Travel Agency Execs Expect a “Leveling Off” but Say There Will Be No Plateau

How long can the spike in travel demand last?

It’s a question TMR has been asking agency executives and advisors for nearly two years. Up until this year, most people have told us the plateau is inevitable. In this year’s (the third annual) six month check-in with executives from travel agency consortia, franchises, and hosts, the answer has changed.

The sharp vertical growth the industry has been seeing is starting to soften, and some segments of travel may even see something close to leveling off, but there’s no plateau coming. The world – and travelers – have changed.

(This is part two in a series based on conversations with seven franchise, host, and consortia executives. Read part one: All Signs Point to Another Banner Year for Agency Community and part three: We Can Survive Anything, Travel Agency Execs Say.)

Continuous growth means no plateau
“We think that the pandemic phenomenon of revenge travel is pretty much over and we’re returning to normalization of travel,” explained David Kolner, executive vice president, Virtuoso.

But that normal doesn’t look like pre-pandemic normal.

“It’s definitely not plateauing,” Jackie Friedman, president of Nexion Travel Group told TMR. “But the trajectory might not be quite as deep year over year.”

Drew Daly, senior vice president and general manager of Dream Vacations, and Kathryn Mazza-Burney, chief sales officer for TRAVELSAVERS, agreed.

“If the question is more towards the demand in the leisure travel space, I don’t see it. I don’t know when it would plateau,” Daly said.

“Given where pricing is and given inventory, I’ll go on record as stating that business will remain. There’s no doubt people are traveling,” Mazza-Burney added.

Growth will likely level off, however, executives agreed.

“When you look at the general population, gas is more expensive, food is more expensive. All the indicators would tell you that there’s going to be a slow-down,” said Phil Cappelli, chief sales officer at Avoya Travel.

“Growth may slow, but it will continue to grow, which is not a bad thing to let everybody catch their breath,” Michael Johnson, president of Ensemble, told TMR. “Will it potentially slow a little bit? Sure. But if you’re talking from an up 50 or an up 40 to an up 15 or 20 or even an up 10, that’s still pretty good.”

Changing customer mindset
Executives attributed the never-ending growth of travel demand to two causes.

First, the COVID pandemic changed people.

“I think that we would think it’s going to happen. It makes sense logically, but the pandemic was never in our world,” Daly said. “More than ever people are wanting to get out and experience the world, and they recognize that time is not a limitless commodity… people are working and traveling more than ever. I think that Band-Aid’s been ripped, and people are going to continue to do those things.”

“We all learned we want to travel,” Friedman said “The post-COVID workforce can be more flexible in where they work and when they work. People can change when they travel because they can still work when they’re traveling, or kids might be homeschooled. Family’s not necessarily tied to just spring break or summer travel.”

All of that means that more people can travel more often, which leads to “nice steady growth,” Friedman added.

The change is also notable in the boomer generation, Johnson said.

“I think as the population continues to age and we talk about this great transfer of wealth from the boomers, how much of that transferable wealth is being invested in experiences? Because multi-gen [travel] is not going away.”

He added he believes that these customers are making the decision to shift away from commodities and products and into experiences.

New advisors bring new clients
The second reason for continual growth that several of the executives we talked to mentioned was the increasing number of travel advisors, particularly at the independent contractor level, which in turn inspire a greater interest in travel, reach more people, and increase the advisor community’s share of travelers.

“As an industry, if we keep bringing in new people who are out there, marketing travel and different travel experiences, I don’t think we’ll see a plateau again,” Friedman said.

“I honestly believe the more advisors we hire, the more demand we’ll create, because it’s those personal connections and the elevator speech and the way they position their value and what they do that draws more people into booking through a travel advisor,” said Alex Sharpe, president and CEO of Signature Travel.

Kolner agreed. “The way we’re going to reach more people from booking direct and doing it themselves is through independent contractors. They make personal relationships that you could never have with the full-service agency of previous days.”

Expect prices to normalize
One area of the industry executives said they expect to see a leveling off is in pricing. Though even here, some executives told TMR they’re not seeing signs of that yet.

One stat Kolner said he follows closely is the ADR (average daily rate) of Virtuoso’s preferred partners.

“It’s already at a stratospheric level,” he said. “It’s like $1,500 a night average.”

While he doesn’t expect to see rates drop, he believes the growth curve will go down to about 10% to 15% year over year.

Should pricing right size, however, advisor revenue – not travel demand – could see a plateau.

“I look at airfares, they’ve been going up for a while,” said Friedman. “Hotels too. So revenues might plateau a little bit if they right size.”

Is the travel advisor’s client changing?
One question that arose in some of our conversations was is the travel advisor client changing? In other words, are only wealthier luxury clients planning to keep traveling and/or use advisors?

The answers we got were mixed.

Several executives we spoke with said, their contemporary business is as robust as ever and still accounts for the vast majority of business.

“That [contemporary] is the bulk of our business,” said Cruise Planners’ CEO and founder Michelle Fee. “We don’t get to a billion dollars with just a luxury segment. That’s not happening. A big piece of our business is contemporary, and a lot of groups.”

Other executives told us it’s the advisors who are making the change, consciously deciding to move their business into the premium and luxury market.

Virtuoso’s Kolner had a different take, explaining how he believes the absence of excess savings will divide the traveler demographic in half.

“We believe that as of March 2024, it [disposable income] is down to pre-pandemic norms. People have either put it [pandemic-related savings] into long-term savings or they’re just back to their normal budget,” he said.

Virtuoso believes that ultra-high-net-worth clients who were traveling before the pandemic and paying more to travel during and after the pandemic, will keep traveling.

But people who were using their excess savings to travel or travel at a higher price than they normally would?

“I don’t know if that client is going to continue spending at those levels going forward. We think there’s going to be a separation of two markets. One, which is the true high-net-worth and ultra-high-net-worth client is probably going to continue to travel like that. The non-high-net-worth traveler is probably going to return to pre-pandemic norms about how they would spend.”

Not all the executives agree, however.

“Salaries have increased from 2019 to today,” Fee said. “And more people are working from home or have a hybrid schedule. I think people have more discretionary income because there’s less dollars being spent on gas and tolls and even work clothes… they have a little bit more discretionary income.”

That money, she added, is being used on experiences like travel, rather than material goods.