RTO Summit Orlando Take-Aways, Part 2
Tourico’s CEO gets Feisty about US Hoteliers and their Ridiculous Dependency on OTAs
The founder and CEO of Tourico Holidays, not known as one who is timid or shy—Uri Argov is known by many as the travel industry’s original disruptor—was feistier than usual when he spoke recently during his participation in what was supposed to be a panel discussion on the impact of the weak euro on the outlook for U.S. inbound travel from Europe.
Instead, even though there was some allusion to the subject (referred to later in this article), Argov unleashed an unusually aggressive attack on hotel pricing practices during a session at NAJ’s recent RTO Summit in Orlando. And there was no disagreement from the other panelist in the discussion, Peter van Berkel, president of Travalco, although van Berkel’s tone was more restrained.
Perhaps because Argov, whose degree in computer science and whose background includes work in intelligence activities when he served in the Israeli Defense Forces, has a more formidable knowledge of the mechanics of hotel pricing practices than most travel industry executives regardless, his criticism was blunt and sometimes mocking.
It should be noted that, earlier in the RTO Summit, van Berkel had started by being sharply critical of the practice by hotel revenue managers to rely on dynamic pricing. “We have to educate the hotels,” he said, adding, “keep in mind … that hotels that only work in the dynamic (pricing) way are limiting their ability to have their product included in our packages.”
How Much is a Bottle of Coke Worth? Then, Argov—in the past, he has described the hotels’ practice of rate parity “a fundamental violation of human rights”—weighed in by illustrating just how dynamic pricing online has made it difficult for B2B receptives to package and sell product that includes a hotel room. “It’s all about dynamic pricing,” he said, going on to use as analogies the way we purchase soda from a supermarket or a movie ticket from a theatre.
Suppose, he said, one were to go into your favorite grocery store to get a bottle of Coke that was posted at a price of $1.99 only to reach the checkout counter and find that the price had just gone up to $2.49. Or, he added, suppose one went to a movie theatre, only to learn that a ticket that had been advertised that morning at $7.50 had increased to $9.00 that afternoon.
“You would never come back again,” said Argov.
And now, he noted, “so many hotels have taken the American way of traveling and tried to impose it on the world”—implying that dynamic pricing in an overseas B2B marketplace alienates the buyer and creates that perception that the hotel is a bait and switch practitioner.
“Every revenue manager in New York City needs to change the price five times a day,” he suggested. He said that, in selling to overseas markets of France, Germany and China, “if the price changes, they will go someplace else.”
The principal culprits, he asserted, were the largest online travel agencies (OTAs), such as the Priceline Group and Expedia which, through their advertising, suggest to the consumer that there is considerable competition among online travel sites when, Urgov said, in reality, there is not because of rate parity.
The Weak Euro Has Hurt, and Will Continue Hurt, the Inbound Industry: Because the euro has been at levels ranging from 25 to 35 percent below 2013 levels, “we definitely see a decline of 10 to 15 percent (in sales volume) in western Europe,”even though actual reservations are experiencing small increase,” Argov told RTO Summit delegates, explaining that, at Tourico, “we charge in euros, then pay in dollars … It hurts a lot.”
Van Berkel, too, acknowledged that the weak euro has had an impact on his company’s business. But he suggested that receptive tour operators can help counter the slide in activity by recognizing that the U.S. is not a budget or economy product for consumers most affected by the weaker euro, but is a luxury product.
He also indicated that Europeans now seem more interested in destinations that are “beyond the gateways,” and that there is an increase in interest in U.S. national parks. As well, he noted, the U.S. is perceived as a safe destination.
And one more thing … Just prior to the panel discussion by van Berkel and Argov, Malcolm Smith, senior vice president of business development and general manager of IPW for US Travel, spoke to summit delegates and he pointed to the growing importance of the MICE market in western Europe as one way in which U.S. travel suppliers can supplant lost business from the leisure sector. He noted that increased MICE traffic to the U.S. last year helped to more than offset lower leisure visitor counts from France and Spain. There were 100 more MICE buyers at the 2015 IPW in Orlando, and another increase in MICE buyers is expected at the 2016 IPW in New Orleans.
Are There Reasons not to Give up on Brazil?
One of the foremost receptive tour operators in the USA in dealing with the inbound market from Brazil, Eduardo Bittencourt, seems to counsel U.S. travel suppliers to take a deep breath, consider the total political, social and cultural environment of the world’s seventh largest nation and third largest overseas travel market, and don’t be rigid by looking only at the nation’s GDP and currency exchange rate.
Bittencourt, managing director of Orlando-based CH Travel, which specializes in MICE travel from Brazil, told delegates not to give up on the market, which has generated increasingly larger numbers of visitors to the USA for more than a decade before flattening out this year.
“Is it really time to give up on Brazil?” he asked rhetorically, answering his own question with: “I don’t think so.” Some key data that support his position include the fact that, in a nation of more than 200 million people, just seven percent of the nation has traveled internationally and, among all Brazilians, the USA—specifically, Florida—is the “number one dream destinations” for all Brazilians.”
Currently, he explained, Brazilian’s international travelers to the United States are not traveling as many days or spending as much, particularly on shopping, when they travel. “They’re still traveling, but they’re thinking about the return,” said Bittencourt. “They are now saving money to pay cash.”
He added: “We are receiving a different passenger—one more interesting in discovering what a destination has to offer—not just shopping. They’re still shopping, but they are buying less. We don’t see so many shopping bags in the (airline) bins.”
So, he emphasized. Brazilians are still traveling.
So, what should U.S. suppliers do—despite the fact that the Brazil is in the midst of a recession and its currency, the Brazilian real, is down 25 percent vs. last year? Key actions he suggested include the following:
—Understand the Brazilian culture. Don’t prepare proposals simply on the basis of performance data or statistical projects at a formal meeting. “You’ll do more business at a dinner or lunch.”
— For the time being, consider relaxing the date for payment deadlines for your product or package. Instead of calling for payment six months out, “Why four or three?”
—Hoteliers can offset the impact of the price of a room by providing free Wi-Fi aces and including a complimentary breakfast.
—One sign that a turnaround might be in the offing (possibly in 2016) is that airlines have dropped fares to the USA. This is related, in part, to a recent tendency on the part of upscale travelers (those in Brazil’s “A” and “B” economic classes) to make their purchases closer to their date of departure. These passengers are also booking more travel on their own.
In essence, Bittencourt concluded, what decline in the market there has been is not due to economic factors, but to political factors, the latter having shaken the confidence of some Brazilians who travel internationally—especially the country’s “C” economic class, many of who have now taken to traveling within Brazil or to in-close South American destinations.
Jay Santos, vice president of global travel industry sales and marketing at Visit Orlando, pointed out that, in the past several years, Orlando had made a strategic decision to focus more on “A” and “B” class Brazilians—individuals who would be less prone to forego long-haul travel to the United States because of economic conditions at home.
Even so, said Santos, travel suppliers in the greater Orlando area have noticed changes in the behavior of Brazilian visitors:
—“They’re traveling, but they’re spending less.
—“They’re doing things other than shopping,” such as enjoying local parks .
—They’re visiting for less than 12- or 10-day actions, staying for 7 days instead.
China, India and South Korea Send More than Half of all International Students in the USA
The just released Open Doors Report on International Educational Exchange for 2015, issued by the Institute of International Education (IIE), shows that 975,000 students came to the United States during the recently completed 2014-2015 school year, a significant increase over the previous school year, with all indications suggesting there are now more than a million international students attending school in the USA.
The implications for the inbound tourism market are significant. Students usually have at least their parents—and, possibly, members of their extended family—accompany them on their trips to the United States. Or, family members and friends visit them at least once during the school year. This suggests that the student-driven market could generate 1.5 million to 3 million or more arrivals to the USA annually.
The countries making up the top three source markets for students—China, India and South Korea—are all growth markets and all are targets of marketing campaigns by Brand USA, the national tourism marketing organization of the United States.
Top 25 Places of Origin of International Students in USA, 2013/14 - 2014/15
| Place of Origin | 2013-2014 | 2014=2015 | % of Total | YoY Change |
|---|---|---|---|---|
| 1. China | 274,439 | 304,040 | 31.20% | 10.80% |
| 2. India | 102,673 | 132,888 | 13.60% | 29.40% |
| 3. South Korea | 68,047 | 63,710 | 6.50% | -6.40% |
| 4. Saudi Arabia | 53,919 | 59,945 | 6.10% | 11.20% |
| 5. Canada | 28,304 | 27,240 | 2.80% | -3.80% |
| 6. Brazil | 13,286 | 23,675 | 2.40% | 78.20% |
| 7. Taiwan | 21,266 | 20,993 | 2.20% | -1.30% |
| 8. Japan | 19,334 | 19,064 | 2.00% | -1.40% |
| 9. Vietnam | 16,579 | 18,722 | 1.90% | 12.90% |
| 10. Mexico | 14,779 | 17,052 | 1.70% | 15.40% |
| 11. Iran | 10,194 | 11,338 | 1.20% | 11.20% |
| 12. UK | 10,191 | 10,743 | 1.10% | 5.40% |
| 13.Turkey | 10,821 | 10,724 | 1.10% | -0.009 |
| 14. Germany | 10,160 | 10,193 | 1.00% | 0.30% |
| 15. Nigeria | 7,921 | 9,494 | 1.00% | 19.90% |
| 16. Kuwait | 7,288 | 9,034 | 0.90% | 24.00% |
| 17. France | 8,302 | 8,743 | 0.90% | 5.30% |
| 18. Indonesia | 7,920 | 8,188 | 0.80% | 3.40% |
| 19. Nepal | 8,155 | 8,158 | 0.80% | 0.00% |
| 20. Hong Kong | 8,104 | 8,012 | 0.80% | -1.10% |
| 21. Venezuela | 7,022 | 7,890 | 0.80% | 12.40% |
| 22. Malaysia | 6,822 | 7,231 | 0.70% | 6.00% |
| 23. Thailand | 7,341 | 7,217 | 0.70% | -1.70% |
| 25. Colombia | 7,083 | 7,169 | 0.70% | 1.20% |
| 25. Spain | 5,350 | 6,143 | 0.60% | 14.80% |
| WORLD TOTAL | 886,052 | 974.926 | 100% | 10.00% |
Were China’s Students a Market unto Themselves … Below, we’ve used numbers from the U.S. National Travel and Tourism Office, together with the IIE Open Doors figures—it should be noted that this is a little like comparing apples and oranges—to illustrate just how significant the Chinese student market is. By itself, the students from China in the United States, make up a source market large enough to rank it 27th among country source markets.
Market & International Rank
| 26. Denmark | 305.331 |
| 27. Students from China ¹ | 304,400* |
| 28. Belgium | 280.121 |
| *Note: Students may account for twice as many arrivals as this number, should they return home between semesters or at another time during the school year. | |
| ¹ Figure is for 2014-15 school year |
Where they go to School: Two New York City schools, NYU and Columbia, are home to nearly 24,700 students—a figure that would be the enrollment at a megaversity in just about any other place in the country. Los Angeles is another city that has two schools (Southern California and UCLA) in the top ten list of schools hosting international students.
Top U.S. Institutions Hosting International Students, 2014-15
| School | Location | Number of Students |
|---|---|---|
| 1. New York University | New York City | 13,178 |
| 2. U. of Southern California | Los Angeles, California | 12,334 |
| 3. Columbia University | New York City | 11,510 |
| 4. Arizona State University | Tempe, Arizona | 11,330 |
| 5. U of Ill. Urbana-Champaign | Champaign, Illinois | 11,223 |
| 6. Northeastern University | Boston, Massachusetts | 10,559 |
| 7. Purdue, West Lafayette | West Lafayette, Indiana | 10,230 |
| 8. UCLA | Los Angeles, California | 10,209 |
| 9. Michigan State University | East Lansing, Michigan | 8,146 |
| 10. University of Washington | Seattle, Washington | 8,035 |
| 11. Boston University | Boston, Massachusetts | 7,860 |
| 12. Penn State-University Park | University Park, Pennsylvania | 7,728 |
| 13. U. of Michigan-Ann Arbor | Ann Arbor, Michigan | 7,423 |
| 14. Ohio State University | Columbus, Ohio | 7,121 |
| 15. University of Texas-Dallas | Richardson, Texas | 7,064 |
| 16. Indiana University | Bloomington, Indiana | 7,009 |
| 17. U. of Minnesota-Twin Cities | Minneapolis, Minnesota | 6,984 |
| 18. U. of California-Berkeley | Berkeley, California | 6,874 |
| 19. SUNY University-Buffalo | Buffalo, New York | 6,852 |
| 20. Texas A&M University | College Station, Texas | 6,690 |
| Source: Institute of International Education. (2015). Open Doors Report on International Educational Exchange. Retrieved from http://www.iie.org/opendoors | ||
Top U.S. States Hosting International Students
| State & Rank | 2013-2014 | 2014-2015 | % Change Year on Year |
|---|---|---|---|
| 1. California | 121,647 | 135,130 | 11.10% |
| 2. New York | 98,906 | 106,758 | 7.90% |
| 3. Texas | 64,277 | 75,588 | 17.60% |
| 4. Massachusetts | 51,240 | 55,447 | 8.20% |
| 5. Illinois | 42,527 | 46,574 | 9.50% |
| 6. Pennsylvania | 41,448 | 45,704 | 10.30% |
| 7. Florida | 36,249 | 39,377 | 8.60% |
| 8. Ohio | 32,498 | 35,761 | 10.00% |
| 9. Michigan | 29,648 | 32,015 | 8.00% |
| 10. Indiana | 26,406 | 28,104 | 6.40% |
| Source: Institute of International Education. (2015). Open Doors Report on International Educational Exchange. Retrieved from http://www.iie.org/opendoors | |||
Equally important, if not more important, to receptive tour operators and U.S. travel suppliers is the second table below, which shows that more than a third of all international students in the U.S. attend schools that are in three U.S. states: California, New York and Texas.
UK Operator Update: Sell-offs, Buyouts and Restructurings in Our Largest Overseas Source Market
Virgin Holidays has taken a lot of heat in the travel trade ever since the company announced in mid-October that it would no longer sell its products through the trade, opting instead to sell direct to consumers. Mark Anderson, managing director, said at a recent trade event that the decision “has not won me any popularity awards with agents” but emphasized that there would not be any reversal of the move. “Owning the customer experience end-to-end is really important to us as it helps us enhance the overall experience for the customer, particularly pre-departure,” he said. “We want to become a top three company in the UK for customer experience and we are well on our way; our Net Promoter scores are very high.” Anderson said the operator’s strong financial position had been achieved through working more closely with Virgin Atlantic and realizing more synergies with the airline. He added that the company would be securing even more leisure flying from its sister airline going forward
The £200-million-plus ($303 million+) takeover of Audley Travel is closer to completion following a bid from New York City-based KKR, a private equity firm that specializes in leverage buyouts. Audley is majority-owned by private equity firm Equistone. The Oxfordshire-based company, which started out as Asian Journeys in 1996, specializes in tailor-made holidays and safaris to 80 holiday destinations including India, Thailand, Botswana, Kathmandu, Cuba and the Galapagos Islands.
Holidaybreak Group has sold Explore Worldwide and diving tour operator Regaldive to Hotelplan UK. Explore, which has operated small group adventure holidays since 1981, currently lists more than 500 itineraries worldwide, including a small number in the USA. The two businesses will join Hotelplan UK’s existing portfolio of activity and experience holiday brands, which include Inghams, Esprit Holidays and Ski Total. Holidaybreak said its decision to sell the businesses is a reflection of the increased focus on its expanding high growth education, hotel/hostel and mainstream leisure assets.
JacTravel has revealed a new leadership structure following the acquisition of TotalStay Group earlier this year. The combined business will be led by an executive team of six. Former TotalStay founder Peter Clements becomes deputy chief executive of the enlarged group under chief executive Terry Williamson. Stuart Ellis, also previously with TotalStay, takes on the role of chief commercial officer Stuart Nassos, with a background that includes tenures with Sabre, lastminute.com and Holiday Autos, is named as chief operating officer and Nick Williams has been appointed chief financial officer. Mario Bodini, who has been with JacTravel for more than 30 years, is now executive vice-president, responsible for new source market development, with a particular emphasis on expansion into China and other Asian markets.
Who Are the Top Tour Operators in Germany-by Market Share?
Faced with end-of-year financial results and passenger volume data that are expected to be flat and losing market share midst an overall market environment that is sluggish due to a weakened euro, TUI Germany, under its new CEO, Sebastian Ebel, is expanding the company’s hotel capacity and cutting some prices as it strives to recapture share in the German market. Ebel aims to increase share to 25 percent by 2020, which would be a 48 percent increase from its16.0 percent share (see table below).
TUI has added 3,500 new hotels for summer 2016 both in short/medium-haul and long-haul destinations—which means 1,700 more hotels in overseas destinations, which is 20 increase over the summer of 2015.
TUI’s prices will drop by about 2-3 percent on average; this figure includes early booking discounts. Ebel said the reduction resulted from “flight over-capacity” and lower jet fuel costs. Still, some long-haul destinations will be more expensive due to the strong the U.S. dollar vs. the weak euro. In a statement, the company said that most destinations are selling well with the exception of Tunisia where bookings have slumped. Premium brand Airtours has a double-digit rise in winter bookings after “good growth” in 2014/15.
Top Tour Operators in Germany
| Tour Operator | Share of German Market* |
|---|---|
| TUI | 16.90% |
| Thomas Cook | 13.20% |
| DER Touristik | 12.40% |
| FTI Group | 8.10% |
| Alltours | 5.60% |
| Alda Cruises | 5.00% |
| Schauinsland-Reisen | 3.70% |
| Small operators overall | 35% |
| * Based on 2013/2014 business year figures | |
| FVW estimate |
Also, from Germany: A Berlin-based meta-search engine for holiday homes, Hometogo, has entered the U.S. holiday market and is launching a nationwide advertising and marketing campaign to raise awareness. The hometogo websites enable users to find and compare offers but then redirects them to the provider’s website for bookings. The company, which is already active in various European markets, claims to cover about 3.1 million offers for holiday homes, including about a halif-million units in the USA where the offering will be expanded
New Feature Introduced at NAJ’s RTO Summit—Suppliers Meet with Receptives in Small Groups
At its recent RTO Summit in Orlando, NAJ introduced a new concept that brought together receptive tour operators with suppliers, hoteliers and DMOs in Collaborative Product Development Roundtables—a sort of “meet-apalooza” format, in which eight receptive operators each had a roundtable at which they sat, with suppliers moving from table-to-table in 20-minute sessions during which they introduced themselves to the operator in preparation for one-on-one meetings the following day. “The format proved very useful, as it provided suppliers with an opportunity to introduce themselves to the operator and prepare both for additional meetings and networking opportunities during which they can get to know one another,” said NAJ founder and CEO Jake Steinman, who added, “we’ve received some suggestions for improvements in the format that will likely result in some tweaking here and there but, basically, it’s a ‘go’ for future NAJ events.”
“Both buyer and supplier enjoy what is more a less a preview of what operators are looking for and the collaborative possibilities that might not have developed in the absence of such a session,” he explained. Following are photos of the roundtable sessions.
Roundtable 1: Uri Argov (center), founder and CEO, Tourico Holidays
Roundtable 2: Jane Ritter (second from right), chief operating officer, Meeting Point North America
Roundtable 3: Peter van Berkel (upper left), president and CEO, Travalco
Roundtable 4: Eduardo Bittencourt (left), managing director of Orlando-based CH Travel
Roundtable 5: Radhika Tripurani (left), director, web portal operations, Tours Limited
Roundtable 6: Gisa Kusserow-Hanson (second from left), managing director, AlliedTPro
Roundtable 7: Izumi Goodwin (speaking), brand manager, Orlando, JTB International
Roundtable 8: Anthony Liu, president, American Holidays
IN MEMORIAM: Christiane Skinner
Christiane Lortie Skinner, the longtime international sales manager for the Vermont Department of Tourism & Marketing (VDTM), passed away several days before Thanksgiving following a long battle against terminal cancer. She had retired from her position earlier in 2015. Well known and highly regarded in the tour and travel industry, was a travel agent in Montreal, Canada and Vermont for 20 years before joining the state tourism office. She moved to Vermont in 1987. The French-speaking Skinner joined the Vermont Department of Tourism and Marketing in January 2001 and was a fixture at the state’s participation in international trade shows abroad and in North America. After being diagnosed with terminal cancer, Skinner retired from VDTM in 2015. An indication of how highly regarded Skinner was came this past September when the Vermont Tourism Summit renamed its prestigious Vermont Travel Person of the Year award to the Christiane Skinner Vermont Tourism Champion of the Year, which will be awarded for the first time at the Summit in April 2016.
HODGE PODGE—Shifts, Shakeups and Occasional Shaftings in the Tour and Travel Industry
Jay Santos, one of the stalwarts in the tourism industry, has parted company with Visit Orlando after serving the organization for nearly eight years as vice president of international sales. “I’m free as a bird and looking forward to the best opportunity in Florida.” Santos told INBOUND.” Prior to joining the Orlando bureau, he was the director of business development for Hotelbeds Accommodations and Destination Services (a TUI brand). Santos also served as vice president of worldwide sales and marketing for ACC Tours for 10 years and executive vice president of AccessUSA for two years before both companies were purchased by Hotelbeds. He can be reached at jay-santos@live.com.
U.S. Secretary of Commerce Penny Pritzker has appointed three new members to the board of directors of Brand USA (officially known as the Corporation for Travel Promotion) for three-year terms: Rossi Ralenkotter, president & CEO, Las Vegas Convention and Visitors Authority (representing the DMO sector of the industry); Kyle Edmiston, assistant secretary, Louisiana Office of Tourism (representing the state tourism office sector); and Maryann Ferenc, owner & CEO, Mise en Place, a well-known Tampa, Florida restaurant. They replace: George Fertitta, former president and CEO of New York City & Company who is now CEO and principal of Bloomberg Associates; Caroline Beteta, president and CEO of Visit California; and restaurateur Roy Yamaguchi. Pritzker also reappointed current board chair Arne Sorenson, president and CEO of Marriott International, to a second term on the body.
Viviane Pio, a veteran of more than two decades in the tourism industry, has been named by CVC to fill the regional sales manager’s post in São Paulo, Brazil. She reports to Emerson Belan, sales director.
After 10 years at Gapnet, one of Brazil’s largest tour operators, Wilson Silva, sales manager, has left the company. In a statement in which he thanked the company for his time there, Silva said that he was looking forward to “the next cycle.” Before joining Gapnet, Silva was a supervisor for Air Madrid in the carrier’s operations in Brazil.
In the UK, Paul Riches has rejoined trade-only accommodation wholesaler YouTravel as managing director for his second tour of duty with the firm. He will head the sales and service team having left Lowcostbeds where he was global development director until the recent round of layoffs in the UK office.
At TUI, a new “modular holidays” unit, covering self-drive destinations, city trips, dynamic packaged holidays and individual long-haul holidays, will be headed by Matthias Gehring, who was previously head of product management for TUI Magic Life and Robinson. Carsten Cossmann, former head of self-drive destinations and city trips, has left TUI.
Renee Wilson has been promoted from tour and travel sales manager to director of sales at New York City’s THE RIDE. She oversees tour and travel and corporate sales. Wilson joined THE RIDE in March 2014. Previously, she was sales and marketing manager at Harlem Spirituals.
