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Gradual Improvements PredictedOctober 5, 2009 By: Dori Saltzman
Travel agents can look forward to a robust six months in terms of customer bookings, say several consortia, host and franchise executives Travel Agent spoke with. Additionally, although the bookings for travel in the current year would typically already be done, agents can still expect to see a significant number of last-minute vacations reserved for travel before the year-end.
However, the news is not entirely positive. While all executives agree the number of clients booking will likely increase through the first quarter of 2010 and beyond, prices will remain low as tight booking windows remain prevalent.
Counting on Pent-Up Demand
According to Cruise Planners’ co-founder and CEO Michelle Fee, expectations for the fourth quarter are “pretty good,” especially considering the fact that positive trends, last-minute bookings in particular, began to kick in around June. In fact, Fee adds, Cruise Planners is already seeing its 2009 numbers starting to look strong.
But the company is still counting on the last-minute booking trend to help make 2009 a solid year. Where in a normal year bookings for the current year would usually be done by now, because the booking window remains within a 90-day range, Fee says the company expects to see quite a bit of business before the year ends.
Part of the reason for the sudden onslaught of last-minute business is pent-up demand, Fee adds. Consumers have gotten tired of hearing about economic uncertainty and unemployment and have reached the point of just needing to live their own lives.
Not content to sit back and hope that business picks up, Cruise Planners is pushing holiday season travel to try and stimulate 2009 business, and planning a week-long World’s Largest Cruise Night event to perk up both fourth-quarter business and 2010 first quarter bookings.
“We’re hopeful that this big push can finish off the year, so we will promote some 2009 business,” Fee says. “But World’s Largest Cruise Event is what really helps us kick off 2010.”
Trends Extremely Positive
The only way to look into the future is to look at the past, Dwain Wall, senior vice president and general manager of CruiseOne and Cruises Inc., tells Travel Agent, adding that the companies have seen the last 20 weeks’ trend “extremely positively [and] in the right direction.”
Among the positive trends Wall cites are an increase in both bookings and sales over last year, year-over-year. Bookings are up 15 percent over the last 20 weeks and the last three weeks’ sales are up 9 percent over last year. In addition to the increase in bookings and sales, Wall says the companies are also starting to see the booking window expand slightly, which he says is an indication that people are finally starting to make vacation decisions.
However, like the other agency groups Travel Agent spoke with, CruiseOne and Cruises Inc. are still seeing a large number of close-in reservations, a trend, Wall says, is not going away any time soon. Currently, about 35 percent of all CruiseOne and Cruises Inc. bookings are for 2009 departures, though that number shrinks every week by a couple of percentage points, Wall adds.
CruiseOne and Cruises Inc. are trying to take advantage of the holiday season to push for any last-minute business, running some specialty holiday marketing promotions. But because the opportunity to sell 2009 business decreases each week, the companies are working hard to stimulate first-quarter bookings by planning a “major” World’s Largest Cruise Night event and are anticipating a much better Wave Season than last year.
While booking trends look positive, Wall adds that he expects pricing to remain low through the first quarter of next year. But he adds, “If the booking window continues to expand, you will see the cruise lines get a little more bullish in terms of increasing their prices.”
Ensemble Travel Group expects to see a “teeny” bit more business in the early part of this year’s fourth quarter, according to President and CEO Jack Mannix . Additionally, this year’s fourth quarter is expected to be better than last year’s, especially because it was around this time last year that business fell off the cliff.
But more importantly, Mannix adds, fourth quarter is expected to be a good push off for 2010, though he says he does not expect business to come booming back.
“We don’t have any expectations at this stage for 2010 that it’s going to come blowing back,” Mannix says. “I think it’s going to take us a while to recover, but I do think that it will be a better year.”
Hoping to bring in any remaining 2009, and early 2010 business it can, Ensemble is running a second round of its Vacation Therapy marketing campaign, which ran for three months earlier in the year. The campaign highlights 48 different supplier offers and has, so far, been well-received.
Ensemble agents are already seeing bookings for early 2010, which Mannix says is much more encouraging than it was a year ago for first quarter 2009.
Part of what’s driving current and future bookings is a sense of increased consumer confidence, as well as people feeling that they’ve gone too long without a vacation.
But although Mannix expects bookings to trend upward, he maintains a cautious optimism, particularly because he anticipates that pricing will remain low. The rubber has not met the road yet, Mannix says. In the first six months of 2010 the travel industry will continue to see a reasonable number of people traveling but relatively poor revenues associated with that travel.
Close-In Bookings Prevent Forecasts
Filomena Andre, CTC, vice-president of sales and marketing for Signature Travel Network, is not as optimistic about the future as the other executives Travel Agent spoke with. Though she says she expects to see some signs of relative improvement in 2010, she is quick to add that the year will be as challenging as 2009.
In particular, booking patterns will continue to be erratic and the close-in booking trend will carry well into 2010. This will hold especially true for mass market and premium cruise lines, as well as for tour operators who have not yet been successful in promoting future departures.
Fourth-quarter business for holiday departures is expected to improve over the coming months, Andre says, as hotels begin to offer “unprecedented” values. Signature is taking advantage of this trend, promoting close-in bookings for holiday cruise sailings, as well as land vacations.
On a positive note, Andre adds that time-sensitive promotions that offer great values for luxury cruises departing next year are creating a sense of urgency, and so Signature agents do expect to see an improvement in luxury cruise bookings made in the fourth quarter for travel later in 2010.
However, according to Andre, consumers have become accustomed to waiting until the last minute to get the best deals. This mindset, she says, will carry into fourth quarter and into next year, preventing the booking window from expanding significantly. Because the booking window will remain tight, Andre adds that future sales are impossible to forecast at this time.
Positive Signs for First Quarter
Based on forward booking patterns, consumer surveys and anecdotal evidence from supplier partners, Roger E. Block, CTC, president of Travel Leaders Franchise Group, says he expects the fourth-quarter booking window to remain extremely short. Additionally, pricing, particularly for cruises, will remain competitive.
However, he adds Travel Leaders franchisees are starting to see some positive trends for the first quarter, with forward bookings on the rise. He attributes the forward bookings to an increase in consumer confidence.
In accordance with the tight booking window trend, a recent Travel Leaders survey found that many consumers are planning a vacation for the fourth quarter of this year. But Block says savvy travel agents should promote spring and summer vacations to these customers when they book their end-of-year break. Though he doubts the bookings will be made in the fourth quarter, Block sees a strong possibility for January and February bookings.
Unlike Signature’s Andre, Block is hopeful that the packaged tour industry will do a good job of advertising limited lower price inventory to bring in bookings for summer Europe vacations. He expects to see this begin toward the end of fourth quarter and continue into the first quarter of 2010.
But while the trends are positive, Block stresses that the travel industry is not back to where it was in 2007, nor will it get there in 2010. Although agents will see a firming of yields, prices will continue to stay low, at least relative to where they were two to three years ago.
Looking Forward to Wave Season
John Lovell, vice president of sales and industry relations for Vacation.com, is optimistic about fourth quarter, though he does not expect to see a hefty rebound in yields. But consumer confidence is stronger than it was in the first half of the year and Lovell anticipates that booking trends from now through January will be stronger than this time last year.
With inventory still available for most travel verticals, including products that lend themselves well to the holidays, such as river cruising, Vacation.com members are continuing to promote fourth-quarter vacations. And a substantial number of consumers are expected to make close-in bookings.
However, Lovell does not expect the strong finish to 2009 to offset the rest of the year’s weak performance. “I’m bullish for the future but I think it’s a little late in the year to make up any of that,” he says.
Looking further ahead, Lovell says customers will continue to come back, and he is looking forward to a more traditional Wave Season this year. Considering there was essentially no Wave Season last year, Vacation.com members should definitely see a year-over-year increase in Wave bookings within the next six months.
But like the other executives Travel Agent spoke with, he also believes the majority of clients will continue to book close-in and a gain in yields will not immediately mirror the gain in customers. However, Lovell is confident that as customers continue to come back, the yields will slowly follow, though not within the first quarter of 2010.
The fourth quarter of 2009 looks good for Virtuoso, although it will not offset the weakness of the previous three quarters, Kristi Jones, president of Virtuoso, tells Travel Agent. But member agents are starting to see an uptick in sales, both short window bookings, as well as future reservations. Revenue remains low due to the depressed pricing, however.
At the network’s recent conference, a significant number of agents, responding to a member poll, said their completed transactions were higher than they were in January. According to Jones, several cruise line partners have told the network that their bookings for travel in the fourth quarter of 2009 are “off the chart,” a fact she attributes to the aggressiveness of Virtuoso’s Return on Life campaign, as well as training and the group’s override agreements.
But she adds that the main reason Virtuoso will be able to do so well in the fourth quarter is the close-in booking window. People are calling, booking and sailing within two weeks, which she adds is almost unprecedented.
Agents also said their future bookings were higher, so much so that some departures for 2010 have already sold out. However, there is still much more availability for the coming year than would be typical in a fourth quarter.
“Consumers respond fast to the market and when they can call and still get the suite they want or the hotel room they want, they [will] continue to [go for] short booking windows,” Jones says.
Luxury cruise lines are stabilizing faster than other travel products though and Jones says she has heard from some suppliers that they are going to start testing the price elasticity of the marketplace. This is partly because, of all their clients, the affluent consumer has been the first to jump back into traveling.
For 2010, Jones says all indications point to a shift in the booking window, which will expand, especially in the luxury market, as availability tightens and prices rise. One thing that will remain unchanged in 2010 is clients will continue to want to feel that they’re getting value. How they define that value, Jones says, is what she thinks will change, going beyond just low prices.