In his “Travel and Tourism Trends and Insights” remarks at NAJ’s recent RTO Summit in Orlando (it is the final of the three RTO Summits that NAJ hosts each year; the others take place in late winter in Los Angeles and spring in New York), Jake Steinman, founder and CEO of the NAJ Group, ended up emphasizing the fact that receptive tour operators remain an integral factor in the travel distribution channels globally and in United States and they will survive by re-imagining and re-inventing themselves—even it means learning and mastering new technologies and even if the RTO segment is coming off a year in which there was both fragmentation and consolidation. Selected highlights from his keynote remarks include the following:
- In trying to predict what trends will prevail in the coming year or two, there are certain macro factors that no one can control. For instance, there is no way to project, with precision, where currency exchange rates will be a year from now. Yet, they will have an impact on the tour and travel industry no matter what levels they reach. Last year, for instance, a major impediment to selling the U.S. travel product was a strong U.S. dollar. A recent snapshot of the dollar’s position shows that it has changed considerably in a year.
- Similarly, when the U.S. National Travel and Tourism Office (NTTO) released its final five-year forecast last October, it had no way of predicting that Donald Trump would be elected president of the United States or that global political tensions (between, for instance, the U.S. and North Korea) would be at a very high levels in the autumn of 2017, or that the political environment in Venezuela would be such that it would bring visitor traffic out of the country to a near-halt. The NTTO 2017 forecast for key international source markets, as well as that of the INBOUND Report were relatively conservative, although there are some notable differences.
- Now, compare the above with the latest year-to-date numbers (below) from NTTO that cover activity through the first quarter 2017. Were these numbers to hold at the same percentage levels for the entire year, they would make the above table way, way off.
- The cost of a hotel room night—the most significant cost in a travel package—has made the market a seller’s market, with occupancy on a rising trend from 2010 through 2016. Hotel industry analysts see demand flattening as 2017 nears an end, as supply has exceeded demand in the second half of the year. Overdevelopment could help make 2018 a buyer’s market. Look for RTOs to partner more and with independent and smaller hotels, whose scale of operation simply cannot endure the steep transaction fees charged by OTAs who re-sell their incremental room inventory.
- RTOs are consolidating and fragmenting at the same time. Illustrating this trend is the recent history of AlliedTPro, which grew out of the 2000 acquisition of Allied Tours of New York City by Zurich-based Kuoni, with another of the latter’s acquisitions, T Pro, a former NYC-based competitor of Allied. The combined entity operated under Kuoni Destination Management, a division that focused on travel within the U.S. The time line of the Kuoni’s acquisitions, divestitures and gradual dissolution as it tried to re-invent itself also shows how one brand intersection a number of the tour and travel industry’s most prominent brands:
—In the 2000s, Kuoni sought to expand the range of its operations and its portfolio. One major development during this period was its acquisition of GTA, the global tour operator with a large bedbank, attractions and entertainment inventory.
—In 2015, Kuoni began selling off different parts of itself in an attempt to strengthen its liquidity position (it turned out that it could not) by selling its tour operating businesses to the German tour operator DER Touristik and early in 2016, it was acquired by the Swedish private equity firm EQT.
—The acquisition included the destination management of Kuoni, which had grown to include units in 17 countries in Asia, the Middle East, Africa and the U.S., including AlliedTPro; Asian Trails; Desert Adventures Tourism; Gulf Dunes, Private Safaris; and Australian Tours Management.
—In April 2016, TUI, Europe’s largest travel company, sold its Hotelbeds unit—the world’s largest bedbank—to the private equity group Cinven and Canada Pension Plan Investment Board (CPPIB).
—Then, in the first four months of this year, 2017, Cinven and CPPIB acquired Tourico Holidays and GTA, the world’s second and third largest bedbanks, respectively.
—In April of this year, Thomas Cook India (it is owned by Fairfax Financial Holdings, a Toronto-based firm that previously acquired the Kuoni brand in India and Hong Kong. Fairfax Financial had acquired Thomas Cook India in 2012) acquired Kuoni’s destination management component, including AlliedTPro.
—A little more than a month later, EQT sold part of Kuoni’s DMC network comprised of AlliedTPro, Asian Trails, Australian Tours Management, Desert Adventures/Gulf Dunes Middle East and Private Safaris Africa, to Thomas Cook India.
—Finally, last June, the JTB brand was brought into the story line when the JTB Group acquired all shares of Kuoni Travel Investment, i.e. Kuoni Global Travel Services, for an undisclosed sum. It will manage the new company under the JTB European managing company TPE.
- Low cost carriers will continue to increase their share of inbound international leisure travel to the U.S. Norwegian Air’s UK subsidiary has received permission from the U.S. Department of Transportation to fly to U.S. destinations. In Latin America, low-cost carriers are increasing capacity on routes between the USA and South and Central America.
- As hotels look for a better margin by not partnering with OTAs, look for DMOs to play “Matchmaker” between receptive tour operators looking for inventory and smaller and independent hotels.
- Confronted with the challenge of finding room inventory, RTOs will be asking themselves if they should focus more on service and in-destination product.
- Leisure groups have gotten smaller in the past several years, which explains the popularity of the 12-passenger Mercedes-Benz Sprinter van taking the place of the 50-plus passenger bus as the preferred mode for ground travel for groups.
- Along with the shrinking leisure group, there is growth in what has come to called the Partially Independent Traveler (P.I.T.) who requires some elements of the group itinerary, but who seeks more free time and independence when on holiday.
- More and more Chinese travelers are exhibiting a preference for self-driving tours—sometimes these tours involve extended families with friends who use vans and/or travel in small “caravans.”
- Hot products for 2018 and 2019 will be “Testosterone Travel” in which travelers can try their hand at using heavy construction equipment, driving exotic race cars on speed tracks or shooting machine guns on ranges.
- Food has become an important for an overwhelming number of international travelers in selecting a U.S. destination or region to visit.
- With medical campuses now established in Nevada and Florida, medical tourism to the USA—especially for elective surgery—is continuing to grow.
… And remember, the only certainty is uncertainty.