It may be that the new normal—a travel market operating with a Euro that is closer to $1.10 vs. $1.20 or more as it had been for years—is having a real-time impact on product sales in Germany. According a recent analysis by industry analyst Paul Needham, writing in the German travel trade publication, FVW, “the German tour operators are heading for problems after expanding their long-haul programs too optimistically this winter, and a price war now looks inevitable.” Some highlights from Needham’s analysis:
—Just a few months ago operators such as TUI, Thomas Cook, DER Touristik and FTI—they are the number 1, 2, 3 and 4 operators in Germany, accounting for more than 50 percent of business volume—revealed significant expansions of their winter long-haul product, but there is now an excess supply.
—The upbeat forecasts by operators “are now looking over-optimistic and it seems that tour operators may have miscalculated demand – and also prices. There is significant excess flight capacity on many routes from Germany at present.”
—As a result, operators have been forced into renegotiating rates with hoteliers to bring down the overall price of long-haul packages. FTI, for example, has cut prices to Asia, Indian Ocean, South Africa and South America by up to 20 percent.
—“Other tour operators may have to make similar price cuts,” said Needham,“ resulting in a general price war that would inevitably hit margins. The bigger losers, however, are likely to be the leisure airlines flying too many empty seats on long-haul routes with high operational costs.”