Building highly customized, individual travel itineraries goes against the economies of scale that large tour operators built their businesses on, but travelers are increasingly demanding an ultra-personalized vacation experience -- and the industry is simply being forced to adapt its business model.
"We're getting to the point where very little is standard, off-the-shelf stuff," said Jack Richards, president and CEO of Pleasant Holidays. "It's been going this way for the last three years. We are doing an inordinate amount of customization for travel agents."
The way many tour operators and wholesalers have traditionally worked is that they use high passenger volumes to negotiate favorable bulk rates with suppliers. Those favorable rates, in turn, help them fill group departures because they are so well- priced.
But off-the-shelf brochure itineraries don't always fit the needs and wants of an increasingly knowledgeable, well-traveled and independent baby boomer generation.
Building custom itineraries requires a whole different investment in time and energy, and the supplier negotiations and economics are totally different than is the case with high-volume group departures.
And while it might seem that high-volume group travel is the more profitable of the two, operators suggest that this is a misconception. Consequently, they say suppliers are increasingly willing to work with them to provide better rates for, as well as give value-adds and upgrades to, an independent traveler who is likely to spend more than a group traveler.
"There's a much higher purchase price on that business than there is on off-the-shelf [packages]," Richards said. "The average purchase price on the customized [itinerary] is well over 20% higher than the off-the-shelf product. And that's significant for the tour operator, for the travel agent and for the supplier."
Indeed, suppliers that in the past might have been less willing to offer individual rates competitive with bulk rates are increasingly realizing that the independent traveler is a worthwhile investment.
For example, Anita Captain, company director of India specialist Greaves Tours, said, "FIT travel usually results in a higher spend at the hotel. They use the spa services, they eat in the hotels, they shop in the hotels. So as a result of that, we get a better rate ... and we are able to be competitive."
Global luxury operator and wholesaler Abercrombie & Kent can compare the two businesses head-on, as its tour operation is about 50% small-group departures and 50% custom travel.
"It's actually slightly more profitable to run a group tour than to do custom travel," said Richard Harris, senior vice president of operations at A&K. But, he added, "in terms of a total revenue, I have to sell a pretty large number of small-group journeys to equal the total bottom-line revenue/gross sales on some of the high-end bookings. ... When I look a little further into the numbers, in terms of profit margin they end up about equal."
Harris said A&K is able to remain competitive on the custom side in part because of its groups business. The volume it provides larger suppliers in small-group departures helps the company negotiate favorable rates for individual clients. Moreover, over time, the company has developed firm relationships with suppliers, which has further helped secure proper accommodations for custom clients.
Some of the challenges, he said, are with top-end rooms and suites, where A&K can't predict the demand, and hotels therefore can't guarantee space or rates. What's more, he said, smaller, popular boutique properties are also harder to contract rates with for custom clients if those properties can get high occupancy rates with or without A&K's business.
And while custom travel seems to be gaining in popularity, creating greater demand for choose-your-own-adventure-style vacations, Harris said there remains a place in the market for group travel.
"For the world of group tours, there are people who like to travel in groups and who feel like groups allow them to travel to destinations safely and securely," Harris said. "I believe there will always be a market for the well-structured group tour. But 20 years from now, I would be doubtful how many of these 48-passenger bus tours will be in existence."
Kate Murphy, president of Wings Travel Group, said that custom travel is up about 30% over the last two years at her agency. After scrimping during the recession, she said, travelers are ready to spend a little more to do things their way.
"There is definitely an uptick [in customizable tours]," Murphy said. "A lot of baby boomers are saying, 'I've been there, done that.'"
She added, "They don't want the standard tour; they want to do more on their own. They are looking for a new experience that they can go home and tell their friends about."
Which is a key reason that baby boomers are leading the way in personalized travel.
"There's a number of reasons why it's picking up," said ASTA President Nina Meyer. "It's the baby boomer scenario. ... These are generally people who at this point in life have more discretionary time and may have more discretionary money and are looking for more experiential travel."
Unlike their parents or grandparents before them, many 50-plus travelers have already traveled quite extensively throughout their adulthood. They know what they want, and it doesn't always exist in the brochure.
"They've done everything, and now they are looking outside the box," said Mitch Gordon, director of leisure services for Wings Travel Group. "People want more of an experience now than [they did] before."
More complex, but more rewarding
Giving travelers a greater experience can mean a wide range of things and, consequently, a wide range in investment of time to prepare and execute.
It can mean booking a brochure tour or cruise and then assembling a customized pre- or post-tour or cruise extension. It can mean additional amenities or experiences throughout a brochure tour, package or cruise. Or it can mean constructing a completely bespoke itinerary from start to finish, including very specialized requests the agent, operator or supplier might never have arranged before.
In fact, said John Burgess, manager of the leisure travel division at Preferred Travel in Naples, Fla., "There are times that it becomes overwhelming. There are times that I think, 'Just give me a cruise or a brochure tour.' But that gets so boring. You can be an order-taker, but there's really no challenge. It's great, it's quick, it's fast and I can wrap it up in no time at all. But if that's all I had to do, I would probably just quit because I wouldn't be happy just doing that over and over again."
On the other hand, Burgess allowed that it's a challenge to continually come up with new ideas for and to try to constantly impress custom clients. But, he added, "that's the rewarding part of it, to be able to put something together and say, 'You're going to love this.' To see their faces light up."
He said it helps when the clients have done some research about where they want to go and what they want before coming to him, which many custom travelers often do.
When it comes to custom itineraries, Burgess doesn't rely solely on commissions for profits but charges a service fee commensurate with the amount of time he invests in the booking.
Murphy of Wings Travel agreed that building personalized itineraries is more fulfilling for agents than booking a brochure vacation.
"For the staff it's more fun; it's not the run-of-the-mill booking," she said.
Several years ago, Big Five Tours & Expeditions decided to drop its brochure business for an almost entirely custom model.
"Before 9/11, we were doing about 50% of each, custom and scheduled," said Ashish Sanghrajka, president of Big Five. "Right around 2004, we said, 'OK, this is not a trend; this is a niche.'"
But beyond that, Sanghrajka also realized that he wanted to sell more authentic travel experiences and that custom travel was the way to do that.
"We realized that on a scheduled tour you can't arrange for authenticity," Sanghrajka said. "When you have 20 to 40 people and take them to one spot, it is no longer authentic."
And while that authenticity often brings a premium charge, custom travelers are willing to pay for the upgrade.
"It's not about price at all," Richards said. "I have yet to see somebody who wants a custom itinerary who wants to negotiate the price. This is not a price-sensitive market."
The ground-support premium
Captain said, "The price point is not even in the top 10" reasons why customers book custom travel with Greaves Tours. She said clients and agents will work with operators like Greaves for the ground support, or "hand-holding," they offer in the destination.
A&K's Harris made the same observation. He noted that while there are plenty of agents capable of and informed enough to build own custom itineraries, he said they will often opt to work with trusted operators for access to the aid and assistance their ground offices can offer clients.
And while there is, of course, often a price to pay for the added attention and service custom travel requires, ASTA's Meyer pointed out that custom travel doesn't always mean high-end or luxury travel.
"We've done custom tours even at lower price points," said Meyer, who is director of sales and marketing, vacations and groups sales at Florida travel management company Express Travel. "I've done custom tours with housing in university locations."
At the end of the day, customization is a way for agents and operators to specialize and differentiate themselves. It's not just the way the market is going; it's where agents and operators need to be if they are going to succeed, Richards argued.
Travelers are "being turned off by the online experience and the impersonalization of the [online travel agencies]," Richards said. "It's become a commodity."
He concluded that tour operators that are not prepared to be in the custom-travel space will not survive.
Follow Michelle Baran on Twitter @mbtravelweekly.