2017Year in Review


By Johanna Jainchill

This year was nothing if not eventful. Starting in January with President Trump's travel ban and continuing into a summer with the most damaging hurricane season in history, an earthquake that killed hundreds in Mexico, followed by wildfires that ripped through California's wine country, the U.S. travel industry was kept on its toes throughout 2017.

But despite turbulence from the White House and Mother Nature, travel sales boomed.

The cruise industry had a remarkable financial year, with record bookings and income.

Tour operators reported a surge in bookings, with 84% of USTOA members reporting that sales were up this year. And luxury sales were up across the board.

The airlines kept making money this year, despite rising fuel prices and the hit from the hurricane season. Hotels kept pace with 2016's record occupancy levels, while room rates edged up slightly, enabling hotel operators to once again boost room revenue.

It helped that, in general, travel had nowhere to go but up after 2016, an election year, which is never good for travel, and with Zika and ISIS dominating headlines.

As always, the news in 2017 was a mix of good, bad and open to interpretation. Here, in no particular order, are what we think was the most memorable.

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Natural disasters

It was starting to feel like Armageddon.

Beginning in late August, Hurricane Harvey hammered Houston, causing record flooding and kicking off the worst string of natural disasters in recent memory. 

Harvey was the first of 10 named hurricanes that together comprised the most destructive Atlantic storm season on record. Its two most powerful storms, the Category 5 monsters Irma and Maria, cut a swath of unprecedented destruction through the Caribbean and the Florida Keys over a two-week period in September. 

While Maria barreled through the islands, a magnitude 7.1 earthquake killed almost 400 people in Mexico City. Two weeks later, some of the most destructive wildfires in California history roared through wine country, destroying lives, hotels and vineyards.

In Anguilla, the British Virgin Islands, Dominica, Puerto Rico, St. Barts, St. Maarten and the U.S. Virgin Islands, many hotels, resorts and restaurants will miss entire seasons. Some won't open again at all.

If there was a bright spot during this time it was the industry's reaction: Cruise ships canceled sailings in order to bring relief items to the islands and rescue stranded travelers; airlines sent planes with emergency responders and relief supplies to areas in need and brought back victims needing medical care; and travel companies large and small, travel agents included, opened their wallets to help the people and economies on which the industry depends.

Tourism groups and officials want travelers to know that the Caribbean, wine country, and Mexico are recovering rapidly, though full recovery will still be long, painful and costly.

Trump

For the travel industry, Donald Trump's election was viewed by many as an unnatural disaster.

Regardless of what side of the political spectrum you find yourself on, the new administration's travel bans and laptop restrictions made travel more difficult and created uncertainty. Trump's decision to reverse several hallmarks of President Obama's Cuba policy, including individual people-to-people travel to the island, put a dent in plans by U.S. airlines and hoteliers to grow that market.

The administration's 2018 budget proposal slashed funding for Brand USA, the nation's largest tourism marketing arm.

And while inbound travel has been hurt by years of a strong dollar, international visitation fell by 4% through June, according to the latest data, and many destination marketers blame Trump's nationalist, America-first rhetoric and antagonistic remarks about Mexicans and other groups, for making overseas visitors feel unwelcome.

All this from a president to whom many in the industry had given the benefit of the doubt, given his ownership of hotels, resorts and casinos, coupled with his business background.

Even some of Trump's own businesses appear to have been damaged by his presidency. Three Trump hotels could be deflagged this year, with the owners of Trump hotels in New York and Toronto paying the Trump Organization to get out of management and branding contracts, and with the owners of the Trump hotel in Panama City trying to do the same. All have cited low occupancy since the brash hotelier became the controversial commander in chief.

The United incident

The forcible removal on April 9 of Dr. David Dao, a passenger, from a United Express flight from Chicago to Louisville, Ky., led to major changes not only at United but in the entire airline industry, which seemed to have reached a low point in its disregard for customers.

The incident prompted airlines, especially United, to review and in some cases revise policies regarding involuntary removals of passengers and the controversial practice of overbooking. Southwest eliminated overbooking entirely in response.

The public also hoped it would lead to some industry soul-searching, as the incident exemplified what many travelers consider to be the direction air travel has taken: the pursuit of profits over customers. Seats continue to get smaller, and fees are the norm for everything once included in the ticket price, from baggage to meals to seat assignments.

Unfortunately for travelers and the travel agents who are supposed to make their travel experience easier, the rise of ultralow-cost carriers and the ensuing need for the major airlines to compete with them have only made stripped-down service more common.

But it was also the year travelers had to accept that their own travel-buying habits are part of the problem: As travel advisers have long warned, buying on price instead of service is an inevitable race to the bottom.

Cruise profits

Executives' comments during earnings calls tell the story:

Royal Caribbean Cruises Chairman Richard Fain: "All of our brands are performing at a level we've simply never seen."

Norwegian Cruise Line Holdings CEO Frank Del Rio: "Our third quarter chronicles the highest revenue, highest earnings and most guests ever carried in any single quarter in our company's history."

Carnival Corp. CEO Arnold Donald: "We achieved record second quarter adjusted earnings. ... That's on top of last year's previous record-setting second quarter."

If there is one sector that will most miss 2017, it has to be the cruise industry, which will find itself saying goodbye to one of its most profitable years ever.

Remarkably, the high margins came despite the destructive hurricane season, rising fuel prices and ongoing currency challenges.

In its favor, the industry reported a resurgent Europe, which generates high yields but had suffered in recent years due to terror attacks, and strength in Alaska, also a premium-priced market.

Finally, as the big three cruise companies continue to sail larger ships, the economies of scale and onboard revenue opportunities make each ship even more profitable.

Mexico turmoil

Before natural disasters took over world headlines this year, Mexico had attracted unwanted media attention owing to both a tainted alcohol scandal at Riviera Maya resorts and a U.S. State Department travel warning that for the first time included some of the country's top resort regions.

The August warning advised travelers of increased homicides in Baja California Sur, which includes Los Cabos, and Quintana Roo, home to Cancun, Riviera Maya and Tulum. 

It didn't help that Trump continued tweeting about Mexico being unsafe in his quest to persuade Congress to pay to build a wall on the southern border.

All the negative headlines took their toll: Mexico bookings dipped and cancellations increased.

Mexico tourism officials spun into damage control to protect their $20 billion tourism industry. And while the unrelenting hurricane season shifted focus from Mexico and traveler memories can be short, the damage was done: As the year ends, some packagers and hoteliers are reporting losses ranging from 10% to 20% compared with last year.

Baha Mar opens

It was a day that began to feel ever-more elusive as the years went by: The Grand Hyatt Baha Mar opened in early May, three weeks earlier than planned, but almost three years behind schedule, becoming the first hotel to operate at the $4.2 billion Bahamas megaresort, the most expensive private development in Bahamas history.

Originally scheduled to open in late 2014, Baha Mar was beset by financial and legal issues. The saga read like a movie script, with rumors of sabotage, stolen documents and power to the construction site being cut. There was a bankruptcy. Rosewood publicly asked to be removed from the project. The resort sued the construction company. Bahamian officials were accused of making sweetheart deals with the resort's Chinese owners.

Yet somehow, the resorts, restaurants and entertainment outlets began to open. So far this year, the openings have included Baha Mar's 100,000-square-foot casino, the Caribbean's largest, a handful of the planned 40-plus restaurants and bars, several pools, shops, the 30,000-square-foot Espa spa and the Jack Nicklaus-designed Royal Blue golf course.

The SLS Baha Mar became the second hotel to open there in November. The 200-room Rosewood is due to open in the spring.

It might not be the megaresort originally envisioned, which included five hotels instead of three, but there is an actual Baha Mar where guests are sleeping, eating and gambling right now, a reality that at one point seemed very unlikely.

Cruise ship technology

This year may be remembered as the beginning of the end of the cruise ship key card.

In January, Carnival Corp. revealed a wearable, Bluetooth-enabled disc called Ocean Medallion that unlocks cabin doors, enables onboard purchases and functions as a passenger ID for boarding. Passengers can use it to make dinner reservations, to order drinks to be delivered wherever they are and to play casino games anywhere on the ship.

But its other capabilities are what will really change the cruise experience.

The Ocean Medallion includes artificial intelligence that can learn from the choices passengers make in food and drink, shore excursions, ship activities and purchases, to offer them personally relevant options.

The experience is so transformative that Carnival ended up slowing down its initial rollout of the Medallion, with CEO Donald concerned that it could create future shock for past passengers.

If so, they had better get used to it. This is the direction the industry is taking.

MSC Cruises unveiled a wearable bracelet this year that handles most ship functions and has a digital personal adviser providing recommendations based on guest preferences.

Royal Caribbean launched an app that enables passengers to handle ship functions from their smartphones, the first consumer-facing piece of a technology initiative designed to enable guests to handle tasks normally done at guest services desks or from cabin phones.

The initiative includes facial recognition technology to make check-in counters a thing of the past and "smart cabins" in which turning on lights, TVs and even ordering coffee will be done via voice commands.

Just this month, Norwegian unveiled the Cruise Norwegian app, which does many of the same things.

So when cruise ships begin putting bars where guest services desk once stood, 2017 will be remembered as the year it all began.

Overtourism, destination backlash

Travel Weekly headlines tell the story:

The Global Sustainable Tourism Dashboard informs us that the Top 10 tourist destinations accumulated 49% of global tourism revenue in 2016. That means that half of the economic benefit of travel is going to about 10 countries, yet residents of those countries are in many cases feeling overrun by tourists. 

Locals are increasingly blaming millions of visitors for everything from rising rents -- the "Airbnb effect" -- to higher-priced restaurants and overall congestion.

While city officials moved to tame tourism by regulating home rental companies, putting holds on new hospitality licenses and limiting cruise ship arrivals, the industry responded as well, by beginning to add lesser-known destinations to itineraries and opening more dialogue with locals to address their concerns.

GDS surcharges

It took awhile, but in the end, Lufthansa CEO Carsten Spohr was proven correct.

He suggested in March that other airlines would follow Lufthansa's lead and begin assessing a surcharge on GDS bookings, given the airline group's success after having implemented such a fee in September 2015.

British Airways and Iberia followed suit first, implementing a $10 surcharge on bookings through a GDS starting in November. Air France-KLM said it would begin assessing a similar surcharge in April.

For travel agents, the moves threaten to complicate their workflow by making comparison-shopping airfares all the more difficult.

But the fees have come in tandem with more airlines embracing IATA New Distribution Capability (NDC), the XML-based standard that enables airlines to sell their products, including ancillaries, through travel agencies.

Adoption of NDC grew significantly this year, with 36 airlines using some form of the technology as of June and another 80 expected to come onboard this year.

American Airlines upped the NDC ante over the summer, offering a $2 per segment incentive to agencies to book through an NDC-enabled connection to the carrier.

Several agencies said they would participate, and in fall, ARC enhanced its settlement platform to support NDC.

As travel companies on all sides navigate this changing landscape, it is only getting more complicated. IAG recently negotiated with Amadeus, Sabre and Travelport for some travel sellers to be exempted from the GDS surcharge on British Airways and Iberia, creating a private channel for the haves, versus the have-nots, within the agency community.

Uber

The world's largest peer-to-peer ride-sharing company has made this list in the past for its disruptive power -- changing transportation worldwide and threatening the taxi and car-rental industries.

This year, it was the threat to its own brand that made headlines.

Uber is one of the travel industry's most valued companies but also one of its most troubled and controversial, marked by a purported toxic culture that imploded this year with the resignation of CEO and co-founder Travis Kalanick.

Uber bet its turnaround on industry stalwart Dara Khosrowshahi, Expedia's former CEO, who is known for his even-keeled leadership and for being a great corporate spokesman.

But Khosrowshahi has his work cut out for him.

He is tasked with taking on a money-losing company dogged by sexual-harassment allegations, a video of Kalanick verbally accosting an Uber driver, a reputation for flouting regulations to get its cars into cities and charges of skirting employment laws with its drivers.

Terrorism, Vegas shooting

Since 2001, travelers have become more inured to terrorism. Destinations bounce back quickly after attacks, and the general sentiment is that life must go on.

ISIS-inspired attacks continued this year, including a series of vehicle attacks in major tourist hubs like New York, London and Barcelona

But travelers seemed to be most shaken, at least temporarily, by the deadliest mass shooting in U.S. history, which happened Oct. 1 on the Las Vegas Strip. It was made all the more frightening by the fact that, to date, law enforcement authorities have found no motive for the killings.

A shooter in the Mandalay Bay Resort fired down on concertgoers attending the Route 91 Harvest festival below, killing 58 people. The incident set off questions about security in one of the world's most visited cities.

In the wake of the shooting, Las Vegas' visitor count for October fell 4.2% from a year earlier, to 3.6 million; overall hotel occupancy declined 2.7 points, to 90%; and occupancy on the Strip fell 2.4 points, to 91.3%.

Hotels began stepping up promotions to lure guests, with discounts at some resorts as high as 25%. On Cyber Monday, rates at several hotels were less than their daily resort fees.

Maybe it was because it was Vegas, synonymous with fun and a place where safety had never been much of an issue, perhaps owing to the famously robust security in the casinos and surveillance cameras that monitor virtually every inch of public space. Maybe because unlike the Orlando nightclub shooting, tourists were the intended target.

Whatever the reason, Vegas officials right now are working to find the right balance between security and letting Vegas be Vegas.

Agency consolidation

The merger of Travel Leaders Group (TLG) and Altour in July was the largest consolidation of 2017, but the entire year was marked by merger mania.

The TLG-Altour combo created an enterprise with annual sales of $24 billion. Analysts said the merger would likely be one of the most challenging that Travel Leaders Group has ever taken on but predicted it would create one of the industry's most powerful agency networks.

It was TLG's largest acquisition of 2017 but far from the only one. During a one-week span earlier this year, it acquired the Andrew Harper Travel Office and Andrew Harper Alliance, an agency and luxury hotel program, as well as Colletts Travel, a U.K.-based luxury agency.

Australia-based Flight Centre also went on an acquisitions spree, adding Quebec's Les Voyages Laurier du Vallon, Mexico-based destination management company Olympus Tours and Bespoke Hospitality Management Asia, a Thailand-based operator of hotels and resorts.

The impact of these acquisitions is still playing out, but TLG's, especially, should result in better negotiating power with suppliers and the ability to attract top agency talent.