus and at the same time an excellent source of opportunities, both in the evolution of the business models and in the integration of technology and marketing capabilities as well as more aggressive distribution. Margin pressures and the continued decline of demand for such a long period will impose intense survival tests, not only for small and medium-sized tour operators, but for some of the large groups too. There are persistent rumors about the viability of the summer 2012 campaign of some of the larger volume prestige brands.
In the attached infographic we can confirm the indisputable leadership of different brands of the Orizonia group, followed at a considerable distance by Travelplan, Tourmundial (El Corte Ingles) and the much less prominent Pullmantur – with a heavy presence in cruise sales – and Soltour.
What’s in Store for 2012?
There will be great interest in following the evolution of the new brands of tour operator Barceló Group and the positioning and market share they can achieve in the first months of their launch, especially the summer 2012 period. There is no doubt, that in an environment of contracting demand, the first effect will be a spectacular increase in sector rivalry with the additional pressure on margins and sales channels.
In the area of the tour operators it is worth mentioning also that while 66% of the respondents already recognize the key influence of the online channel in their travel decision and booking. Given an environment of ever increasing customer acquisition costs, there are huge opportunities for differentiation among the main players who can occupy competitive online and mobile environments that at the moment they are available, but will be gradually be filled by “super-specialists” with low booking, distribution and marketing costs, and which in the medium-term will become leaders of specific secondary destinations or specific leisure activities.
In short, a first reading of the distribution map in Spain leads to an interpretation in which the main actors are similar to those of a few years ago, but upon second readings you can appreciate that all the models are subject to competitive tensions that can produce an interesting twist to this picture in a very short time. Moreover, some of these dynamics are already present in a more or less “silent” way over the past two years.
A fascinating and undoubtedly decisive moment for the Spanish tourist market, with as many dangers as it has opportunities, where there is only one certainty: the continued erosion at the foundations of the traditional distribution models demands a faster and more innovative adaptation than the sector is presenting to its market.
Once again, it seems the future will belong to the bravest and fastest.
(*) Note that there are overlaps in the infographic in the sales volumes of tour operators that are integrated into a larger group, as in the case of Tourmundial and el Corte Inglés.