Here, based on our coverage of the inbound tourism industry for the past year and beyond, as well as our ongoing review of a wealth of information resources and our own industry sources, the Inbound Report presents what we believe are the top trends for the industry for the coming year. There are other items that we could add to the list, to be sure, but in the interest of brevity and broadest relevance, here they are.
- The currency exchange rate should remain stable; so should business in Europe. From a high of just under $1.40 in April of last year, the euro plummeted in value against the dollar by 25 percent to about $1.06 in early November, oscillating up and down until this month, when it crept back up to $1.10. U.S.-based receptive operators who had to sell product in euros but pay their suppliers in dollars have taken a beating in 2015. While no one is saying so publicly, street-corner logic, which hopes that it has no place to go but up, just might be right.
Regardless of the Federal Reserve Board’s decision this month to increase interest rates (pushing them up for institutional borrowers usually makes the dollar more expensive vs. other currencies), the noted international economist, Anatole Kaletsky, wrote last month, “Fortunately, the market consensus concerning the dollar’s inevitable rise as U.S. interest rates increase is almost certainly wrong.” He cited a number of reasons for his position, suggesting that—because a Fed interest rate hike has been speculated on for most of 2015—most currency traders have already taken their gains. Also, institutional traders seem to be aware that any further increase in the value of the dollar would be disruptive to the global economy.
In essence, the marketplace simply cannot handle a much stronger dollar; traders know that. And, as far as the tour and travel industry is concerned, travel bookings for next year were set at the euro’s low. The inbound travel market might not get that much stronger, all of the above suggests, but it should not get any worse.
For a real-time view of what the fluctuations in the dollar-euro currency exchange over the past year look like, visit: http://www.xe.com/currencycharts/?from=EUR&to=USD&view=1Y
- Receptive tour operators are diversifying in several new ways:
—By opening new source countries as they struggle to survive by trolling for new clients in third- and fourth-tier markets such a Peru and Ecuador. And Teamamerica increased sales in 2015 by attending 25 international trade events.
—By establishing outbound divisions in order to neutralize the effect of the exchange rate and maximize staff utilization. American Tours International (ATI) has now established a new outbound division that will be fed by their Triple A partners.
—For the FIT “Bed Bank” receptive operators such as Tourico, Hotelbeds and GTA are expanding into offering to attractions and activity providers that cannot do so themselves.
—By bundling hotels with attractions product and shopping vouchers for travelers from markets where travelers pay a surcharge on credit card purchases made while they are abroad.
- The Chinese Market is evolving into Self-Drive Group Tours. Spurred on by favorable rental car rates and the desire to capture some of the explosive FIT market, Chinese receptive operators offer self-drive tour programs for FITs and groups of as many as 20. For the latter, the RTOs operate in a caravan system in which the tour guide with driver of the lead car and everyone else are connected by walkie-talkies.
- Demand for U.S. National Parks will grow, aided by promotions surrounding the 100th anniversary of the National Park system in 2016, which will be boosted by the release in key international parks of Brand USA’s giant screen film promotion featuring national parks (This film will be followed up by another film in 2017) as operators seek low-cost stops in their itineraries. At most national parks, it costs nothing but a vehicle fee to enter and to use their facilities. (In addition, Fodor’s has ranked U.S. national parks Number One on its list of Top 25 Destinations for 2016.) However, capacity at hotels and accommodations in our near the most popular parks during the peak summer months has frustrated operators.
- Look for expanded diversity in USA destination offerings (Think “Beyond the Gateways”) to international operators as receptives try to appeal to repeaters and differentiate themselves. While visitors to the United States want to see what they’ve seen promoted or talked about through media channels and in the movies—New York City, Los Angeles, Miami, Orlando and Las Vegas—they are OK with staying in Upstate New York, the San Fernando Valley, Fort Lauderdale, Cocoa Beach and Laughlin, Nevada and visiting destinations outside U.S. Gateways.
An emerging destination for travelers from India, for instance, is Harrisburg, Pennsylvania. Right next to the Hersheypark theme park and entertainment complex, the area is also home to many Indian Americans and has a Bochasanwasi Shri Akshar Purushottam Swaminarayan Sanstha (BAPS) center, as well as the nearby Indian American Religious Institute temple and center.
- Partially Independent Travel (PIT) is a hybrid genre of product that continues to grow as Baby Boomers, the fastest growing segment of the escorted tour market, are loathe to being overly programmed while, at the same time, tour operators seek a means to reduce overall tour costs to offset the exchange rate.
- “Testosterone Tourism” is a growing category for incentive groups. For these visitors, “manly” activities that are prohibited in their home countries—such as shooting automatic assault rifles—are now routinely included in incentive ideas to everyone from Brazilians to Chinese. Not to mention the driving of exotic race cars on enclosed tracks or the construction site in the desert around Las Vegas that allows participants to pretend they’re on construction site operating heavy equipment and bulldozers. The women’s equivalents to these include spa treatments, shopping and preparing a meal with a famous American chef.
- Dining will be a major tourism product. Open any issue of Conde Nast Traveler or Travel and Leisure and you’ll see that 50-60 percent of the photography is food-related—either images of restaurants or actual meals in an inviting setting. To accommodate demand, tour operators will need to offer concierge services by curating dining experiences, assisting in reservations and even providing transportation.
- MICE visitor numbers will grow as suppliers and receptives look to compensate for a decline in leisure visitors. After a fall-off in visitors from Spain, France, Brazil and several other source markets in 2014, specialty receptive tour operators in the U.S. managed to make up for the loss by providing product for MICE groups, whose spending levels are much higher than leisure travelers. Receptives are finding such groups enjoy sporting events, music concerts and special events at entertainment venues. One indication of the growing strength of this market segment is the presence of an additional 100 MICE buyers at the 2015 IPW in Orlando, with even more buyers expected for the 2016 IPW in New Orleans.
- Air traffic from Asia and Southwest Asia (especially India) to the USA will grow as Gulf carriers increase lift capacity and connecting flights from three major international carriers situated in a triangle that puts them within in commuting distance of one another (Distances: Dubai to Doha 236 miles; Doha to Abu Dhabi 187 miles; Abu Dhabi to Dubai 81 miles.) in what is becoming the world’s major connecting point for East-West air service.
Gulf Carrier Air Traffic to/from USA
October 2015: Year-to-Date
Carrier Passengers (millions) Change, year-on-year Emirates 2.521 +33.4% (to/from Dubai) Qatar 1.051 +34.6% (to/from Doha)* Etihad 0.971 +43.4% (to/from Abu Dhabi) * Some limited service from Milan Source: U.S. Department of Commerce, National Travel and Tourism Office
- With fuel costs actually decreasing, airfares should remain stable into 2017; this should help keep package prices stable for next year-and-a-half.
- China Market Needs more Regulation. By 2021, the National Travel and Tourism Office (NTTO) has estimated, China will be sending 7.3 million visitors to the United States. This will place considerable demand on suppliers and put additional stress on the infrastructure for inbound tourism in the USA, which is already straining to handle the 2.5 million visitors who have visited the U.S. in 2015. The industry will have to be vigilant to monitor itself so that unregulated, non-certified tours, tour buses and tour services—they are already active and operating in parts of the country—do not cheapen the American experience for visitors. The industry will also have to intensify efforts to provide enough adequately trained, Mandarin-speaking personnel to accommodate Chinese travelers.
- It will be a sellers market for hotels through 2017. Hotel occupancy rates, as predicted by PKF consulting, are expected to remain high through 2017, and it will continue to be a seller’s market, which is not good for business in major cities, where ADRs increased 4 to 5 percent this year and are expected to do the same in 2016.
- Digital literacy is becoming a must. Understanding the rudiments of digital marketing will be more important than relationships to international marketing and sales professionals. New technologies are now available that will automate bookings for small attractions and tour operators for international distribution. Small attractions and activities are much more creative and targeted than established attractions. A host of newly released apps—such as pictyear, eatwith and feastly, detour, periscope and others will be discovered by operators who will use them to enhance their tour products.● Mercedes’ Sprinter Van May be the Motor Coach of the Future … There may always be 50-passenger buses to take groups from activity to activity, but 36- and 27-passenger vehicles are now de rigueur, and watch for more Mercedes “sprinter vans,” which are larger than familiar airport shuttle vans, holding 18 people. They are the new motor coach of choice for those working with Baby Boomers.
- Millennials will represent a challenge … International operators and their U.S. receptive counterparts will have to deal with Millennials, who now outnumber Baby Boomers. (In the USA, for instance, there are 76 million Baby Boomers, but 87 million Millennials.) While this new reality might provide a challenge for operators, it also presents an opportunity for the growing popularity of inter-generational travel.
- And finally (for now, at least) free Wi-Fi will be the most appealing amenity offered by everyone from hotels to motor coaches, as international visitors don’t want to use their expensive data plans while abroad and, at the same time, hand-held devices and smartphones rely on Wi-Fi availability.