“Go West, young man, and grow up with the country” is what New Your Tribune editor and publisher Horace Greeley wrote in July 1865. And today, more than 150 years later, one still has to Go West to develop a more complete grasp and understanding of the inbound tourism industry in the United States as filtered through the eyes and words of the West Coast receptive tour operators who do an increasingly larger proportion of the overseas inbound market business—much larger than just a decade ago. Remember, it was only a decade ago, toward the end of 2007, that the United States signed a bilateral tourism agreement with China and received Approved Destination Status (ADS), which allowed promotion of leisure tourism by U.S. travel suppliers and the receptive tour operators.
“Going West” recently on a series of visits to the offices of major receptive tour operators based in Los Angeles was the INBOUND Report’s editor, Jake Steinman, founder and CEO of the NAJ Group. He met with the leaders of New World Travel, Americantours International, JTB USA, TPI, Lassen Tours, Grand Destinations and Ctour Holidays and Lion Tours. Afterwards, he collected his impressions and distilled what he discussed with the receptive tour operators and fashioned a summary of a trends and developments that he shares with us here. He begins, however, with developments brought about by actions on the part of global operators.
—The Receptive Tour Operator (RTO) segment of the tour and travel industry is consolidating and fragmenting at the same time. Tourico Holidays and GTA are now part of Hotelbeds, a consolidation that resulted in a huge, worldwide bedbank which allows them more scale to compete with online travel agencies (OTAs). Meanwhile, new tour operator companies have been created by former employers who had been downsized but have still maintained relationships with group operators and suppliers. Many of these “mom-and-pop” operators are able work from their homes with reduced overheard and undercut their former employers for business.
—Chinese group business to Los Angeles has been disappointing for this summer. Several of the major attractions in southern California were taken by surprise by the decline in seated coach business. We visited the offices of Ctour, a division of Ctrip, which recently purchased Seagull Holidays and Tour4Fun as well as a controlling interest in L&L Travel on the East Coast to service their leisure group tours. One problem they have on their minds is the increase in visa application rejections since the last election.
—Ctour, which for the past three years had experienced rejection rates of from 5 to 7 percent for the groups they service, are now finding turn away rates as high as 50 percent. With 100 buses a day on the road around the U.S. during the summer high season, its China offices are working overtime to generate additional demand to fill the pipeline. Other companies that specialize in MICE programs reported 20 percent rejection rates, as interviewers have become more suspicious in interviews. Sometimes there are reasons for the increased scrutiny: In one case, an applicant’s stated purpose of visiting the U.S. was to attend a conference, but when the interviewer discovered that the applicant couldn’t speak a word of English and would not understand the conference sessions, his visa was rejected.
—From a company that specializes in standard budget group tours, we heard that the Chinese market is evolving in two ways: First, new air service to U.S. destinations has been announced this year from second and third tier cities to major gateways that are generating a slew of first time visitors who are opting for these budget tours. Meanwhile, carriers are also announcing new service from mature source cities such as Shanghai and Beijing to second-tier U.S gateways. Tourism from these cities is now driven by FITs or PITs (partial FITs-families) traveling together who need ground services.
—What’s called the post 1980 and post 1990 market—those born after those dates—are now predominantly FIT and they are surprisingly adventurous. This summer, in northern Africa, I was able to connect first-hand with two Chinese couples traveling FIT-style. (My vacation bucket list included camping out in the desert of Morocco, riding camels and experiencing a third world culture.) On the way to the desert we overnighted in Ouarzazate, an obscure city built around an oasis that is Morocco’s Hollywood (major movie studios filmed desert classics such as Lawrence of Arabia, The Mummy, Gladiator and many other films here, and the town’s main attraction is a movie set façade). Almost every other tourist in our little hotel had done what we did—hired a highly knowledgeable guide who navigated us through the countryside to stop at clean restrooms and find food that was safe from contamination and arrange the best campsites so there would be no surprises.
In the lobby of a small boutique hotel we struck up a conversation with two Chinese couples in their thirties who spoke fluent English. They worked for European banks in Shanghai and were also camping in the desert, but they were completely DIY: they rented their own SUV through Zuzuche, employed the services of a guide and used Chinese FIT infrastructure—review and chat forums, We Chat and search—to identify hotels, places to eat as well as restroom stops along the way where the attendant wouldn’t withhold toilet paper until properly tipped. They saw themselves as explorers.
About the FIT infrastructure used by Chinese travelers: They began their research using two common review sites: MaFengWo and Qyer, which are the dominant forums for FIT travelers that function in a way that is similar to TripAdvisor—providing hotel reviews—and Dianping (similar to Yelp!) for restaurants and things to do. Then they go Ctrip or Qunar, the two primary OTAs to plan their trip and if they don’t find what they need on these booking sites, they will go to a travel agent. Meanwhile, rental car companies such as Zuzuche and Huizuche are providing a layer of infrastructure to Chinese FITs who want to roam the roads. Not only do these sites include translation of Chinese driver’s licenses, but they are also connected by investment to HiGuides, an app that functions as an Uber for Mandarin speaking tour guides throughout the world, complete with consumer reviews.
—Bookings from Germany Tanked in 2016. They declined by 25 to 30 percent in 2016 following a banner year in 2015 during which all the major agencies had leveraged currency futures to protect against the rise in the U.S. dollar and found themselves the low cost provider when the dollar spiked. While 2017 started off flat in the first three months of the year, business has slowed since April, especially for MICE groups. For New World Travel, this is a year to focus on efficiencies, cost reductions and creativity. In addition to the continued strength of the U.S. dollar, politics is playing a significant, if under-the-radar, role. Besides a reported 40 percent fewer searches for flights to the USA, according to OTA site Hipmunk, operators are reporting cancellations based on changes in sentiment. For example, one West Coast receptive operator worked with a company in Sweden which had reliably sent a group of 300 to the U.S. every year. This year, the group cancelled as they could not even sell enough to fill one motorcoach—something they attribute to a virtual hatred of President Trump.
Will Evaneos be a Threat to Tour Operators in Europe? Earlier, we referred to the fact that the RTO channel is both consolidating and fragmenting at the same time. While the three primary hotel aggregators are now combined under Hotelbeds, several new, smaller operators have formed with minimal fixed overhead and group contacts from previous employers. Meanwhile, on to the scene has come Evaneos.com, a French-based website that has raised $21 million in venture funding, that enables a traveler to create multi-day vacations and book bespoke tours that are bid on by travel agents and ground operators. The INBOUND Report has learned that some bidders are small receptive companies using their language capabilities and contacts with vendors to serve as local tour guides and land operators. One question many in the industry have is: Are these receptives contributing to the disruption of international operators, many of whom sell tailor made programs and could be their clients, too?
—In Japan, Travel Voice, a travel industry news site, also provides a way to connect Japanese speaking guides in multiple cities around the world with tour operators who are experiencing a shortage of Japanese speaking tour guides as the younger generation appears to have no interested in this type of work.
—How 90,000 Chinese FIT’s Rent Cars in the US. While two couples may rent conventional automobiles, multiple families traveling together will rent 11-12 seat vans. Huizuche is a new website specializing in overseas car rental listings, partnering with more than 10 well-known auto rental services–such as Hertz and Avis–to cover about 180 countries and areas that support drivers with Chinese licenses hitting the roads, Huizuche’s main selling point is that it’s all in Chinese, meaning that travelers don’t have to grapple with websites in English or some other language in order to make a booking.
That also means the startup Huizuche provides an easy, one-stop way to evaluate rental prices and lots of other options across all the major services. Huizuche makes money from a cut of each booking.
The startup says that about 40 percent of its car rentals are for the U.S., amounting to about 90,000 rides per month across U.S. States by Chinese tourists and businesspeople. This means the site is processing over 200,000 bookings per month across the world. A rival site, Zuzuche, is doing the same thing, even aggregating from many of the same big rental players.
—Overall, business last year was down from 2015 by 4-5 percent and, so far this year, bookings are running a little behind last year. For JTB USA, the growth opportunities lie in their burgeoning Chinese business under the TPI brand and Lassen Tour brands. And recently, they won the contract as US-receptive operator of record for CVC, Brazil’s largest tour operator. This year, the JTB USA has made investments in office infrastructure to service CVC’s customers in New York, Florida, and other Cities.