The Experiment that Failed: Amazon Quits Selling Package Tours
Abruptly, and with no public notice, online retail giant Amazon.com has shut down its hotel booking site, Amazon Destinations and has also stopped selling reservations via its Amazon Local app. While the move came as a surprise to the journals that first reported the shutdown two weeks ago, it does not seem to have surprised to Mel Tye, the Merrimack, New Hampshire tour operator—his Tye’s Top Tour and Travel sells both domestically and internationally—who was one of a small group of operators who worked with Amazon to get the project under way.
The website was launched last spring, offering hotel rooms in Seattle, Los Angeles and New York. Within four months, it had spread to 35 cities. There was no statement from the company on what caused the sudden closure of the site, except for a company spokesperson’s brief response to one tech journal’s query: “We have learned a lot and have decided to discontinue Amazon Destinations.”
In discussing the matter with the Inbound Report, Tye was a little more expansive than was Amazon. “We sold two tours on Amazon, one to the induction ceremony at the Baseball Hall of Fame and one to a Red Sox–Mets game,” he told us, adding, “the approval process was very cumbersome and took an average of six weeks to get approval on package. (Even so, he sold $5,000 in packages within two weeks.) The test window was small. After we ran these programs, Amazon advised us they were pulling the plug on this project as the expected targeted revenue from the five tour operators selected for this project was not reached.”
It seems as if the Amazon team was unfamiliar with some of the collaborative practices—practices considered de rigueur in the tour and travel industry—that wholesaler, retailer and supplier share in selling a product to the travel consumer. For instance, Tye explained, Amazon was unwilling to provide him with contact information for travelers, and his staff had to wait for customers to contact his company once a travel voucher was purchased, or reach out to the Amazon sales team to get the customer to contact his office. So, recounted Tye, “We informed Amazon that with travel unless we were able to contact the customers and complete the information necessary to make travel arrangements the program would not work.”
Amazon’s reaction? “They advised us that they were pulling the plug on selling tours,” said Tye, “and would attempt to sell hotel vouchers and attraction vouchers only that did not require customer contact information. These travel vouchers could be used by any person holding the voucher.”
Could Amazon have done something differently to move the project along, we wondered. Said Tye: “We were learning as we went along, and doing two local tours was not a realistic test of selling tours on Amazon. In my opinion Amazon did not give significant time to develop a model to sell travel as a product.”
The collapse of the project might have something to do, as well, with the fact that the commissions that Amazon wanted to achieve with each of the participating operators (usually, at least 30 percent, it was reported), made the packages too expensive. Whatever the real reason or reasons for the shutdown of the Amazon travel site, no one we talked to thought that it would reappear any time soon.
Part 3: East Coast Listening Tour —Conversations with RTO’s
New York City has long been the hub of receptive tour operator activity in the USA, as the city has been the principal gateway for overseas travel to the USA. As large as its reach is, the community is a tightly knit one, with most of its staff located in mid-town Manhattan. Following are some notes on what we picked up during our recent visits there with receptive tour operators as part of our 2015 Listening Tour on the U.S. East Coast.
At TeamAmerica, in our conversation with Veronique Hubert, chief operating officer and co-owner, we learned:
- Hubert had baby this year (June 4) and is engaged to an industry colleague at GTA.
- Overall sales for the company are up 30 or 40 percent, due to diversification beyond Italy and France, TeamAmerica’s base markets.
- The company has spread out into Middle East, Africa, Latin America and Asia—and now has someone selling to the Chinese market.
- Staff have attended 25 shows this year—all over the world, which drove sales increases
- It has focused on reducing costs through IT, and has opened up an IT office in Bangladesh
At New World Travel, we spoke with Peter Dorner, president, who told us:
- There was a small wave of group cancellations from Germany at beginning of the year.
- Incentive requests have decreased.
- Uschi Brunner left after 15 years to become business development manager for CI Events, a corporate events management company with operations in Australia, the UK and Hong Kong.
- Overall sales have not been affected this year but they are cautious about next year.
- 30 percent of the company’s business is now from outside Germany.
- Business has slowed considerably but they are continuing to grow.
- Operators were at first a little stunned by the decline of the Euro vs. the U.S. dollar; they now understand it’s the new normal and are creating programs that have kept prices the same. They’ve making up the difference by reducing tour costs by downgrading hotels or having fewer days.
During our visit to AlliedTPro, we met with Mark Morello, CEO, who told us:
- They will be moving on November 2 in to the GTA offices across from Penn Station after its lease expired. The company plans to remain until GTA’s lease expires in 18 months at which time the two units plan to find new space for both companies.
- September is the beginning of quotation season for groups and AlliedTPro has been swamped with requests for 2016. So much so they are seeking to add another person to groups.
- AlliedTPro’s two-and-a-half-year-old brite spokes division of experiential tours has met with great success for its sports programs and many of the products concepts has been well received by MICE operators looking for new incentive ideas.
Chinese Trying to Acquire Starwood
It would have been inconceivable a decade ago to imagine the scope and reach of investment that has recently taken place in the China-driven travel and tourism industry as it affects the United States. And in its wake, the activity has left industry professionals contemplating just where it might lead.
A quick re-cap of some major developments in this activity:
—Last year, Anbang insurance bought Hilton’s globally known Waldorf Astoria Hotel in New York for $1.9 billion.
—Early last week, online travel agencies Ctrip.com and Qunar announced their merger, creating an online travel behemoth in the world’s largest country source market for tourism. Ctrip and Qunar will combine products and services and control 70 percent to 80 percent of the hotel and air ticket markets, wrote Summit Research analyst Henry Guo.
—And then, last Thursday, on top of the Ctrip-Qunar merger announcement, it was revealed in the official newspaper China Daily that three major Chinese firms are seeking to acquire U.S.-based hotel giant Starwood (its brands include Sheraton, Westin, and W hotels). The three Chinese companies are sovereign wealth fund China Investment Corporation (that manages part of China’s foreign exchange reserves), Hainan Airlines and Shanghai hotel Jin Jiang. Analysts told the newspaper that Starwood could turn out to be the largest international acquisition by a Chinese firm, surpassing that of U.S. meat company Smithwood, acquired by Shuanghui in 2013 for $7 billion.
The Inbound Report heard speculation that the nature of the activity and the players involved suggested that there could emerge in China the type of vertically integrated travel company that exists in Europe: i.e., Germany’s largest tour operator, Tui, for instance, has its own airlines, ships, hotels and ground transport network.
We put the question of what all the activity means to Las Vegas-based Bob Gilbert, who heads up China Ready Partners in North America.
“I think there will be a lot of positioning within China to gain footholds outside of China. ‘Money’ will invest outside of China as they feel there is more security and stability,” he said. “Look at the intra-China Ctrip – Qunar deal…it is huge. More will follow.”
Meanwhile, Back Online: As reported by Bloomberg, China’s online travel market will more than triple to $200 billion by 2020, Goldman Sachs analysts led by David Jin wrote in a note last week. While the number of Chinese who book trips online keeps growing, tougher pricing competition has hurt profit margins for the biggest online travel agencies.
Bloomberg also reported that China’s three largest Internet companies are all seeking to capture more leisure travelers:
—Alibaba Group Holding Ltd. is expanding its Alitrip unit,
—Tencent Holdings Ltd. offered to buy out the 85 percent of Elong Inc. it doesn’t already own as they compete with Baidu. (Baidu Chairman Robin Li said the deal “demonstrates Baidu’s continuing commitment to online travel, an industry with tremendous potential ahead.”
—The acquisition would add to the $62.5 billion of Internet deals involving Chinese companies during the past year, data compiled by Bloomberg show.
“If you look at the travel market, it’s such an obvious way to drive synergy through consolidation,” said Chi Tsang, an analyst at HSBC Holdings Plc. “The key issue the two have always needed to figure out was always about valuation and management integration.”
Brazil—For the Real, is “up” the Only Way to go?
When delegates to the World Travel Market (WTM) gathered a year ago, the buzz among those who work the Brazil market centered around the slide of the Brazilian Real. While the currency and the national economy were weak, few speculated that the economy would sink into the worst recession in a half century or that the real would grow even weaker, plummeting in value against other global currencies. The real opened this week, as WTM convened in London, at $0.259—a decline of 35.7 percent against the U.S. dollar at the same point last year. The table below tracks the month-by-month weakening of the currency.
November 2014 to November 2015Month-by-Month Value of Real vs. U.S. Dollar
|Nov. 1, 2015||$0.26|
|Oct. 1, 2015||$0.25|
|Aug. 1, 2015||$0.29|
|Apr. 1, 2015||$0.32|
|Mar. 1, 2015||$0.35|
|Feb. 1, 2015||$0.37|
|Jan. 1, 2015||$0.38|
|Dec. 1, 2014||$0.39|
|Nov. 1, 2014||$0.40|
|Source: Compiled by Inbound Report, using currency tables of Xe.com; figure is rounded to nearest mill|
Other economic markers are, to say the least, not encouraging. News reports tell us that the nation’s unemployment increased to 8.7 percent of the working population in August. That’s an increase from 6.5 percent rate of last November. Overall, the Brazilian economy remained static in 2014, expanding by just 0.1 percent. And, for 2015, it is expected to contract by 3 percent.
Meanwhile … CVC is Clearly the Top Travel Brand in Brazil: When Brazilians think travel agency, they first think “CVC.” That’s the report from top-of-mind-research recently conducted by the newspaper Folha de São Paulo, using statistics from Datafolha. CVC—its majority owner is the Carlyle Group, a Washington, D.C.-based venture capital firm—had a 19 percent brand awareness index when survey respondents were asked about travel agencies. This is two percent more than last year. This marked the fifth consecutive year that CVC has ranked first among travel agency brands. The two tables below show the top four brands in travel agency and airline categories.
Top Brazilian Brands—Travel Agency Category
Top Brazilian Brands—Airline Category
RTO Summit Nears One-to-One Ratio of Buyers and Sellers
With 51 operators from 31 companies attending NAJ’s RTO Summit in Orlando in less than two weeks, there will be close to a 1:1 ratio of buyers to U.S. travel suppliers and DMOs attending the event. Business appointments will be held on the second day of the Summit, which takes place Nov. 16 and 17 at the Wyndham Grand Orlando Resort.
Sponsored by Visit Orlando and the Inbound Report, the first day of the Summit will revolve about the Inbound Symposium, featuring a unique program mix that will include:
—A ninety-minute series of collaborative roundtables in which receptive tour operators with experience in product development that appeals to international visitors from a variety of source countries will rotate to different tables to talk with suppliers;
—A special session in which each of nine suppliers will make three-minute presentations in the Pecha Kucha format (10 slides, with slides automatically advancing every 20 seconds) to a panel of receptive who will critique each presentation a la “The Shark Tank” television program;
—An in-depth presentation s on the markets of Brazil and India by industry leaders with expertise in these markets;
—US Travel’s senior vice president, business development and general manager, IPW , will moderate a session on different ways one should present to international leisure tour operators, MICE operators and Receptive Operators during appointments at IPW.
—An industry panel of experts will analyze and explain the impact of the strong U.S. dollar on 2016 travel to North America; and
—Insights from Uri Argov, founder and CEO of Tourico Holidays, on the subject, “What Keeps Hotels from Working with Receptive Operators?”
Coolest Travel Products of 2015: The first night of the Summit will conclude with a special reception during which NAJ will honor the Coolest Products of 2015. Launched this year, the project has drawn an unexpectedly large number of nominations. Winners will be honored for the innovation and effectiveness of their new travel products.
For the complete details on the RTO Summit program, as well as registration materials, visit:
How I Got My Start in the Travel Trade
“How I Got My Start” is a regular segment in which we cull a couple of selections from our interviews with international operators, domestic operators, receptive operators, destinations, hotels and attractions to explore the path that led one to a career in the travel trade industry. One thing we have learned: the road to where they are is almost never the same. In this issue, we feature: Brian Chuan, director, tourism marketing & development, Macy’s Inc; and Kelli Norman, director of tourism marketing and sales, Virginia Beach CVB.
Brian Chuan: “It all began for me as a part-time job during college. I started as a delivery person for Lion Tours USA. This was way before e-tickets era so I would deliver paper tickets to both wholesale and retail clients. Eventually I got into the tour operations department, managing the inbound tour business and was thus exposed to the wonderful world of the travel industry. Since then, I have experienced many facets of the trade, including hotel (Marriott), restaurant (Planet Hollywood), destination (Hollywood & Highland) and now retail (Macy’s).”
Kelli Norman: “At just 16 years old, a friend talked me into applying for a job at a theme park. Little did I know that each day I was building my skill-set to eventually shape my career. Customer relations, sales, leadership and time management were just a few of the many experiences. After college I was hired full-time to be the park’s director of sales. Then, after many incredible years in a Florida working for a CVB, I advanced my career and moved to Virginia Beach. Seventeen years later, I still love my CVB job as a DOS and, yes, I still have crazy, fun summers!”