The Inbound Report

Covering the Inbound Tourism Industry Since 1996

Is the Summer Travel Season Looking Up or Down for German Trade?

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GfKAs March closed out with the Euro remaining stubbornly stuck at less than $1.10 on the currency exchange markets—this is down more than 20 percent what it was trading at the close of March 2014—at least one major travel marketing research firm released numbers showing that German travelers are growing reluctant to make bookings for this year’s peak travel season.

The Nuremberg-based market research firm GfK reported that, in March, based on its monthly survey of 1,200 leisure travel-focused agencies:

  • Bookings for winter and summer holidays increased by just 1.7 percent,
  • Summer 2015 sales were slightly better with a 2.8 percent rise; and
  • The resulting cumulative increase was 5.9 percent.

The German travel trade publication, FVW, had its own take on the numbers calling the 1.7 percent monthly increase “surprisingly low” in contrast to a 10 percent increase for February and 6.4 percent cumulative increase, and taking into account the weak comparative month of March 2014, which marked the start of a weak bookings period through until last summer. For individual months, summer 2015 sales trends were relatively stable in March, said FVW. According to GfK:

  • May now has a cumulative 20 increase rise in bookings;
  • June is down by 4.6 percent; and
  • Demand was also strong for August, which registered a 1.3 percent increase over last year, even though sales were 20 percent higher for the same month last year.

In contrast to the GfK report, another monthly survey—this one by Frankfurt-based Travel Agency Technology & Service (TATS)—had strikingly upbeat numbers. TATS, which evaluates figures from 2,400 flight-oriented travel agencies, reported that:

  • The number of leisure travel advance bookings in March was 14.3 percent higher than a year ago;,
  • Revenues for departures in March were 10.7 percent higher than the previous year;
  • Leisure travel sales had a cumulative 6.2 percent rise for the first three months of 2015.

 

Germany Notes: Thomas Cook Reducing Amount of Deposit For Package Tours and DER Appoints New Manager.

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In separate moves that should make it easier for Germans to purchase their travel arrangements, fvw reports that:

 

  • Thomas Cook GermanyAs a result of a German Federal Administrative Court ruling last year, Thomas Cook Germany is reducing the amount of a deposit for brochure package holidays from 25 percent to 20 percent, and for last-minute trips from 30 percent to 20 percent;

 

  • The deadline for paying the remaining 80 percent of the vacation package price has been changed from 40 days to 30 days before departure; and

 

  • Alltours has increased the number of sales outlets in Germany by 10 percent by signing up 800 more travel agents following changes to its commission arrangement. The majority of the new agents are smaller outlets.

 

  • Sedat TatliMeanwhile, Sedat Tatli has been appointed to manage the DER Touristik brand, Meier’s Weltreisen, beginning in June. He has been promoted to the job from his current position as M-W’s product manager for Asia and the Indian Ocean. He succeeds Matthias Rotter, who has been appointed as managing director of the DER Touristik Frankfurt, which includes responsibility for Dertour and ADAC Reisen.

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Mixed Reports for 2015 Summer Bookings from Germany—Will it be Another Flat Year?

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downloadAccording to a couple of regularly released travel trade surveys, bookings for summer holidays have picked up, reports the German travel trade publication FVW, belying the sense of hesitation and anxiety that one sensed at ITB earlier this month in Berlin, and in the longer trend line for German arrivals in the U.S. over the past several years.

 

U.S. Arrivals from Germany

2012-2015

YearUSA Arrivals (000s)% Change vs. Previous Year
20151,994††1%
20141,9693%
20131,9162%
20121,8763%

† Forecast

Source: U.S. Department of Commerce, International Trade Administration, U.S. National Travel and Tourism Administration

The Nuremberg-based market research firm GfK reported that, based on its monthly survey of 1,200 leisure travel-focused agencies, holiday bookings for summer 2015 were 10 percent higher year-on-year in February, although it should be noted that February of last year began a period of weak bookings that continued up until the summer of 2014. Cumulative summer sales are now 6.4 percent ahead of last year. Bookings were particularly strong for departures in May and July, said GfK, and there was good demand for June.

Another monthly survey—this one by Frankfurt-based Travel Agency Technology & Service (TATS)—had less upbeat numbers. It showed a sales increase of just 2.5 percent for leisure travel in February, resulting in a cumulative increase of 4.5 percent for the first two months of 2015. The TATs figures suggest a growth in business that is closer to the NTTO arrivals forecast in the above table.

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ITB 2015 Report—Will Euro Exchange Rate Tumble Cause Arrivals to Topple?

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Jake Steinman at ITB
Inbound Publisher Jake Steinman at ITB

Much of the discussion at ITB March 4-8 in Berlin had to do with the weakness of the Euro. The confluence of circumstances that need to align in order to grow a mature market like Germany, and Western Europe for that matter, include: a strong economy; reliably miserable weather; an entitlement mindset as to the sanctity of vacation time; and the Democrats in control of at least one branch of the U.S. government. However, a reliably consistent exchange rate that does not fall below (US) $1.20 to the Euro.  Of all these variables, of course, the volatility in the exchange rate is more influential than all others combined.  The Euro’s plunge, which is approaching near parity with the U.S. dollar, is largely due to market speculation that Greece will exit from the Eurozone and poor economic conditions in Spain and Italy. (To read a daily update currency forecast analysis, click here http://www.euroexchangeratenews.co.uk/euro-to-us-dollar-eurusd-exchange-rate-forecast-to-gain-despite-mounting-potential-for-a-grexit-10091)

Offsetting the concern over the Euro, however, is the sense among both the travel trade and consumers that the U.S. is a safe destination; this is a strong point in its favor, as interest in the Middle East and North Africa–favored destinations among Europeans–has fallen off due to political instability and concern over terrorist activity.

Carroll RheemWhat, 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 organization’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, which suggests a two-to-four percent decline in visitor arrivals from markets in the Eurozone. “We do expect to see some impact on arrivals for the next year,” said Rheem. “We are expecting lower arrivals.”

A 12-Year Snapshot of Euro-Dollar Exchange Rates

2004-2015*

YearEuro = $
2015$1.07
2014$1.39
2013$1.31
2012$1.32
2010$1.38
2009$1.30
2008$1.56
2007$1.33
2006$1.21
2005$1.34
2004$1.23

* Date measured: Mid-day rate on March 16 of each year

Source: Prepared by Inbound per xe.com

One objective of our attending ITB in Berlin this year was not only to determine the trends coming from Europe, but also to understand the impact and the various strategies that different segments of the industry will use should the current exchange rate persist through the Fall and into 2016.

In conversations over a two-day period with a cross section of 40 suppliers, tour operators, destinations and rep organizations at ITB, we offer the following observations exclusively to our INBOUND REPORT subscribers.

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In Germany, Consumers, Travel Trade in Buoyant Mood for ITB 2015

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ITBThis week’s ITB—the world’s largest travel show—in Berlin takes place just as the news comes that the nation’s consumer confidence in the economy is high and as the German travel trade is registering bullish numbers for the summer travel season. Travelers from Germany comprise the USA’s largest overseas source market in continental Europe and ITB historically has served as a barometer on how the tour and travel industry in Germany and, to a great extent, in the Eurozone will perform in the coming year.

  • First, from the research firm GfK comes the news that that consumer confidence in Germany could reach a level of 9.7 in March, up from February’s 9.3 rating.  If so, this would be the highest reading in more than 13 years—since it reached the 11.0 mark in October 2001.

A GfK statement on the numbers said, “Despite the ongoing crisis in eastern Ukraine and uncertainty as to whether Greece will remain in the Eurozone, Germans remain confident that their economy is clearly on course for growth.” However, acknowledging that other factors in the global economy must be considered, the firm said that, “If developments in these areas cause uncertainty among German consumers, this will also have a severe impact on the consumer mood and therefore also consumption.”  

  • Second, Deutscher ReiseVerband (DRV)—the German Travel Association—reported Feb. 26 that bookings for summer holidays this year increased about five percent, year-over-year, in January, with DRV President Norbert Fiebig observing, “We expect further growth at a high level for the whole tourism year.”
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DRV pointed out that, for the 2013-14 year that ended last October, the German tourism market once again hit record levels—Germany is the only European market that did not decline in the immediate wake of the 2008-09 global economic recession—with tour operators increasing their combined revenues by nearly 4 percent to €26.3 billion ($29.4 billion), which was about €1 billion ($1.2 billion) more revenues than in 2012/13. Growth was driven by cruises and demand for higher-value and higher-priced holidays. And while revenues grew by almost 4 percent, the number of customers increased by 2.5 percent, indicating that there was an increase in average prizes.

(Just before ITB was to open, ITB officials indicated that more than 110,000 trade visitors were expected at the event, held annually at the 1.7 million square-foot Messe Berlin convention center complex.)

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