WTM PREVIEW: The Balance Sheet Perspective
While it may not be the best of times for staging the annual World Travel Market, it is not the worst of times, either. Operators and U.S.-based receptive and suppliers who gather on the exhibit floor of London’s Excel for four days beginning Nov. 2, will be finalizing business for next year in an environment in which the pluses weigh a little more than the minuses.
The minuses:
— As the Queen told Alice in Lewis Carroll’s Through the Looking-Glass, “Here, you see, it takes all the running you can do to keep in the same place.” Because of inflation and an economy that suffered more than that of most nations during the 2008-09 economic recession, income levels for the UK’s traveling middle class have remained flat for a decade.
— While year-on-year outbound travel totals have increased, the main beneficiaries of the increase have been European and short-haul destinations, not long-haul U.S. destinations.
The pluses:
—The growth and the recovery of the UK inbound market is, by nearly all accounts in the trade and consumer news outlets, inching along at a modest rate and should continue to do so.
— Despite the tilt to close-in holiday travel, a strong majority of vacationing Brits seem to have sworn off travel to the Middle East and Muslim countries (a horrible terrorist attack last June at a Tunisian beach resort resulted in the murder of 30 UK holidaymakers); because the USA is perceived as a safe destination, schadenfreude creates an opening for U.S. destinations.
Neutral
The exchange rate, which has seen the Euro suffer substantially vs. the U.S. dollar, should not be a factor. The British pound sterling opened at $1.58 this week, down from just under $1.61 a year ago—a decline of less than two percent.
Some Just-Released Numbers: Adapting the expression accordingly, arrivals from the UK to North America continue to centimeter along, according to the latest departures data released by the UK Office for National Statistics (ONS). The statistics agency said in its latest release that visits abroad by UK residents during Quarter 2 April to June 2015 increased by 7.7 percent to 18.0 million compared with Quarter 2 April to June 2014. For North America, the percentage increase was slightly lower (+ 6 percent), likely the result of a stronger U.S. dollar vs. the Canadian loonie.
At the same time, visits to European destinations by UK travelers increased by more than a million in the second quarter of 2015 vs. the second quarter of 2014, reported ONS—an increase of a little more than 8 percent, with British travelers taking advantage of a weaker euro. The Inbound Report has put the latest ONS report into perspective in the following tables (for the most part, the figures have been seasonally adjusted), which show that the numbers are still lower than they work a decade ago. Keep in mind that visits to the USA comprise about 80 percent, or more, of the totals listed here.
A 10-Year Perspective
UK Visits to North America
2005 through 2014
| Year | Number of Visits (000s) | Percentage change |
| 2005 | 4,869 | -- |
| 2006 | 4,702 | -3.40% |
| 2007 | 4,587 | -2.40% |
| 2008 | 4,629 | 1% |
| 2009 | 3,652 | 0.50% |
| 2010 | 3,653 | 0% |
| 2011 | 3,668 | 0% |
| 2012 | 3,334 | -1% |
| 2013 | 3,389 | 11% |
| 2014 | 3,677 | 8% |
| Source: UK Office for National Statistics |
Annual NAJ Listening Tour: Insights from 16 Industry Leaders
NAJ took the opportunity this month to conduct our annual listening tour, during which we visited personally with, or had extensive telephone conversations with, executives of ten receptive tour operator (RTO) offices for our annual exchange of ideas and briefings about bookings. During the tour, which took us from New York City, down the East Coast through Philadelphia and Washington D.C. and on to Orlando, Florida, we also met with officials from the DMO community, travel industry associations, key suppliers and the U.S. Department of Commerce’s National Travel and Tourism Office. All totaled, the Annual Listening Tour involved visits with 16 different organizations as we sought to see how booking levels were being affected by the appreciation of the U.S. dollar vs. other U.S. currencies as the new normal, well as how they were adapting to a variety of new competition.
The East Coast Listening Tour visited the following: AlliedTPro; Tourico Holidays; Hotelbeds; Meeting Point International; New World Travel; TeamAmerica; Merlin Entertainments (its brands include the Lego Group and Madame Tussauds); NYC and Company; Philadelphia CVB; Philadelphia Tourism Marketing Corporation (Visit Philly); U.S. Travel Association; National Travel and Tourism Office; American Bus Association; Visit Fairfax (Va.); Visit Orlando and Experience Kissimmee. In common: All have had to find ways to respond and adapt to the changes that are reflective of an industry that has survived 9/11, the Internet disintermediation of their client’s clients and the 2008-09 financial crisis that shook markets and economies worldwide.
IN A NUTSHELL:
Exchange Rate: Receptives have accepted the fact that a 20-40 percent more expensive U.S. dollar is now the new normal. RTOs were bracing themselves for weaker bookings from Europe last October when it became clear that the $1.10-$1.13 Euro to the dollar level was going to stay. The initial effects were mixed with slightly weaker bookings and cancellations in the beginning of 2015, but they still held out hope that the exchange rate could rebound back to the $1.20 level or above. Now, they seem to be resigned to the fact that the industry is entering a different era where they will need to work with the current level of exchange
In the 28 countries that comprise the Eurozone as well Brazil and Australia there is the hope that some external development will eventually weaken the dollar which may deliver an unexpected windfall. As a whole, operators are a crafty lot—they have, after all, survived 9/11 and the financial crisis of 2008.
Generally, they are adapting in the following ways:
▪ Maintaining last year’s price points by reducing the number of days, lowering the quality of hotel offered in their brochure—or lowering their profit margins.
▪ Continuing to lower their own cost structure, either through reductions in staff or investing in IT that will make staff more efficient;
▪ Hoping that political unrest and turmoil in the Middle East and part of Asia may result in a flurry of new bookings to North America, which is perceived as a safe destination;
▪ Placing faith in their hotel relationships to preserve MICE groups, which seem to be shifting to other less expensive destinations such as Mexico and the Caribbean.
▪ Diversifying into emerging international markets or expanding sales and marketing staff in overseas markets
▪ Many are now offering attractions free automation so they can begin bundle hotels together with attractions as a dynamic package.
What We Heard: Observations and Insights from our Meetings
▪ Traditional national receptive operators are trying to understand whether they are hotel providers or service providers. Since they cannot compete for the rates offered by bed banks and OTAs, they compete through creativity and client service in hopes that these make up for hotel rate differences.
▪ Reported bookings for 2015 are mixed with the German speaking market either flat or down between 3-10 percent. Those who have relied on Brazil for their growth the past four years found that business was off between 20-30 percent, especially if Brazil had not been their major focus. Others, whose main niche is Brazilian MICE business, even reported growth this year by offering creative new products. Bookings from Japan are off between 5-10 percent while bookings from China were up 7-10 percent, but at lower price points.
▪ MICE groups are continuing to send requests for quotations, but conversions are lower as they shift to less expensive destinations.
▪Where are the lower airfares? While Latin American carriers have slashed prices in many cases by 66 percent, European fares to the U.S. have remained stubbornly high.
▪ The once-robust Brazilian market that many receptive operators expanded into during the past five years has cooled considerably in light of the Real devaluation on side and ADR increases imposed by hotels who are now enjoying the highest rates in 10 years as domestic corporate business continues to see strong growth.
▪The phenomenon of pre-bought “Permanent Room Blocks” (PRBs): RTOs in major cities, in order to be able to guarantee available continues, but many hotels are reducing the allotments when operators are asking for more.
▪ Growth opportunities are in Africa, China and India, which has just approved an increase in the validity period for tourist visas to visit the USA to 10 years.
▪ For intensely competitive International leisure and MICE groups, the RTOs told us that their biggest competitors are not other RTOs but the sales agents for the major hotel chain’s who are able to quote rates without the receptive making a mark-up by bundling the hotel rate with additional services. In many cases, the International corporate sales person or the GSA has no connection with the individual properties that are being requested where RTO’s believe they can obtain a better rate through their relationships.
▪ For the hotel brokers–Tourico, Hotelbeds and GTA—the common challenges are:
- Rate parity, i.e. guaranteed lowest rates which are being forced on the hotels by Expedia and Booking.com, are also imposed on the RTO’s who cannot control who their clients resell the room to. Hotels now have software that can identify the source of rate parity violations and impose penalties or cancel contracts altogether.
- OTAs are now selling directly to international wholesalers: Expedia and Booking.com have begun selling their inventory of 750,000 hotels to wholesalers, who are willing to accept a 5-7 lower margin than they would receive from RTOs in exchange for providing access to so in some cases 10 times the inventory.
- They are all trying to extend their distribution networks by finding new markets to find new clients their competitors have yet to reach.
▪ Anticipating reduced volume from Europe, several operators have reducing expenses by cutting staff.
▪ One of the primary challenges RTOs face is the lack of upward mobility among the younger generation of employees. If one peruses Glassdoor.com, where employees are able to review their companies anonymously, with a few notable exceptions, the comments generally describe the atmosphere as follows:
a) Pros: Great travel opportunities
b) Cons: poor communication, an expectation of work beyond business hours at poor pay, and advancement opportunities are few.
c) Ambitious employees either jump for advancement or use their contacts to start their own receptive company offering superior service and attention to clients.
- More on Rate Parity—“Parity” is in the eye of the subjugated: Hotels are under contract to comply with rate parity—a.k.a. Best Available Rate (BAR)—by OTAs such as Booking.com and Expedia in order to preclude any direct selling to consumers at lower prices. Receptive operators are under contact by individual properties to ensure that their international clients do not sell to consumers below BAR and are fined penalty fees when it happens. Many hotel chains now have forensic specialists researching the arcane websites that feature their franchisee rates below BAR to the consumer. The digital trail leads them back to the receptive, who has no way of knowing which client resold the rooms or to whom.
- The shrinking size of groups—Hotels are becoming more generous with the definition of “group” proves the value of relationships. RTO’s report that groups are getting smaller: in some cases groups originally estimated for 20 have dwindled down to five passengers, due to the appreciation of the U.S. dollar, but RTOs with strong relationships with hoteliers are able to operate groups as low as five.
What do the Latest Data tell us about the World’s Most Visited Long-Haul Destinations?
From the just released authoritative study the Visa Global Travel Intentions Study 2015, comes the revelation that the increase in global international travel seems to be powered by an increase in intra-regional travel. But, while intra-regional is a strong trend, the USA is nonetheless singular in its global appeal with long-haul visitors from the regions, as the following tables illustrate.
Most Visited International Destinations
2015 vs. 2013
| 2015 Country and Rank | 2013 Country and Rank | ||
|---|---|---|---|
| 1. USA | 1. USA | ||
| 2. Japan | 2. UK | ||
| 3. Hong Kong | 3. France | ||
| 4. UK | 4. China | ||
| 5. Australia | 5. Hong Kong | ||
| 6. Singapore | 6. Singapore | ||
| 7. France | 7. Thailand | ||
| 8. China | 8. Malaysia, Japan, Spain | ||
| 9. Thailand | 8. Italy, Australia | ||
| Source: Visa Global Travel Intentions Study 2015/Prepared by Millward Brown |
(Notes: The environment and types of activities available to travelers are what made USA, Japan, Hong Kong, UK and Australia the top five destinations in 2015, while the outlook for European destinations is positive and could be driven by expectations of further depreciation of the Euro.)
Top Three destinations by Travelers from Each Region in the Past Two Years
| Travelers from Asia Pacific | |||
| Destination | Share of Asia Pacific Market | ||
| Japan | 27% | ||
| Singapore | 21% | ||
| Hong Kong | 20% | ||
| Source: Visa Global Travel Intentions Study 2015/Prepared by Millward Brown | |||
| Travelers from Europe | |||
| Destination | Share of Asia Pacific Market | ||
| Spain | 27% | ||
| Italy | 18% | ||
| Greece | 14% | ||
| Turkey | 14% | ||
| USA | 14% | ||
| Source: Visa Global Travel Intentions Study 2015/Prepared by Millward Brown | |||
| Travelers from the Americas | |||
| Destination | Share of Asia Pacific Market | ||
| USA | 42% | ||
| UK | 17% | ||
| France | 16% | ||
| Source: Visa Global Travel Intentions Study 2015/Prepared by Millward Brown | |||
| Travelers from Africa and the Middle East | |||
| Destination | Share of Asia Pacific Market | ||
| UAE | 16% | ||
| Egypt | 15% | ||
| Turkey | 11% | ||
| Source: Visa Global Travel Intentions Study 2015/Prepared by Millward Brown |
(The Visa Global Travel Intentions Study 2015 was commissioned by Visa to Millward Brown. The study was conducted with 13,603 travelers, aged 18 years and above across 25 countries in January and February 2015.)
Some Former Nascimento Managers Land Safely at Other Companies
The wake turbulence from the failure and bankruptcy proceedings in recent months of Brazil’s second largest tour operator, Nascimento Turismo, has seen several of its one-time executives land safely at other major travel companies in the country:
—After leaving Nascimento Turismo, Cleiton Feijó accepted a position with Travel Master, Minas Gerais; his job will be to direct the company’s São Paulo base.
— Visual Tourism has announced the appointment of Wagner Silva , as branch manager. The former manager at Nascimento will coordinate units in 11 Brazilian cities: Belo Horizonte, Brasilia, Campinas (SP), Campo Grande, Curitiba, Goiania, Porto Alegre, Ribeirao Preto (SP), Rio de Janeiro, Salvador and Santo André (SP). Silva was with Nascimento Turismo for nearly eight years. Prior to that he was sales manager for 18 years at Panexpress Travel and Tourism
Not all of Nascimento Turismo’s staffers have fared as well. Some dismissed and out-of-work former employees have demonstrated outside what were Nascimento offices (see photo) demanding benefits they say were included in their employment agreements. When it filed formal bankruptcy papers, the family-directed, 54-year-old company indicated that it owed more than $6 million to creditors—at least half of which is owed to U.S.-based receptive tour operators.
To read the article on what caused the failure of Nascimento Turismo, visit:
Challenges Confront NTTO
At the U.S. Department of Commerce’s National Travel and Tourism Office in Washington, D.C., the business of crunching numbers is a serious one for the one entity that provides the most extensive array of information and reports on overseas travel to the USA. This fact was reaffirmed during our recent meeting with Ron Erdmann, deputy director of NTTO (pictured at left with Inbound‘s publisher Jake Steinman), when we visited him as a part of our 2015 Listening Tour during which we spoke with receptive tour operators, travel industry suppliers DMOs and travel industry associations.
Our key takeaway from the meeting with Erdmann: Road bumps in timely reporting of the data. The collection and analysis of new arrivals numbers by the U.S. Department of Homeland Security, has taken longer than expected. The problem is that they’ve been slow to make adjustments for nuances that will account properly result in higher quality data. For example, those arrivals traveling with work visas cannot be counted as visitors in the arrival numbers they report. It has taken longer to provide quality data for the destinations.
Markets such as Western Europe, Japan and Canada are mature and should be addressed differently. Major swings in arrivals will correspond with the cyclical nature of currency fluctuations; otherwise destination marketers should expect low single digit variations from year to year.
How do you market to a mature destination? Answer: You pursue repeaters by combining Tier 1 destinations with new destinations surrounding them that have interesting product. This may result in fewer overnights for the Tier 1 destinations, but it’s better than receiving nothing.
What happened to the timing with Chicago’s funding woes could not have been worse. The numbers for 2013 were down from the previous year, but if we look more deeply at the data the actual arrival were down for business travel, which the tourism division has no control over, while leisure travel was up which could have been used to argue to maintain the staff driving that end of the business.
Vacation Home Rentals Reshape the Kissimmee Florida Brand
Sponsored Article
When the Inbound Report’s editor first visited Kissimmee Florida in 1989, the small city (estimated population today is about 50,000) was regarded by the travel and tourism industry as cozy place along State Route 192 lined with mostly budget hotels that had several thousand rooms for available for cost-conscious families visiting the nearby Disney attractions, whose main entrance at the time was not that far away.
Today, as a result of a decision made a decade ago to repurpose large tracts of undeveloped land, Kissimmee is officially known as the Vacation Home Capital of the World, with 20,000 rooms in large homes, resort residences and virtual mansions, as well as another 20,000 rooms available in conventional hotels.
And it’s not stopping there. D.T. Minich, president and CEO of Experience Kissimmee—he came to the destination in the summer of 2014, leaving his post as executive director of Visit St. Pete/Clearwater—told the Inbound Report in a recent interview, said that the growth of the rental home market “has really taken off in the last two years,” and that another 3,000 homes of three to fifteen rooms each will be built in the next three years, bringing at least 20,000 more rooms into the destination’s inventory. Following are some highlights from our conversation with Minich.
How it got Started: Osceola County, Florida, which is adjacent to the southern border of Orlando/Orange County, Florida, was looking for ways to differentiate its lodging product from other jurisdictions in the Greater Orlando Area and to make the land generate tax revenue. At the time the vacation rental market had just begun to grow. Government officials reasoned that subdivisions with a residential character—but zoned for the purpose of attracting guests and visitors—wouldn’t clash with the residential character of the Kissimmee area that is not already part of the tourism industry.
They also reasoned, correctly, that such properties would attract investors who wanted a reliable investment. They were right. Wealthy investors have financed the growth and development of the areas of Kissimmee zoned for home rentals.
How it Works: Reunion Resort became the first community. It is the location of homes that range from what one might consider a traditional four-bedroom residence with added amenities for those who rent it to a 14,500-square-foot house with nine bedrooms, a two-lane bowling alley, fully stocked arcade, spa, racquetball court and a 12-seat in-home movie theater.
Jeeves Holiday Homes (www.jeevesfloridarentals.com), an Orlando-based luxury-rental-home management company, takes care of the homes, while scores of entities sell the rentals. Research has shown that families, especially well-to-do extended families who want to stay together (sometimes with their nanny) are a natural target. So are meeting planners for businesses who want to send employees to a place equipped with conference rooms and AV equipment, but also has built-in recreational facilities, such as in-house bowling alleys, game rooms and an adjacent golf course. Minich said it’s a perfect setting for team-building exercise and for incentive groups who want to combine work with entertainment options, including all the nearby Orlando attractions. As one industry observer told us, “Nowhere else do you have the concentration of 100 theme parks and attractions as well as year-round weather.”
Which International Visitors Like It and Why They Like It: Minich told us that the country markets of the UK and Brazil are number one and two. Number three is open to question for the moment. But Minich pointed out that this could change with the launch last month of daily service by Emirates airlines to Orlando from Dubai, UAE, which also is a connection point for travelers from through the Middle East and Asia. The visitors from UAE, for instance, like the ease of staying as a family or extended family and attendants in a single place. Minich also expects that MICE traffic will increase as tour operators become more familiar with the possibilities of the vacation home product.
Why Others Like the Model: Those receptive tour operators that sell the product like it because there is no rate parity to deal with. The units are owned by private investors who care about keeping their properties rented and keeping the revenue stream going. Receptives like the flexibility and packaging possibilities offered by rental homes.
Probably most important, the “locals” like it—really like it. This is because, despite all of the new home developments built in Kissimmee, and despite all of the property tax for Osceola County and its schools that that the new homes in new neighborhoods have generated in the past eight years, not a single property has produced a single school student.
Why Others are Imitating the Model: They aren’t. Despite the popularity and proven promise of the Kissimmee experience in Central Florida, it does not appear that any other U.S. destination comes close to incorporating the rental home market as a part of its travel and tourism infrastructure. We at the Inbound Report could not locate anything quite like the Kissimmee model, and Minich—who makes it a part of his job to be aware of what the competition is doing—did not know of any.
So, it is safe to suggest that no destination will threaten Kissimmee’s officially registered designation and de facto status as Vacation Home Capital of the World. (For more information, visit:
http://www.experiencekissimmee.com/places-to-stay/vacation-home-rentals/
HODGE PODGE: Shifts, Shakeups and Occasional Shaftings in the Tour and Travel Industry
Nicki Grossman, president and CEO of the Greater Fort Lauderdale CVB, has announced that she will retire on June 21, 2016. Grossman has held the top position at the Fort Lauderdale bureau since 1995 and has played a major role in increasing the destination’s visibility internationally. She serves as a board member on numerous industry and civic organizations and in 2007 she was inducted into the Visit Florida Tourism Hall of Fame.
Selina Chavry has been promoted to the post of global managing director of Pacific World as Herve Joseph-Antoine has becomes chairman of the global events management company. DMC.A 15-year veteran of Pacific World, Chary was previously regional director, Asia. Joseph-Antoine expands his responsibility within Pacific World’s parent company, Hotelbeds Group, as regional managing director Asia-Pacific, destination management. Along with its global alliance with Access Destination Services, Pacific World now has 13 physical offices, serving 36 destinations in North America
Chris Keller has left his post as executive vice president of global sales for Tourico and joined GTA in a senior position. Keller had served at Tourico for two-and-a-half years. Prior to Tourico, he was with Hotelbeds for almost 15½ years (1997-2013).
The Munich tour operator 
has filed for insolvency. One Touristik was launched in late 2011 as a specialist in long-distance travel. The sole managing director is Menking Rico. The company sold mainly over the Internet.
