What is Dynamic Packaging?
A keystone in the evolution of travel packaging was the inception of dynamic packaging software. These complex systems allow tour operators and travel agents to mix and match various combinations of travel components to create bespoke holidays on demand.
Holiday packaging has evolved significantly over the last 25 years, accelerated by an ever-increasing proportion of online transactions over the web and other digital applications.
Dynamically packaged travel products offer almost limitless flexibility when compared to more traditional, fixed packaged tours found in most holiday brochures. The flexible nature of DP holidays has in part contributed to its rapid growth in popularity.
Dynamic packages have grown in popularity with tour operators supplementing their product range by offering DP holidays alongside their pre-packaged arrangements.
Likewise, airlines have started to offer branded DP holidays using dynamic packaging solutions to match ground arrangements with their inhouse flight inventory.
An increasing number of travel and tourism businesses are starting to recognise the incremental revenue opportunities that dynamic packaging technology can provide. Not only being able to marry flight and hotels together seamlessly but also maximising ancillary sales.
Choosing the right DP software is an important step on the way to becoming a successful holiday business. Let’s look at the benefits that DP holidays can offer over fixed packaged holidays
Dynamic Packaging Software Benefits
Being able to create holidays on the fly has numerous advantages. Some of the advantages of being to offer dynamic packaging travel include:
- Providing the customer with more choice and flexibility in selecting their holiday arrangements
- Allowing the customer to cherry-pick which travel options they want and remove components they do not need
- Filling gaps in availability when fixed packages may not be available
- Offering alternative options when fixed packages do not meet the customer’s requirements
- Being able to manage yield and margin business rules with a greater level of fluidity
- Gaining a competitive advantage by generating prices based on real-time supplier connections
- Actively managing business rules and generating dynamically priced holidays
Technology – Important things to consider
In the past, DP holidays came under criticism with some detractors claiming they offered less consumer protection than traditional package holidays.
The ‘split contracts’ applied to DP holidays, created a loophole which meant that such arrangements fell outside of the definitions of the Package Travel Regulations (PTRs).
Some commentators claimed that DP holiday providers had gained an unfair competitive advantage by selling dynamically generated holidays with a lower tax liability. Lower tax liability could allow those businesses to undercut the price of an equivalent package holiday.
Under recent updates to the PTRs, more holidays now fall under the regulation, giving consumers added protection when things don’t go to plan. The regulations require that any travel company combining and selling travel services as part of the same holiday or trip will form a single contract and as a result, will fall under the PTR’s definitions.
Travel companies or travel providers will be liable for providing the services and therefore responsible if anything goes wrong. In essence, the customer has a contract with the package provider rather than sperate contracts with each of the airline and hotel.
There is far more to dynamic packaging technology than simply choosing the right software. You will need to consider the legalities of selling travel components in this way.
You will also need to source the right products at competitive rates and deal with any operational issues that may arise from selling DP holidays
In the traditional package world, once a package is sold it is the responsibility of the Tour Operator to deal with any operational issues, such as overbookings, cancelled/unavailable facilities etc.
If you start dynamically packaging, you will need to consider what you will do if the low-cost airline that you have used as part of your dynamic package changes the flight time or even worse cancels the flight.
You will then be left with the accommodation and the responsibility of finding your customer an alternative flight. There are also issues around financial bonding and ATOL that you need to consider.
These obligations should be an important consideration when thinking about entering the DP market.
Choosing the best System
In addition to the existing regulatory requirements, another important consideration is which technology supplier to choose. Building a DP system from scratch is an in-depth task which requires significant investment and know-how and may not be a viable approach for all businesses.
As DP technology experts, Travology can offer expert and impartial advice on which DP solution will be best for you. We have many years of experience of working with several DP system providers and can help you with the vendor selection, system integration and project management of a DP system lunch.
Travology has been at the forefront of the dynamic packaging technology market helping travel companies to find the right technology and systems to be able to compete in the latest dynamic market.
The right technology is critical to be able to package and sell products in this new dynamic way. You may well have your inhouse flight or bed stock, but you will probably want to source additional stock from scheduled airlines, low costs airlines and charter airlines as well as get bed stock direct from hotels or bed bank suppliers.
There are then the ancillary products such as transfers, car hire, airport parking, excursions and tours all of which can form part of the dynamic package. If you can’t sell these items, then the customer is likely to buy them from someone else.
There are numerous travel technology companies in the marketplace that will tell you that they have the answer to all of your problems and can provide you with a dynamic packaging engine today, but do they understand the market and the potential pitfalls, which can be extremely costly?
If you want to get into the DP market, contact Travology and we will give you independent advice based on our extensive knowledge and experience to ensure that you avoid any costly errors.