Crises and changes have been the dominant themes this year and uncertainty looks likely to continue in 2016, writes Paul Needham.
2015 has been a turbulent year in the German leisure travel industry with swings in demand, crises in destinations and managerial changes at the market leaders. Crisis management and restructuring have been top of the priority lists at major tour operators while travel agents have tried to cope with fluctuating business trends.
German consumers started the year in a shopping mood and holiday bookings grew well in the first few months. But demand weakened in the spring before recovering well in the summer with good late sales. The tourism year closed with low single-digit growth. Over the last couple of months, however, bookings have slowed, and tour operators report a relatively modest start to summer 2016 sales. Travel agents are unsurprisingly pessimistic about the outlook for next year.
With the German economy generally growing solidly this year and unemployment still at low levels, crises in various destinations are largely to blame for this fluctuation. Above all, the terror attacks in Tunisia, which killed dozens of tourists, Ankara, Beirut, Paris and elsewhere, as well as the charter jet crash at Sharm el-Sheikh have left consumers uncertain about whether and where to go on holiday. The massive inflow of refugees into Germany since the summer has added to the sense of uncertainty. Destinations such as Tunisia and Egypt have seen bookings slump while demand for Turkey has also suffered.
Meanwhile, it has also been a turbulent time within the German travel industry. Both TUI and Thomas Cook replaced their Germany chiefs due to disappointing financial results and the two companies have embarked on their latest restructuring measures to improve efficiency, reduce costs and benefit from European synergies, including TUI’s ‘power brand’ strategy and Thomas Cook’s new European tour operating model.
DER Touristik also restructured its Germany management team but its most spectacular move was to snap up Kuoni’s European tour operator businesses at a bargain price to turn into a European group and narrow the gap to the two market leaders. FTI, Alltours and Schauinsland also remained on the growth path.
Both Air Berlin and Lufthansa have also been flying through turbulence this year. At Air Berlin, new CEO Stefan Pichler aims to finally steer the carrier out of the red but has been braked by disagreements with shareholder Etihad Airways over the size and shape of the planned downsizing, as well as by the dispute with the German transport ministry over the two carriers’ code-share flights. Lufthansa will look back on 2015 as an “annus horribilis” due to the traumatic Germanwings crash and the damaging strikes by pilots and cabin staff.
Looking ahead, travel industry leaders have repeatedly affirmed in recent weeks that Germans will continue to travel next year but are warning they are likely to switch to destinations seen as safer. This seems a highly likely scenario unless tangible improvements can be made in safety and security in the troubled destinations.
However, there are also signs of optimism despite this somewhat gloomy picture. For example, bookings for cruises and long-haul holidays continue to grow strongly, city trips remain popular and overall demand remains positive. Fundamentally, the German leisure travel market remains stable and robust, and can be expected to continue growing in 2016.