3 Key Shifts in the Travel Space
The travel space is ever moving. And always changing.
In this post I want to talk about three shifts taking place. These shifts, I believe, will have a dramatic impact on the travel landscape for years to come. The first is the drop in tourism to Mexico.
The violence and safety factor that has been around for years is now taking its toll. Latest reports indicates a 20% reduction in tourism year over year.
And at a time when the Mexican government should be investing more to help promote their tourism, they are doing just the opposite.
They announced earlier this year they are closing the Tourism Promotion Council of Mexico (CPTM). And the savings they will realize from these closings will be used to fund a train connecting cities in the Yucatan peninsula with archeological sites throughout the area.
Not sure this is the best use of those dollars to drive tourism…
And at the same time that passengers from North America are going down, the number of rooms in key destinations like Cancun/Playa del Carmen are going up. Not a good situation for some.
Let’s put the Mexico situation on the back burner for a few minutes and focus on the second trend — the “merger” between The Mark Travel Corporation and Apple Leisure Group.
It’s already been one year since these two titans merged and the impact is being felt — particularly by the mid-size players throughout Mexico. Note by mid-size I’m talking about hotel chains with 1-3 locations, each with about 400-500 rooms.
These suppliers have a lot to worry about.
As I pointed out in my post from a year ago, those hotel groups not part of the ALG family or without the deep pockets to stand alone will get hurt. And that prediction is coming true.
In talking to insiders, these mid-size chains are running scared. And they should be. They don’t have enough brand awareness. They don’t have the war chest to go direct to the consumer. And there is an increase in hotel rooms and a decrease in tourism.
So, what’s going to happen?
As tourism drops, rooms still need to be filled. The bigger players are going to drop their rates forcing the pack to follow. This will further increase the pressure on the smaller players to react by dropping their rates to stay competitive. The net net of all this — Mexico is about to become the biggest bargain in travel.
Eventually, the rates will get to the point that it will start to spark interest. But it will take years to get ADR back up. And sometimes it never comes back. Think Acapulco.
But sadly, too few are taking the aggressive action required to not simply stay alive but to thrive in this new world order.
Tourism to Mexico is going to drop
What To Do?
If you are a Marival, Excellence, Palace hell even Iberostar…what’s your next move? Ignoring this situation isn’t going to make the problem go away.
The best play to make given the situation is to work closely with advisors in order to drive business. Some may think now is the time to start or amp up a direct to consumer strategy. I don’t — for two reasons.
1. The costs are too high. If you are going to commit to a consumer direct strategy you better have millions of dollars and be ready to invest those millions over multiple years. Few are lucky enough to be in this situation.
2. Money aside, most don’t understand the North American market and what it’s going to take to break through. And by the time they figure it out, the business is going to be gone.
The path to survival is clear — it’s with the travel advisor.
True, many are now part of the ALG ecosystem, but there are plenty of ICs in the space that may be willing to work directly with hoteliers — provided there is an advantage.
Hoteliers here are the steps you should be considering.
1. Connect with any advisors you have worked with in the past. This has to be your first move. Now, I understand you may not have a very large database because most of that information came through a tour operator. But any names you have are gold. Reach out and start by asking how you can work together.
2. Begin collecting advisor information. Get something on your website that tells advisors you are looking to form a partnership. Direct them to a form, capture their info and follow up with ideas to work together. Capture critical information and get back to them right away. Follow up is a must! Once you make a connection, start the conversation regarding ways you can work together.
3. Creative thinking. Once you have made your connection, what can you provide that will get an advisor to promote your properties. Consider, special access to inventory, early booking specials, special benefits for each customer they send to your resort. Pro tip: go beyond a fruit basket delivered to the room.
Much of this work will need to be done one advisor at a time. But now is the time to focus on creating a long-term relationship.
What about the travel advisor?
This situation in Mexico also provides advisors with a tremendous opportunity. Advisors don’t sit around waiting for a call. Get on the phone and start the conversation. Now is your time to reach out and form a connection that will help you build your business.
So, what’s this going to take?
A plan.
You are going to need to think about your business and how you plan on driving room nights to a hotel partner.
Maybe this will come from your group business?
Maybe you have a growing database of Gen Y and Z customers that you can direct to certain hotel properties.
Whatever the case, you need a plan. This doesn’t have to be overly complex. In fact, the simpler the better. Below are some thought starters to get you going.
Your Co-op Plan
Below are some thoughts for pulling together a plan that can result in a partnership. The key is to keep it short and simple.
Background:
Start with a brief overview of your business, the areas you specialize, and any relevant background. Your location. How long you have been in business. Your experience and background.
Goals:
List out what you plan on delivering. Think about this in terms of customers, or room nights or number of groups. Note: if you are dealing with groups list out the average size of your groups. In this section include the time period when you will be delivering the business.
The Ask:
What do you want that will help position your business for success? Rates, access to inventory, special treatment for your customers at the resort… This will probably require a bit of negotiation.
Strategy & Tactics:
List out the steps you plan on taking to deliver to connect and engage with customers.
There may be other elements you want to include, but the points above will start the conversation.
The 3rd Trend — The Impact of AirBnB:
Believe it or not, it has been only 10 years since AirBnB launched. And the impact has been enormous. In Hawaii, AirBnB is causing a dramatic impact on hotels throughout the islands. More and more tourists are using rental properties like AirBnB and VRBO as their preferred option.
This is a trend that will continue to increase — especially given the rise of Millennial travelers.
The impact of all this is starting to get hoteliers concerned about the future. Like their counterparts in Mexico, hotel chains need to reach out to advisors to help stop the bleeding.
They need to connect with advisors arming them with offers that will get customers to select an advisor vs. going the rental route. Access to inventory. Special rates. Deals on tours and activities are some of the ideas that come to mind.
Hotels will need to face the reality of the situation. Unless they can go directly to the customer or bring in customers through the travel advisor, I believe they are going to be scrambling to fill their rooms.
And I believe one can look at Hawaii as a cautionary tale for other destinations in the future.
It’s The End Of The World As We Know It
Clearly, the game has changed.
The way things have been done before — no longer applies.
Shifts are occurring and there will be massive disruption before we reach a new level.
It’s concerning. And unsettling. But with upheaval there comes opportunity.
I believe this is a new era for hoteliers and advisors to work together creating a true marketing partnership. But the timing to create these partnerships won’t last long.
The chance to strike is now. Some will see the opportunity and take action…many won’t. And for those that don’t move…the disruption will be fast and furious. Remember it took only 10 years before Blockbuster went from owning the category to going out of business.
10 years!
Do you think you will have that long? The clock is ticking.
Thanks for reading. Love to know your thoughts so please leave a comment below.
