Recent trends in the European hotel industry have seen a shift towards favoring individual FIT bookings over group business, as hotels aim to optimize revenue. However, this move may come at a cost, jeopardizing the long-standing relationships that tour operators have with these establishments. According to industry experts, this strategy could backfire when travel demand eventually cools off.
Robert Cole, a senior research analyst at Phocuswright, notes that the prioritization of FIT bookings over group business is not a new phenomenon. It all boils down to the revenue optimization strategy adopted by hotels in response to the current demand pattern in the industry. As long as there is a high demand and consumers are willing to pay premium prices, hotels may continue along this path.
Implications for Tour Operators
Tom Jenkins, CEO of the European Tour Operators Association, acknowledges the challenge faced by tour operators due to this shift in hotel booking practices. As demand for Europe remains high, tour operators may have to reallocate their efforts, emphasizing shoulder and low-season products to add value for hotels. This adjustment will be crucial in maintaining a balance in the industry ecosystem.
Tour operators like Perillo Tours have already felt the impact of hotels preferring FIT bookings in Italy. The reluctance of partner hotels to accommodate group business has forced tour operators to seek alternative accommodations. The U.S. Tour Operators Association has also highlighted contracting challenges, tighter inventory, and higher costs in Europe, signaling a need for strategic adaptation.
According to industry experts, the essence of the client-supplier relationship plays a significant role in shaping the dynamics between hotels and tour operators. The distinction between a long-term partnership and a transactional exchange determines the mutual benefits derived from the collaboration. Achieving a balance between maximizing profits and fostering strong partnerships is essential for sustainable growth.
The European hotel industry has witnessed a substantial increase in rates since the reopening post-pandemic, currently standing at an average of 20% above 2019 levels. Demand has surged, driven by major events and attractions, resulting in higher prices but also normalizing year-over-year pricing. Italy, in particular, has experienced heightened demand, with upcoming events like the Jubilee further fueling expectations for the future.
Advisors’ Perspective
Travel advisors have also encountered challenges due to the shifting preferences of hotels towards direct bookings. Some establishments offer incentives to advisors for FIT bookings, leading to a preference for individual reservations over group rates. The potential consequences of severing ties with travel advisors, who play a critical role in recommending properties, highlight the need for a balanced approach to booking strategies.
While some hotels have shifted towards direct bookings and reduced group accommodations, there are exceptions like Preferred Hotels & Resorts, which remains open to group bookings through their Twenty platform. This initiative aims to provide tour operators with flexibility and access to a diverse range of hotels without committing to minimum volume requirements. By offering such options, hotels can cater to varied booking preferences in the evolving market landscape.
The increasing dominance of FIT bookings in European hotels reflects a broader trend in the industry’s revenue optimization strategies. While this shift presents challenges for tour operators and travel advisors, it also underscores the importance of adaptable partnerships and collaborative efforts to navigate the evolving travel landscape effectively. Balancing short-term profitability with long-term relationships remains a key consideration for stakeholders across the value chain in the European hospitality sector.