Tour operators are diversifying with new product lines priced both lower and higher than their traditional tours. The strategy is aimed at reaching new markets as well as building brand loyalty among travelers – and travel agents.
It’s a strategy that mirrors one adopted by hotel companies years ago. When travel sellers — and their clients — can find a choice of tour products at different price points from a single company, they’ll have no reason to take their business to a competitor.
The trend goes beyond simply adding lower- or higher-priced offerings with the same profile as existing programs. Tour firms have launched branded product lines offering distinctive itineraries based on the immense popularity of themed and experiential travel.
A&K’s surprising move
The latest development is from luxury tour operator Abercrombie & Kent (A&K), which in September launched its Connections line, priced at 30% less per diem than its luxury small group tours. (See story, "A&K Expands Reach With Lower-Priced Tour Program", Sept. 24, 2012.)
A&K’s move was an attention grabber, given the firm’s 50 years as an iconic luxury brand. Yet other operators also are diversifying — at both ends of the market.
“Where once upon a time, the market was fairly linear, we’ve all blurred the lines,” said Richard Launder, president of Travel Corporation USA, which owns more than 20 tour operator brands, including Brendan Vacations, Insight Vacations, Trafalgar, Uniworld and Creative Holidays.
“It’s exactly the same concept — and for the same reasons — as the hotel segmentation of years ago,” said Launder. “You get people into the brand and comfortable with it, and you build loyalty. The concept of diversification is that if we don’t accommodate the client, someone else will.”
Butterfield & Robinson, a luxury operator specializing in walking and cycling tours, had that in mind when it launched its new Bistro line earlier this year. The tours are priced at 20% to 40% less than its traditional product.
“A lot of our travelers trade down in off years and go with the competition. Now they can stay with us,” said Norman Howe, president and CEO.
Recent economic woes made the timing right for the launch of Bistro, he said. “There’s a post-Lehman Brothers, anti-opulence atmosphere that favors a more simple, stripped down travel experience.”
But it wasn’t soft demand that inspired the new product line, according to Howe. “We’re not seeing any weakness at the high end of the market, but this represents a growth opportunity for us. Convincing people to get on a bike for a week can be difficult. Lowering the barrier on price is a way to get them to try us out.”
Expanding into affordable
The sluggish economy was behind SITA World Tours launch of its new Affordable line of tours, said Laudie Hanou, vice president.
The price differential between the Affordable tours and SITA’s high-end programs varies by tour, she said. Affordable India, for example, costs 18% to 20% less than SITAs Deluxe India.
“With the changing economic climate, it became increasingly important to monitor our booking levels, destinations and price points that were selling more frequently,” Hanou said.
“We recognized that consumers still wanted to travel despite the changing economy and were seeking lower-priced programs that still offered great value.”
Moving up the price ladder
At Travel Corporation USA, Launder commented that luxury operators can only move downwards into a less-expensive segment, while Travel Corporation’s varied brands can move both up and down the price ladder.
Travel Corporation operators Brendan Vacations and Insight Vacations are both carving out places at the higher end of the market with new lines aimed at affluent travelers.
Traditionally mid-market and premium operator Brendan Vacations several years ago added a higher-end product called Boutique Journeys. Boutique Journeys features deluxe guided tours, with prices 25% to 40% more than Brendan’s guided vacations. Offered initially to Ireland, the program has been expanded to new destinations for 2013.
Catering to demand
“We saw a demand for tours with smaller motorcoaches able to reach destinations the larger vehicles can’t and with properties too small to accommodate larger groups,” said Brendan Vacations president Nico Zenner.
He also noted that “the higher end of the market is not as impacted by the economy and has sustained the downturn better than the lower end.”
Another example is Insight Gold, from premium tour operator Insight Vacations. Insight Gold is a collection of luxury escorted tours. At 15% to 20% more per tour, the line is a step above Insight’s core product, said Marc Kazlauskas, president.
“We believe escorted luxury tours like Insight Gold were an underserved segment. We’ve seen clients take an Insight premium tour then go to a Gold tour. Clients started asking for a higher-end product,” Kazlauskas said.
“For agents, it’s about trusted partner loyalty, while clients would rather Insight tackle that new market than go elsewhere.”