Americans prefer independence (when traveling)

by Tom Johansmeyer on

The United States is the largest leisure travel market in the world – by far. The closest point of reference is the entire European Union. We’re three times larger than our closest competitor, the United Kingdom. Yet, despite our size, we just don’t spend as much money on packaged travel. In fact, the folks in the UK spend 50 percent more on it than we do.

Over here, the travel business accounts for $271 billion a year, according to travel industry research firm PhoCusWright, and only 7 percent of that ($18 billion) is spent on travel packages. Meanwhile, the UK has an $84 billion-a-year travel industry – not even a third of ours – and they spend $30 billion a year on packages (35 percent of the local market).

What’s the deal?

There are plenty of reasons bandied about. Europeans tend to take longer vacations, with 10 to 14 days not unusual (especially for the residents of northern European countries), and they tend to take more time off than the workaholics in the United States. They go more and longer, which translates to increased spending.

But, this doesn’t explain the affinity for packages. What makes Americans different?

Well, independence is a major factor. Americans usually prefer to set their own agendas, deciding what they want to see and do, taking on the task of research (and coming to places like Gadling – thanks, by the way, we all appreciate it) and putting together the pieces on their own.

Maybe we’re getting lazier or trying to seem like sophisticated Europeans, but the packaged travel market is growing on this side of the Atlantic, even rapidly. Of course, you need to compare it to starting point to understand how this can happen. In 1999, the packaged travel market was effectively nonexistent. Some large, enterprising online travel agencies, however, created a market from nothing, and turned it into an $8 billion space by the end of last year. This “new” offer has grown at a compound annual growth rate (CAGR) of 50 percent during this time, while tour operators have seen aggregate revenues decline at a compound annual rate of 5 percent.

So, we’re still not heavy package buyers in the United States, but taking the easy way out is becoming more and more attractive.

Insider’s look: why does defining “package” matter?

by Tom Johansmeyer on

For the average traveler, definitions don’t matter much. You figure out the type of trip you want to take, whip out your credit card and do the deed. It’s really pretty damned simple. But, for every purchase you make, there are countless eyes watching. Nothing nefarious is going on; it’s all actually quite innocent. When you think about how many people rely on your willingness to open your credit card – and how the travel market as a whole is being beat to hell this year – it makes perfect sense that the industry will watch, analyze and try to find new and interesting ways to get you to lay out some cash for travel.

For the business, definitions are incredibly important. When they look at where the money is going, how a particular trip is defined allows these insiders to communicate, develop strategies and invest in different excursions. If one guy says, “Packages are hot,” and another doesn’t define packages the same way, limited resources will be wasted. When money is pissed away, there isn’t as much available for discounts and other promotions. So, nailing down the lingo actually helps you in the end.

What’s at stake in all this? Well, according to travel industry research firm PhoCusWright, just over $18 billion. Yeah, it’s in bold for a reason. This is a hefty chunk of the total U.S. travel market, but it’s also among the most difficult to understand. There are nuances that mess with the vocabulary. I spent some time as a strategy analyst covering this industry, and sorting out the details is an absolute nightmare.

So, if you’re at all interested in the business of travel, take a look after the jump at the different flavors of “package.” I know there have to be a couple of geeks like me out there who find this stuff fascinating.

Okay, you made it past the jump! You’re one of the devoted. So, let’s get into the weeds. PhoCusWright has a solid definition of package: “a travel reservation containing at least two of the three major travel components (flight, accommodation, car rental) where there was a single booking and payment transaction.”

This isn’t exactly brain surgery, until you think about the different ways that you can pull this formula together. There may be other components, including transfers, day tours, activities, meals and travel insurance. Is an all-inclusive a package? According to this definition, it is. But, you’re really just booking the resort, rather than using a service to pull together the different parts from several vendors. It can get muddy fast.

A package (or, “vacation package”) may include: flight, accommodation, rental car or transfer, day tours or activities, meals and travel insurance.

A charter, on the other hand, is “a flight where the tour operator takes risk on the inventory (or owns the plane) and, usually, sells the seats as part of a package.”

This, of course, differs from “escorted tours,” which “usually include more travel components and have fixed departure dates.”

If you’re looking for a definition of “FIT,” go for the most recent. It used to translate to “foreign independent travel,” which consisted of “leisure trips abroad without an escort or fixed package structure.” This has changed, however, and now refers to “flexible independent travel.” The parts may look like a package, but the itinerary is built specifically for the traveler.

And then, there’s group travel. This consists of both packages and FITs for groups of leisure travelers, with “group” starting at nine people. But, it can vary.

Got a handle on all this? Let’s make it worse.

There are also a number of package providers. “Total vacation packagers” (TVP) is used for all tour operators – but not the online packaging conducted by the major online bookers (like Orbitz). A tour operator provides all kinds of packaged travel, with “escorted operators” a subset that focuses on specialty programs that can become pretty complicated. Online packagers aggregate and sell (duh) online, and wholesalers bundle and resell different products as packages, even if there’s no common theme.

Click here if you’re in the biz and would benefit from buying the full report.

World tourism to be slower than expected this year

by Tom Johansmeyer on

The UN World Tourism Organization just changed its mind about global travel and tourism this year. I guess forecasting is easy when you can always issue a new one … as long as the previous efforts are forgotten. Well, I wish I could tell you that the UN believes we’ve turned the corner – and that travel is going to spike this year. But, it isn’t. The group has added a bit more doom and gloom to its prediction, given continued economic instability and the swine flu situation.

Worldwide, the organization predicted a 4 percent to 6 percent international tourism decline for the year – this is down from the January prediction of zero to 2 percent. The changed direction coincides with the International Monetary Fund‘s sense of the global economic situation. In January, it called for economic growth of 2 percent this year. Now, it’s predicting a fall of 1.3 percent.

For the first four months of 2009, the World Tourism Organization noted an 8 percent drop in global tourism, with only 247 international tourism arrivals. Europe‘s results were more severe than those of the world as a whole, off 10 percent. Asia was down 6 percent, and Africa and South America were up 3 percent and 0.2 percent, respectively.

Even in tough times, everybody wants to go to France, which remained the top tourism destination with 79 million arrivals. The United States moved into second place for the first time since the September 11, 2001 attacks, reclaiming its position from Spain.

PhoCusWright: Travel biz to drop 11% in 2009

by Tom Johansmeyer on

Everything that came after 2006 sucked, right?

If you feel this way, you’ll love the latest study from travel research firm PhoCusWright, which estimates that the travel industry will fall back to pre-2006 levels this year. The U.S. travel market is forecasted to decline by 11 percent by the time the ball drops, reflecting a change in consumer demand levels. Frankly, people who are out of work aren’t likely to demand a hell of a lot of travel services.

For those of us sick of hearing how the Baby Boomers will change the world, the study has a nice, bright silver lining. Generation Y (the one that comes after Generation X, for those of you wondering) are opening their wallets – unlike the boomers.

People in the 25 to 34 age bracket are spending the most per household on travel, and if you’re 18 to 34, you’re more likely to plan a bit more travel this year. The Boomers (45 to 64), who pride themselves on being the wealthiest generation alive, are spending the least per household on travel. And, they’re the group most likely to make more cuts.

Generation X doesn’t care. It never cared. It’s just mad that Kurt Cobain is dead.

Unfortunately, the Gen Y surge and Boomer cut doesn’t bode well for the travel industry. The people making the least are increasing their spend, but the deep-pocketed Boomers’ cuts will more likely be felt by a struggling travel and tourism industry.

By the way, props to PhoCusWright for putting some meat in this press release.

Strong 2008 continues to Q1 for UK travel to US

by Tom Johansmeyer on

There may be bad news all over the travel economy, but from time to time, we’re able to dig up a positive development. The U.S. Department of Commerce’s Office of Travel and Tourism Industries was able to deliver a bit yesterday. Travel from the United Kingdom to the United States was up 3 percent in 2008 from 2007. Sure, it’s not much, but it’s better than a downward spiral.

Last year, 4.6 million people came to the United States from the UK, an increase of only 1 percent year-over-year. Just over a million of them came in the last quarter of the year, representing a drop of 11 percent from the same quarter in 2007. In November and December 2008, arrivals were down 14 percent (for each month) from the same periods in the prior year.

The first quarter of 2009 remained fairly steady, with bookings to the United States by UK tour operators down slightly. Sixty percent reported a decrease in bookings, with only 20 percent reporting projected increases. They meet in the middle at flat-to-down slightly. This trend seems likely to continue in the second quarter, with 56 percent of UK tour operators expecting trips to the United States to fall and 16 percent reporting “much lower bookings for the quarter.”