Preview 2012: Retail

If 2010 proved to be the year of recovery for travel sellers and 2011 a year of growth, how 2012 will shape up is still anybody's guess.

This year, many travel agencies reported their best years on record, and analysts said pricing had made a significant rebound from the depths of 2009.

But 2012, it turns out, is a wild card of the postrecession years for both travel and the economy at large.

One thing that travel sellers seem to agree on is that those who have made it this far, surviving the recession and even flourishing while coming out of it, did so by becoming stronger and more efficient.

"The survivors are much more professional today than they were," said Roger Block, president of Travel Leaders Franchise Group. "People in business today are fact-based, data-driven, service-oriented and knowledgeable. They have their own internal training departments, IT departments, marketing departments. ... The agencies that have survived are offering a better product."

Technology has helped. For example, Block noted that the cost to implement technology has fallen significantly, enabling agents to become more efficient.

Agents will certainly continue to accelerate their investment in technology in the coming years and will just as certainly embrace more of the social media tools their clients are using.

A blurring of online, offline sellers

In 2011, online travel agencies became more aggressive in partnering with traditional agencies. And traditional agencies demonstrated that they had learned a lot from the OTAs, offering services normally associated with the online giants. That trend should grow in 2012.

Block noted that the trend is "blurring" the two kinds of travel sellers.

"The OTAs are trying to provide more and more service, and the traditional agencies are trying to get into offering the form of booking that the customer wants to do when they want to do it," he said.

Block is among many travel sellers who are bullish about 2012. In part, that's because just as travel agents arose from the recession as better salespeople, so, too, have people become better consumers.

The industry encouraged consumers to open their wallet after the recession, in part by offering deals, often at the last minute. But since then, agents say, consumers have learned to separate low prices from high value instead of just waiting for price drops.

"Last year was a difficult year for the consumer who waited, especially when you look at Europe," said Vacation.com President John Lovell. "Airfare went up very quickly, [and] the consumers who postponed Europe last year and ended up booking something else are now booking early."

Susan Reder, managing partner of Frosch Classic Cruise and Travel in Woodland Hills, Calif., said luxury consumers, in particular, have learned to shop for value.

"People who know value are booking early," she said, noting that suppliers have begun offering better early-booking incentives and have held true to their word about raising prices.

Reder expects suppliers to continue to entice the luxury consumer with free air next year, especially since airfare continues to remain so high and is an important part of the value consumers expect.

"Companies that include air will seal the deal," Reder said, adding that "2012 looks strong, but there are definitely a lot of shoppers out there."

Mergers and acquisitions

Looking ahead to 2012, agents can't help but wonder if the renewed surge in agency consolidation will continue.

This year, Travel Leaders Group bought V-com, the largest travel agency consortium, which in turn bought Cruise Shoppes, the eighth-largest consortium.

Private equity entered the fray this year, by acquiring Directravel, the first in what many predict will be a major roll-up of corporate agencies.

Bob Sweeney, president of Atlanta-based Innovative Travel Acquisitions, said overall activity levels in the merger and acquisition of travel companies are on the rise, and he predicted that more transactions will be taking place in the next two to three years than have taken place in the past two to three years.

He attributed this trend to several factors, including an improving economy and "the faith of the buyers that the world's not going to end. The confidence from the buying side is better than it has been for that last three years."

In addition, travel companies are more attractive than they used to be, in part, Sweeney said, because they have become better companies: "People have right-sized their companies and made decisions to shift employees onto commission and off the salary model."

Another factor, Sweeney said, is simply demographic: "The average agency owner is around 60. Many people are approaching the age where they are starting to take a peek at the exit."

Crises, politics and uprisings

In part, analysts are reluctant to prognosticate about what 2012 will bring because of the inherent uncertainties of an election year, and because geopolitical events such as Europe's debt crisis and the Arab Spring are still playing out.

Some have already voiced caution about what lies ahead for the industry.

PhoCusWright recently reported that after fully recovering in 2011 from the ground it lost during the recession, travel would experience a slowdown in 2012.

In its annual U.S. Online Travel Overview, the research company, which is owned by Travel Weekly's parent, Northstar Travel Media, said that despite some positive trends, 2012 and beyond is "clouded with uncertainty."

"Do not let travel's impressive performance in 2011 mask some concerning underlying trends," Douglas Quinby, PhoCusWright's senior director of research, warned. "The gains have largely been fueled by the corporate travel rebound and tight airline capacity. The leisure environment overall is soft, and continued high unemployment and consumer pessimism over the state of the economy make for a challenging outlook for 2012."

The report predicted that economic pressures will slow online travel growth to single-digit gains.

PhoCusWright analyst Carroll Rheem predicted, "In 2012, we'll see some slowdown from the ramifications of macroeconomic issues. We'll see weakness in terms of the pickup and the trajectory of growth."

Still other analysts said travel would continue to grow next year and that numbers-wise it would be at a disadvantage compared with 2010 and 2011, which saw relatively easy comebacks after travel's nosedive in 2008 and 2009.

"We're still seeing growth and recovery, but we are maybe at the later innings of that cycle," said Matthew Jacob, a travel industry analyst with New York-based ITG Investment Research.

Jacob predicted that 2012 would experience a "pretty decent growth rate," but he also pointed to the uncertainty next year will bring, noting that much hinges on whether "these economic worries become a reality."

"There is a lot of concern among investors and analysts and forecasters," he said. "But consumers don't really seem to have changed their behavior yet when it comes to travel. We are still seeing improvement in cruise ticket pricing, in airfares, in hotel room rates as well as bookings. ... There is a little bit of a disconnect between the people watching the markets who are concerned about it and what consumers are actually feeling today."

Follow Johanna Jainchill on Twitter @jjainchilltw.