Senior Editor Michelle Baran caught up with Tauck CEO Dan Mahar on the christening cruise of Tauck's sixth river vessel, the Savor. Mahar weighed in on where he sees the river and land businesses headed in 2014 and beyond, and whether he sees the river cruise business competing with land tours.
Q: How much more development and capacity can the rivers absorb?
A: There is still quite a bit of opportunity for capacity expansion. It doesn't mean there won't be challenges in ports here and there. But there are hundreds of locations where people are docking. Those docking locations, those towns, villages and cities, see this as an economic development opportunity. There will be pressure points, but overall the market will continue to evolve to accept the increased capacity.
Q: Do you see the flood of new ships potentially putting downward pricing pressure on everyone else in the market?
A: Honestly, it's zero to do with pricing pressure for us. Because we don't see ourselves as competing with Viking or any of these guys, really. We try to see ourselves as our own segment. It's really just more a matter of always maintaining the brand. Because we don't discount anywhere. Even in 2009 and 2010, we didn't discount our land tours or anything at that time. ... We just have the philosophy that everybody pays the same rate. And I want to maintain that almost at all cost.
Q: Are you worried about the river cruise side of the business stealing away business from the land side?
A: I want to be real clear on this, because we have not seen that at all. We're getting people new to Tauck come in to river and then go over to land, because they're coming off of large ships, and they like the more intimate experience here, and they like the destination immersion. So we're seeing it as a great entree to bring people into the Tauck brand. ... So that's No. 1. No. 2 is, even in Europe, our Europe land [is having] a record year in 2014, and it had a record year for 2013. So we are adding capacity and growing and must continue. Honestly, I spend more time worrying about gaining capacity on our land programs in Europe. With high-end European hotels, there's a capacity constraint there. And with the Russians and the Chinese and all the world coming, it's not like in Asia where there's five-star hotels being built on every block and there's unlimited supply. I don't want river to grow so much that it begins cannibalizing land. And so far it hasn't.
Q: How much of the business is river cruising?
A: The vast majority of our business is still on land, [which is] probably in the 80%-plus range.
Q: Do you think the river share will grow?
A: I think they'll both grow. I think the macro trends for travel are very strong. You've got demographic trends in the United States and elsewhere around the world that are really positive for travel. You've got an aging population in the U.S. There are more people at the age where they have the time and the money and want to travel. We'll have 20 million more 60-year-olds 10 years from now. So you've got growing demographics and then within travel, there's an increasing percent of people who want a more immersive destination experience. And so those trends are up there, and then we're sitting here doing what we've always done, in terms of our focus on the destination. We're rowing toward where the macro trends are very positive.
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