Tour Package or Not Tour Package Used to be you'd save a bundle buying plane tickets and hotel rooms from an all-in-one travel packager. These days it often pays to go it alone
(MONEY Magazine) – If anyone could get you a sweet deal on a vacation to Rome, you'd think it would be New Jersey-based Perillo Tours. After all, the company's website says it "pioneered the concept of the package tour," has sent more people to Italy in the past 60 years than any competitor, and can book at half the cost an individual would face "because of the buying power that evolves from our being the largest tour operator to Italy."
So why could MONEY so easily book an eight-day trip for two to Rome almost identical to Perillo's for $1,000 less? The company's "Roman Holiday," a Monday-to-Monday excursion that marries a plane ticket and six nights at the four-star Cicerone Hotel with airport transfers, a city tour and the services of a local host, costs $4,178 for travel in October; we found the flight, hotel and extras for $3,142. In fact, leaving the Friday before and enjoying an extra weekend in Rome we still saved $150. (Company president Steve Perillo didn't return calls.)
In short, if you blindly buy a package tour, you may end up paying far more than necessary, especially to Europe. Tours work better for other regions and destination types. But if you spend time investigating, you'll often find that you can put together the same trip a packager can--for considerably less.
WHO PAYS RACK RATE?
In the past, tour operators would buy big blocks of hotel rooms and airplane seats at such deep discounts that even after adding a markup and paying a travel agent's commission of 10% to 15%, they could still sell you the tour for less than if you had stitched the deal together yourself. But times have changed. Packagers still often get 30% off the rack rate on hotel rooms, perhaps more in slack times. But hardly anyone pays the rack rate anymore--there are too many weekend, last-minute and Web-only specials. Meanwhile, the airlines have all but abandoned tour operators. They used to sell packagers blocks of seats at up to 40% off published fares but ceased doing so as they improved yield management. Now tour operators are forced to sell tickets out of the regular inventory of cheap seats. And with airlines still operating fewer flights than they did before Sept. 11, many operators are finding it hard to secure even those seats in high season. Tom Parsons, who sells packages at Bestfares.com, reports that three airlines he deals with made no cheap fares to Europe available this June, July or August.
DARE TO COMPARE
For all those reasons, it pays to find out what it would cost to assemble vacation components yourself. To start, it's often worth comparing packages from three or four different companies. For any given destination, several operators usually offer accommodations at some of the same hotels. Those tend to be solid choices, so start your comparisons there.
As for which packagers to look at, check the tour operations of the big airlines that serve the destination, as well as Liberty Travel and Funjet for North America and the Caribbean. For travel abroad, see AffordableTours.com, which discounts packages from the big independent foreign specialists. Make sure tour prices include air taxes and fees, which packagers usually reserve for the very fine print.
Now check the package's air itinerary against online fares posted at Orbitz, Travelocity and Expedia. The three services often turn up different fares, so it makes sense to try them all. Even with dial-up Internet service, this shouldn't take more than 10 minutes. With room rates, it's best to cast a wider net. The most efficient and reliable strategy is to start at the hotel's official website. Then search Google for the hotel's name, the name of the city and the word "book," which will pull up all the discount booking sites that have deals with the property (as well as reviews and much more). The best of the big sites is Discounthotels.com, followed by Hoteldiscounts.com and Hotels.com. Accomline.com has good deals for London. You'll also find that British Airways Holidays (Baholidays.com) has some of the best room rates, even for some hotels in the U.S. Like any airline tour operator, BA will sell you a room even without a plane ticket.
If appropriate, you can now price the other amenities that come with the deal. AutoEurope.com discounts overseas car rentals. And city tours are widely (and cheaply) available online or at your hotel. Finally, add it all up.
EUROPE, NO; CARIBBEAN, YES
MONEY ran dozens of comparisons like this and found that Perillo was pretty typical--it's often possible to create your own European package for less than very similar deals offered by packagers. We checked Rome itineraries featuring the Cicerone and 14 other hotels with five other tour companies, and except for three combinations from American Airlines Vacations (AAVacations.com), none came close to the prices we got booking independently. Ditto for Paris: On Columbus Day trips from New York to two dozen hotels, with four different operators, only American beat the à la carte prices, and then just half the time. To London, packagers scored somewhat better. Of the six major operators we checked, American and Virgin (Virgin-vacations.com) routinely beat the best separately booked itineraries.
Caribbean and Mexican packages, on the other hand, consistently beat the best à la carte price. In May, for example, Liberty Travel (among others) offered air and hotel packages at more than 200 properties on 23 Caribbean islands, at up to 35% off regular rates. There were two catches: You had to book by early June and travel from September through mid-December, which tends to be the Caribbean's rainy season. Still, the savings were impressive, even to three islands that get very little rain in the fall. From New York City to the Wyndham Aruba Beach Resort, Liberty's $736-per-person package over Columbus Day weekend was about $300 cheaper than booking separately. Liberty was almost $500 less to the Grand Cayman Marriott Beach Resort and about $200 less to the Windjammer on St. Lucia. Great deals are more elusive in high season, but when MONEY checked weeklong February vacations at several Cozumel resorts from three U.S. cities last year, packages beat independent bookings 2 to 1.
In the U.S., tour economics work best at so-called destination properties--places like Orlando, Las Vegas and Hawaii. Still, there's no guarantee those savings will be passed on to you. Only three of the five tour companies MONEY checked would save money for Boston travelers looking to book a Columbus Day weekend trip to any of 16 hotels in Las Vegas--and then only if they were willing to fly at inconvenient times or on circuitous routes. With normal flights, only Expedia's packages came out ahead, typically by $30 or less. At the priciest hotels, booking separately usually saved $100 or more.
In their defense, packagers argue that price is only one part of their value proposition, ad copy notwithstanding. "Most important is the customer service," says Ray Snisky, a vice president at Mark Travel, which runs Funjet Vacations and tour programs for United, US Air and Southwest, "working with a company that knows the destination, that has a presence in that destination." And there's much to be said for the ease of being greeted at the airport and shuttled to your hotel, and for having a local host who can offer sightseeing and dinner suggestions.
But you have to ask yourself: Is it worth paying hundreds more?