Jet2Holidays

Upon their departure from MyTravel in 2003, Steve Endacott and Bill Allen established the On Holiday Group. Their vision was to harness the dynamic packaging revolution they foresaw, reshaping the UK tourism industry over the subsequent decade.

Three key factors driving this were.

• “Just-in-Time” Holiday Creation was facilitated by Low-cost carriers. 

The emergence of low-cost carriers provided the necessary impetus for growth, enabling Dynamic Packaging systems to generate millions of holiday options overnight. This was achieved by amalgamating flight options with hotel inventory sourced from bed banks, thus enabling the creation of holidays booked in a “Just in time” manner once the customer selected the desired offering.

• Conflicting “Yield Models” existed. Tour operators aimed for 99% load factors and would reduce flight prices close to departure to maximise utilisation. Conversely, low-cost carriers applied a yield management approach from the outset, with low initial prices that increased with every four seats sold and only 90% load factors targeted with high prices near departure. Dynamic packaging, therefore, offered considerably lower prices than those in tour operators’ brochures, with late sales based on seats provided at no risk and below cost by the tour operators. This unsustainable strategy was a major contributing factor to the eventual disappearance of major tour operators.
• The advent of the Internet. Previously the major operators owned 60% plus of all Highstreet agents, allowing them to effectively control holiday distribution and directionally sell to their in-house tour operations.  The internet allowed new entrants such as On the Beach and Travel Republic to show customers lower dynamic packaging holiday options with much wider flying programs and bigger choices of hotels at lower prices.

Creating Jet2 Holidays

In 2007 the On Holiday Group (OHG) reached a ground-breaking deal with the regional low-cost carrier Jet2.com to create a new holiday division for the airline powered by OHG’s Dynamic Packaging technology, with beds being supplied exclusively by the group’s Bed bank division.

This operation proved highly successful and is now the UK’s Largest ATOL bonded tour operator.

Steve Endacott the CEO of OHG who headed the project puts its success down to the following key factors.

1. Hidden Flight Discounts: Low-cost carriers routinely monitor each other’s pricing and frequently match any reductions. On Holiday Group (OHG) persuaded Jet2 to offload seats from underperforming routes at £50 per seat discounts into non-opaque package holidays, a sector which competitors were neither monitoring nor operating within.
2. Implementation of Low-Cost Yield Model for Holidays: Like flight prices, holiday prices began low and followed the same pricing trajectory as flights until the seats were offloaded at a hidden discount, primarily in the last-minute market. This strategy was designed to uphold high prices, thereby incentivising early flight-only bookings.
3. Employing Cross-Referral Advertising: Jet2.com held a dominant position in regional above-the-line advertising, driving significant brand traffic to its airline website. By cross promoting this traffic with holidays, they significantly reduced the cost per customer acquisition, outperforming both traditional tour operators and online travel agent competitors.
4. Holidays are treated as a core product. Competitors such as Easyjet wasted many years as they regarded Hotels as an ancillary sale and did not embrace holidays as a separate market requiring a dedicated focus.
5. Embracing independent high street agents. Jet2 Holidays permits agents to determine their own margins while incorporating a modest 6% commission. Agents must therefore charge higher prices than those on the online site. This essentially equates the cost of sales for third-party agents with that of direct channels, making their usage a “no-brainer” decision.

Learning. Don’t try to make too much profit out of a partner or they will simply take the best of your ideas and recruit their own team to manage the holiday business. Also, check all contract breakage penalties for maximum damage limits!!