Published on Saturday, October 8, 2016

Undercutting is not for the long-term. Demise of volume players.



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The recent insolvency of Low Cost Travel Group, one of the large players in the travel industry had a big impact on the travelers, hotels and all related players from both wholesale & retail arms. There were about 27,000 people on a holiday who had booked through the company comprised of a €200 million wholesale arm and €500 million OTA / retail arm.

It's not the first time in our history that a seemingly invincible travel company has gone broke. Just a few months ago Gateway, Belgium went down under. As also was the fate of Transhotel about 2 years ago. All these companies had a similar strategy of growing unsustainable volumes by selling below operating cost.

So where to from here?

The larger wholesale companies are going to be reviewing all of their contracts with all of their supply chain starting immediately. It will now be very difficult for the next 12 months for new players to enter the market as everyone gets a little more cautious. As if recent political, terrorism and financial events have not been enough of a challenge to the industry.

Consumer confidence in online travel agencies will take a significant hit. It's now for the travel agents to let their customers know.

Concludes Prakash Bang, founder of roomsXML.com, "Undercutting, discounting, price gimmicks, cash-backs and the likes are not going to work. Travel agents should realise that there's no free lunch. It's in their interest to opt to work with companies that are profitable… these companies are likely to be around when times become tough!"


 

Prakash Bang
Managing Director
roomsXML Solutions Limited
[email protected]

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