Tour Operators Going Through Difficult Times

Everybody knows that since deregulation a lot of airlines have gone out of business, victims of runaway competition and/or their own undercapitalization.

The woes that led to the demise of dozens of carriers in the last eight years have been well chronicled. The day may come when we’re going to have just half a dozen really strong airlines, each of whom will have ingested several of its weaker brethren along the way.

But there’s another segment of the travel industry that’s been having its problems of late that doesn’t get nearly as much ink. It’s the tour operator community.

Last year alone, at least 18 wholesale tour packages throughout the country fell by the wayside. Their product line encompassed the Caribbean, Las Vegas, Western Canada, Europe and much more.

On this side of the country, Carefree David West in Los Angeles, Travel America in Las Vegas, Scantravel Africa and Scantravel Europe, both in Tucson, all folded their tents.

The most shocking of all was the closure of New York-based Caribbean Holidays. What was shocking was that the company was a fixture in the marketplace, had been for nearly half a century.

There didn’t seem to be any advance notice that it was in trouble. Nevertheless, it left debts estimated at between $4 million and $5 million.

That was the biggest single failure, but it’s entirely possible that all of the others combined will show liabilities of at least twice, possibly three times that much.

That money isn’t all owed to the public. The bulk of it is due airlines, hotels, car rental companies and sightseeing operators, the suppliers of goods and services to the packager. But undoubtedly, customers are among the creditors. Many vacation dreams were shattered and much money lost.

Many wholesalers are finding the going tough right now due to several factors.

Woes of the World

World conditions, of course, play a part. Those who specialize in Europe had a tough year because of terrorism. Not all of them were financially able to withstand such a decline.

Expo 86 drew 22.1 million visitors to Vancouver, B.C., many of whom might otherwise have gone elsewhere. That traffic was, therefore, unavailable to operators in the Caribbean, Hawaii, Mexico and other destinations.

Ironically, though, one of those who failed was West Coast Cruises, a Vancouver firm set up specifically to package Expo in conjunction with a cruise experience.

There were other contributing factors, peculiar to individual companies, Scantravel Africa, for instance, chose this year to diversify into Europe and lost its shirt in a down market.

Carefree David West claimed that a fire at its head office, which destroyed most of its records, put it behind the eight ball. One eastern company laid the blame at the door of an embezzling accountant.

And there was deregulation. Although the law applied specifically to the airlines, it has had a marked effect on all other segments of the industry.

It has changed the very structure of the air carriers’ relationship with travel agents and it certainly has made its mark on tour wholesalers. Deregulation opened the gates for a rapid influx of new-entrant carriers. These carriers looked around for tour packagers to cooperate with them.

Not always finding enough, they created their own, either from scratch or by surreptitiously or openly taking over existing companies. These companies, of course, had special deals and lower rates than their independent competitors.

The independents cut prices of their tours to keep abreast and got themselves into financial difficulty. It’s the airline industry experience in microcosm.

How can you know if the tour operator you’re dealing with is reliable? A few months ago one answer might have been, “Look at the company’s longevity and its track record.”

Caribbean Holidays seems to have largely invalidated that advice.

One thing you can do, though, is watch out for a company that presses you to pay unusually far in advance of travel. That could be a sign that the company is struggling to raise cash.

Look for companies that offer you price and performance guarantees, not gimmicks.

Ask about the operator’s bond. Some companies maintain their own protection trust funds for the benefit of clients. Don’t just take the operator’s word for it; check with the bank in which the trust fund or bond is administered.

You might also want to look for the USTOA (United States Tour Operators Assn.) logo. That group of several dozen wholesalers has a protection fund that will safeguard all or a large part of your investment if one of its members goes under. Its member companies cooperate with one another in providing the travel contracted for if one of them is in no position to deliver.

Remember, though, that not all tour firms are members. Some choose not to be but maintain their own voluntary performance bonds anyway. Don’t be afraid to ask. And don’t accept half-answers.

Reimbursing Clients

There is also a Tour Payment Protection Plan operated by the American Society of Travel Agents, which is to be used to reimburse clients of operators who go under. But only, of course, if you booked your travel through an ASTA-member agency.

Look, too, for an airline endorsement somewhere on the brochure. Generally speaking, if a carrier lends its name to an operator’s product, that operator has been fairly closely scrutinized, even though it doesn’t always guarantee that the airline will provide the transportation you hoped for if the tour firm collapses without paying for it.

Consider the quality of the tour literature. A glossy, expensive brochure doesn’t certify that the company is reliable. But I have seen some that look as if they were written on cocktail napkins.

Anybody buying a package based on one of those is asking for trouble.