Last updated: 10:30 AM ET, Fri June 03 2016

Globus’ Steve Born: The Dynamics of the Tour Marketplace Have Changed

Tour Operator | Globus family of brands | David Cogswell | June 03, 2016

Globus’ Steve Born: The Dynamics of the Tour Marketplace Have Changed

Photo courtesy Globus

As travel sellers struggle with shifts in demand in reaction to terrorist acts in Europe and the Zika virus in Latin America, the fundamentals of the marketplace are shifting, according to Steve Born, vice president of marketing of Globus. But it’s not just the reactions to fears of terrorism or disease that is changing the market, he said. And the changed market dynamics are likely to be with us long after the attacks on Paris and Brussels or the Zika virus have slipped from top of mind.

“The 2016 travel year has been unlike any other,” said Born, “both in terms of booking periods and the destination mix. It is unique.”

The year 2016, for which sales started in mid-summer 2015 for tour operators, got off to a good start, said Born. “We were bolstered by pent-up demand for Europe. Because of currency exchange rates our prices to Europe were actually lower than in 2015. And there was a rebound in the travel market.”  

Sales started to slow down and flatten last fall. “Then when Paris hit in November we had an extremely quiet period from November all the way through December,” said Born. “Typically that would be a slower time of year in terms of activity and booking volume, but it was really super quiet. The effect of Paris wasn’t just Paris. It wasn’t just France. It put a lull into the entire European travel market at that time.”

Business started to rebound in January and then came the attack in Brussels on March 22.

“When Brussels came it was another lull,” said Born, “but it wasn’t necessarily for us about people considering travel to Brussels. It was a reminder that there are some concerns about traveling to Europe, kind of a ‘what next’ kind of attitude.”

Globus’ Avalon brand of river cruising also encountered a lull, Born said, from a different origin.

“There was some softness in river cruising due to a lot of new inventory being made available,” he said. “This is the first year all the new builds we’ve been reading about over the past couple of years hit the water and the market. With the softening of the upper end of the European travel market we had some concerns about Europe, and the number of new cabins available also contributed to a softer European market.”

Business started to pick up again in May, Born said, but as the dust began to clear he noticed more fundamental shifts apparently taking place. “We’ve seen some gains over last year, but overall it’s a much different pattern than what we’ve seen in the past,” said Born. “And the destination mix has changed.”

While the end result of 2016 will be very close to that of 2015, Born said, the marketplace that emerges after these shocks will be different from what it was before. “There’s a lot of growth outside of Europe,” said Born. “We’re doing really well in North America this year. That’s bolstered by two things. One is the national park product, our partnership with the National Parks Foundation. We were really able to take advantage of spotlight on the centennial anniversary of the National Parks. And our Canadian tours are doing very well. That is helping to offset some of the ups and downs we’re seeing in Europe.”

Globus’ exotic destinations are also strong, with the exception of South America, which received a body blow from the Zika virus.

“Latin America was doing well for us,” said Born, “continuing a five-year trend. But the Zika affect on South America was a little bit surprising. Originally we were hearing it was primarily affecting Caribbean all-inclusives and cruises. But it turned out to be anything south of border. For an international traveler who can probably decide to do that trip of a lifetime at any point, a lot of them said, ‘You know, this may not be the year to do that.’”

Asia, Africa and the South Pacific are selling well, partly as a result of positive currency exchange rates. “When you wash out all that and add it all up, the volume looks almost identical to the volume last year,” said Born. “But the way it’s shaping up is less predictable and a different mix of booking periods and destinations.”

Born believes the shift in the marketplace is going to be with us for years.

“The peak periods are not as predictable for us anymore,” said Born. “It’s not necessarily that we’re seeing more close-in bookings or longer lead times or any of the kinds of things we’ve been looking at for years. It’s more about the unreliability of past patterns. No longer can you plan on the kinds of trends we used to depend on.”

In past times, Globus could reliably predict what sort of volume it could expect on a week-by-week basis. That seems to be no longer possible.

“This year the anomaly is that those traditional peak periods are out the window and it’s more up and down,” said Born. “It is based not just on the uncertainty about international travel, but it’s also tied to suppliers pushing out a lot of offers so that the consumer, the traveler, is more in a wait-and-see mode.”

The special offers of tour operators started in response to the crash of 2008, when panic set in and tour operators felt they had to put out special offers to attract business. “It didn’t take long for consumers to realize that there is no consequence to them for waiting,” said Born. “There will be better offers coming up.”

The tours market has corrected some of the price ground it lost after the crash, but events of this year caused tour operators to come back with more price-cutting offers again.

“It’s a great time to be a traveler and consumers know it,” said Born. “They take a wait-and-see approach dictated more by their patience than by traditional booking patterns. Now with the boomer market, you’re talking about more and more empty nesters. Ten thousand of them a day are retiring. And they have the luxury of not being beholden to a schedule as they had when they were working or had kids at home. Now their time is theirs and they have more flexibility both in terms of when they need to make that booking commitment and when they travel. They can be more receptive to supplier offers throughout the year because their schedules are more flexible.”

The change we have seen in the last year will not change back to what it was, Born said. This is the new reality.

“The boomers are in full control of these decisions,” said Born. “So looking at our 2016 and how unpredictable it has been I think we are seeing signs of things we are going to see for years on out. This could be a 20-year stretch when the dynamic of travel is really changed to be completely and 100 percent consumer-driven by the boomers, and supplier or traditional cycles won’t dictate what they do and how they do it. It’s more about maintaining consistent contact with them and the right connection in terms of your product offering and your offer to get them to act. I think that’s how this year is playing out.”

So, if this is true, where do the millennials fit into the picture? They may be dominant in the consumer electronics market, or the entertainment market, but in the tour market, it will continue to be all about boomers for a long time, said Born.

“Millennials – that’s the buzz,” said Born. “But it’s almost discounting the fact the boomers are the ones driving the market now. Millennials are a hot topic, maybe even in some cases guiding the media themselves. And millennials are more present in the media than ever due to social media. But really in terms of numbers and who is making the purchase, it is dominated by boomers.”

Gen Xers are a smaller, more silent generation, said Born, and they are “in the throes of life’s burdens,” immersed in debt, mortgages and work schedules. They don’t have the freedom or discretionary income of the boomers and they are much fewer in number.

“On the international travel front, the Gen Xers have yet to really present themselves as a force. It’s just dominated by boomers. With the millennials I think it is more legend than actuality, from everything we have seen. Yes, they have a higher interest in travel and in travel agents. But as far as who is really pulling the trigger and has the money and the means to do it, it’s not really a factor. It’s more buzzworthy than it actually is wallet worthy.”

For tour operators such as Globus, it means that the sales force has to become more aggressive in reaching the consumers, who know they have power and can bide their time.

“If you forget about categorization and these generational stereotypes that we use as marketers and just think about humans, every human appreciates experienced support in anything they do,” said Born. “It’s the idea of having an expert help you with your plumbing issues as opposed to you going to Home Depot and taking it on yourself. The mindset of having a qualified expert help you with something that if you get wrong could have major consequences, that’s really ubiquitous.

"There is no break in appeal between any age group or generation or ethnicity or income level on the basic idea that having experienced support is a blessing. The need for an expert to be Sherpa, guiding you through that process is greater than ever. It’s just that the pathway is different.”

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