Tour operators look to long-haul for margin

Before the summer I was at an event in Nairobi talking about the Spanish outbound market to members of the Kenyan incoming trade. Having heard on the news what a state Spain is in, they were all surprised to see me there at all …but when my advice to them was to concentrate solely on presenting their best and most luxurious products to the Spanish market they looked at me as if I were a baboon in a frock. I explained “The Kenyan Tourist board is measured by visitor numbers but you, as a business, are interested in profit. Statistics might be down but profits can still increase”. Well admittedly it is not exactly rocket science but I think it was enough to persuade some top safari camps to come over to FITUR despite the tourist board not having a stand this year.

Over the last year or so I have mentioned several times that the higher-end long-haul destinations should be those most resilient to the current economic down turn. It stands to reason that business travel, luxury, honeymoon, etc. are the segments that are not so cost-sensitive and therefore not so directly affected by the nation’s consumer confidence as the bog-standard middle class family holiday. It seems that the Spanish tour operators have come to the same conclusion and more and more are promoting long haul destinations where there is more margin. I have mentioned in previous posts how the sector’s wise old owl Pepe Hidalgo, president of the same Globalia Group that back in the eighties lead the people’s revolution for mass travel with their famous “Curro está en el Caribe” campaign, saw the crisis coming a couple of years ago and responded by creating Latitudes, a higher-end brand specializing in “grandes viajes” hoping for “grandes margins”. The Orizonia group have shifted their attention from the popular Viva Tours o Iberojet brands to push for higher margins from Kirunna. Meanwhile the Barceló group has launched La Cuarta Isla, a tour operator specialising in long haul and exotic destinations. Tui Spain too are seeing their best results and growth from the Tui Ambassador tours brand specialising in long-haul. Even Panavision, the classic package operator I knew years ago for their cheap coach tours around Europe, have started programming Kenia and other African destinations, if not we a separate brand, at least with a separate brochure.

It’s not just the big groups that are focussing on long haul, some mid-sized tour operators such as Mapa tours, who made a fortune by investing heavily in Prague or Cairo are going longer distances and with smaller groups to increase returns.

Other long-haul specialist operators such as Catai Tours, Nuba or Marco Polo have always focussed on this segment and have a bit of a head start though they will inevitably notice that their niche is getting crowded with hungry competitors.

So this could be a silver lining to the dark cloud hanging over the Spanish economy for long haul destinations. But what about the traditionally cheaper destinations that have been popular with the budget traveller or the mass tourism market (as far as Spain’s outbound tourism could ever be called “mass”)? We have seen how North African destinations such as Tunisia and Egypt have not surprisingly opted to lower prices to win back the market share they lost in last year’s storm but much as a 300€ holiday to Egypt might be tempting for the tourist but it is not going to leave much margin for the travel agent, the tour operator or even the airline. Similarly the average long weekend in any destination in the Euro zone is hardly worth the effort to sell. If we add to this the fact that Spanish travelers are increasingly confident booking short and mid-haul travel online direct from suppliers it makes more sense for the Spanish tour operators to concentrate on the long-haul “grandes viajes”.