With 51 operators from 31 companies attending NAJ’s RTO Summit in Orlando in less than two weeks, there will be close to a 1:1 ratio of buyers to U.S. travel suppliers and DMOs attending the event. Business appointments will be held on the second day of the Summit, which takes place Nov. 16 and 17 at the Wyndham Grand Orlando Resort.

Sponsored by Visit Orlando and the Inbound Report, the first day of the Summit will revolve about the Inbound Symposium, featuring a unique program mix that will include:

—A ninety-minute series of collaborative roundtables in which receptive tour operators with experience in product development that appeals to international visitors from a variety of source countries will rotate to different tables to talk with suppliers;

—A special session in which each of nine suppliers will make three-minute presentations in the Pecha Kucha format (10 slides, with slides automatically advancing every 20 seconds) to a panel of receptive who will critique each presentation a la “The Shark Tank” television program;

—An in-depth presentation s on the markets of Brazil and India by industry leaders with expertise in these markets;

—US Travel’s senior vice president, business development and general manager, IPW , will moderate a session on different ways one should present to international leisure tour operators, MICE operators and Receptive Operators during appointments at  IPW.

—An industry panel of experts will analyze and explain the impact of the strong U.S. dollar on 2016 travel to North America; and

—Insights from Uri Argov, founder and CEO of Tourico Holidays, on the subject, “What Keeps Hotels from Working with Receptive Operators?”

Coolest Travel Products of 2015: The first night of the Summit will conclude with a special reception during which NAJ will honor the Coolest Products of 2015. Launched this year, the project has drawn an unexpectedly large number of nominations. Winners will be honored for the innovation and effectiveness of their new travel products.

For the complete details on the RTO Summit program, as well as registration materials, visit:

http://www.rtosummit.com/rto-summit-mice/rto-summit-mice-agenda/

▪ 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:

1. 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.
2. 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.
3. 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.

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.