Chapter 30
Bribes, Brochures and the Birth of True Vertical Integration
True vertical integration wasn't created by owning each part of the supply chain; it happened only when the people running those businesses trusted each other enough to act as one.
Bribes, Brochures and the Birth of True Vertical Integration
Most company mergers look wonderfully logical on a spreadsheet. Unfortunately, the people being merged rarely behave like Excel cells and often hunker down in air-raid bunkers.
Going Places had been created by combining Pickford’s Travel and Hogg Robinson’s leisure shops, thereby giving Airtours a powerful high-street retail network. In theory, this should have enabled our tour operating and retail divisions to work closely together, but in practice, the original management team remained highly protective of their roles and openly resisted closer cooperation with the Airtours commercial department.
I have to admit this deeply frustrated me and led to regular complaints to David Crossland. I could see the potential benefits of working together, but every attempt at joined-up thinking seemed to disappear into a swamp of internal politics.
1995–96
David eventually accepted that Going Places needed a complete cultural change, and in 1995 he followed up his raid on Thomson for tour operating talent with a raid on Thomas Cook that brought Tony Bennett in as Managing Director and Peter Shanks as Commercial Director, both bringing substantial experience. The management team was later strengthened by appointing Francesca Ecsery-Merrens as Marketing Director in 1996.
I was initially concerned that we were importing too much Thomas Cook thinking into Airtours; however, those concerns quickly disappeared. Tony brought leadership and momentum, while Peter Shanks turned out to be a commercial soulmate who genuinely believed the tour operator and retailer should collaborate rather than spend their lives fighting each other.
This mattered because the high street was rapidly becoming a battleground.
The vertically integrated chains of Lunn Poly and Going Places were competing against the traditional retail giants of Thomas Cook and the combined strength of the Co-op retail divisions. These large retailers earned commissions of around 12%, allowing them to give away about half as much in customer discounts while still making money.
1995
By 1995, the discounting war had escalated, with 10% and 15% off becoming common, and the additional discount often funded by the retailer’s in-house tour operator. Independent travel agents could not compete because they lacked the combined margin earned across the retailer, tour operator, airline and hotel.
It was a brutal but strategically effective acquisition strategy by the big groups, as independent agencies were pushed into losses and then became available for acquisition, accelerating consolidation on the high street.
Peter helped me recognise that the real pricing battle had shifted and that it was no longer simply about which tour operator printed the lowest brochure prices. The objective was to attract customers into your shops and guide them through an entirely integrated funnel: from Going Places to Airtours Holidays, then onto an Airtours airline seat and, wherever possible, into a hotel where the group had committed capacity.
This led us to a radically different approach.
Airtours had spent years building a reputation for low brochure prices but now radically increased those starting prices by building approximately 20% commission into the holiday. Going Places then added its own contribution, allowing us to advertise a headline retail discount of up to 25%.
1996
The discount looked enormous, even though much of it was already built into the brochure price. Today, consumers are familiar with fluid pricing and permanent sales messages, but in 1996 this was a major change in how package holidays were marketed.
1997
Timing was critical. We needed Thomson to have completed the first print run of its Summer 1997 brochures before revealing our offer, which made it extremely difficult for them to respond quickly. Airtours’ private investors went off and offered the required bribes to Thomson’s printers to learn exactly when their first edition summer brochures would be printed. As usual, I preferred not to ask how they got the information but just used it.
David Crossland was understandably nervous about such a radical move. However, he had encouraged his retail and tour-operating commercial directors to work together, and he now found both of us standing in his office, arguing passionately for the same plan.
1996–97
He eventually relented, and in July 1996 we launched our 25% discount campaign as an early booking grab for Summer 1997 sales.
1997
Thomson’s response showed how seriously it viewed the threat: it scrapped its first-edition brochures and spent the next two months producing a competitive response. That gave Airtours and Going Places a valuable window in which to dominate early Summer 1997 bookings, and Thomson never fully recovered the lost ground that season.
Looking back, the campaign represented a quantum change. It accelerated the move towards higher brochure prices, larger headline discounts and increasingly fluid pricing. More importantly, it demonstrated what genuine vertical integration meant.
Our commercial departments effectively became one team. Airtours often designed Going Places’ discounts and advertising campaigns, while Peter focused on extracting better commissions from third-party operators and increasing ancillary sales instead of wasting energy fighting his most important supplier.
Peter also taught me the value of preparation, as my earlier hotel negotiations had given me an instinctive negotiating style that often involved closing a deal on the spot. Peter meticulously planned what he could concede, established his final settlement point and calmly walked away if it was not achieved. He also taught me the art of silence and forcing the other party to show their hand first, allowing you to adopt your own position and often secure a better deal than expected by just using the words “I’m afraid that doesn’t work for us”, particularly when you have the upper hand in size and strength.
That patience eventually became central to my negotiating style and gave me a detailed understanding of how to play chess with other retailers.
Interestingly, this showed me that true vertical integration wasn't created by owning each part of the supply chain; it happened only when the people running those businesses trusted each other enough to act as one and put all egos a side to get the right combined result.
