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Budget Travel – Does it have to be a race to the bottom?

In some ways, budget travel operators have replaced a generation of independent backpackers. Obviously not everyone travels with a group luggage tag, but as companies continue to battle in an increasingly aggressive price war, group travel has become more competitive yet harder to sell.

I’ve worked in the budget travel sector for 20 years and lived through the typical barriers to sale. Natural disasters, new competitors entering the market, equity financed buy-outs, volatile exchange rates and political manoeuvring. These have all impacted and caused us to change our strategy for better or for worse.

Ultimately, what remains is a highly saturated market in which few companies specialise. Jack of all trades, master of none. There are simply too many generalists fighting in the dirt for the same customer, discounting wildly and offering exorbitant commissions to agents to secure preferred choice status. Very few are making the returns one would expect in the great price war.

Budget Travel

Discounting has become the norm with customers calling to ask when the next sale is on. Certainly not a question that builds brand loyalty and is the product on offer therefore being dictated by the customer or the competitive industry? The question on my mind is, why should we expect the customer to be loyal to one brand? Digitalisation has given us access to many more immediate choices. Younger travellers are tech savvy and attracted by technology which appeals to them. Airbnb and Uber are evidence enough of this.

We currently live in a buyers market; customers are all too happy to watch tour operators bruise themselves in the ring for a lower price point. A well known U.K. tour operator recently made the unavoidably courageous, yet highly risky decision, to lower their prices by 25% and stop selling via agents. Does this spell the end of the High Street travel agent or give other brands cause for concern?

Even heritage brand’s such as Kumuka, haven’t weathered the storm, have been sold or closed their doors. There are more that have followed suit. Rumour is the powerhouse that was Imaginative Traveller was allegedly sold for £1 and is now the host body for other brands’ creations.

My experience amongst the budget travel youth market is times have changed. Customers are doing their research and shopping around. Offering the lowest ‘from’ price and expecting customers to pay for everything else in destination isn’t enough. It needs to be value product. Failure to do so, and budget tour operators may discount themselves into the scrapheap of history.

Budget Travel companies need to adapt to the changing market instead of trying to dictate it. Building the database from a brand’s legacy isn’t enough. Embrace change or move aside and make space for those who will.

You may ask why a 41 year old claims to know the buying psyche of the Generation Z traveller? Well, given the number of years in the industry, the fact I currently work in the 18-30’s market space, and travel amongst them, I’d say I’ve earned my stripes or at least the right to have an opinion.

Generation Z travellers seek real and meaningful experiences and are happy to pay for them, not just tick boxes. They want quality over quantity. There is a distinct difference between Millenials and Generation Z. Eco-tourism and traditional touring are being replaced by, for example, the more experiential wilderness hiking or a kayaking trip. Late boozy nights are being replaced by a morning run and local cooking class. To a high degree, younger travellers are driven by their social peer network where life is displayed across multiple social platforms for others to see and interact.

Listen to your customers’ feedback; failure to do so will be to your detriment. Survey the customers who didn’t book, they are key to your brand’s future and will ultimately dictate your brand direction. Be pro-active instead of reactive.

Is offering the cheapest price and little value really what your customers are looking for? The bitterness of poor quality remains long after the sweetness of low price is forgotten. In this increasingly social and connected world, word of mouth is the most powerful tool and only the right product and standard will grow your database.

The budget travel-sphere is a rough playing field, as is the ever-increasing pricing war. Be clear that only your customers can grow your business so with this in mind, give them what they will pay for!

If you fancy reading some of my other Asia articles, click the links below:
The big business of wellness tourism
How can cities beat the over tourism epidemic?
Thawing of the Polar market
How much do consumers really care about sustainable tourism?
Millennial family travel market – How ready is your business to adapt?
Emerging Youth Travel Market Trends


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