U.S. Tour Operators Ride the Coronavirus Storm

The repercussions of the coronavirus are beginning to show in the travel industry, as Asia-based tour operators, hotels and cruise lines feel the first impacts, and travel advisors begin to field calls from anxious customers. But U.S.-based tour operators remain relatively calm.

That’s not to say there has been no fallout. Last week, Pacific Delight Tours announced it is closing its doors; this week it was HotelnAir.com, a $25 million joint venture of Korea’s two largest agencies, Mode Tour and Hana Tour.

In an earnings call on Tuesday, Hilton CEO Chris Nassetta offered up a time frame for the virus. He said 150 of the brand’s hotels have been closed in China, and based on the industry’s experience with the SARS outbreak in 2003, he expects “escalation and impact from the outbreak” to continue for three to six months. Then, since “these things don’t turn around typically overnight, another three to six months on recovery. So essentially, a 6- to 12-month period of time.” 

At the United States Tour Operators Association (USTOA), President and CEO Terry Dale said Pacific Delight Tours, a long-time member of the association, has promised to refund clients for any payments they have made on trips that were not booked, and no other USTOA members are expected to fail.

Pacific Delight will not be dipping into the USTOA $1 Million Travelers Assistance Program, which protects consumers for “loss of deposits and payments for tours or vacation packages in the event of a USTOA Active Member bankruptcy, insolvency or cessation of business or the material failure to complete performance of tour(s) or vacation package(s).”

In his nine years at the helm of USTOA, Dale told Travel Agent, Pacific Delight is just the second member company (along with Cox & Kings last year), to cease operations—a fact he attributes to USTOA’s focus on the quality, rather than the quantity, of its membership.

In order to join, USTOA members must put up a $1 million Treasury note, letter of credit or bond, to be used to pay back consumers in case the company goes out of business. In addition, the association works to help consumers and travel advisors navigate other options, such as refunds from their credit-card companies.

“We want travel advisors to book our members with confidence; it’s key that when you book a USTOA member they deliver the kind of experience your customers want. And if for some reason they do not, we will stand with the customer,” Dale said.

Since members also must have a U.S. base of operations, Pacific Delight, with its U.S. headquarters office in New York, is the only one whose focus is entirely on China.

Dale said he does not see the folding of the two companies as any kind of trend. Indeed, USTOA members polled in late 2019 were optimistic about 2020 sales, and advance sales have been “very robust.”

Asked whether the $1 million would be enough in case a supplier folds, he said it’s enough for a smaller company, and larger ones tend to have additional private insurance policies.

Meanwhile, travel advisors are reporting customer concerns, but not a flood of cancellations. Travel Leaders Network yesterday released results of a poll completed by almost 400 of its members; while 30 percent reported high to moderate cancellations in Asia, few are seeing cancellations elsewhere.

Thirty-six percent of advisors reported cruise cancellations, including 13 percent who reported “a high number.” But 96 percent said they are confident their clients will rebook once the virus passes.

In the meantime, noted John Lowell, president of leisure travel, supplier relations and networks at Travel Leaders Group, this is peak winter break travel time for Mexico and the Caribbean, and those destinations have not been affected.

At Ovation Travel, Gina Gabbard, SVP of leisure and independent advisors, said she has not heard of any other tour operators in trouble. The agency “relies heavily on the Virtuoso supplier network, but I and my colleagues also keep our ears to the ground and stay in contact with our partners. Many suppliers in China have a very positive outlook; they know this will pass.”

Travelers, too, seem to be taking this latest travel emergency in stride. “We are not seeing mass cancellations in Asia,” she said. “Travel is a very personal thing, and while some people want to postpone, others are more adventurous.”

Luxury travel advisor Barbara Hammer, an Ovation independent advisor based in New York, said she had 10 corporate customers headed to a toy fair in China who, one by one, have canceled, and now is beginning to see Hong Kong trips being postponed. With a 50-50 corporate and luxury leisure client base, she had just those 10 bookings to China—but many more to Japan, Vietnam and other destinations in Asia. 

While “keeping her finger crossed,” though, she is not overly concerned. “I think customers who work with a travel agency are savvy travelers,” she said, and not easily deterred.

Indeed, noted Lowell, “at times like these the value of booking with a travel advisor becomes increasingly apparent.”

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