Light at the End of the Tunnel for Tourism Industry?

The last two years have not been good ones for the travel industry in Germany.

Accustomed to near constant growth, the tourism business has watched its turnover plummet in the face of a whole series of events that kept travellers at home. The industry was first sent reeling after the terrorist attacks of September 11, 2001. Then further terrorist attacks in Bali and Tunisia, the outbreak of the pulmonary disease SARS, and the war in Iraq acted like body blows to an industry that was already watching the bottom drop out.

But several of Germany's large tour operators are saying a turnaround could be at hand as people slowly begin packing their bags and travelling again. While none will call the current situation rosy, industry leaders are adding a dash of optimism to their business prognoses.

"We've seen a pickup in our bookings for a good ten weeks," Volker Böttcher, managing director of Germany's largest travel concern TUI, told reporters in Hanover, adding that numbers since May were up from the previous year and that sales volumes were increasing at a healthy rate.

Despite the new optimism, the TUI chief emphasized that the company was far from where it wanted to be. "Of course, we're not satisfied, since we're not going to be able to completely make up for last year's losses this year," he said.

Improving, but not good

Germany's other major travel operators find themselves in similar situations. Thomas Cook, Europe's number two travel company after TUI, reported that despite the improving business it would still have to count on significant losses for 2003, even though Stefan Pichler, Thomas Cook's president, said they would not be as severe as the €123 million ($142 million) the company lost in fiscal year 2001/2002. Despite an upturn in bookings since the end of the war in Iraq, Stefan Pichler, Thomas Cook's president, said he was counting on a depressed travel market for 2003 overall.

"Right now the industry is at the level it was in 1998," he told reporters.

Pichler has his sights set on 2004, when he said could the industry could see a substantial pickup in the number of people travelling, from 2.5 to 3 percent.

Most tour operators seem to have written off summer 2003 entirely. The domestic travel industry looks no different. A new report out by the German Chambers of Commerce (DIHK) shows there is still a good deal of pessimism among German restaurant and hotel owners about overall profits this year. More than a third of hoteliers and 42 percent of restaurateurs expect losses this year.

"The combination of the poor economy as well as difficult discussions about taxes and reforms means that the consumers don't feel like spending on vacations and leisure activities," said Martin Wansleben, head of the DIHK.

Winter strategy

To lure people back to vacation destinations, tour operators are planning to drastically sink prices this winter season. Germany's travel giants like TUI, Neckermann and ITS are lowering tour package prices by more than ten percent.

The large operators are also hoping to stem the tide of last-minute vacations, whose popularity has boomed over the past two years. This year alone, the number of last-minute bookings rose by 70 percent. These vacation packages, reserved sometimes just days in advance, are less expensive than other options, but earn travel companies little in profit.

"You can't offer somebody one or two weeks at a high-quality hotel for €299 or less and think you can make money off of it," said TUI's Böttcher. "Such offers are going to ruin our company sooner or later."

Both TUI and Thomas Cook plan on reducing the number of last-minute offers, but at the same time enticing travellers with better incentives to book early. TUI said it will offer customers who plan their vacations in advance savings of up to 25 percent.