Capacity the biggest challenge for Europe tour operators

Capacity the biggest challenge for Europe tour operators

As the euro continued to rally last week, threatening to
make Europe less of a bargain for U.S. travelers, tour operators rolling out
their 2018 brochures this month reported that the exchange rate has not impacted
their prices much, if at all.

What is having an impact and is proving a bigger challenge,
they said, is the growing capacity crunch in Europe’s top destinations.

The operators reported that travelers’ seemingly insatiable
appetite for Europe is putting as much if not more pressure on pricing and
product than the strengthening euro, which reached 1.20 against the dollar last
week after flirting with parity at the start of the year.

Having contracted with European suppliers well before the
euro started to rebound, tour operators have set 2018 prices from flat to less
than 10% above this year’s.

“One of the big [destination] focuses for next year
will be Europe, but more focused on Belarus, Cyprus, Moldova, Poland and some
of those more untouched Scandinavian regions like Greenland,” said Leigh
Barnes, regional director of Intrepid Group. “I think this is super
important as we’re seeing over-tourism occur in Europe. There are more
Americans wanting to come to Europe than ever before. We know there’s demand.
Off that, we’re trying to create new and innovative ways to get people to see

Barnes said that creating more off-the-beaten-path
itineraries provides both a way for Intrepid to align itself with a growing
desire among travelers to experience new and emerging destinations, as well as
a more sustainable way for the company to diversify its European product beyond
the hot spots.

Other operators are taking a similar approach. They have
noticed that just as some of Europe’s traditionally most popular cities are
presenting crowding and pricing challenges, travelers are also starting to look
for alternative destinations because they’re craving something different.

Along those lines, for 2018, Globus is launching its
Undiscovered Italy product, which is designed to lure travelers to destinations
such as Sicily and Apulia.

Vanessa Parrish, channel marketing manager for Globus, said
that while the tour operator does not have a problem securing accommodations in
places such as Rome, Venice and Florence, offering alternative itineraries in a
top destination like Italy gives Globus an edge over the competition.

“We’re really going to places where nobody else is
going, [where] we really felt like we had a competitive advantage,”
Parrish said.

Trafalgar, too, said it is experiencing increased interest
in less traditional European destinations, such as the Balkans, especially
Croatia; Portugal; and Scandinavia. In response, it has increased capacity in
those areas for 2018.

Yves Marceau, vice president of buying at G Adventures, said
its prices will be up slightly for 2018, due mostly to the stronger euro.
Marceau reported that hot destinations such as Iceland, Ireland and Eastern
Europe are in greater demand, which is translating into higher prices in those

Tour operators said that despite the capacity crunch and the
rallying euro, it is their long-standing supplier relationships, hard-earned
credibility and advance buying strategies that have enabled them to continue to
offer attractive pricing in an increasingly competitive European travel

Tauck vice president Jeremy Palmer said, “In addition
to the euro strengthening, in those areas where there is [high] demand because
of capacity concerns, you have added price pressures, where hoteliers and
suppliers are looking for more money. So how are we dealing with it? Luckily,
because we obtain our inventory and lock it so far out and given the
relationships we have, we generally are able to get the capacity we want, and
we got it before the price moved upward.”

He added: “We try to do multiyear contracts for just
this reason.” Across its global portfolio, he said, Tauck saw its prices
increase between 3% and 5% for 2018 compared with this year.

Palmer said that 2018 bookings for Europe are strong,
including for France, which had been lagging other destinations the last two
years following the Paris terror attacks in November 2015.

“At the moment, we’re seeing demand up 15% to 18% for
2018,” Palmer said. “And it’s pretty evenly spread.”

Intrepid’s Barnes said that as the company has experienced
much higher volumes of customers, it has been able to negotiate better with
Europe suppliers. That is especially true of the U.S. market, which has seen a
50% increase in Intrepid’s passengers in the past two years. Intrepid’s Europe
pricing for 2018 inched up 0.4% above 2017.

Other regions rebounding

Beyond Europe, operators are optimistic about 2018 overall,
noting that destinations such as East Africa and the Middle East have been
rebounding. For example, G Adventures reported a global increase in demand for
the Middle East, with a 36% year-over-year growth in bookings in 2016 vs. 2015.
In response, the company added an Oman tour for 2018.

Similarly, Intrepid said it is experiencing a 70% increase
in Middle East bookings.

In addition to seeing a big rebound in Europe, Tauck’s
Palmer said, East Africa is experiencing strong recovery. He added that the
popularity of the operator’s North America itineraries never really came down
from their 2016 National Park Service centennial high.

“There is a travel boom happening at most destinations,”
he said.

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