TUI to Test Dynamic Pricing in the UK

25.08.2023 - 13:36 / skift.com / Sebastian Ebel / Selene Brophy

TUI Group sees an opportunity to leapfrog from selling package holidays with static prices to helping travelers book individual trip components with dynamic pricing.

The Hanover-based travel colossus has not yet “materialized its strong positioning” to offer its customers a more flexible packaging of flights, accommodation, and experiences to create a connected trip booking, said Sebastian Ebel, chairman and CEO of TUI Group, during an earnings call on Wednesday.

Ebel said TUI had to move faster, noting that Booking Holdings was now also putting investment into next-gen AI to advance Booking.com’s connect trip strategy.

The CEO said the company needed to focus on strategic initiatives, including long-promised dynamic packaging, where trip components are bundled together. Trip pricing would ideally reflect supply and demand signals, and more customization and upselling would be possible.

Ebel was particularly worried about maintaining and growing market share, specifically in the UK, where TUI is said to have lost its leadership footing.

He said that UK inventory availability — and the attractive margins presented by flexible booking of flights, accommodation and experiences — meant TUI could significantly improve its performance without having to effect major pricing changes to the product in the UK.

Ebel confirmed the expansion of its digital platform from its Nordic region to more markets including the UK.

“Dynamic packaging gives us a lot of benefit,” Ebel said. “It is also one of the reasons why we are able to plan to sell significantly more in the UK… due to access to variable stock we can dynamic package and that should lead, without starting any price activities, to move into a strong growth pattern.”

TUI’s performance in the UK during the latest quarter saw an improvement of 10 percent year-over-year and overall bookings surpassing 2019 levels. The gains benefited from 6 percent higher pricing over the last six weeks of the quarter ending March 31.

“The margin grid of dynamic package product is very attractive and it remains a must-do to gain profitable market share in the UK,” he said.

Added strategic pillars mentioned during the earnings call by Ebel all point towards a more flexible connected trip model.

Added development mentioned by Ebel also included an increased focus on value-added products through TUI’s direct booking flight marketplace. Instead of using New Distribution Capability (NDC) systems through Amadeus and Sabre, direct flight booking would improve its ancillaries’ growth, allowing customers to personalize their trips with airport and flight extras. That puts it at odds with some industry trends among travel agencies.

With the focus on growth in the UK, it is notable that