Reader response to an article in Eyefortravel.com

Timothy J O'Neil-Dunne
Managing Partner
T2Impact Ltd, Global Travel eBusiness

I have to take issue with David Burns on the basis of his supposition. Far from the case where the suppliers margins are tightening – they are indeed expanding. For proof you need look no further than the FT or the Wall Street Journal.

Airline profit margins are running at close to some of their highest in years, at least they are the best since 2000. Yields are up across the board in Hospitality and Airlines. Almost everywhere you look there is a another report of health in the finances of the major players. This significant reversal in fortune is driven not by the cost of fuel but by the shortage of supply. Fundamental economic forces that have reduced the availability of supply in the for example US market (New Orleans) coupled with a strong increase in demand for travel products leading to raising of margins. Ignoring the likes of Ryanair and other smarter (financially speaking) suppliers, British Airways and even United Airlines are reporting “very nice thank you” profits.

Where I will agree (but for different reasons) is the need to control costs and reduce or cap fees by the industry. If (which is in our opinion only temporary) the TMCs are enjoying higher margins it will be short lived.

At T2Impact we see that there is a shift away from the traditional intermediary market towards a more balanced mix of supplier direct with Intermediary channels both online and offline, this is clear. The impact, our analysis has shown, results in an effective cap on the fees that can be charged by an intermediary (on or offline, Touchless or Full Service) to either a leisure or corporate based consumer. However a new conflict is emerging; the Suppliers globally are on a mission to move the cost of the distribution system to the intermediaries and users. So far they seem to be quite successful. The big squeeze for any intermediary will be how to accommodate this shift. That my friends will not be accomplished by marginally tweaking the current model. Radical change is in order.