NASHVILLE -- Tour operators face challenges from the emergence of
conglomerate corporations, Internet firms and aging baby boomers
who are reluctant to travel in large groups.
Those were some of the conclusions drawn by the accounting and
consulting firm Deloitte & Touche, which was commissioned to
study the effectiveness of the National Tour Association and to
analyze industry trends and their potential impact on tour
operators.
The study is full of useful data and conclusions, according to
Hank Phillips, NTA executive director.
It was presented to the NTA just days before the start of the
organization's recent conference in Nashville, and the NTA board
and officers had not yet had the chance to absorb the information,
Phillips said.
"We've brought in an outside entity and essentially bared our
soul to them," he said about releasing the study to the media.
According to Deloitte & Touche, once such conglomerates as
Global Vacation Group, Far & Wide and Global Leisure emerge
from merger and acquisition "transitional growing pains" they will
be in positions to become dominant players.
The consolidation in the package travel industry has emerged to
"combat shrinking profit margins and increased competition,"
Deloitte & Touche wrote.
"Larger corporations can buy in mass volume and can obtain
better prices, making profit margins comparatively larger [than]
their small business competitors."
Larger NTA tour operators plan to merge or acquire other
companies, the study found.
Twenty-eight percent of NTA operators with annual sales in
excess of $3 million indicated that they intend to merge or to make
acquisitions.
The study revealed that industry consolidation is on the minds
of NTA members, with 61% of respondents agreeing that the
association should do more to address emerging alliances and
partnerships.
Those surveyed also said they believe that the need for
independent and autonomous tour operators will always exist.
The study said NTA tour operators might "not feel the effects of
consolidation" if they carve out a market presence.
Those who do not identify a particular market strategy or a
niche will be "jeopardized by the expanding presence and travel
products offered by the major consolidated industry operators."
Deloitte & Touche found that smaller NTA operators might
benefit in a consolidated environment, with customers looking to
smaller firms for more personalized service.
One of the challenges operators face, according to the research,
is finding a way to cater to the more sophisticated baby-boomer
traveler who is not blindly loyal to a product or a service.
"NTA members need to re-emphasize customer service and exceed
the expectations of their clients to avoid jeopardizing future
business and word-of-mouth referrals," the study said.
Also, "tour operators should not try to force feed group travel
and motorcoach tours but promote their ability to organize the
consumer's independent travel plans."
NTA members surveyed
agreed that the organization needs to pay attention to how baby
boomers are leading a trend away from traditional motorcoach
tours.
Twenty-three percent of members indicated that the biggest
threat to the packaged-travel industry is baby boomers' lack of
interest in group travel.
Many members said they are prepared to offer more independent
travel options and smaller group tours to reach new consumers.
Sixty-five percent of NTA members said they plan to re-evaluate
their target demographic market, and 54% said they plan to offer
new products.
The study also looked at technology and e-commerce and found
that many NTA members have Web sites or are updating their
sites.
However, the research also revealed that some NTA members had
failed to embrace e-commerce and are not giving it the resources
needed to stay in touch with the marketplace.
The report stated that more customers will book directly through
a supplier via a Web site.
For their part, tour operators said they believe the biggest
threat to their business is suppliers that market directly to
consumers.
The study also indicated that some agent commissions "will start
to vanish as more purchasing occurs on line."