Bed bank sector ripe for consolidation
Major moves in the bed bank sector have been predicted on the eve of the ABTA Travel Convention.
On Holiday Group CEO Steve Endacott predicted the accommodation-only market will grow by 45% next year despite the collapse of XL Leisure Group and the removal of one of the largest seat only players in XL-owned Freedom Flights.
OHG announced year on year volume growth for 2008 of 42%.
Accounts for 2007 showed its bed bank business making a profit of £336,000 on a hotel turnover of £45.7 million and gross commissions of £7.4 million.
Endacott said: “Historically it has taken 18 months for the flight capacity to be replaced post a major collapse, however the appetite of low cost carriers to expand into leisure routes is much greater now that the credit crunch is impacting impulse buy city routes.
“This in turn will be boosted by seat brokers bringing in aircraft with heavily discounted leases and potentially lower fuel prices than $128 a barrel which is the price major operators appear to have hedged at.â€
OHG believes the major operators are more likely to try to control the dynamic packaging sector by acquisition than trying to compete head on.
Endacott added: “My historical information is that the major operators have a average over head of £23.50 per passenger whilst bed banks are much more efficient with an over head of £6.25 and can therefore trade at lower margins and lower prices.
“These numbers may have changed a bit with the consolidation of the majors.
“However, the basic premise remains that agents can dynamically package to produce cheaper prices, unless they are staved of both beds and seats.
“Hence I can see the logic for the major operators further consolidating the bed bank market.â€
by Phil DaviesÂ
Phil Davies
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