No room for small fries
Travel packages are the big deal in Poland, but smaller fimrs are feeling the squeeze.
As the travel industry's major players complete their expansion plans for Poland, local agencies are turning to niche sectors and mergers to root out further market share, while others are simply shutting their doors.
"Market consolidation is a natural trend in Europe," said Krzysztof Lopacinski, director of the Tourism Institute. "We see an increasing concentration of capital in the European travel market, and the concentration is spilling over to Poland."
According to Lopacinski, the market's consolidation will be completed in the next couple of years. "In the end, there will be just under 10 big firms on the market," he said. "We have about 15 now; there should be 10-12 by the end of 2001, and next year another two or three may fall out."
The big four Neckermann, Ving, TUI, and Scan Holiday have already garnered more than half the market. Zofia Grotte, general manager of Prestige Travel, said their share is now close to 70%.
"Wherever there is a fierce struggle for hotels, firms with little capital cannot survive ... small operators cannot compete in places like Majorca," said Krzysztof Piatek, president of Neckermann Polska Biuro Podrozy. Other agencies agreed. "Big operators are muscling Polish companies out of the market," said Izabela Klat, sales and marketing director at Lodz-based Rainbow Polska. "There is much more money behind them because they have support from the West." Andrzej Kalinski, director of Aladin Group, added that "big firms keep prices low and can boast of strong and established brands." Competing on price is one of the most difficult tasks facing Polish operators. "They have been selling under cost since they entered the Polish market," Klat said. "Some of this dumping is still going on."
According to Piatek, during Neckermann Polska's first year in 1997 it grabbed 3% of the market. By last year that figure had grown to about 15%. He now forecasts that 2000's revenue of zl. 118 million ($29.5 million) will rise to more than zl. 160 million ($40 million) in 2001. "This year we recorded a 105% growth on sales for the winter vs. winter 2000, and our summer sales have already exceeded last summer's results by 53%."
His Polish counterparts, meanwhile, do not see their sales growing nearly as much, although some have looked to mergers to stay competitive. Recent alliances include Rainbow Tour and Globtroter, which merged to form Rainbow Polska, while Itaka was incorporated into VING. However, Kalinski said mergers are not always enough. "It's too late for consolidation," he said. "The last moment to join forces was three or four years ago. There are only a few serious Polish operators left on the market."
Compounding problems for domestic agencies is that not all of them interested in mergers have been able to find partners. The result is that some of them have been forced to shut their doors. "Many Polish firms have already had to close down," Klat said. "Small companies have no chance of surviving on the market."
Industry sources are uniform in their assessment of small operators' future, saying that specialization is their only chance to survive. "Small firms don't have to be ruined by the big ones," Piatek said. "They just have to refocus their strategies. They can do roundtrips, coach travel or tourism." Grotte of Prestige Travel agreed: "We started in the early 1990s in mass tourism, but after the first bankruptcies in the industry we realized the only way out is to find a niche." Prestige found its niche in incentive travel. "Incentive business is a niche because the big operators don't want to do it," she said. "It's a customer-tailored service and involves much more effort for the organizer." Lopacinski agreed: "A big tour operator will not bother organizing a pilgrimage from Bilgoraj to Rome, so this is something for smaller firms." He also sees another refuge for the industry's smaller players. "Firms can become agents for big operators and sell their products," he said.
Overall, despite the thickening competition, most industry players are optimistic about this year's sales. "We don't expect a slide this year, despite the intense competition," Kalinski said. "The big four expected revenue growth and they have already sold their planned number of trips."
"There will be no market slump this year despite the general economic recession because travel operators cut their margins and are offering specials to entice travelers," Klat said.
Operators across the board agreed that Poland's economic slowdown has been offset by a spectacular rise of the zloty over the last year particularly against the Euro which has greatly boosted the purchasing power of Poles. "Our zloty-denominated prices have slid by more then 20% against last year, solely due to the zloty's climb against the Deutsche mark," Piatek said.
