Hectic week on Wall Street has little effect on travel bookings

By Michelle Baran

As stocks tumbled last week and economic analysts warned of a possible repeat of the financial crisis of 2008, the travel industry braced itself for a slowdown.

Yet, as the tumultuous week came to a close, the bookings were still coming in, and few in the industry were seeing any immediate cause for alarm.

“Bookings, both for 2011 and 2012, have actually remained very strong, even as the debt ceiling debate was raging in Washington,” said Tauck spokesman Tom Armstrong. “Overall, we’re up double digits for 2011, and for 2012 as well.”

Armstrong added: “We’re not really seeing any slowdown in bookings, so any issues about credit concerns or the stock market don’t seem to be impacting our guests.”

When asked if that might be because the demographic of Tauck’s client base includes many retired travelers, he responded, “I don’t know that we can point to any single reason for that resiliency [in bookings]. Individual guests have their own reasons why they’ve decided to book.”

Others saw positive booking trends as well amid the deluge of negative economic news.

Steve Born, vice president for marketing at the Globus family of brands, said of the recent debt-limit debate and market swoon, “Interestingly enough, our 2011 numbers and 2012 early bookings have been strong over that period.”

He noted that the week before last, sales were up 15% over the same week in 2010. And for early 2012, the company is up 10% overall compared with early 2011 bookings this time last year.

“A bit surprising,” Born admitted. “But I can speculate that either our market is less invested in volatile stocks, so less impacted than the average [consumer] in week-to-week fluctuations, or that over the months and years, they’ve become more immune to week-to-week fluctuations in the market.”

On the other hand, some suppliers reported that phones were ringing less than normal.

Jack Richards, president and CEO of Pleasant Holidays, said his company had “experienced a slowing in bookings, related to the debt crisis and declining stock market over the last few days.”

Richards said that prior to the debt crisis and stock market decline, business had been very strong at all of Pleasant’s destinations, and that the company had seen improved bookings to Mexico, primarily to Cancun, the Riviera Maya and Los Cabos.

Richards said he wasn’t too concerned yet because his fall 2011 bookings to all destinations except Mexico are up double digits over 2010, and advance bookings for 2012 are “way up” over the same period last year for FIT, groups and weddings/honeymoons.

On the retail side, Julia Horn, leisure sales manager at Travel Service in Emmaus, Pa., said things were quieter last week.

“We don’t know how much the economic situation will impact us,” Horn said. “The political and economic climate always does have an impact on our business and how people travel and if they travel.”

Price increases seem certain

While it remained unclear just how and whether economic woes in the U.S. would affect travel spend in the coming weeks and months, one thing seemed certain: The global economic climate and its effect on international currencies is going to force 2012 prices up. The question is, how much?

Tour operators, which traditionally price very far out (they will be finalizing their 2012 brochures over the next few months), are estimating increases anywhere from single-digit percentages over 2011 up to as much as 25% over this year’s prices.

“The euro is about $1.43, and to me that’s high considering the underlying economic problems Europe has,” said John Galvin, CFO at Collette Vacations. “And the U.S. has a real interest in keeping the dollar weak, because it helps our markets.”

He said Collette bought most of its currency for 2012 “a long time ago,” and therefore the company was pretty well hedged as it prepares its tour prices for 2012.

Even so, he said, “The reality is prices are simply going up. From an inflation standpoint, the underlying inflation in the U.S. economy is nowhere near where it is if you’re trying to sell outbound travel.”

Galvin said Collette’s 2012 prices could end up being close to 10% above 2011 prices.

Paul Wiseman, president of Trafalgar Tours, said 2012 pricing could see jumps of between 10% and 25%, depending on what the dollar does in the next couple of weeks.

“People this year are getting a fantastic bargain,” Wiseman said. “But that has to catch up eventually. The currency’s been weak all year.”

While Wiseman said he is hoping the dollar will strengthen a little and thus help with pricing, the reality is that customers will have to accept higher prices.

“We will do our very best to find currency hedges and try to protect our customers as best we can,” he said. But he added: “No one is going to be anywhere near dollar for dollar on last year.”

And while a possible price hike of 25% on a tour might seem like a lot, Wiseman said he was far more concerned about the rising cost of airfare than about tour prices.

“I think the airfare situation is more dramatic than the currency situation,” he said. “Even though 20% sounds like a big number, that can be $300. Airfare can be more than triple. That’s far more substantial.”

Wiseman is encouraging agents to once again try to persuade travelers to book 2012 before Christmas or “you’ll pay double the airfare. ... And that’s not ideal for any of us.”

A clouded crystal ball

How price increases, coupled with a wobbly economy, are going to play out in bookings is anybody’s guess. For now, the industry is waiting to see how travelers will respond to the growing uncertainty.

Doug Risser, co-owner of Menno Travel/American Express in Goshen, Ind., said, “This is more of a long-term situation that is evolving that we will watch, but we haven’t seen any changes yet.”

Steve Gorga, president of Travel Impressions, said he hadn’t seen a drop-off in bookings yet, either.

“And hopefully we won’t,” Gorga said. “I think people are cautious, but they have been all year.”

Moreover, several suppliers and retailers expressed anxiety about the potential for the U.S. economy to slide into the second half of a so-called double-dip recession.

“We haven’t seen it hit yet,” Collette’s Galvin said of recent economic setbacks. Yet, he cautioned, “We have that concern that if we go into a second recession we’re going to see some difficult times ahead.”

Like many in the industry, Collette saw a strong 2010, bolstered by the thousands of Americans who flocked to Germany for the once-every-decade Oberammergau passion play.

This year, Collette says it is going to end up about 4% to 5% ahead of last year’s sales. For early 2012 bookings, Collette is seeing passenger growth of about 10%. In revenue terms, it says its growth is closer to 14%.

“We haven’t seen a profoundly negative impact,” Galvin admitted. But, “we’re concerned.”

For 2012, Wiseman that Trafalgar is “expecting growth, but we’re not expecting it to be a boom growth year.”

He said that Trafalgar’s retail partners are mostly forecasting somewhere between flat bookings and 10% growth for next year.

“Right now, we are very happy,” Wiseman said. “But we do expect [the strong bookings] to taper off.”

Gay Nagle Myers contributed to this report. 

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