Tour operators will try to avoid adding fuel surcharges to their trips for as long as possible. They're aware that making their trips more expensive could put a dent in their recovery because consumers will only tolerate higher prices to a certain extent.
The rising price of oil is threatening the travel industry’s rebound, with the increase causing airlines to pass their surging fuel bills on to consumers as well as forcing U.S. travelers to alter their summer vacation plans.
It’s also making tour operators ponder increasing the price of their trips to compensate for booming fuel expenses, which companies that still haven’t fully recovered from the pandemic are hesitant to do to avoid denting travel demand.
“When costs rise, prices also need to rise,” said Mike James, the global head of products and operations at Exodus Travels. “And while the cost of fuel is the most obvious, we are hearing about wider energy costs, food costs, and other goods possibly having extreme rises.”
SmarTours CEO Christine Petersen acknowledged the rising price of oil is a significant issue for her company. “Our biggest concern is avoiding passing on the cost to customers,” she said, adding the increase in fuel costs is more likely to impact airfares than the cost of grand transportation. “We’re starting to come out of the pandemic and resume travel, (so) we don’t want high prices to be an impediment.”
As James envisions tour operators passing on air surcharges to consumers, Petersen has reason to worry that higher prices may deter travelers from joining smarTours’ trips.
“Consumer sentiment surveys and research are showing that consumers are less concerned (about fuel surcharges), but in the end, each person has a set amount of money allocated to spend on holidays,” said Yves Marceau, the vice president of product for G Adventures.
“So while they may increase their (travel) budgets due to having extra savings from the lockdowns, there will always come a point where they will cut back if it becomes too cost prohibitive.”
Marceau believes that fuel surcharges haven’t had a significant impact on consumers’ summer plans yet due to the pent-up demand for travel while both James and Petersen said that their customers haven’t expressed any concerns about surging oil prices. But as Marceau has seen fuel surcharges on flights impact travel demand, tour operators are urging travelers to book quickly to avoid incurring sudden price increases.
“The message to customers (is) ‘Get booked early, so that your price is fixed,'” James said, adding that very limited circumstances exist in which Exodus can increase prices after a booking.
For those travelers who have already booked tours for this year, James doesn’t believe the rising oil prices will impact their trips. Exodus has pricing agreements with companies it works with until the end of 2022. But James admitted that if suppliers contacted Exodus to say they could no longer sustain prices, his company would enter negotiations with them.
Tour organizers are already taking to steps to make their trips more fuel efficient though. Petersen said smarTours is varying its routes and using forms of transportation better suited for it group numbers to improve fuel efficiency, a step Marceau said G Adventures is taking.
Ulla Hefel Böhler, the chief operating officer for The Travel Corporation Tour Brands, the parent company of dozens of tour operators, also believes increased fuel costs will drive such businesses to make their trips greener. She envisions tour operators quickly adopting technology that reduces the use of fossil fuels.
“Think zero emission vehicles, biofuel, hydrogen long-haul coaches, etc.,” Böhler said.
[UPDATE: Ulla Hefel Böhler is the chief operating officer for The Travel Corporation Tour Brands, not for all of TTC as previously reported]
Free Daily Newsletter
Sign up for the most popular Skift daily download of news, happening, and headlines in the travel world
Photo credit: A worker fueling a jet Getty Images