|Finding the sweet spots in the travel industry
April 15, 2009
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Amid a barrage of unrelenting bad news on the economic front, it's easy to lose sight of the fact that some parts of the industry are holding their own, even flourishing. Here's a look at what's working and what's making money.
Meg Austin used to love arranging travel for honeymooners, but these days they're "grumpy." They nitpick like never before, she said.
Recently, after Austin arranged a double upgrade at a hotel and made dinner arrangements for one couple, "the bridegroom called to complain that his seat on the airplane did not recline," she said, "and the limo was not what he had envisioned."
On another occasion, the bride called from her honeymoon to complain that there was a dust bunny under the bed. An exasperated Austin, who does business as Meg2Book, an independent contractor in Denver, responded brightly, "Call housekeeping or give it a carrot."
These indeed can be trying times. Agents are working harder, often for less income.
Everyone wants a deal, preferably at half the best quote available. But prices often have already been cut, which lowers yields for retailers selling commissionable products. Compounding that effect, some customers are downgrading to still-cheaper trips than they might otherwise buy.
In addition, agents have to work longer with many customers before they will "pull the trigger," as James Berkeley, president of Destinations & Adventures International in Beverly Hills, Calif., put it.
And then there are the customers who won't buy anything this season, either because they're out of work, they feel guilty about spending the money or they believe it is wiser to hold their cash despite the good prices.
A brighter side?
Such challenges might seem to define the stark reality of today's market, but the news isn't all gloomy. Indeed, the same facts can be viewed in a more positive light.
Agents dislike the poorer yields, to be sure, but they would rather sell travel than not. Jack Mannix, president of Ensemble, said that by early March, his members were "happy just to be selling travel, as opposed to the fourth quarter when very little was happening."
Not unreasonably, agents figure it's better to have clients in the habit of buying travel, even at low yields, and keep their agencies poised to serve them when they are ready for more upscale purchases later.
On the other hand, the drop in prices means clients who don't need to cut their budgets can buy products they never dreamed of, and that has promising ramifications for the future.
"We get a better response with luxury and high-end products now available to the midrange buyers like never before," said John Krieger, president of Cruise & Tour Center in Dallas. "So our passenger numbers are down, but the average price per sale is up," as are yields, he said.
At the same time, luxury cruise lines have expanded their markets, Krieger said. "Once people experience that product, more people will aspire to buy it at higher prices later." It is comparable to moving clients to a balcony cabin, he said, after which "they never go back" to the cheapest products.
Clients' reluctance to book quickly is frustrating, but the industrywide late-booking trend gives reason to hope for more robust booking activity before the peak summer season.
Susan Sparks, an adventure travel specialist who operates Points of Interest Travel in Aspen, Colo., admitted, "It's really tough right now."
But, she added, "I feel there will be a lot of last-minute decisions to travel. For my clientele, travel really is a lifestyle and a necessity, and the time will come that they can't sit still anymore." Sparks is an independent contractor affiliated with Brownell Travel in Birmingham, Ala.
As for Austin, whose business is affiliated with the Travel Society in Denver, the nearly recession-proof honeymoons are good business, even if newlyweds are a little touchier than usual. She also finds success with families by playing to what she calls the "pre-empty-nest syndrome."
"I say, 'You will have these teens for only a couple of more years. You have to go.' And it works!"
It doesn't hurt that Austin specializes in a slice of the adventure travel market, scuba diving and skiing. For her clientele, she said, "The adventure is an addiction."
However, if the family travel can wait, those trips are more vulnerable. Judy White, a family travel specialist and owner of Wilton Center Travel in Wilton, Conn., said this segment is suffering along with the rest of her business, with the exception of multigenerational trips, which are "holding their own."
Multigenerational trips are often paid for by the senior members, who might figure they can't wait too long. There is a once-in-a-lifetime, or a last-chance, aspect to them.
The perception of once-in-a-lifetime choices also affects the choice of destination, which offers agents some unexpected opportunities.
"Exotic is about the only thing that is selling right now, the places that people consider the trip of a lifetime," said Bob Whitley, president of the U.S. Tour Operators Association. "Now is the time to go, because they may never have another chance at current prices. Egypt is No. 1 on that list. South America is being discovered, too."
Data from the United Nations World Tourism Organization bear out these points. In 2008, the three fastest-growing regions were the Middle East, at 11.3%; Central America, at 7.9%; and South America, at 5.9%. Worldwide growth was only 2%.
Berkeley, at Destinations & Adventures, specializes in the Middle East. For him, "business is not so bad," and Egypt is the "locomotive." For his upscale clients, "travel is a lifestyle," though some are more cautious about their spending and some might travel less often.
Latin America specialist Robert Becker, managing director of Protravel Active Adventures in New York, said he's as busy as he's ever been. His business to the region is up, he said, but that follows a very quiet period in late summer and early fall.
Coming into the new year, Geographic Expeditions saw improved sales for the Galapagos and Patagonia, said the company's president, Jim Sano.
Some windows of opportunity are even narrower. For example, Sano said Antarctica was up 33% this year, and there was an "inexplicable" mini-surge in travel to Iran. Sano said 2009 bookings are triple last year's. "The numbers are not huge, but it is about $600,000 in sales for us."
Then there is the 30-person special-interest group Casto Travel is assisting with $150,000 worth of ground arrangements for a fishing trip in Alaska. According to Marc Casto, president and COO of the San Jose, Calif., agency (No. 47 on Travel Weekly's 2008 Power List), his clients are economists, nearly all of them public speakers.
"Apparently, in these dour times, the continuing need of cable news to have experts tell us how bad things have gotten is treating some people well," Casto observed dryly.
Clearly, there are sweet spots, large and small, for the trade. Here's a look at three that seem just a little sweeter than most, each for a specific reason:
Adventure travel, because its adherents are passionate about their experiences;
Honeymoons, because newlyweds are loathe to give up this special trip;
Cruises, because the prices are so good.
John Golicz, CEO of Connecticut-based Unicomm, which owns and produces travel shows, said the firm was "quite concerned" about how adventure-focused shows would fare in today's climate.
But attendance in Washington kept pace with 2008, and it rose in Chicago and Los Angeles. The D.C. and Chicago events were part of the Adventures in Travel Expo series, and the Southern California event was the Los Angeles Times Travel & Adventure Show.
Golicz said more than 45,000 people attended, including some 1,700 to 1,800 travel agents.
Historically, 73% of attendees at these events buy travel while there or based on something they learned at the shows, spending an average of $6,174, according to COO James Forberg, and the company expects a similar buy-and-spend rate in 2009, based on preliminary survey results.
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