Tour operators believe inflation isn't slowing down travel demand. But they're fighting hard to ensure their sector's recovery won't take a hit if they can't avoid passing on rising costs to consumers with limited travel budgets.
Tour operators face a delicate balance in these times of protracted inflation, growing their businesses in recovery mode but making sure their customers never recoil from sticker shock in prices of tours.
Inflation has threatened to slow down travel industry’s recovery this summer, with corporate executives warning that surging prices could dent travel spending while also impacting where meeting planners are opting to hold events.
Although inflation eased off of a 40-year high last month — dropping from a 9.1 percent annual rise to 8.5 percent, according to a report on Wednesday on the Labor Department’s Consumer Price Index — tour operator executives acknowledge that inflation presents an uncertain future for their businesses.
“Given the way global inflation and oil prices have risen this year we are just now starting to see price increases come through,” said Matt Berna, Intrepid Travel’s North American Managing Director. “(And) if the past two years have taught us anything, it is that we don’t know what’s around the corner.”
While G Adventures‘ Vice President of Product Yves Marceau emphatically states his company has never passed along a surcharge to travelers who have already booked a trip, he — like Berna — acknowledges having to absorb additional costs. Fuel is the most significant area Intrepid Travel has seen price increases, on average between 30 and 40 percent in most destinations. But Berna acknowledges rising fuel prices impact the total cost of each of Intrepid’s trips differently.
“On some trips it is as little as 0.5 percent while on other trips it might be 7 percent or 8 percent,” Berna said. “Inflation varies wildly again according to destination. In Turkey, for example, we’re seeing pretty extreme inflation which is averaging around 80 percent.”
So how much could inflation and a possible recession impact bookings for tour operators? Steve Born, chief marketing officer at the Globus family of brands, is optimistic that economic headwinds won’t dent his company’s recovery.
“Overall travel demand could be impacted if economic challenges loom, but early signs for 2023 demand show no slowing down,” Born said. “There’s such a strong overall interest in a return to international travel after years of disruption, and that won’t be stopped.”
However, Berna expresses concerns about having to navigate an uncertain environment. “There are always going to be unknowns,” he said. “The biggest unknown I’m concerned about is how this will affect community-based tourism.”
When asked to elaborate about how inflation would impact community-based tourism, Berna cited consequences of inflation — such as soaring airfares and rising oil and food prices — as factors that would reduce the purchasing power of travelers.
While Intrepid Travel hasn’t had to trim trips from its itinerary yet, Berna admits that inflation has driven the need for the company to cut expenses.
“We’ve tried to tighten (our) schedule to alleviate unnecessary relocation costs between trips,” he said. “Having a tighter schedule of trips and a more regional view allows us to operate more efficiently (and save) employee costs.
Those steps, Berna believes, are necessary for companies like Intrepid to take advantage of the pent-up travel demand.
“Efficiency is going to be key as the industry rebounds, Berna said. “We can’t simply expect our customers to cover all of the increasing costs.”
Photo credit: Tour operators have seen fuel prices rise worldwide