Travel to Europe suffered a blow from terrorism but is rebounding

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Norwegian Cruise Line has seen a drop in North American customers for its European cruises such as this one off the coast of Santorini.
Norwegian Cruise Line has seen a drop in North American customers for its European cruises such as this one off the coast of Santorini.

It has not been an easy year for European tourism.

In November, 130 people were killed in Paris in coordinated attacks targeting a soccer stadium, concert venue and neighborhood bars. In March, terrorists hit the Brussels airport and metro, taking the lives of 32 people.

All this came on top of a migrant crisis that has had news media beaming images of Greek beaches and Eastern European highways flooded with refugees fleeing the wars in Syria and Iraq.

Travel Weekly checked with cruise lines, hoteliers, tour operators, travel agents and airlines in an attempt to understand the impact all of this bad press has had on what has traditionally been the most popular long-haul destinations for U.S. travelers.

What we found is that while Europe bookings are down in some cases, especially for cruise lines, the booking landscape has shifted, with destinations like Spain and Ireland getting a lift while traditional powerhouses such as France and Italy are experiencing softness.

The results indicate that while travelers are being cautious — the booking window has shortened, and newcomers are putting off Europe for other parts of the world — overall, as we’ve seen again and again, they are resilient, have relatively short memories and know a good deal when they see one. 

Cruise

After the Brussels attacks, cruise lines  said Europe became a tougher sell for Americans, leading them to turn to locals to fill their ships on Mediterranean itineraries.

Executives at Royal Caribbean Cruises Ltd. (RCCL) said this “lull” in bookings meant that the percentage of Europeans filling its Europe-based ships would increase to around 70% this year from about two-thirds in typical years.

Those changes come at a cost: Europeans book later, pay less for their tickets and spend less onboard.

“As a result, we have lowered our yield expectations for these itineraries,” RCCL chairman Richard Fain said in a conference call with analysts.

The attacks had even more impact on Norwegian Cruise Line Holdings’ (NCLH) most recent results, according to CEO Frank Del Rio.

“Yield growth for the second quarter will not be what we had expected coming in,” he told analysts last week.

Traditionally, NCLH has sourced less business in Europe than either of its major competitors, RCCL and Carnival Corp., with only about a third of its overall bookings for European itineraries sourced locally.

“So we still rely primarily on the North American consumer,” Del Rio said.

Not all of Europe is being equally impacted. Cruises to the Baltic and other northern European sailing areas have been relatively unaffected compared with Mediterranean ones.

Some lines are fighting the slump with promotions.

In April, Silversea Cruises offered a 10% early booking discount for Mediterranean cruises, some of which were only 80% full, said Mark Conroy, managing director of the Americas for Silversea. Another promotion offers $199 one-way business-class fare on certain Med itineraries.

Conroy said bookings after the first week of the promotion were up 40% compared with the previous week.

“The area that’s suffering is particularly the eastern Mediterranean, and we’re trying to get people to think rationally about what the real risk of sailing [there] is,” Conroy said. “If you’ve got a client that’s value-based, then you should convince them to go to the Med in 2016.”

There are signs of improvement. Del Rio said NCLH saw an uptick in bookings over the past few weeks.

“As time and distance from the event [grows], people tend to forget what happened,” Del Rio said. “We put the past behind us, and we look forward.”

A silver lining for the cruise industry has been a stronger year for North American bookings in areas closer to home, with robust Caribbean business in particular.

Tour

While tour operators have reported that Europe bookings took a notable hit after the attacks in both Paris and Brussels, most say that they are now slowly picking up again.

“Sales volume to Europe is now even compared to this time last year,” said Steve Born, senior vice president of marketing for the Globus family of brands. “Volume had been softer following Brussels, but we’re beginning to see some pickup once again just in the past few weeks.”

Globus said its bookings are up 30% for Ireland. Pictured, the Ring of Kerry.
Globus said its bookings are up 30% for Ireland. Pictured, the Ring of Kerry.

Destinations in Europe that are faring well for Globus, such as Ireland, up 30%;  Spain and Portugal, up 10%; and Northern Europe and Scandinavia, up 32%, are making up for France, Central Europe and Eastern Europe, which are currently down compared with last year, Born said. 

Tauck also experienced a Europe slowdown right after both terrorist events, but has recently seen “a very nice uptick” in bookings to the Continent, according to spokesman Tom Armstrong.

One of the bigger challenges in the aftermath of the attacks, said Paul Wiseman, president of Trafalgar USA, has been a much tighter booking window that is making it hard to gauge how 2016 Europe bookings will end up.

“Clearly there is a late booking pattern,” he said. “We saw April departures fill only in March, which is extremely rare, if in fact we have ever seen such a pattern.”

Trafalgar is also seeing traditionally less popular European destinations pick up some of the overall bookings slack.

“Italy and France, both very large volume destinations for Europe, have suffered both directly and indirectly from the terrorism issue,” Wiseman said. “While we have seen declines there, we have also seen corresponding unusually high demand for destinations that traditionally had less volume, such as Spain, Portugal, Eastern Europe, Scandinavia, Ireland and Scotland. Ireland, in particular, is having such a fantastic run of late that capacity is becoming a major issue, particularly in Dublin.”

Trafalgar has also used promotions to help stimulate Europe bookings, such as a series of “buy one, get one 30% off” flash sales, and the operator is promoting the safety and security that traveling on a guided vacation provides, with a “confidence in travel” campaign designed to help agents and consumers “overcome fear of travel using key pillars of guided vacations to reiterate that we are with clients all the way,” Wiseman said.

Hotels

In the hotel sector, dullness in Paris and Brussels has also been offset by demand boosts in markets like Spain and Germany, according to the major hotel brands. 

Several executives said that the Brussels attacks did not have nearly as wide an impact on booking as the Paris ones did.

Marriott International’s and Starwood Hotels & Resorts’ first-quarter revenue per available room (RevPAR) advanced 2.7% and 1% in Europe, respectively, matching their global RevPAR growth rates. Hilton Worldwide’s European RevPAR growth of 2.9% even outpaced its 2.1% global increase.

And while Hyatt Hotel’s RevPAR for Europe, the Middle East and Southwest Asia plunged 5.9% from a year earlier, those results factored in both results outside of Europe and the fact that 250 of the 950 rooms at France’s Hyatt Regency Etoile were out of service because of renovations.

After the Paris attacks, bookings dropped off immediately for the remainder of the fourth quarter, with the effects spilling over into the first quarter for both Paris and, to a lesser extent, London.

“The U.K., namely London, remained soft, and security concerns continued to pressure our results in Turkey,” Hilton CEO Christopher Nassetta said in an April 27 earnings call. Still, Nassetta added that “Continental Europe performed well with strong transient group demand, particularly across Germany and Prague.”

Marriott CEO Arne Sorenson said during an April 28 earnings call that overall Europe hotel demand had been helped by a resurgence in travel to the Continent’s southern regions, with Spain in particular being viewed as an alternative to politically unstable areas such as North Africa and the Middle East.

Sorenson said he was “pleasantly surprised” with first-quarter results in Europe, although the timing of the Brussels attacks meant their impact could be felt later.

“But at the moment, it feels Brussels- and Paris-focused in terms of weakness as opposed to Europe as a whole,” Sorenson said. “So we would expect to continue to see positive sorts of low- to mid-single-digit RevPAR growth in that market.”

Expedia CEO Dara Khosrowshahi, meanwhile, said that the Brussels attacks did not spur the same level of booking cancellations that Paris did.

“When the Paris attack happened, what we saw was an overall tone of fear that not only hit Paris, but also hit a number of other major investment centers,” Khosrowshahi told analysts in late April. “We didn’t see a similar thing with Brussels.”

Travel agents

Retail bookings reflect much of the same results, with many reporting that weakness in France and Turkey is being countered by strength in other markets.

In fact, while in some cases bookings to Europe are  down as much as 15%, in others they are up by just as much.

Gary Smith, a Dream Vacations franchisee, called his 2016 Europe bookings “remarkably flat” going into the summer season, saying there is little interest in Paris but still some interest in southern France.

Jeff Anderson, executive vice president of Avoya Travel, said Europe commission numbers for the first four months of 2016 were down 4% vs. last year, but that April seems to have been a turning point.

Avoya agents saw a 6% increase in European travel commissions last month, and the retailer’s Europe cruise business was up 14%.

Most agents attribute the decreases in Europe travel to first-time travelers holding off and redirecting to other places, while more seasoned travelers are still comfortable heading to the Continent.

Diana Hechler, president of D. Tours Travel and a Europe specialist, said that European bookings are down by about 10%, mostly due to what would have been first-time European travelers who are heading elsewhere, creating “a little softness in the market.” More seasoned travelers are still going without pause, she said.

Booking.com also saw evidence of Paris dropping in popularity this year. From June 1 through Aug. 31 last year, Paris was the top-booked international destination for U.S. travelers. It fell to No. 3 during the same time period this year, according to data from the Priceline Group.

Counterintuitively, many agents say Europe bookings are up. Richard Engle, with Protravel International in Chicago, said Europe bookings were up between 10% and 15%. In fact, he called the interest level for the Continent “off the charts.”

This was supported by the amount of European products travel agents are placing in their shopping carts on VAX VacationAccess, up about 10% this year, according to Lynn Clark, vice president of engagement at Trisept Solutions. While interest in Paris is down about 20%, she said it is still the second most-popular destination this year, after London.

And for agents with global reach, softness in Europe just means their clients are going elsewhere. Avoya said the Caribbean is up 6%; Alaska, 24%; Asia, 22%; and the U.S./Canada, 18%.

Airlines

One sector that hasn’t reported any significant drop in Europe bookings this year is aviation.

In fact, the major U.S. airlines said they expected demand for travel to Europe to grow this summer, although second quarter bookings would likely be affected by the Brussels attacks.

Delta president Glen Hauenstein said in April that the airline predicts demand for Europe will grow 4% to 5% over the summer, while United and American executives made similar forecasts during earnings calls last month.

“We see strong bookings in the summertime for transatlantic,” American chief revenue officer James Compton said.

Part of the drive is price; airfares are at their lowest levels in years. While in past years people were deterred from traveling to Europe because of high flight costs, the opposite is true this year.

Airfares to Europe this summer are selling for 7% less than last year, according to the website Hopper, which tracks GDS searches in order to analyze airfare prices and demand. Some destinations are seeing steeper drops. Prices are down 16% to Amsterdam, 15% to Athens and 14% to Dublin.

Europe fares also dropped during the first quarter, though not as much as they did in other markets. United saw a dip of 4.1% in its transatlantic ticket prices, as measured by the fare cost per mile. Prices dipped 0.9% at American and 6.6% at Delta.

For United and American, the drop was lower than any other region in the world, while Delta’s dip was steeper than the drop in domestic tickets but gentler than the one for tickets to the Pacific and Latin American regions.

“Demand across the transatlantic though, particularly in light of the Brussels tragedy, has remained pretty strong and pretty resilient,” American president Scott Kirby said during the carrier’s earnings call last month.
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News editor Johanna Jainchill and senior editors Michelle Baran, Jamie Biesiada, Danny King, Robert Silk and Tom Stieghorst contributed to this report.

Correction: Silversea's $199 business-class fare on certain Med itineraries is a one-way price. An earlier version of this report mistakenly said the price was for a roundtrip ticket.

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