European hotels are increasingly turning away group business in favor of more lucrative FIT bookings, which may have long-term repercussions on their relationships with tour operators. Experts warn that this strategy could backfire when post-pandemic travel demand eventually cools down. Robert Cole, a senior research analyst at Phocuswright, emphasizes that this shift is driven by hotels’ revenue optimization strategies as long as consumer willingness to pay premium prices remains high.
Tom Jenkins, CEO of the European Tour Operators Association, acknowledges that tour operators may need to pivot to meet the changing dynamics in the market. As demand for Europe continues to grow, tour operators might need to reallocate efforts from peak season offerings to shoulder and low-season products to manifest added value for hotels. Jenkins suggests that this realignment can help tour operators maintain their partnerships with hotels despite evolving booking practices.
Challenges Faced by Tour Operators
Tour operators like Perillo Tours have experienced challenges in securing accommodations in Italy due to hotels prioritizing FIT bookings. Tighter inventory and higher costs in Europe have impacted USTOA tour operator members as well, creating difficulties in contracting accommodations. Globus and Tauck have also encountered similar issues, prompting them to find alternative solutions to accommodate their guests without disrupting their tours significantly.
Enduring Relationships with Hotels
While some hotels are turning away group business in favor of individual bookings, companies like Tauck have maintained long-term partnerships with hotels across Europe. Joanne Gardner, Tauck’s vice president of worldwide operations, emphasizes the value of consistent business relationships built over several decades. Despite increased demand and pricing, Tauck’s enduring partnerships have allowed them to adapt to changing market conditions and continue thriving in Europe.
Implications for Client-Supplier Relationships
Robert Cole from Phocuswright underlines the importance of fostering long-term partnerships based on mutual benefit rather than transactional interactions to navigate the evolving landscape of hotel bookings in Europe. Establishing strong client-supplier relationships can help mitigate potential risks associated with hotels favoring FIT bookings over group business in the long run.
European hotel rates have surged since the resumption of travel post-pandemic, currently averaging 20% higher than 2019 levels. Alexander Robinson of STR notes that high demand for hotels in Europe has been driven by major events like the Olympics and concerts, contributing to rising prices. Italy, in particular, has experienced a surge in demand, with expectations for increased bookings during the Jubilee next year, further complicating availability for tour operators.
Travel advisors like Megan McCaffrey-Guerrera and Karin O’Keefe have encountered obstacles in securing accommodations for their clients as hotels increasingly prioritize direct bookings and advisor FIT rates. The shift towards favoring individual bookings over group business has led to doubled prices and limited availability for travel advisors, highlighting the strained relationships between advisors and hotels in Europe.
Some upscale hotel portfolios, such as Preferred Hotels & Resorts, remain open to group bookings through platforms like Twenty by Preferred Hotels & Resorts. By offering tour operators flexibility in booking hotels without minimum volume commitments, Preferred Hotels & Resorts aims to support group business while adapting to changing market preferences in European hospitality.
The trend of European hotels favoring FIT bookings over group business poses challenges for tour operators, travel advisors, and hoteliers alike. Navigating this shift requires adaptability, strong client-supplier relationships, and innovative solutions to sustain long-term partnerships in the dynamic landscape of European travel.