European hotels have been turning away group business in favor of more lucrative FIT bookings, which can risk their reliable, long-term relationships with tour operators. This move could backfire if and when travel demand cools from its post-pandemic boom. According to Robert Cole, senior research analyst for lodging and leisure travel at Phocuswright, this shift in hotel booking practices ultimately comes down to revenue optimization strategies for the hotels. However, experts warn that prioritizing individual bookings over group business may have negative consequences in the long run.
The European Tour Operators Association’s CEO, Tom Jenkins, acknowledges that as long as demand for Europe remains high, tour operators may have to pivot to areas where they can provide added value for hotels. With hotels favoring FIT bookings over group business, tour operators like Perillo Tours have had to find alternative accommodations in popular European destinations like Rome, Venice, and Sorrento. This shift has created contracting challenges for USTOA tour operator members as tighter inventory and higher costs continue to make booking accommodations in Europe a challenging task.
Globus and Tauck have also felt the impact of hotels turning away group business in favor of FIT bookings. While they have been able to pivot and find alternative accommodations at comparable properties in some cases, the overall trend poses challenges for the tour operator industry. However, not all tour operators are affected equally, and some, like Tauck, have managed to maintain their business relationships with long-term hotel partners regardless of the rising demand for hotel space across Europe.
Since travel reopened after the pandemic, European hotel rates have substantially increased, averaging about 20% higher than 2019 levels. This surge in prices has been driven by various factors, including rising costs, inflation, and high demand fueled by events like the Olympics and concert tours. Italy, in particular, has experienced a surge in demand over the past two years, with expectations of continued growth next year due to the Jubilee, the Catholic holy year. The rising costs and limited availability of hotel space pose challenges for both tour operators and individual travelers.
Travel advisors like Megan McCaffrey-Guerrera and Karin O’Keefe have also faced challenges due to hotels prioritizing FIT bookings over group rates. Some hotels offer incentives to advisors for FIT bookings, leading to higher commissions and extra amenities, while tour operators struggle to secure accommodations at reasonable rates. However, the trend of favoring direct bookings by hotels and cruise lines may negatively impact both tour operators and travel advisors in the long run.
Preferred Hotels & Resorts Approach
While many hotels have shifted away from group business, there are exceptions like the Preferred Hotels & Resorts, which offers a platform for tour operators to book hotels in 80 countries, including Europe, without committing to a minimum volume. This approach aims to provide flexibility for tour operators while addressing the challenges posed by hotels prioritizing FIT bookings over group business. Isabella Moroni, vice president of leisure sales for Europe at Preferred, highlights the importance of maintaining partnerships between hotels and tour operators to ensure mutual benefit in the long run.
The trend of European hotels turning away group business in favor of FIT bookings poses challenges for tour operators, travel advisors, and the hotel industry as a whole. While rising demand and high prices may incentivize hotels to prioritize individual bookings, this shift could risk long-term relationships and impact the overall sustainability of the tourism industry. Finding a balance between maximizing revenue and maintaining strong partnerships with tour operators and travel advisors is crucial for the continued success of the European travel market.
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