Most tour operators profited from good market growth last year but there are plenty of challenges ahead in competition with individually organised holidays, warns fvw’s Klaus Hildebrandt.
Nearly €65 billion! That is what Germans spent on pre-booked holidays and private leisure trips of more than one night last year, according to market researchers GfK. This does not even include business travel and spending of more than €25 billion in destinations. These figures show just how much Germans value travelling.
About half of this spending, some €34 billion, is generated by the organised travel market, mostly by tour operators. The other half is individual travel by customers who have booked directly with airlines, hotels and other suppliers or through portals.
The good news for tour operators is that in 2017 they kept up with the overall market growth of about 8%. In recent years individual travel repeatedly won market share, with portals such as Booking.com, holiday house suppliers, low-cost airlines and self-drive destinations as the main winners.
As the new fvw Tour Operators Dossier shows, nearly all tour operators recovered last year from an average previous year. The outlook for 2018 is positive after strong bookings in December and January. But everything is not so sunny when you consider a few points.
Firstly, the tour operator market growth is clearly driven by cruises. The segment’s revenues increased by 16.8% last year, according to the fvw dossier. Without Aida, TUI Cruises & co, the market would only have grown by 3.5%. A spectacular comeback by tour operators after a poor previous year looks different…
Secondly, tour operators and their travel agency sales partners are missing out on part of the organised travel market. Bookings through the 2,500 small tour operators and coach holiday firms, trips organised by non-commercial organisations such as churches, schools and clubs, and not least the offers sold through travel portals add up to billions of euros.
Thirdly, the fortunes of general tour operators depend on destinations with a high proportion of package holidays. So tourism managers have to hope that the comeback in Egypt and now also in Turkey and Tunisia continues. Otherwise, customers could switch again and drive to destinations in their cars, which is a market segment that tour operators and travel agents largely miss out on.
Fourthly, even though tour operators are keeping up with overall market growth, hotel and holiday home portals continue to grow strongly and offer a product choice and flexibility that tour operators cannot.
The major tourism groups are not inactive, though. They are expanding their portfolios, developing exclusive products and investing in hotels. Medium-sized tour operators are doing well in niches. The figures show that customers are happy to book tour operator holidays when there is a convincing complete package of product, service and price.
However, if the tourism industry cannot manage to keep up with the growth of individual travel, then everyone will be competing for a smaller cake. And that will not be to everyone’s taste.