Along the Way to its 100 Percent Market Share in China, Ctrip is Building Share in USA …
Plus some other insights on the USA’s No. 3 Overseas Source Market: Ctrip, the online travel agency which one Chinese tour operator said several years ago would not be satisfied until it has a 100 percent market share in China, is on its way to sending more travelers to the USA than any other travel company in the world. This is what delegates to last week’s NAJ-sponsored RTO Summit East in New York City derived from a discussion among a panel of receptive tour operators that included Jack Lok, founder, L&L Travel, the largest Chinese receptive operator on the U.S. East Coast.
Last October, Ctrip signed a partnership agreement with L&L, Ctour (formerly Seagull Holidays), a Los Angeles-based receptive operator that has China’s largest Visit USA market share on the West Coast; and Tours for Fun, a Los-Angeles based OTA that focuses on the Chinese market. That agreement gave the trio of U.S.-based companies access to Ctrip’s more than 250 million online users.
Lok told delegates to the RTO Summit that the company expects to double its current volume of visitors to the USA by 2018, reaching 1 million.
- Why they come to the USA—because the United States is regarded as a prestigious destination.
- The principal sources market within China for Visit USA traffic are the metropolitan areas of Shanghai, Guangzhou and Beijing.
- The “first wave” of Visit USA travelers came as groups; the “second wave” won’t be coming as group travelers, but as FITs.
- We will continue to see group traffic China in healthy numbers because there will be more travelers from the nation’s second-tier cities. (Remember that “second tier,” in terms of population, would not be the case were they in the U.S., as there are now over 160 cities in China with a population of over 1 million, according to China Today.) Also, there will be an almost inexhaustible supply of first-time Chinese travelers for years to come.
- Groups still comprise about 65 percent of visitors from China, and will continue to maintain their importance as a market segment for some time to come.
- L&L is developing a new type of hybrid tour for some of its customers. There is a transportation portion of a trip, with travelers having the option to spend several days driving and exploring on their own. They are then picked up at an agreed-upon destination to complete their tour.
No More Brand USA?
Late News—Trump Budget Would Eliminate Brand USA: The Trump Administration’s just-released budget document for the next Fiscal Year (FY 2018, which begins Oct. 1, 2017) calls for the effective elimination of Brand USA. The budget does so by taking funds collected from travelers to the USA from Visa Waiver Program nations who register to travel to the United States through the Electronic System for Travel Authorization (ESTA) and are charged a fee to do so. Currently, these funds are turned over by the U.S. Department of Commerce to Brand USA, matching those collected from industry contributions. No longer. Under the Trump budget. They would instead help to support U.S. Customs and Border Protection (CBP), a part of the U.S. Department of Homeland Security, which already receives a portion of the funds collected through ESTA.
As soon as the potential elimination of Brand USA became known, U.S. Travel Association President and CEO Roger Dow issued a statement on the proposed elimination: “With all that’s going on in the world, unilaterally disarming the marketing of the U.S. as a travel destination would be to surrender market share at the worst possible time. It’s especially perplexing that the elimination of Brand USA is on the table when both Commerce Secretary (Wilbur) Ross and OMB Director (Mick) Mulvaney each have supported it previously.
“The creation of Brand USA was a bipartisan effort led by Republicans that passed both chambers by overwhelming majorities. The agency was responsible for adding $8.9 billion to the U.S. economy last year, according to the firm Oxford Economics—a 28-to-1 return on investment. Brand USA isn’t funded with a dime of taxpayer money, reduced the deficit by $50 million, and by the OMB’s own accounting eliminating it would put the federal budget further in the red.”
In reality, the budget document that was just released is mostly a record of the Administration’s priorities. It is likely that, given the amount of funds involved–barely above the level of an asterisk in a $1.1 trillion budget proposal–that senior level officials were hardly aware of any impact on Brand USA. Indeed, both Ross and Mulvaney had previously supported Brand USA.
Congress will do the authorizing and appropriating. And this is where the industry’s principal advocate, US Travel will be discreetly lobbying both Republicans and Democrats to make sure that Brand USA survives, as it did in 2014 when it was able to get the agency reauthorized for five years. So, the early take, based on comments about, and reactions to, the proposal to eliminated Brand USA, is that Congress is likely to overlook the President’s priorities on this particular matter.
How Will Consolidation affect the Tour and Travel Industry? — Insights from RTO East Panel
And More Trend Bytes from a Panel of Top Receptive Tour Operators … On the surface, the dizzying pace of acquisitions in the tour operator-bedbank segment of the tour and travel industry this year does not seem to phase key U.S. receptive tour operators. This is probably because, underneath the surface, it really doesn’t.
(The world’s largest bedbank, Hotelbeds—itself acquired from TUI in late April of last year—announced this past February that it had acquired Orlando-based Tourico, the number two bedbank/tour operator in the world. Then, last month, Hotelbeds announced that it had purchased UK-based GTA, the third-largest bedbank.)
“It could go either way for us,” responded Jennifer Workman, regional director of contracting, East Coast, New World Travel, when asked during a panel discussion which took place at NAJ’s RTO Summit last week in New York what impact the recent series of acquisitions would have on the business of New World Travel, a receptive tour operator subsidiary of Frankfurt-based DER Touristik, one of Germany’s top three tour operators by market share. Germany generates about 80 percent of New World Travel’s business.
“Who knows? It might get them to ‘come out’,” added Workman, indicating in not-so-subtle terms that the bedbank, with its automatic service fees charged to operators, conduct their B2B business with the same add-ons and service fees that online travel agencies (OTAs) charge consumers.
And, for the future, there seems to be no way around Hotelbeds, which proudly boasts on its website that it is “The World’s Bedbank,” operating in 125 countries and offering products from 180 countries. The number of its hotel partners—the company put it at 120,000 prior to GTA acquisition—is probably in the neighborhood of at least 150,000.
Reacting to the question in similar tone was Ester Roth, senior group manager for AlliedTPro, who said that the consolidation in the bedbank sector “wouldn’t have much effect,” and Pabs Raghava, president of Tours Limited—headquartered near Atlanta and whose key market is India—who told the Summit that it” would not have a great impact on our market.”
But What about Consolidation in the Hotel Sector? Panelists struck a different tone when it came to the matter of the impact on the tour and travel industry of consolidation among hotels, an activity that seemed to reach its apogee last September when Marriott International made a $13 billion acquisition of Starwood Hotels & Resorts Worldwide. All totaled, 30 hotel brands are now part of Marriott, creating the world’s largest hotel chain, with more than 5,800 properties and 1.1 million rooms in more than 110 countries—or 1 out of every 15 hotel rooms worldwide. The brands range from Marriott’s Marriott, Courtyard and Ritz Carlton brands to what used to be Starwood’s Sheraton, Westin, W and St. Regis properties.
Workman said that one of the net results is that it is going to be harder to get contracts with hotels, suggesting that it “seems like travel is moving toward dynamic connections.“ There is a lot that we have to re-think,” she said, asking aloud, “Will we be a world specialist?” She added, “In two years, I’ll know more.”
Roth had a slightly different take on the issue. While acknowledging that the hotel portion is the biggest part of the revenue involved in a travel package, she pointed out that, in the New York area, “Lucky for us, there is competition among the hotels.”
“There are new hotels on every block,” she noted. “Revenue managers used to think they can get away with it (higher room rates) … then they realized they can’t. The more hotel beds there are available, the better our situation.”
Raghava seemd to echo what Roth said and added, “It’s a win-win situation … as long as the hotels are going to work with us …”
A Picture is Worth …
Here is a photo sampler from NAJ’s Tour Operator Summit East in New York of some of the people who were a part of its seminars, panel discussions, breakfast, luncheon, business meetings and closing reception.
South Korea may lose 100% of its China Tourism Overnight
Seat Capacity for China Outbound Traffic has More than Doubled in Past Decade: Based on the data for the number of seats made available for the 2017 summer season (known in the industry as S17, which begins the last Sunday of March and runs through the last Saturday of October), the USA is the top long-haul destination for travelers from China.
The latest data made available from the air traffic reporting site, anna.aero, based on numbers from the OAG Schedules Analyser, offer the reader the opportunity glean different findings.
—One development, in particular, that stood out for the Inbound Report, was the substantial decline (26 percent, year-on-year) in departure seats for South Korea, which has benefited from interest by millions of Chinese in South Korea’s music and televised entertainment programs. In fact, South Korea ceded its position as the number one international destination for Chinese travelers to Japan.
The reason—and it should alert other countries that political actions have consequence—for the sudden drop-off has to do with the decision of the South Korean government to deploy the U.S.-supplied Terminal High Altitude Area Defense (THAAD) missile system. The South Korean government considers THAAD a deterrent to the expanding military activity on the part of North Korean. The Chinese government believes that the system, with its sophisticated radar, is too close to China’s mainland and that its deployment is an extremely aggressive move.
As a result, the Chinese government announced in March that it would ban all group travel to South Korea as part of its response the South Korea’s decision to deploy THAAD system.
Chinese travelers have taken the ban seriously. It was reported that, when the Costa Serena cruise ship recently docked at Jeju, South Korea, all 3,400 Chinese passengers aboard refused to disembark.
Also, the popular South Korean supermarket brand, Lotte, has closed at least 79 of its 99 supermarkets in China have been closed or are closing as a result of the disagreement. And major online sites have voluntarily pulled Lotte products from their posted offerings.
—Another fact that becomes readily apparent is that, even with the admonition not to travel to South Korea, it, along with Japan, Thailand, Hong Kong and Taiwan—as destinations—account for more than half of outbound seat capacity from China.
—While traffic from Shanghai and Beijing dominate departures from China, traffic from Guangzhou has increased substantially.
International Carriers Fly into Commuter Airports on East Coast
Low-cost carrier Norwegian Air has confirmed that its new transatlantic flights from Ireland to the USA’s East Coast will include use of the U.S. Customs and Border Protection’s (CBP’s) pre-clearance facilities at Dublin and Shannon airports. The services, which start in July, will fly to Stewart International Airport in Newburgh/Windsor, Orange County, New York—about 60 miles north of New York City; and Thomas Cook will fly to Providence Airport, which is 60 miles south of Boston’s Logan International Airport. Cork Airport in Ireland will also get its first ever transatlantic flights with a service to Providence.
U.S. pre-clearance allows passengers to undertake all U.S. inspections prior to departure, so they can skip immigration queues on arrival in the US. Today, CBP has more than 600 law enforcement officers and agriculture specialists stationed at 15 air preclearance locations in 6 countries: Dublin and Shannon in Ireland; Aruba; Freeport and Nassau in The Bahamas; Bermuda; Abu Dhabi, United Arab Emirates; and Calgary, Toronto, Edmonton, Halifax, Montreal, Ottawa, Vancouver, and Winnipeg in Canada. In Fiscal Year 2016, CBP personnel stationed abroad precleared 18 million travelers, representing over 15 percent of all commercial air travelers to the United States.
In order to make the flight to suburban New York a more seamless connection to New York City, Norwegian has also confirmed details of a new direct shuttle service from Stewart International Airport into central New York City. The new service, operated by Coach USA, has been timed to meet Norwegian’s flight arrivals, allowing passengers to take a direct journey into central Manhattan for $20.
Said Norwegian’s chief commercial officer Thomas Ramdahl: “The countdown is now on … and we look forward to welcoming many Irish passengers on-board our affordable flights to the US this summer.”
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On May 14th, Thomas Cook Airlines launched its inaugural flight to San Francisco (SFO) from Manchester Airport. (Manchester is 190 miles north of London Heathrow.) Thomas Cook is the largest carrier serving the U.S. from the UK airport. “We are absolutely delighted to see Thomas Cook Airlines’ inaugural flight to San Francisco leave from Manchester, the UK’s global gateway to and from the North,” said Stephen Turner, commercial director at Manchester Airport. “Manchester is the only UK airport outside of London to offer direct services to San Francisco and gives our 26.5 million annual passengers easy access to the West Coast of the U.S.” Twice-weekly flights (Sundays and Thursdays) to San Francisco are operated by Thomas Cook’s A330-200s, and face competition from Virgin Atlantic Airways’ three times weekly service from London Heathrow.
Will Brexit Bust Britain’s Boom in Outbound Travel?
Last Year was a Robust Year for the Industry: Despite last June’s referendum vote to have Britain exit (“Brexit”) the European Union (EU) and the subsequent slide of the British pound sterling from $1.48 to $1.22 (a decline of 17.5 percent), it was also a year during which Britons who were skittish about traveling outbound to neighboring short-haul destinations such as France and German because of concerns over safety and security, headed across the English Channel in healthy numbers. In fact, it was a historic year for outbound travel by UK residents, according to the UK Office for National Statistics (ONS).
Some info bytes from recent ONS reports on outbound travel from the UK:
—There were 70.8 million visits overseas by UK residents in 2016, the highest figure recorded by the IPS.†
—The year-on-year quarterly growth in 2016 varied between +11 percent (Q1) and +4.7 percent (Q2). This was slightly lower than the growth in numbers of visits seen in 2015 but higher than in 2014 and 2013.
—Earlier this year, ONS said that UK residents made some 8.8 million visits abroad in the first two months of 2017 vs. 8.5 million for the same period in 2016—an increase of 3 percent (it should be noted that traffic was down by 2 percent in February 2017 vs. February 2016).
—The USA remains the favorite long-haul international destination of choice for Britons.
Two Notes:
- The ONS full-year report came out as the UK is in the midst of a general election called by the government of Prime Minister Theresa May for June 8th. May succeeded David Cameron who resigned last June 24 in the wake of the June 23rd Brexit referendum, which won with just 52 percent of the vote. (It is merely coincidence that last year’s vote was on the final day of IPW 2016 in New Orleans while the upcoming general election vote takes place on June 8th—the next day after the final day of IPW 2017 in Washington, D.C. Polls suggest that the May government should win enough seats to maintain control of Parliament—although their lead over opposition parties is narrow.
- The election notwithstanding, most travel and tourism industry analysts are cautious about linking the industry’s near-term future in the UK. The consensus is, instead, that currency exchange rates are what matter most. And in this instance, the outlook is almost reassuring—considering that the British pound sterling, which fell from $1.48 to a 30-year low of $1.22 in the four months following the Brexit vote, and has since crawled back up to $1.30. Seven months ago, the Telegraph, in an Oct, 11, said, “The average analyst thinks the fall in sterling is probably over. The market consensus is that the pound will stay at roughly $1.28 for the next six or nine months, before edging up to $1.30 in the second half of 2017 and creeping up over the next few years, ending up back at $1.48 in 2020.” It was $1.48 on the day of the June 23, 2016 Brexit vote.
†The International Passenger Survey (IPS) collects information about passengers entering and leaving the UK, and has been running continuously since 1961. The IPS conducts between 700,000 and 800,000 interviews a year of which over 250,000 are used to produce estimates of Overseas Travel and Tourism. The study results are used by various government departments, including the Office for National Statistics (ONS), the Department for Transport, the Home Office, HM Revenue and Customs, VisitBritain and the national and regional tourist boards.
Soon, Half of Google Mobile Searches will be Voice Searches
“Everything in the future is going to be voice,” Laszlo Horvath, CEO of Active Media, a Silicon Valley guru and popular speaker at NAJ events, told delegates to last week’s RTO Summit East in New York City. Not only that, he added, soon “thirty percent of web browsing will be without a screen.” And because hands-free requests and commands are so easy for the mobile user, searches will grow even more.
This means, Horvath said, that the new role of DMOs will be that of “storytellers” able to convey information, as answers, in ways that suit the person who needs concise answers quickly.
While Horvath’s observations about voice searching were just a part of a presentation on how DMOs can create should season SEO co-op programs for their international and domestic marketing, it seemed to lock in the interest of delegates who showed up for the Summit, held at Manhattan’s Wyndham New York Hotel.
It is not that the data have not been available. A year ago, Google’s CEO, Sundar Pichai, in remarks introducing Google’s Google Home—a competitor of the Amazon Echo—said that 20 percent of queries on its mobile app and on Android devices are voice searches. At about the same time, Hitwise came out with a report showing that more than half of internet searches for travel (not including map sites) were conducting using a mobile device.
Source: Hitwise
By 2020, Horvath said, 50 percent of searches will be by voice. While Horvath was addressing the RTO Summit in Manhattan, Ben Sauer, strategist at the digital design firm Clearleft, had just finished telling some 500 attendees, mostly British travel agents, at the Advantage 2017 conference near Cannes, France why consumers are plugging into voice searching in greater numbers. “People are more self-service these days,” Sauer said, according to a Travel Weekly account, adding, “Voice can help with that. You can book a short-haul, last-minute holiday through voice and it will probably help you.”
Voice recognition technology is intelligent enough to save customers’ favorites using masses of data, but may fail to present them with sufficient choice and new ideas, said Sauer, explaining that it can inspire customers of travel agents to explore new destinations, but is long way from having the common sense to complete complex bookings. In a poll of the mostly travel-agent crowd at the Advantage conference, 73 percent said they had used voice recognition.
Look for this at IPW …
HODGE PODGE: Shifts, Shakeups and Occasional Shaftings in the Tour and Travel Industry
Will Seccombe, former president and CEO of Visit Florida, has been named president of the Connect Travel division. Connect Travel is the leisure tourism division of Connect and serves as a strategic marketing partner offering a full suite of digital, social, content activation and cooperative marketing solutions for destinations. A veteran of more than 25 years in the tour and travel industry, Seccombe headed Visit Florida for nearly five years before his dismissal last December after state legislators objected to the funding of several of the agency’s ventures, including the use of a famous rapper whose video promotion was deemed by some to be a little too racy.
Gillian Young has been named the new executive director of the Visit USA Committee in Ireland. Gillian has nearly 30 years’ experience in the travel and tourism industry, and has specialized in the U.S. market for 23 years with American Holidays.
Luciane Leite has been named the new director of WTM Latin America, the relatively new trade show that was launched in April 2013 and held most recently last month in São Paulo. Leite, the former manager of the event, succeeds Lawrence Reinisch.
David Holder has announced that he is leaving his post as president of Visit Syracuse after 10 years to join Jones Lang Lasalle as vice president-tourism. He’ll be based in Syracuse. Previously, Holder was director of tourism & business development for Fredericksburg, Va. For nearly three years. Prior to that, he served as executive director of the Steuben County (N.Y.) CVB.
Renee Areng was voted out of her job as executive director of Visit Mississippi Gulf Coast last week by an 11-4 vote of the organization’s board of directors. Areng, who came to the organization on Aug.1, 2014, did not have her three-year contract renewed. Instead, the board extended it until Sept. 30, which meets a required four months’ notice needed to end the contract. Areng came to Visit Mississippi Gulf Coast from her post as executive vice president of Visit Baton Rouge, where she served for 12 years.
Insight Vacations and Luxury Gold chief executive John Boulding is scheduled to retire later this year. Boulding has been with parent company The Travel Corporation for 33 years. The Travel Corporation’s brands also include Trafalgar, Contiki Holidays and Uniworld Boutique River Cruise Collection. Boulding will remain with escorted touring specialist Insight Vacations and Luxury Gold to help with the transition to new chief executive Ulla Hefel Bohler.
