Tour Operators, Wary of Discounting, Favor Package Upgrades

One thing most tour operators agree on is that in the current economic climate, they have to provide incentives to drive business –and those that don’t risk losing business and ultimately going out of business. What they don’t necessarily agree on, though, is what kind of incentives to provide.

Operators fall into two camps on incentives: discounting vs. value-added offerings. There is economic reasoning behind both strategies. And at the end of the day, operators will absorb the costs of the deals in hopes of getting returns that ultimately justify those costs.

But according to travel industry researcher Stanley Plog, they’re better off investing in incentives that have greater perceived value than the actual cost of the offering. For some operators, discounting is the equivalent of a dirty word that signals a slippery slope of competitive price slashing and dangerously low revenue flow.

This month, Travcoa added hotel stays to 10 of its Escorted Journeys for 2009. Guests can check into the hotel in their arrival city one night early, free of charge.

For instance, TravCorp USA, which owns several tour operator brands, was able to negotiate some favorable rates with British Airways. A few of its brands then combined that with their own individual price absorption and repackaged the promotion in completely different ways.

African Travel Inc., for instance, is offering free companion roundtrip air to Africa in conjunction with the purchase of a southern Africa safari on either British Airways or South African Airways. The first passenger purchases land and air at the regular published rate, and the second traveler receives an equivalent ticket for free.

Sister TravCorp brands Trafalgar Tours and Insight Vacations are presenting the British Airways rates a little differently.

Insight Vacations is offering companion air to Europe for $199 (when a traveler purchases an air-inclusive Insight Vacations Premium or Essentials Europe package), and a companion air rate of $399 to Cairo.

Trafalgar, on the other hand, is asking its customers to simply compare prices. It is offering roundtrip airfares from New York to Rome on British Airways, for example, starting at $454 per person, compared with the carrier’s published rate of more than $1,000.