A rollercoaster ride for 2016
Predicting the future is never an exact science, and with all that is going on in the world, it’s even more difficult. Steve Jones investigates what 2016 might bring for travel agents.
When the dust literally and metaphorically settled on the most recent series of terrorist atrocities – assuming it ever really does settle after such traumatic episodes – travel companies the world over were again left reflecting on what the impact may be for the industry.
It always seems crass and insensitive to talk of a potential booking downturn amid such human tragedy. Yet once the initial shock subsides our attention is inevitably drawn to the wider ramifications as the resilience of the industry, and the travelling public is once again put to the test. Such events, and the rising concern of repeat terrorism activity, is one of the unknown factors facing retail leaders as the industry heads into 2016.
As Travellers Choice managing director Christian Hunter told travelBulletin: “We have built our budgets around double digit percentage growth in 2016 and early indications are positive…but there is so much in travel that we have absolutely no control over that can derail the industry in a heartbeat.
Initial reaction to the indiscriminate Paris attacks, the downing of a Russian aircraft over the Sinai, the bombings in Beirut and the hotel attack in Mali – the latter a rarely visited destination by Australians and maybe less psychologically damaging as a result – suggest no major downturn and, to some extent, a renewed determination not to be cowed.
But there was a mixed reaction from retail leaders about its impact on travel.
In the UK, Thomas Cook chief executive Peter Fankhauser warned the industry is facing the greatest turmoil in decades such was the “disruption in so many markets”.
“In my 30 years in the industry I have never seen anything like it,” he said, before adding the more positive observation that consumer confidence tends to rebound relatively quickly.
Hunter also predicted the events will have little long term effect although he conceded some consumers may rethink their plans.
“It may make some people question where and when they go but it doesn’t mean they will cancel their travel plans altogether,” he said. “It’s tragic what is happening and to be honest I think we’ll see more of it, certainly in the short term, but I don’t see it having a major impact like SARS did. Australians are resilient when it comes to this sort of thing.”
Express Travel Group chief executive Tom Manwaring agreed that even if consumers are delaying their plans, they will “reappear in two or three months”.
“I don’t believe they are saying ‘we are not going to travel’,” he said.
But Steve Labroski, chief executive of itravel, painted a more cautionary picture, warning it was not so much the attacks themselves that may deter holidaymakers heading into 2016 but the relentless threats emanating from Europe in particular.
Asked if he was hopeful of a solid year ahead, Labroski said: “I was until all these things started to happen. This is the time of year when everyone focuses on earlybirds so what do we do if something else happens?
“I agree that people are resilient but every time you turn on the TV there is another threat and that is going to be the problem. It’s non-stop and a new headache every day.
“The saga is continuing and that’s where we all struggle. We just have to look at new ways of encouraging people to travel.”
TravelManagers chairman Barry Mayo was also more circumspect, admitting many of the group’s agents are amending European itineraries amid heightened nervousness.
He predicted a shift to closer to home destinations in the wake of the Paris attacks, with the weakening dollar “also a concern”.
Helloworld, meanwhile, reported a reluctance of consumers to commit in the immediate aftermath of recent events, with those in the booking and quoting stage holding back.
“Christmas bookings remained positive,” acting chief executive Jenny Macdonald added.
Despite the ongoing uncertainty over what the next few months may hold, Flight Centre boss Graham Turner told travelBulletin he expected a “reasonably solid” year, while acknowledging 2016 would be “nothing spectacular”.
Subdued consumer confidence due to domestic economic headwinds could dampen demand although competitive airfares will help “keep people travelling”.
“It won’t be a booming market, it’s likely to be pretty placid but it could be worse,” he said.
The sentiment was echoed by Hunter who said broader economic issues surrounding job security and interest rates may impact decision-making more than terrorist activity.
Nevertheless, early indications were promising despite the virtual absence of any discernible booking pattern.
“It will be a tough year but we are optimistic. Despite what might seem to be uncertain economic times our forward bookings are ahead of last year,” he said. Continues from previous page ‘I agree that people are resilient but every time you turn on the TV there is another threat and that is going to be the problem’
“But it is unpredictable. There are peaks and troughs and it varies state to state.
“We’d all like more predictable traditional booking patterns but that’s the way it is.”
Demand will be driven by increased capacity in both the airline and cruise sectors, he added, the latter of which is showing no sign of slowing.
“Competition drives competitive pricing. More seats and cabins need to be filled which means suppliers need to be sharp with their pricing,” Hunter said. “Consumers will be able to find good deals in 2016.”
Helloworld noted a rising trend for people to take “shorter breaks more often” and highlighted river cruising and domestic holidays as growth areas.
A common ambition among retail leaders over the next 12 months is to further customise product for a consumer armed with more knowledge than ever and who is seeking travel experiences, not just a holiday.
While the trend is not new, retailers were united in a belief that demand for such product will accelerate in 2016 and place agents under further pressure to deliver.
Today’s consumer wants to be recognised as an “individual with a specific, unique and personal set of wants and needs”, Magellan Travel Group chief executive Andrew Macfarlane said.
“Travel to experience new places, new people and new cultures has become a cultural imperative and they want product and services tailored to their personal preferences,” he said, arguing that central to such personalisation is face-to-face contact with experienced consultants who can add value.
“Consumers are spoilt for choice but what they really need is a curated selection of choices tested and recommended by an experienced travel professional,” Macfarlane said.
Like Hunter, he predicted a strong 2016 for the industry as additional airline and cruise capacity “makes travel even more affordable”.
Manwaring urged the industry to step up its training of agents and insisted the most effective way of developing knowledge is to experience the product. And if that meant paying for airfares and hotel rooms rather than relying on industry partners to fund famils then so be it.
“The airfares and hotel b
eds don’t have to be free. Pay for them and view it as an investment,” he said.
“It should be like any other industry. If you want to learn how to be a plumber you pay for it and it has to be accepted as a cost.
“But some people still view travel as a part time cottage industry and that is wrong.” He added: “If you exceed the consumer’s expectations then you become unbeatable and that is what we must all aim for. When the customer can save $10 booking it next door then you won’t see them again.
“Consumers spend hours researching and know the destination. And if you just sit there with a blank face and are learning off the customer then you are in trouble. That is where the big squeeze is going to happen. If we lose our relevance we become obsolete. We have to accept this as a major challenge.
“The professionalism of travel agents needs to come through over the next few years so we demonstrate real added value.”
Hunter, who unveiled a new training portal called TC Exell at the group’s recent conference which gives members access to preferred suppliers’ training material, said it was more important than ever to demonstrate value.
“If we don’t, we lose the transaction,” he warned, revealing a renewed push within Travellers Choice to put the customer “at the heart” of every decision.
Turner said Flight Centre had ambitions tosell more “commoditised low margin product” online and focus on providing the key baby boomer market with customised product.
“This market is going to grow over the next 20 years but they don’t necessarily want to go on holiday, they want to travel and have experiences rather than sit on a beach in Bali,” he said. “We want to give the baby boomer a better experience with relatively unique product. A small proportion will be our own product but a lot will be from suppliers that we can make different with add ons.”
The retail giant also reiterated its intention to forge closer relationships with low cost carriers to grow leisure sales, a strategy Turner flagged at its annual general meeting.
The commercial terms were not “excitingly generous” but it’s a product that people want, he said.
“It’s good the low cost carriers have recognised the distribution system and it’s important for us to be able to supply the product and make some money out of it,” Turner told travelBulletin.
And what of the retail landscapeitself? Will there be further movement as groups look to grow their membership?
Manwaring likened the movement to the San Andreas fault – “it keeps shuddering away” – but there was a general consensus of a relatively stable year, despite further management and ownership upheaval at Helloworld. “I’m sure there will be movement as there always is but I don’t think we’ll see the level we saw a couple of years ago,” Manwaring said.
“And to be honest it’s good to have a fluid market because it ensures groups have a strong value proposition and are doing the right thing by their members.
“We are focused on our value proposition to make sure we are in a position to pick up any agents who are out there looking for a new arrangement.”
However, Mayo suggested – perhaps unsurprisingly – that the home based model will continue to grow at the expense of bricks and mortar stores.
The shift will accelerate, should margins continue to tighten, he said.
“The simpler business model with its reduction in overheads and cutback of nonrevenue producing activities will be an important factor in the decision process of choosing to continue as bricks and mortar or adapt to the low cost home-based model,” he said.
Macfarlane added that agents are increasingly holding their franchisors to account, a self-appointed empowerment that will continue.
“Agents now demand their group is transparent, efficient and cost effective and add value for their business,” he said. “If they don’t get that, they walk.”
Whatever the next 12 months holds for the retail sector, 2016 is certain to be another challenging year, yet one that will throw up many opportunities for growth. For the time being however, particularly in light of recent events, industry leaders are holding their breath.