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A New Look at Tour Sales Opportunities in 2010January 19, 2010 By: George Dooley
If you are looking for ways to improve yields and profitability and need an ally to build consumer demand, take a new look at tour sales and the members of the U.S. Tour Operators Association (USTOA).
Offering an unprecedented diversity of tour options with minimal discounting and high yields, tours may prove to be the fastest growing segment of the industry in 2010. And one of the best received by value hungry consumers.
USTOA president Bob Whitley reports USTOA’s 47 tour operator members represent164 brands that fit virtually every travel destination, market segment and all price levels. This includes river cruises, escorted tours, FITs, groups and scores of special interest tours from art to zoology in the U.S., Canada, Mexico and all international destinations.
Tour sales are not only profitable, but a source of repeat business with high levels of tested consumer/customer satisfaction. This includes sales by independent home based agents who now account for at least 30 percent of tour sales including escorted tours and FITs.
Critically important, USTOA members know their markets. Many, including the giants such as Globus, Trafalgar, GoGo, Travel Impressions, Mark Travel and Tauck to name a few have decades of expertise and a global presence. Travel agents currently account for $8.4 billion in tour operator sales, ASTA reports.
Tour operators are often giants in their chosen markets - CIT in Ireland is an example - knowledgeable and well positioned with strong destination links and support. Like travel agents, tour operators are squeezed by online and direct sales trends and like agents must find ways to engage customers – online and offline – with flair and imagination.
Crucially, tour operators, like travel agents, are intermediaries and compete with online travel sellers. To prosper they must deliver value. (And a few started their corporate lives as agents.) Commissions are generally 10 percent but can reach 18 percent for productive agents. And there are lots more to selling tours than just seniors, as opportunities exist with boomers, students and young adults.
Most tour operators have also invested in online booking capabilities that reward agent’s productivity, ease booking complexity and aggressively promote their destinations to consumers. Travel Impressions, for example, offers incentives for online bookings while VAX Vacation Access is a powerhouse in tour sales.
What about 2010? Most tour operators are looking at 2010 as a potentially strong year for sales. A recent USTOA member survey found that more than 75 percent of responding tour operators anticipate sales to rise by an average 18 percent in international packaged travel this year. This includes price sensitive destinations such as Las Vegas, Florida or Mexico.
Just over 56 percent said they foresee average growth of 10 percent in domestic packaged travel. While over 35 percent said they believe domestic travel sales will remain on par with 2009 results, only 7 percent said they expect a decline.
Noteworthy, this year’s USTOA survey results are in sharp contrast to responses from USTOA tour operators at this time last year, when more than 70 percent said they expected sales to either plateau or decline in 2009—a prediction that proved accurate throughout most of the year.
There is lots of good news for tour selling agents. Looking forward, some 75 percent of the tour operators said they are more likely to lower their prices in the year ahead by an average 5 percent, while the remaining 25 percent said their 2010 prices would increase slightly, about 6 percent. Value and pricing will conspire to attract new clients.
More than 65 percent of USTOA respondents said they are planning to increase their 2010 offerings, adding new destinations and hotels, plus more experiential travel based around specific consumer interests. Tour operators put tremendous effort and expertise into designing tours to meet – if not exceed – traveler’s expectations.
The tough news for 2010 is that tour operators and agents will be doing battle for consumer dollars. A full 80 percent of USTOA members see the amount of discretionary income, as the major factor affecting international travel in 2010, with another 20 percent saying the value of the dollar will be a determining go/no-go factor. Skilled professional agents who can tip the balance in favor of a go decision will be prized and rewarded.
The USTOA predicts travelers will continue to make cost-conscious decisions such as traveling to countries less affected by dollar declines. They will adapt their vacations by choosing less expensive alternatives in hotel arrangements or taking shorter trips and seeking last minute deals that include significant savings.
The cultural and historical travel market is huge as are family vacation sales, adventure tours, national parks, and more. Religious faith based travel shows growth as does ski vacations and soft adventure markets. Romance and honeymoon travel demand is a perennial and gourmet travel is a force to be reckoned with. Luxury travel is another opportunity.
USTOA members are encouraging consumers to travel with lots of incentives such as discounts, promotional pricing, flexible payment plans, value-added offerings and guaranteed rates and early booking incentives. Good deals will also have longer shelf life to encourage travelers and their agents.
One member offered a financing plan with three months interest-free credit in cooperation with lenders, to help travelers find ways to continue to make travel affordable during the economic downturn.
Travelers will also win from greater flexibility and re-booking assistance that makes it easier to change travel plans or dates. Once stringent cancellation policies have been lessened, underscoring that the industry wants to work with agents and travelers.
Other incentives include relaxed cancellation waivers, value-added offers and discounts for second tour -all examples of promotional products travelers can expect from vacation vacation packagers in the year ahead, according to the survey.
Along with deeper discounts travelers can look forward to value-added offerings such as free nights or meals, USTOA says. For example, one USTOA company offered a free two-night three-day stopover in Fiji for travelers purchasing select Australasian destinations.
The USTOA itself offers strong support for travel agents and is anxious to reach out to the independent home based agents. Whitley urges agents to attend USTOA seminars as well as the education and training programs offered by many if not most member tour operators. Agency consortium and major host agencies also have tested programs to build tour sales.
The foundations of the USTOA member tour operators are also solid. The USTOA made history in 1976 when it became the first travel organization to establish a consumer protection fund, followed by a $100,000 per member bonding requirement to protect consumers' tour deposits and payments in case of bankruptcy or default.
The USTOA plan has evolved and today is a $1 Million Travelers Assistance Program -- which requires each member company to set aside $1 million of its own funds specifically to protect consumers' deposits and payments. As Whitley notes this is recognized as the strongest of its kind in the industry.
The USTOA also has ongoing public relations campaigns to educate the traveling public about the benefits of packaged vacations. They also help destinations and travel entities build tourism through workshops, site inspections, and meetings. The USTOA’s new website (www.ustoa.com) also has online tools to help agents find the right tour program and destination for their clients.
Last but not least, USTOA's highly active government affairs committee has championed a policy of open borders. The committee has worked successfully with the State Department and other government entities to facilitate tourism worldwide.
Today the USTOA has 47 active corporate members representing 164 brands (and 264 associate members as well as 475 allied members) Current estimates are that USTOA member companies move more than 11 million passengers annually and account for an annual sales volume of more than $9 billion.
Looking ahead, travel agents can also be encouraged by global trends: the current pick up in business and consumer confidence, the widely predicted rebound due to pent-up demand that the UNWTO envisions and the ability of destinations to actively leverage opportunity. The UNWTO also notes the major international events taking place in South Africa (FIFA World Cup), Canada (Winter Olympics) and China (Shanghai Expo) that will create potential extra travel demand. Last but not least the UNWTO cites the flexibility shown by the tourism sector in dealing with rapid shifts in demand and volatile market conditions that has made it stronger.
USTOA Chairman Charlie Ball summed up the optimism of most USTOA members. “I’m optimistic because I cannot remember a time when the number one message of the USTOA brand – value, has ever been more relevant.” He adds that six of 1o Americans believe packaged travel offers value. For travel agents translating that value to consumers will be a challenge and an opportunity.