Selling European vacations is a mixed bag for travel sellers this year, thanks to positive and negative forces that include high air fares on one hand and pent-up demand on the other.
As the summer Olympics get under way in London, agents and suppliers report that certain Europe destinations, including Italy and France, have enjoyed an increase in bookings, while others, notably England and Portugal, lag behind.
Overall, said Neil Martin, founder of the Transatlantic Report, “we're seeing more growth than we expected.”
No longer trapped
Among positive factors driving Europe bookings this year is post-recession consumer demand.
“People have been somewhat trapped over the past three or four years, not feeling like they can spend as much,” said Beth Flowers, travel advisor at Brownell Travel, in Birmingham, Ala. “Now that things seem to be coming back together, European travel is extremely attractive and business is way up.”
Flowers said her clients were booking more elaborate trips this year.
“It’s not necessarily a volume-of-business increase, as it is the quality of European business that has increased,” said Flowers. “Just as many people are going, but [they're] spending more.”
Martin said he thinks that baby boomers will be planning longer trips, to make up for a lack of travel in previous years. “People are accepting a new reality; if they don't travel, they may just never travel again.”
Air cost a barrier
On the downside, the prohibitive cost of air travel to Europe remains a major barrier. Carriers are raising prices, while capacity remains tight.
“Airfare is outrageous when you're talking about $1,300 roundtrip,” said Sharon Emerson, a home-based agent in Seattle.
Nico Zenner, president of Brendan Vacations, said the high cost of air travel has prompted some clients to decide against Europe. “It is really so expensive to fly to Europe, and it seems to be holding back people who are upset once they find out the cost of air. It's usually even more than the cost of the land portion.”
However, high air costs also create an opportunity for agents to suggest longer stays in Europe, since airfare will be expensive no matter how long clients are touring.
“With air costing what it does, why not spend longer in Europe and discover the interior with a cruise-land package?” said Zenner. “It is a great experience to be on a river cruise and then spend more days going to different countries.”
Brownell Travel is seeing healthy demand for cruise-land packages in Europe.
“We do a great deal of people doing land and cruise combos,” Flowers said. “People on cruises into port cities still want to get into the heart of the country and explore.”
While air may be costly, a European vacation still offers a solid value proposition for agency clients.
“Agents really need to be aware that Europe is still very affordable – a great destination for the luxury client as well as clients seeking an affordable vacation,” said Kier Matthews, vice president of sales for wholesaler Europe Express.
More affordable Euro
Another positive force is a more favorable currency exchange rate for U.S. travelers. As of last week, the U.S. dollar's buying power was US$1 to .86 Euro, up from US$1 to .77 Euro at the close of 2011.
While closer Euro-dollar parity gives Americans more bang for their travel buck, not everyone agrees that this price advantage spurs bookings.
“People don't make the decision to travel when the Euro sinks,” said Matthews. “They're aware of it and monitor it if they're planning a trip, but I don't believe the Euro causes people to get on planes.”
Matthews, who sells European vacations exclusively through agents, says Europe Express' business is up 44% year-over-year.
He attributes the additional business to demand from consumers who haven't booked a major vacation in years, especially from those looking for authentic, and often multigenerational, experiences.
Small group travel
Europe Express reported last week that small groups of eight to 15 travelers represent 42% of its group business so far in 2012, an increase from 2011. The most popular destinations for the company’s small group trips are Italy, Spain, the U.K., France and Ireland.
Matthews told Travel Market Report that he’s seeing more travelers heading to Greece, despite the country's political strife, as well as plenty of luxury travel to Switzerland.
Consumers are more aware than ever of how political and economic uncertainty in countries like Greece and Portugal may affect their trip, travel sellers said.
“Travelers are extremely conscious of what's happening and follow the politics very closely,” said Flowers. “We rely on the State Department for what we should be selling, and we always put our colleagues on the phone in Athens or Cairo to dispel any myths or what the media may be over-hyping.”
Matthews suggested that potential Europe clients aren’t necessarily deterred by political uncertainty in destinations. “Travelers to Europe are more savvy and informed than travelers who stay domestic. As a result, they dig a little deeper than the evening news broadcast.”
July's Summer Olympics in London have caused many to put off trips to Great Britain and visit the continent instead, agents said.
“Great Britain has so much going on, and the pound is so expensive, that it makes the Euro Zone so much more attractive,” said Flowers.
For its part, London is suffering a decline in tourism while hosting the summer Olympics. But according to the European Tour Operators Association, the city’s tourism is faring better than other recent host cities, including Beijing and Athens, which suffered worse declines.
“In the context of Olympic tourism, London is set to deliver an outstanding performance,” said Tom Jenkins, executive director of ETOA, in a release. “And there is still plenty of space: this is excellent news for last-minute visitors to London.”
The publicity surrounding the Olympics is likely to spur travel to Britain in the long run, Zenner commented. “There will be tremendous PR for London and the Olympics.”