Kuoni can be Trade Friendly without being Trade Only

So Virgin Holidays has decided to stop offering its products for sale through travel agents, saying: ‘It’s just the way things are going these days.’


The rationale, according to Virgin Holidays is that when they sell through the trade they don’t talk to the customer directly and they need to make sure that the booking experience is in line with theirs, which they can only do if it’s direct with the customer.


But hang on… is this really just the way things are going these days? I suppose that depends what they mean. If your strategy is to constantly and aggressively offer lower prices in your own channels than in other travel agents then of course that’s the way things are going. No sensible agent is going to support a tour operator that blatantly undercuts them on its website – there are only so many 10% weekend discounts an agent can take before they decide it’s not worth the biscuit anymore.


Coincidentally 10% is the share of Virgin’s business that was left with the trade before today’s announcement – surprisingly high in my view when you consider the barriers that were put in their way.


Another blow to the ‘just the way it’s going’ argument is Specialist Holidays Group’s decision to launch a trade only long haul brand under the TravelMood banner this week. Ignoring for a moment the fact that this news has been greeted with deep scepticism by the trade, SHG has recognised that trying to line up trade support alongside in house distribution with preferential pricing is almost impossible, but rather than give up and walk away, they have concluded that third party distribution can be a valuable asset.


So what of the customer ownership argument, the one that goes 'we’re a customer focused business so we can only operate if we own the customer relationship from start to finish'? In reality, there are very few businesses that are able to manage the full end to end experience with the customer – even Virgin Holidays will still be working in partnership with hotel chains, car hire companies, Disney and many others to ensure that the customer experience is delivered to their expectations.


Major brands often invest a significant proportion of their marketing on third party distribution experiences; think of L’Oreal counters in department stores or franchised Mercedes Dealers or approved Apple outlets. All of these require a high investment from the supplier to ensure a seamless customer experience in keeping with the brand values. The advantage though, is that third party outlets can provide massively wider brand exposure with a variable cost linked to turnover. In other words you get all of the branding benefits but you only pay when they sell the product.


Here’s what we think at Kuoni. We really value trade distribution – we have a brand that was built by the trade – and we believe in partnership. In truth, we were too reliant on a small number of high turnover agents (the multiples) who saw an opportunity to switch sell into their own brands leaving us with little option other than to create our own sales channels to plug the gap.


From the start though we have been crystal clear – we want our own distribution to complement good quality third party outlets, not to replace them. That’s why from day one as Managing Director I implemented a price parity policy, a policy that still remains in place five years later. It’s also why we have invested heavily over the same period growing a national chain of branded partner agents – some even operating with the Kuoni banner above the door.


I am absolutely convinced that it’s not necessary to be ‘trade only’ to be trade friendly but it’s a tough message to convey, especially when many others with mixed distribution models have consistently moved in a different direction. Rather than looking inside travel for the answer, I prefer to look outside where third party distribution happily complements B2C sales.


Virgin’s decision is helpful to Kuoni – highlighting once and for all that we’re not the same. We never were. At Kuoni we have led the way on customer service through our stores – we are the example that Virgin Holidays is trying to follow – but we have never believed that we are the only people capable of delivering that service. There are hundreds of agents that we trust with our branding, and thousands that we trust to deliver great service to our customers.


Abandoning agents is not just the way it’s going; it’s just the way Virgin Holidays is going.