Aside from normal inflation, which seems to be about $100-200 every year (other than significant drops/gains to the euro or pound), do you think the cost of tours will go significantly up next year (perhaps the all around cost of recouping losses), or down to attract more business? Or will prices stay stable but perhaps offer fewer experiences than normal?
I think the European travel industry will be eager to attract U.S. visitors when we get the all-clear to travel again and maybe tours will be priced to attract back visitors. Many southern European nations rely heavily on tourism. As for the flight to get to Europe... that may be a different matter. tickets may go up to cover the costs of the flight, especially If airlines have to leave out the paying passenger in the middle seat.
I suspect even Rick doesn't know. I'd say there are three major components of the price of a tour: direct costs (hotels, restaurant meals, bus rental, tour guide costs, and driver costs if separate from bus rental), indirect costs (RS company back-office expenses including labor costs of admin staff, rent, marketing, etc.) and profit. The profit component could be tweaked a bit, I assume (to temporarily absorb a short-term increase in one of the other two cost categories), but I don't think it will change a lot. The indirect costs are probably flexible only to the extent that Rick doesn't have to bump all the employees back up to full time from their reduced hours. When a full slate of tours returns, I assume the company's indirect costs will be roughly back up to where they were before.
The big question to me is the direct costs. I sort of doubt that bus expenses and guide/driver labor costs will change a lot, but we've speculated on the forum about the possible permanent closure of hotels and restaurants. Eventually, hotel/restaurant supply will come back into balance with demand, but that could take quite some time. In the meantime, how will the demand for hotels (especially) and restaurant meals align with hotels and restaurants open for business? Will there be more avid middle-market travelers than hotel rooms and restaurant seats so costs go up significantly? Will overall travel demand from middle-market travelers drop more than the supply of hotel rooms and restaurant seats so costs go down significantly?
I have no clue. (I rather suspect transatlantic airfares will be higher by the time we have a vaccine and I'm ready to buy my next ticket. But that's a different question.)
Note: I'm not in the travel business, nor am I an accountant or an economist.
I would anticipate that costs will increase. In the U.K., there are noticeable increases in supermarket food prices, albeit petrol costs are temporarily low.
Those hotels, restaurants, tourist attractions etc that survive are likely to face higher taxes to pay for the government costs associated with the pandemic and they will have to repay the bank/ government loans that they have had to tide them over the last few months plus there is going to be less competition, so prices will rise.
If planes have to run with the middle seat free, not sell food and drink or duty free goods, then they will need to recoup this income plus with less competition, flight prices will rise.
The picture Jennifer paints is not a happy one.
A 50% increase in airfare and having to bring your own PB&J sandwich for a 12 hour journey from the western US will likely reduce the 'hordes of tourists' in Europe. Only the wealthy who are willing to endure a bare bones environment will be traveling.
As for the topic question, I suspect prices for the tours will not change much, but the biggest difference is likely to be fewer departures as folks get comfortable with travel and the financial hazard of cancellations.
Whether trip insurance ( with broad enough coverage to be useful) will be available at affordable rates is another issue yet to have any clarity.
I'm guessing the answer depends on whether there's a vaccine by 2021? If so then, as mentioned, overseas trips could become cost prohibitive for the Average Joe Blow. This would be a great thing for those who can afford the trip and for local residents as tourist sites won't be inundated.
Are people going to risk this until there's a vaccine? Again, if you have plenty of money you can afford to be stuck in Europe for an indefinite period if another surge happens.
I've asked myself this same question many times in the past month and not only for the RS tours but hotels, airfare, restaurants, etc. Will supply and demand still dictate? When the green light goes off will their be a tourism surge that drives up demand and costs, or will there be a trickle effect with vendors needing to keep costs low to attract consumers? I wonder about taxes and surcharges as well, a temporary 10% increase in the VAT to help the recovery, additional hotel taxes or other tourist taxes?
With all the other speculation on what will happen, there's no good way to predict what will happen specifically for overseas travel. But what some economists are concerned about is deflation, as the spending habits of Americans contract, and more money (for those employed) goes into savings to prepare for another crisis. So less money, chasing goods and services that have capacity but fewer customers. I don't see a mass of Americans (other than us on the forum) who will prioritize foreign travel. Increases in medical insurance (your regular insurance) to pay for the massive demand on health care, and taxes to pay for the services people suddenly realized only government can do, will suck a lot of the leisure dollars out of the US economy.
The biggest chunk of the cost of a guided tour is the labor (the tour guides and bus driver) and probably insurance. With high unemployment (depending on the country), the supply of labor expands drastically so purchasers of labor (employers, etc) have a lot of bargaining power. You also have to take the exchange rates into account (USD-EUR). We don't know what those will look like. Also, some countries where RS has tours are not on the EURO (e.g. Turkey, Bulgaria). The Turkish Lira, for example, is now almost 8 to 1 USD, making the country very affordable, even more so for independent travel (IMHO, the RS tours are priced quite high for Bulgaria and Turkey given how inexpensive both countries are. When I went to Turkey in 2015, it was about 4 Lira to 1 USD, so the current situation is a historical low). RS will also have to decide how much profit margin will be acceptable in their pricing strategy. There are many retired Boomers on this forum that have ample funds to travel and haven't taken a huge economic hit, so a tour company like RS doesn't have to discount their offerings to get those folks on board. RS also competes with other "small group" tour companies for business (although it has a very good built-in fan base of repeat business), so what the competitors will be doing will also be a factor.
I am not predicting a doomsday scenario for airlines, they will need competitive fares (at least for a chunk of their passengers) to entice people to get on planes again. Pricing everyone out would not be a good strategy for filling seats.
Will prices go up or down? Absolutely yes, unless they stay the same. Nobody has a clue about what the COVID 19 virus will do so it’s all a guess. The nice part is that whatever advice you get on.a free forum is worth twice what you paid for it. With the vaccine situation being what it is I am not even sure it will be safe to travel at any price next fall, I certainly hope so because I’m running out of next years but we can only wait and see.
Irv, if you mean next fall as in 2021 then I would be optimistic that an effective vaccine will be available. The fall of 2020? No.
I wonder if the perceived hassle of traveling pre-vaccine will affect people's decisions.
There are many retired Boomers on this forum that have ample funds to
travel and haven't taken a huge economic hit
I wonder if this is true. I'm mid-50's so not yet retired, but I can see the finish line. My retirement investments took a 15% hit over the past few months, and it could be a few years before they fully recover. I'm lucky that I've got time on my side and so I'm taking the time to invest using the buy-low sell-high strategy. Some of the older members of this forum may not have the luxury of time that I do.
There are many retired Boomers on this forum that have ample funds to
travel and haven't taken a huge economic hit
Yeah, I think this is true. I'm mid-sixties retiree, and although my retirement investments have taken a big hit too, I am less worried about recovery of the markets in my lifetime than I am in the fewer years of good travel available to me. So I'm more likely to try and squeeze in a couple of tours in 2021 if they're available. I recognize there's a huge junk of my demographic in the US for which travel was not a priority, but that was true before the pandemic too.
I expect it will be a long time before we know the extent of limited tour availability for 2021 (if all goes well) but I am hoping regulars here will continue to share their plans of signing up so we have some idea of what folks are doing. Maybe RSE will have some kind of phased rollout of tours so as to gauge interest.
I'm lucky that I've got time on my side and so I'm taking the time to
invest using the buy-low sell-high strategy. Some of the older members
of this forum may not have the luxury of time that I do.
Keep in mind that, when people are retired or very close to retirement, they try to minimize their exposure to risk in their investment allocation. So they likely won't have their nest eggs placed in aggressive stock portfolios that can take a rough tumble downward. A lot of current US Boomers have predictable money streams from Social Security and pensions (also called "defined-benefit" plans), which are a thing of the past for generations like mine (unless you are a government employee, but even those defined benefit plans are nowhere as generous as even 5-10 years ago, and require more risk sharing from employees).
RS 2021 tours will go up in price.
If hotel prices here are any indication, that component may go down. We just booked an incredible deal on a place in Charleston in December.
Travel companies (hotel, air, cars, cruises, and so on) in the US are still not certain that people will want to leave the relative safety of quarantine (self imposed or government mandated) any time soon. Well, you did see those fools out for the Memorial holiday crammed together on beaches, but that is only a small portion of the traveling public and many of those were locals to the specific beaches so used minimal travel resources. Because of this, the prices through the end of the year are going to be low. For example, Southwest has flights pretty much anywhere for $49 plus you get double miles (other airlines are having similar deals). I see similar low prices in other travel related businesses -- they just want to fill empty spots and even at a lower price resulting in a partial loss, it is better than an empty spot generating zero income and a total loss. Depending on which way the number of people traveling goes (up or down) will push the prices up or down. Standard supply and demand.
In other words: No one still knows nothing yet. :-)
We can always hope that prices will end up around what they were initially this year with minimal change for similar product. This doesn't mean we won't end up paying more if enough budget options close for good and we all have to go up one price level on our options.
Allan, if you have figured out the "buy low sell high" strategy, then you have made history and deserve a lifelong appointment as Treasury Secretary, Chairman of the Federal Reserve, and Harvard Professor of Economics. Hamilton and Volcker would pale in comparison.
On another note, with social distancing I wonder about the lines to get into, say, Versailles? Assuming smaller crowds maybe it's not a problem.
Regarding Southwest Airlines and flying in general, does anyone really want to be confined in a cylinder with dozens of other people for the foreseeable future? There are no guarantees every flight will be at low occupancy, and there are flights that are jam-packed due to limited flights. It's a roll of the dice that doesn't make sense to me.
In our experience they go up every year, regardless. One year when the euro had dropped 20% over the previous year when we took a tour, the tour costs went up by 10%. We couldn’t quite figure out that logic, but we went anyway.
BigMike, No, I do not want to be in any place in close confinement with a group of people any time soon. It is nice that Southwest and other airlines do have low prices available for the time being for those who absolutely have to fly somewhere (like people who are still not home with family due to travel interruptions and medical staff needing to get to areas of flare ups). With the cleaning routines the airlines are (supposedly) doing, a plane might be the cleanest place to be right now with the lowest possibility of catching anything. At least they want you to feel that way so you will fly. However, I will be doing any necessary travel by personal auto for the foreseeable future. Luckily, I have very little necessary travel to do in my future other than getting back to Houston as soon as I can schedule movers and get out of my lease where I am now.
When I envision travel in 2021 I see a big ???? If there is no effective and widely available vaccine or simple and effective treatment many of us in the RS tours demographics simply won’t travel at any price. If there is a vaccine and/or simple treatment neither will be 100% effective. Therefore there will be some degree of social distancing. That means much smaller groups. I’m sure even now there are size thresholds for break even so not all tours can be easily downsized. I suspect RS may tiptoe back into touring in 2021 with fewer tours, much smaller groups, avoiding venues where crowding is inevitable. If that is the case I suspect these tours will be more expensive.
Here's a new bbc.com article on what may happen to airfares: