Why Ryanair is offering package holidays now

Ryanair is taking a step back into the past in its bid for world travel industry domination. The airline recently began to sell package holidays through its website, offering the traditional combination of flights to a popular sun destination, accommodation, transport and support.

Chief marketing officer Kenny Jacobs agrees that it is a close approximation of the type of deal that most consumers bought from a travel agent on the high street 20 years ago, but which has been losing popularity as Ryanair and other low-cost airlines take increasingly large chunks of the market.

“There has been a change. People look for their own flights and accommodation. They have been unbundling package holidays for years,” he says. Nevertheless, he argues that reworking the old-fashioned package deal makes sense for Ryanair.

"If you look at where Europeans go on their holidays, we already have the flights," he says. "Many people fly from northern Europe to southern Europe. We are the number one inbound carrier to Spain, the number one inbound carrier to Greece. In fact, the only place we do not go to is Turkey, but that market is down 40 per cent."

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The flight is one of the two main ingredients. The other is accommodation, followed by transport to and from the airport, and some form of support when you get to your destination, should you need or want it.

New product

Ryanair Holidays – as the airline's new product is known – has a partnership with Spanish companies World2meet and Logitravel, which will provide the accommodation and support. Jacobs says that the airline will offer everything from villas to three-star hotel rooms.

Travellers will be able to customise aspects of their vacations as well. They will also be able to pay in the traditional way, using a deposit to secure their booking and paying the balance later on.

As ever, Ryanair will try to avoid adding either cost or complexity. Its partners are providing the rooms and support. Everything can be booked through its website, so the company is not adding extra infrastructure.

It is taking an approach similar to that already followed with another of its recently-launched products, Ryanair Rooms, where customers can book hotels through its website. The airline’s initial focus will be on building volume, in other words, selling as many holidays as it can, to give it a strong overall position in the market.

Part of the logic is to create a further market for its flights, part of it is to exploit the high levels of traffic on its website – an estimated 1.5 million people visit every day.

Digital airline

The airline's push into new territory has attracted market analysts' attention. Mark Simpson and Jack Diskin of Irish stockbrokers Goodbody produced a report earlier this year, Decoding the Digital Airline, which found that 149 million people logged on to Ryanair's website in the June to August period, and about one in five of them bought a flight.

They believe the flow of people to the website gives the airline plenty of opportunities. What sets Ryanair apart from rivals is that the carrier is about to “use this as a springboard to developing another leg to their business”, they argued. While those remarks applied specifically to Ryanair Rooms, the holiday operation looks like an extension of the same strategy.

It could also help to boost Ryanair’s view of future bookings, which in turn feeds into the information that it can give investors and the markets on its likely financial performance when it reports results every three months. Both the Irish company and its rivals announce summer and winter schedules more than six months ahead to attract as much advance business as possible.

Biggest markets

The airline has just launched Ryanair Holidays in Ireland, Britain and Germany and will target more countries through 2017. The UK and Germany are two of the biggest markets for sun holidays. About 30 million Germans head south every summer, as do 20 million UK residents. The same destinations are popular with both: southern Europe and the Mediterranean area.

Bookings are strong, according to Jacobs, who expects the market to kick off fully as people leave Christmas behind and start to think about where they want to go on holidays.

"There has been an incredible surge in demand this past year for Spain, which is up 30 per cent. Spain will be big next summer, followed by Portugal. In fact, if you are going to Spain this year, make sure you book early," he advises.