The advertisements are all over the internet: ridiculously cheap holidays (US: vacations) if only you are able and willing to leave at very short notice. Often, these trips are cheaper than a scheduled air-fare alone. Sometimes, they are cheaper than staying at home, once you have factored in the cost of heating and food. Why?
The answer, of course, lies in the economics of the package tour industry, which are very interesting indeed. Most people take this sort of holiday during the summer, but all the operators have a lot of plant and overhead that does not go away for the rest of the year: hotels, aircraft, staff...
It can therefore make sense to organize packages that barely cover the costs involved, or even that run at a loss. Obviously the operator has to cover his variable costs (aircraft fuel, food, laundry), but after that, anything he makes to offset his fixed costs (aircraft, hotels, staff) may be a better bet than having plant and staff sitting idle.
Try not to let your eyes glaze over as you read this. It is akin to those problems you were set at school, about some idiot filling a bath with a hole in it (why would anyone do that?) but it is going to save you money. Or at least, it will explain how and why you can save money, and better still, it gives some insight into how to turn a package tour into semi-adventurous travel.
Let us take a simple example: a hotel with 250 rooms.
Across the year, the fixed costs for these rooms -- servicing debt, maintenance, taxes, permanent staff -- might be set (for ease of calculation) at £5 per room per night which the hotel owner will have to pay even without letting a single room.
Let's also assume variable costs (cleaning materials, laundry, electricity, etc.) of £1 a night, though of course, these are only payable if the room is let. Although the calculations are in pounds, they are equally valid, with adjustments, for any currency.
During the winter -- December, January and February, let us say -- the hotel can be closed down, and many small family-run hotels do in fact follow this route. But let's assume 100 days closed, multiplied by 250 rooms, multiplied by £5 per night in fixed costs. This is an impressive £125,000 (a quarter of a million bucks in early 2008) which has to be made up when the hotel is open.
Now stay open for those 100 days, at a loss of £2 per night. In other words, you let the rooms out at £4 per night, even though the room is costing you £6 a night (£5 in fixed costs plus £1 in variable costs).
In one sense, you have lost 100x250x2, or £50,000, as compared with your actual costs. But equally, you have taken 100x250x4, or £100,000, so your net loss is £50,000 instead of the £125,000 you would have lost if you had closed for 100 days: you are £75,000 better off. You have also maintained staff morale by providing for your employees, and kept the hotel clean and operational. Then, when the fat days of high season come, it will be a lot easier to recoup £50,000 than £125,000.
Of course the numbers given above are a gross over-simplification: not only are the figures made up, but you might only be able to fill 100 rooms. Even so, from the hotel owner's point of view, there is obviously a lot to be said for staying open at a small loss, rather than closing altogether at a big loss.
Exactly the same considerations apply to the tour operator who block-books the rooms. Better to lose a small amount than to lose a lot, and it keeps the staff happy too.
It is therefore entirely possible that the out-of-season traveller can find a package at little more than cost, or if competition is fierce enough (as it is with popular mass-tourism destinations), at less than cost. So let's assume 250 two-week packages at £199 each. These come up all the time.
Now let us jump forward to two weeks before the departure date. Fifty two-week packages (out of 250) remain unsold at £199. The operator can tough it out; hope they sell. But the aircraft will fly anyway; the hotel rooms are booked anyway; the buses to transport the holidaymakers are booked already. Better to sell those 50 packages at £99 because demand will rise at the lower price. Sell all fifty and it's £4,950. Otherwise, he might sell another 10 to 20 at £199 (£1,990 to £3,980); or he might sell none.
Cut to six days before the departure date. There are still five packages unsold, so he has made £4,455 on the 45 he has sold. Fine. Sell the last 5 at £79, £69, £59, £49, whatever you can get -- though at £49 you are probably reaching the realistic limit of what it is worth in time and effort to sell and track the packages, to say nothing of the (by now negligible) variable cost to the operator.
On the other hand, the travel agent might be able to sell a travel insurance package (with a fat profit, and never any discounts), so he won't mind. Yes, he will get the occasional awkward customer like us, with annual travel insurance (coming soon), but that is a risk of the game. It is common nowadays to refuse bookings without travel insurance, and not many punters will be able to read the policy number over the 'phone, or fax a copy of the certificate.
What the semi-adventurous traveller now has is a ticket, plus a roof over his head if he cannot find anywhere better to stay. Book at the last minute -- you need to be flexible about where you are going -- and you may have paid no more than the equivalent of a week's lodging at a hotel for the pair of you, so you have, in effect, free flights. Or better still, free flights and and a week's free lodging. Such are the economics of the business (see above) that a 2-week trip may cost no more than one week, and may even be a few pounds cheaper. We go for two weeks whenever possible.
As soon as the trip is confirmed, book a hire car, to be collected at the airport. We have tried booking on arrival, but it always takes far longer and usually costs quite a bit more. The countervailing disadvantage to doing it our way (booking in advance) is that you have to persuade your travel rep (the company's representative) to tell you the name and address of your hotel. They do not always like doing this, as the cheapest deals are always 'allocated on arrival', but this has worked for us so far: the rep will have your name listed against the hotel, even if they have difficulty in understanding what you are doing, and why.
Finding the hotel may not be easy, or you may be arriving at an hour when the car hire office is closed, so you may choose to book the car for pick-up next day; go to the hotel in the coach; and then get a taxi (or bus, or just walk) to the car hire company in the morning. The only time you come unstuck on this one is when the hotel is 15 miles from the airport and the taxi fare eats up the savings. At the other end of the trip, you just return the car to the airport and join your party.
There is a whole article on research (along with advice on maps). If you don't already have a guide book, buy one. Alternatively, hunt around on the web. Better still, do both.
Working with your rep
Avoid the vast majority of what the rep tries to arrange for you, especially the 'welcome drinks' and excursions: the former are an appalling thief of time, and the latter are normally overpriced. Do however take care to find out where the company notice board is, and read any notices on it. Arbitrary changes of departure time are not unusual, though often, only the departure time from the hotel is brought forward: the flight time is unchanged. Get the rep's telephone number, too, but don't expect to get through first time, especially on a mobile.
If the rep can see that you have a reasonable idea of what you are doing, they will normally be quite cooperative, because they can see that you are unlikely to be much trouble. Some -- probably most -- have a lot of local knowledge and are there because they love the place. This will soon become apparent. Others are dumb bunnies who are completely out of their depth. This will soon become apparent too.
If the room is completely hopeless -- over the disco, etc., as described in choosing a hotel -- then try to get it changed, but don't take it for granted this will happen. The name of the game is maximum occupancy, after all, as described above. The same goes for rooms that have no curtains, hot water, etc., though you are in with a better chance here: there are always a few emergency rooms, or they may move you to another hotel if things are bad enough.
We never have high hopes for such rooms, and are frequently reminded of the Ninth Beatitude: 'Blessed are they who expect little, for they are seldom disappointed'. Our room in Faliraki was so noisy (because of the discos three buildings away) that we had to be very tired indeed to sleep there -- but out-of-season rooms in Apolakkia are blessedly cheap, quiet and superior, as well as a long way from Faliraki.
This is what it's about. Faliraki in Rhodes is a by-word for all that's worst in mass-market, low-end tourist destinations. Much the same is true of some of the low-end areas of Malta: Qormi, for example, though Malta tends to be quieter and most tour companies make some attempt to match their customers' ages to the kind of hotel they are likely to appreciate most (or dislike least). Some of the Goan holiday resorts are awful, too (we had to hire a motorcycle locally, because car hire wasn't feasible).
But there is so much to see in Rhodes and Malta and Goa that the gruesome mass-market tourist traps just don't matter. You can go back to your package hotel if it's not too bad, or you can go elsewhere: in Gozo, sister island to Malta, we love the Cornucopia hotel in Xaghra. Sure, it is expensive by our standards, but when we have paid so little to get to Malta, we don't mind paying a bit more for a hotel that we really like.
Catacombs, Bingemma, Malta
Always spend the first and last night at the paid-for hotel, even if you are away the rest of the time, in case of surprises, but otherwise: well, you could hardly ask for a cheaper adventure -- or a safer one, with the package to fall back on.
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© 2008 Roger W. Hicks