Bolstered by new technology, traditional tour operators in the UK have been able to develop new products and new ways of reaching new customers while, at the same time, technological progress has powered some dramatic growth among OTAs. This is the key finding the Travel Team at BDO UK—the UK branch of the international tax, consulting and business advisory firm, BDO—in its just published “Travel Diaries—The annual update from the BDO Travel Team.”
As the report put it, “New technology has facilitated the impressive growth of beach-focused OTAs such as Love Holidays, On The Beach and Travel Republic which deliver approximately 3 million UK passengers to beach destinations. Meanwhile, luxury tailor made operators and escorted tour providers have developed product and customer acquisition strategies that meet the needs of a cohort of asset rich baby boomers eager to tick off their bucket lists.” This has created new entrants into a growth market, fueling merge and acquisition activity, the report added, which helps to explain the steady announcements of mergers and acquisitions in the UK tour and travel industry.”
Using the information gleaned from its research and analysis of the British travel market, BDO came up with its Travel Growth League—a collection of the Top 50 travel companies—tour operators and OTAs, that have used technology and M&A strategies to grow their businesses over the past three years.
Notes on the Growth League 50:
—The BDO Growth League is based on the highest turnover growth among the largest 75 ATOL (Air Travel Operators License) holders in the UK. One needs an ATOL to conduct a tour operator business. Turnover growth is measured by the three-year compound average growth rate (CAGR). As only ATOL holders have been included, this league excludes travel businesses that do not sell flights (e.g. domestic operators).
—Strong Growth for the OTAs: There has been a continuous offline-to-online channel shift which has benefited the OTAs with online penetration in the UK at 65 percent in 2017 and forecast to grow to 72 percent by 2020 in the UK (Source: Phocuswright 2016 – UK Online Travel Overview Twelfth Edition).
—Loveholidays remains the current standout UK-based OTA for growth and this is reflected in its sale to Livingbridge. It would be no surprise if Loveholidays retains it top No. 3 spot in the second edition for The Travel Diaries in 2019. On The Beach, the UKs largest beach OTA, will however be expecting that its acquisition of Classic Collection and the creation of a new “Classic Light” product range and a vast new agent distribution network will see it increase its YoY growth as it reaches new customers. Travelup will continue to drive volume, increasing its top line in the process, and we expect another strong performance from them next year.
—Don’t Forget about the Tour Operators: Five of the top ten companies in the league are traditional tour operators. All with CAGRs above 20 percent—Ocean Florida, the Florida specialist, Dnata and Jet2 Holidays are the top three tour operators with CAGRs of 40 percent, 36 percent and 31 percent respectively. The largest operator in the list, TUI UK, is in 30th place with a steady but strong CAGR of 8 percent.
—Surprisingly, despite being the third largest ATOL holder with 3.8 million passengers, Thomas Cook missed out on the top 50 with a negative CAGR of 5 percent. Trailfinders, the largest tailor-made operator in the league continues to benefit from the shift to more complex and itinerary-rich travel has a solid 3-year revenue CAGR of 7 percent.
—Private Equity Support is Helping to Deliver Strong Growth: Six of the companies on the growth league have private equity backing and a combined CAGR of 16 percent. Loveholidays, Iglu.com and ITC are the fastest growing. Private equity houses remain very keen on acquiring high quality travel assets and we would expect to see a higher degree of private equity-backed companies on the league next year.
