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.

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