Last year, tour operators such as Trafalgar Tours faced a drop in demand that forced many of them to cancel and combine tour dates. For 2010, Trafalgar has cut capacity to ensure the same thing doesn't happen again. Senior Editor Michelle Baran spoke with Trafalgar President Paul Wiseman about how capacity changes affect everyone from major hotel partners to the individual tour guides.
Q: How much has capacity been reduced for 2010 compared with 2009?
A: We took around 30% of the departures out of the brochures and out of the reservation system upfront. There are four elements of what we contract: transportation, accommodation, sightseeing and meals. The least flexible of those four are the transportation and the accommodation. So for 2010, we contracted excess capacity to what we published in the brochures, and we have been holding that excess capacity in reserve, which if we need to -- [and] it now looks like we will -- we certainly will tap into.
Q: What are the terms of your supplier contracts and release dates in order to accommodate the "hidden" additional capacity?
A: It's around 60 days where we need to be letting the hotels know what capacity we're actually going to [use]. The only time that we have any variance in our hotel release dates is where it is in conjunction with special events [such as the] Edinburgh Tattoo and Oberammergau.
Q: Looking at 2010 bookings, how are they tracking thus far?
A: We've already got a lot of dates that sold out. Our sales are now over 50% up for advance bookings.
Q: Have you already added some capacity back in, then?
A: About 35% of what we've taken out.
Q: How has all of this affected your relationship with suppliers?
A: The first thing is that suppliers have been more flexible. We have two kinds of operating years in Europe: We have years when they're flexible, and we have years when they're inflexible. Going into 2010, everyone was flexible. From the point of view of contracting, it was a great year. They're looking for volume, and operators like us were able to provide volume.
Q: What kind of risks are there when demand and capacity fall and rise dramatically like they have been?
A: We have to be very careful of our relationship with suppliers in managing risk. When you have a year when there isn't good utilization, suppliers tend to oversell. That's where smaller operators get squashed. Hotels can turn around and say [they're overbooked]. You see the airlines doing it all the time. When a hotel oversells, that's called a book-out, and we have very strict rules for hotels that book-out. The last thing a hotel would want to do is book-out with us, because of the strict penalties.
Q: In addition to hotels, many other suppliers were affected by the crisis, all the way down to the tour guides.
A: 2009 wasn't a good year for any tour guide. I don't think anybody got the amount of work that they wanted. So they're all hopeful. The tour guides now are getting the calls. Last year you had two tours in April, now you'll have four tours in April.
Q: As capacity starts to return, how will you juggle meeting the demand while not bringing in too much capacity?
A: It's probably in 2011 that capacity will start to turn up again. Then pressure starts to appear on capacity. There may be some specific tours that will just completely sell out. But that's a problem we'd be happy to have.