So, was that it? Is the Great Recession of the 21st Century over? Didn’t you hear the Champagne corks popping? No; nor did we. They were drowned out by the sound of reality crashing down like a cartoon piano.
We may be seeing signs of the end of the recession, but its effects will be felt for the next two years at least – that was the view from the Visit USA Association AGM last week.
Members reviewed the gloomy statistics – visitors to the US were down 7.4% year-on-year in June to 339,300, and down 17.3% for the year to date at 1.78 million. But do not despair: the US and other long-haul markets have some real strengths over short-haul – especially the eurozone.
“If you think you had it bad, go to Majorca,” said On Holiday Group chief executive Steve Endacott to the assembled operators. “The biggest problem is that hotels are going out of business.”
Sales for the Balearic hub – once the bread and butter of the package holiday industry – are down 30%. In common with all short-haul summer-sun destinations, the switch from two-week to seven-night durations has meant a severe drop in bed nights. But length of stay in the long-haul market hasn’t really changed, said Endacott.
Thanks to currency hedging, the US is going to get cheaper in 2010 while the eurozone gets more expensive. “And, as interest rates are so low, if you have money and you have a job, you’ve never been better off. In short, there is no reason not to go on holiday next year.”
This does not, however, mean the On Holiday Group is going to start sending large numbers to the US. Why not? Because it lacks the necessary ingredients for dynamic packaging: no low-cost carriers and too many established hotel brands. Marriott, Starwood, InterContinental and others already have an online presence so there is less of a need for bed banks.
Endacott’s tip to the operators and destinations was to distribute content to online players, and embrace price-comparison websites. Sites such as comparethemarket.com and confused.com are dominating the financial services sector, but have been slower to take off in travel.
“User reviews could not be more important,” he stressed – acknowledging his own involvement in the new comparison site hotelly.com.
Invest in training
Now is also the time to invest in training, regardless of the destination or product. Visit USA is hosting roadshows on December 1, 2 and 3 in Ashford, Liverpool and Belfast, with up to 200 agents expected at each.
The Co-operative Travel director of retail distribution Trevor Davis welcomed the prospect, but asked: why only three? Scotland, Yorkshire and the Midlands were equally important targets, he said.
“If you think your retail base is wide enough, look again – you can sell more if you have more trained staff,” added Davis, pointing out that the correct training brought the The Co-operative Travel Group a 60% increase in cruise sales.
Considering productivity per staff member, he acknowledged that training during opening hours was “almost a no go”, but said staff had been keen to attend evening training sessions as the number of industry social events had declined.
Online training also plays a role, 75% of which is completed in agents’ own time.
Despite the toughest trading conditions in years, there is good news – not least for the US, with three new flights.
British Airways (BA) head of consumer sales Simon Brookes painted a bleak picture for the flag carrier: a record profit of £883 million in 2007/08 became a £401 million loss this year, with a £94 million loss in the first quarter of 2009/10 – BA’s only ever first-quarter loss. But he stressed the airline was still committed to the US and was cutting back only on frequencies, not destinations served.
Operators including Kuoni confirmed bookings have been strong for the new daily Las Vegas service, and the new London City to JFK route displays a bullishness that is out of step with the times.
“There couldn’t be a worse time to launch a corporate route,” admitted Brookes, “but it does demonstrate our commitment to the market.”
Iceland Express provides the third new flight – a no-frills route from Stansted to Newark that involves a two-hour stop in Reykjavik. It doesn’t have the phone/email/internet connectivity that BA’s City service boasts, but at £335 return it could encourage budget travellers.
Reasons to be cheerful?
Elsewhere in the long-haul market, there are reasons to be cheerful – not least in terms of deals available.
Virgin Holidays head of USA and Caribbean Angus Bond said New York and Las Vegas hotels in particular had been cutting rates, allowing operators to pass on savings without cutting their own revenue.
Certain Asian routes are also benefiting from good fares: ANA is offering Heathrow-Tokyo from £655 as of this month, including taxes, compared with £904 this time last year. SAS has a premium economy sale: return fares from London to Tokyo or Beijing start at £869 return, including taxes.
Like the US, visits to long-haul markets are also down this year: in the 12 months ending June 30, Australia saw a 4% dip in UK visitors to 650,600 (against a forecasted drop of 9.2%).
But UK and Europe general manager Rodney Harrex stressed Tourism Australia would be maintaining its marketing spend in the UK, and anticipated a 3.5% increase in visitors next year, buoyed by a growth in air capacity and hosting the Ashes tournament next summer.
Thailand is another long-haul favourite, attracting 800,000 Brits annually. This year has been tough, with visitors from the UK down 7% to 436,000 in January to August, but the Tourism Authority of Thailand (TAT) is confident it can still reach more than 700,000 from the UK by the end of the year.
The peak season is approaching, a new tour operator has launched – Surreal Holidays – and TAT has switched its marketing focus from chic hotels and resorts to value. A Post Office survey recently named Thailand the cheapest long-haul destination for 2009, with prices lower than South Africa, Malaysia and Kenya.
TAT’s plans may seem ambitious given the UK’s economic forecast: 0.7% growth in 2010, 2.2% in 2011, 3.2% in 2012, and 3.4% in 2013, but as Oxford Economics chairman John Walker pointed out to Visit USA: “Be very cautious about believing what an economist tells you.”
Will the UK’s recovery outpace the rest of the world?
- The UK’s monetary policy response has been more aggressive than the rest of the eurozone – cutting interest rates and bailing out banks.
- The UK has benefited from lower interest rates.
- UK consumers typically have higher levels of wealth than counterparts in the US, Germany and France.
- A weaker sterling has boosted export competitiveness.
- Stock levels have been cut aggressively.
- Our fiscal stimulus measures (investing in public work projects) have been smaller than those in the US, Germany and Japan. And we have a bigger budget deficit.
- We also have more consumer debt compared with the US, Germany and France.
- The fall in wealth will be noticeable due to the fall in property prices.
- Trade is weak. The export market is smaller and we rely less on manufacturing than the US, France, Germany or Italy.
- Demand is likely to stay weak due to tax rises, more unemployment, and decline in consumer confidence. Borrowing is likely to remain difficult.
Source: Oxford Economics
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