Tour Operators Capacity the biggest challenge for Europe tour operators By Michelle Baran / September 25, 2017 Share 1 Photo Credit: Shutterstock -- As the euro continued to rally last week, threatening to make Europe less of a bargain for U.S. travelers, tour operators rolling out their 2018 brochures this month reported that the exchange rate has not impacted their prices much, if at all. What is having an impact and is proving a bigger challenge, they said, is the growing capacity crunch in Europe's top destinations.The operators reported that travelers' seemingly insatiable appetite for Europe is putting as much if not more pressure on pricing and product than the strengthening euro, which reached 1.20 against the dollar last week after flirting with parity at the start of the year.Having contracted with European suppliers well before the euro started to rebound, tour operators have set 2018 prices from flat to less than 10% above this year's. "One of the big [destination] focuses for next year will be Europe, but more focused on Belarus, Cyprus, Moldova, Poland and some of those more untouched Scandinavian regions like Greenland," said Leigh Barnes, regional director of Intrepid Group. "I think this is super important as we're seeing over-tourism occur in Europe. There are more Americans wanting to come to Europe than ever before. We know there's demand. Off that, we're trying to create new and innovative ways to get people to see Europe."Barnes said that creating more off-the-beaten-path itineraries provides both a way for Intrepid to align itself with a growing desire among travelers to experience new and emerging destinations, as well as a more sustainable way for the company to diversify its European product beyond the hot spots. Other operators are taking a similar approach. They have noticed that just as some of Europe's traditionally most popular cities are presenting crowding and pricing challenges, travelers are also starting to look for alternative destinations because they're craving something different.Along those lines, for 2018, Globus is launching its Undiscovered Italy product, which is designed to lure travelers to destinations such as Sicily and Apulia.Vanessa Parrish, channel marketing manager for Globus, said that while the tour operator does not have a problem securing accommodations in places such as Rome, Venice and Florence, offering alternative itineraries in a top destination like Italy gives Globus an edge over the competition."We're really going to places where nobody else is going, [where] we really felt like we had a competitive advantage," Parrish said.Trafalgar, too, said it is experiencing increased interest in less traditional European destinations, such as the Balkans, especially Croatia; Portugal; and Scandinavia. In response, it has increased capacity in those areas for 2018. Yves Marceau, vice president of buying at G Adventures, said its prices will be up slightly for 2018, due mostly to the stronger euro. Marceau reported that hot destinations such as Iceland, Ireland and Eastern Europe are in greater demand, which is translating into higher prices in those areas. Tour operators said that despite the capacity crunch and the rallying euro, it is their long-standing supplier relationships, hard-earned credibility and advance buying strategies that have enabled them to continue to offer attractive pricing in an increasingly competitive European travel environment.Tauck vice president Jeremy Palmer said, "In addition to the euro strengthening, in those areas where there is [high] demand because of capacity concerns, you have added price pressures, where hoteliers and suppliers are looking for more money. So how are we dealing with it? Luckily, because we obtain our inventory and lock it so far out and given the relationships we have, we generally are able to get the capacity we want, and we got it before the price moved upward."He added: "We try to do multiyear contracts for just this reason." Across its global portfolio, he said, Tauck saw its prices increase between 3% and 5% for 2018 compared with this year. Palmer said that 2018 bookings for Europe are strong, including for France, which had been lagging other destinations the last two years following the Paris terror attacks in November 2015. "At the moment, we're seeing demand up 15% to 18% for 2018," Palmer said. "And it's pretty evenly spread."Intrepid's Barnes said that as the company has experienced much higher volumes of customers, it has been able to negotiate better with Europe suppliers. That is especially true of the U.S. market, which has seen a 50% increase in Intrepid's passengers in the past two years. Intrepid's Europe pricing for 2018 inched up 0.4% above 2017. Other regions reboundingBeyond Europe, operators are optimistic about 2018 overall, noting that destinations such as East Africa and the Middle East have been rebounding. For example, G Adventures reported a global increase in demand for the Middle East, with a 36% year-over-year growth in bookings in 2016 vs. 2015. In response, the company added an Oman tour for 2018.Similarly, Intrepid said it is experiencing a 70% increase in Middle East bookings.In addition to seeing a big rebound in Europe, Tauck's Palmer said, East Africa is experiencing strong recovery. He added that the popularity of the operator's North America itineraries never really came down from their 2016 National Park Service centennial high. "There is a travel boom happening at most destinations," he said.