Cancun convention & visitors bureau trends and Economy Report – September 2009

CANCUN CONVENTION & VISITORS BUREAU

Trends and Economy Report –

September 2009

Tour operators seeing signs of recovery

Tour operators spent the first half of the year desperately waiting for the phones to ring. And then, in a possible early indicator of recovery, the late-booking calls started coming in.

"Mid-June, we saw the last-minute booking pattern come virtually out of nowhere," said Paul Wiseman, president of Trafalgar Tours. "Things started to accelerate for late-summer travel for Europe as well as domestic for the U.S.

"The bookings have exceeded last year, sometimes by over double. And when you consider we really didn’t get into the bad booking pattern until September [last year], what that’s done is put a really sweet end to what was initially looking like a very sour year."

An uptick in business over the summer months has prompted Collette Vacations to readjust its year-end revenue projection by an additional $11 million, compared with what the company projected for the year in May, said Collette CFO John Galvin.

Galvin said that August bookings for travel within 2009 were up 105% compared with August 2008; July was up 93%, and June was up 87%.

"A year ago, you entered the perfect storm of negatives for tour operators," said Galvin. "Vendors were undercutting you, consumer confidence was down, all the negatives that could occur, occurred."

But, he added, "The pickup in bookings from June through August has had a very positive impact on our numbers for the year. It is still a tough year, but we are seeing the light at the end of the tunnel."

Unfortunately for operators, the severe downturn that took hold last September continued into their busiest booking season, January through March. The summer months are a moderate booking period, and the end of the year is traditionally the slowest time of year.

So, while operators are pleased with the increase in business this summer, no one has said 2009 will end ahead of 2008.

Wiseman said Trafalgar has already readjusted its 2009 projections twice but still isn’t sure where the year will end.

"It’s actually difficult to calculate where we’re going to finish this year," said Wiseman. "There’s no historical precedent for this whatsoever."

Even in the luxury segment, things seem to be stabilizing somewhat.

"We have definitely seen an increase in business compared to the same time last year — about 25%," said Scott Wiseman, president of Abercrombie & Kent USA. "Travel agents tell us that although their clients have tightened their belts over the past year, they are now ready to reward themselves with a vacation."

A rainy, cool summer in the Northeast and much of the Midwest may also be a factor, he said, as the biggest increases are to warm-weather destinations such as Egypt and Morocco. "We anticipate continued very short lead-time bookings for the remainder of the year and are now seeing strong interest in holiday travel," Scott Wiseman said.

While the late-booking summer uptick might not save 2009, operators are already looking ahead to 2010, where they have two things going for them: early booking patterns that suggest positive performance and early hedging and pricing contracted into April 2011 that will only become increasingly attractive if and when foreign currencies strengthen against the dollar and suppliers begin to increase prices as the global economy stabilizes.

"As of the end of August, we’re [ahead] 49% in people under deposit for 2010, compared to where we were a year ago for 2009," said Galvin.

If the positive trend continues, tour operators that were faced earlier this year with supplier retail pricing so severely discounted it threatened the value of packages could now be singing an entirely different tune.

"We negotiated everything and locked in all of our contracts all the way through April 2011, and we will absolutely benefit from that," said Trafalgar’s Wiseman.