One thing travel sellers won’t have to worry too much about heading into 2014 is sticker shock when selling escorted tours. Despite ongoing global economic uncertainty, tour prices for the most part appear to be holding steady for next year.
Tour operators, most of which released their 2014 brochures within the last month, reported average price increases for 2014 tours of no more than 5% above 2013 prices, a bump they attribute to a combination of fluctuations in currency exchange rates and increased hotel and supplier taxes.
For Abercrombie & Kent, a slight price increase in Europe for the company’s 2014 departures “reflects one thing really,” said Richard Harris, the operator’s senior vice president of operations and product. “When we, like many operators, priced 2013, the euro was particularly weak against the dollar, and when we came to price 2014, it was having one of its intermittent stronger moments against the dollar.”
In all, about half of A&K’s global departures for 2014 are priced the same or below 2013 prices. The other half have gone up slightly, in most cases by single digits, with the average falling between 2% and 5%, according to Harris.
And, looking back, he said, while the pricing environment for 2014 appears tame, in 2013 the company managed to do slightly better, with more than half of the tours priced the same or below 2012 prices.
For tour operators, a big part of the pricing game is determined by currency exchange rates.
Early in the year, they exchange bulk amounts of currency, then use currencies other than the dollar to pay suppliers. So the rate they get on that hedge, compared with the rate they got in previous years, is often a major factor in determining prices.
It would appear that operators hedged slightly better in 2012 than they did this year.
Nevertheless, a relatively attractive pricing environment heading into 2014 enabled A&K to double the capacity on its lower-priced Connections by A&K product, which is priced about 30% less per diem than a typical A&K small-group journey.
Earlier this year, A&K announced it was increasing the number of Connections itineraries to 31, more than half of them in Europe, up from the 17 itineraries with which it launched the brand last year.
Asked to explain how A&K was able to negotiate the lower rates it needs to keep Connections pricing competitive, Harris said it was in fact harder to negotiate attractive hotel rates at the higher-end luxury properties for its standard small-group departures than it was at the premier hotels the company uses for Connections.
“I almost count it as a bigger achievement to be able to hold and improve on rates with luxury hoteliers that have seen an improved demand,” Harris said.
“Whereas the next tier down has not seen a bounce. There’s been less resurgence of demand in the premier hotels, and they are still very cognizant of the importance of price in delivering business.”
In addition, he said, a successful first year with Connections helped in contract negotiations.
Upscale tour operator Tauck reported that where 2014 price increases occurred, they were generally less than 5% and resulted from factors including foreign exchange rates and supplier prices.
In the mainstream segment of the tour market, the Globus Family of Brands saw an average brochure price increase in Europe of about 3% for 2014 compared with 2013, an uptick Globus’ director of channel marketing, Jennifer Halboth, attributed mainly to increased supplier pricing due to both strong demand and taxes.
While the tour prices themselves should not be too much of a hurdle heading into the new year, one of the larger challenges operators have faced in recent years is airfare, which has often topped the price of the tour itself for international travel, making clients rethink their booking.
But tour operators don’t seem too concerned about international airfare for 2014 just yet.
“I think people’s expectations have finally reset permanently,” Halboth said. “Two years ago, everyone still thought, ‘I should be able to get to Europe for about $1,000.’ Once consumers reset their expectations, it doesn’t affect sales.”
She added that Globus has worked with travel agents to upsell clients who are heading abroad in order to better justify airfare costs. She said a successful approach has been to tack on extra days at the start or end of the itinerary to make the price of airfare seem more worthwhile.
So far, it’s working. Europe bookings for 2014 are already up 20% at Globus compared with the same time last year, driven mostly by individual sales and not just the traditional early booking group sales.
Halboth noted that consumers have learned the hard way that waiting until the last minute to book doesn’t pay.
Consumers, Halboth said, are realizing, “‘Oh, I can’t go when I want if I don’t plan?’ We had some soft years, so people felt like they could get a deal late. And now they’re saying, ‘I’m not going to try that again next year.’”
Moreover, the consumers who do wait, she said, are more flexible on dates and departures, which gives retailers a little more wiggle room to make the booking.
Beyond Europe, operators reported a mixed bag for 2014 pricing. Tour prices in much of Asia are generally flat or slightly down, Africa prices dropped a bit and South America benefited from exchange rates that favored the dollar. Domestic tours generally held steady, as well. Follow Michelle Baran on Twitter @mbtravelweekly.