The Good News—the U.S. Dollar is Strong. The Bad News—the U.S. Dollar is Strong
For U.S. consumers, the strong U.S. dollar vis-à-vis other major global currencies has meant less expensive imported goods and cheaper travel abroad. For those traveling to the U.S., the cost of doing so is up, in some instances, by more than 20 percent compared to what it was a year ago.
When asked what, exactly, will the impact of a 10-to-20 percent year-over-year decline in the value of the Euro vs. the dollar mean? Carol Rheem, vice president, research & analytics at Brand USA, told a March 12 meeting of the agency’s board of directors that, for every 10 percent decline in the value of a currency vs. the dollar, there is roughly a two percent decline in visitors, adding, “We do expect to see some impact on arrivals for the next year,” said Rheem. “We are expecting lower arrivals.”
A little less than three months later, when ipw opened in Orlando, Rheem made another presentation in which she furnished new data that seemed to substantiate the projection. While we won’t know what the impact of the strong U.S. dollar (or weak Euro, Real, Peso, etc.) is going to be until the final arrivals numbers for this year are in—and this won’t happen until next spring—one table in particular shows its impact is already having a telling effect.
Is Brand USA’s marketing program having an impact (1)? Prior to 2011, when Brand USA began to implement the first elements of an international destination marketing program for the USA, its share of the long-haul international travel market had declined. Now, U.S. share is holding steady, and even increasing, in top markets. Coincidentally, each of the top ten markets listed In the table below is one that is a target of Brand USA’s ongoing marketing campaign.
Is Brand USA’s marketing program having an impact (2)?
Overall, U.S. share of the long-haul international travel market has been increasing in each year of Brand USA’s existence. The agency was created in March 2010 through legislation that was signed into law by President Barack Obama.
Beyond the Data: Three months prior to ipw, at ITB in Berlin, we heard from a number of operators—particularly those from Germany, the largest overseas source market in the Eurozone—that the weak Euro had already had an impact on sales for summer 2015 product and that they had adjusted to the situation by diversifying and reaching into other markets.
In the case of Brazil, it might be worse. There, the Real is off by a double-digit percentage decline vs. the dollar. In addition, at the end of the first quarter of 2015, the nation slipped into a technical recession. One successful receptive tour operator based in Florida who specializes in the MICE market told us that business was off by 30 percent compared to last year. And at Orlando’s upscale Mall at Millennia, Brenda Lounsberry, marketing director, told us that Brazilian travelers, the number one international market (ahead of the UK) for the mall, was off from 2014. (Following the substantial dropoff in traffic following the 2008-09 economic recession, mall tenants were able to hang on because they were able to refocus attention on the 60 percent of the customer base that is local.)
Marketing Tactics: Rheem also gave an explanation of what factors go into the which countries Brand USA selects for its marketing activities. (Note: PPP, or Purchasing power parity, is a component of some is a technique or measure used to determine the relative value of different currencies.)
And finally, what Brand USA’s research tells us about the outlook for the next two years among top source markets.
Weariness over Weakened Euro Affecting the Trade Outlook in Germany
The ongoing weakness of the Euro vs. the U.S. dollar is beginning to sink in—to the point at which the travel trade in Germany, which is the largest inbound source market in the Eurozone, is beginning to talk about it in tones that acknowledge its impact. It in its first publication following US Travel’s ipw show in Orlando, the German trade publication Touristik Aktuell (TA) cited reports from tour operators that seem similar to what INBOUND suggested following ITB two months ago in Berlin.
Now, says TA: “…what one must not forget is that the good prices for trips to the USA have come this season only about because the organizers were able to purchase in the past year still to a favorable exchange rate. That will be definitely different now.”
Robin Brückner, product manager for TUI, Europe’s largest tour operator, told TA, “it is expected that there will be significant price increases.” Meanwhile, Timo Kohlenberg (pictured here at ipw with Jake Steinman, founder and CEO of the NAJ Group, publisher of INBOUND), president and CEO of Hannover-based America Unlmited, predicted price hikes of up to 35 percent.
As a result, German operators are now negotiating more intensely with U.S. suppliers, who are sensitive to the price issue, by incorporating savings elsewhere, such as inclusion of additional services in their products.
There are, however, those who dismiss the notion that the outlook is negative. According to TA, “only a few Germany-based U.S. supplier representatives are worried.” For instance, Martin Walter, managing director of Brandmasters America, the agency that represents Brand USA in Germany, said “The influence of the exchange rate on the travel decisions overestimated.” And Hans Gesk, president of Germany’s Visit USA Committees, said that he does not expect a major breakdown of the German source market next year: “Our experience shows that many long-term (travelers) plan their trip and are willing to invest anything.”
CBP in Talks to Expand Number of Overseas Pre-Clearance Facilities
It was officially announced in Washington, D.C., around the same time Gil Kerlikowske, commissioner of U.S. Customs and Border Protection (CBP) told a packed news conference at ipw that the agency was in talks with 10 airports worldwide to implement pre-clearance facilities where USA-bound travelers could go through the clearance process before even entering the U.S. And after they did, arrival at a U.S. airport would be not different than if a passenger had arrived on a domestic flight.
Kerlikowske said that pre-clearance helps identify threats to the U.S. and speeds up entry into the country for almost all passengers. Las year, it worked for some 17 million USA-bound air passengers. Currently available in just a handful of overseas airports and Canada, the list of potential sites includes some major international points of departure—especially from Europe—to the United States.
Ten Foreign Airports Identified by CBP for Possible Preclearance Locations
| Country Market | Airport |
|---|---|
| UK | London Heathrow |
| UK | Manchester |
| Belgium | Brussels |
| Spain | Madrid-Barajas |
| Netherlands | Amsterdam Airport Schipol |
| Norway | Oslo |
| Sweden | Stockholm Arlanda |
| Turkey | Istanbul Ataturk |
| Dominican Republic | Punta Cana |
| Japan | Narita International |
Current Pre-Clearance Locations
| Country/Market | Airport |
|---|---|
| Ireland | Dublin |
| Ireland | Shannon |
| United Arab Emirates | Abu Dhabi International |
| Bermuda | L.F. Wade International |
| Aruba | Queen Beatrix Internationa |
| Bahamas | Nassau |
| Canada | Lester B. Pierson International |
| Canada | Winnipeg |
| Canada | Vancouver |
| Canada | Victoria (Port Angeles, Wash.) |
| Canada | Montreal Trudeau |
| Canada | Halifax Stanfield |
| Canada | Edmonton |
| Canada | Calgary |
| Canada | Ottawa McDonald-Carter |
A “Challenging and Highly Competitive” Business Environment Leads to Drop in Bookings for Kuoni Travel Operations
The numbers in the June 11 year-to-date financial update by Zurich-based Kuoni were mixed, but the two numbers most closely watched for the company, which earlier this year stunned the tourism industry by announcing that it would sell off its tour operator-related businesses in 2015, were down. That is:
- Bookings for the tour operating activities that are up for sale, were down 8 percent in the first five months of the year.
- Sales for destination management specialist Global Travel Services fell by 7 percent year-on-year.
- Meanwhile,
- Bookings made on the GTD Division’s booking platforms for room nights in hotels and destination services were up 12 percent in local currency terms
- Sales were up 11 percent for its visa business VFS Global.
In the statement that accompanied the report on the key figures, the company, which is the oldest tour operator in continental Europe, said, “The business environment remains ‘challenging and highly competitive.”
“In a persistently difficult market environment in Scandinavia/Finland, the booking trend improved slightly, but sales fell mainly because of a significant decrease in flight capacities,” the statement added, noting that business out of Switzerland, its home market, suffered because of the “removal of the floor on the euro/Swiss franc exchange rate” earlier this year.
Kuoni—it owns NYC-based receptive tour operator AlliedTPro, which is a few blocks away from Kuoni-owned GTA offices— said that it still expected the sale of its tour operator-related activities in Europe will take place this year.
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 Sharon Siskie, vice president sales and marketing, international, Disney Destinations; and Michael Goldsmith, vice president of international marketing, Las Vegas Convention and Visitors Authority.
Sharon Siskie: “My first job in travel was at Premier Cruises Lines as a Reservation Sales Agent in the call center. I needed a late shift job while I was going to school at UCF during the day, and the job fit my schedule. It was quite an accident….but over 25 years later I can’t imagine working in any other industry!”
Michael Goldsmith: “While attending the University of Arizona in the 1980s, I talked myself into a job as ‘Campus Coordinator’ for group travel specialists in Tucson, Arizona. This challenging role required me to visit each of the sororities and dorms on campus to promote and sell Spring Break trips to Mazatlan, Mexico. After graduation, I spent five weeks in Mazatlan on the operations side, engaging in difficult and strenuous activities such as setting up volleyball nets and soccer goals for the daily beach activities, distributing credentials and room keys, and awarding prizes for various contests and activities. My choice of a career was certainly guided by that experience.”
HODGE PODGE: Shifts, Shakeups and Occasional Shaftings in the Tour and Travel Industry
Kuoni Travel UK has appointed Steven Seddon to the newly created role of head of marketing and digital. Seddon comes to Kuoni from the Monarch Travel Group, where he was head of marketing. There, he helped develop marketing and digital strategy for brands including Monarch Holidays, Cosmos Holidays, Cosmos Hotels, Monarch Hotels and Avro.
DER Touristik has appointed Dirk Tietz to the newly created position of chief transformation officer (CTO), a post that will put him on the executive board of the company, which is Germany’s second largest travel group. The principal task of the CTO is to manage the digitization of the company. Prior to joining DER Touristik, Tietz worked nearly six years for TUI, lastly as director of digital commerce for TUI Germany.
