This time of year many investors hear the words “past performance can not be used to predict future returns”. In fact today I received a note from Vanguard discussing this very phenomena. They called it past performance bias. Here’s the premise: in many areas of life, performance from one time period to another is consistent. For example, if you had a really good experience eating at a restaurant, chances are good that you’ll enjoy your next meal at the same restaurant. But in investing (ie: stocks and bonds) this is not necessarily true. Vanguard suggests that there are three factors to making better decisions about investing: Education, Discipline and Focusing on what you can control. I thought it would be interesting to see if these also apply to vacation planning.
There’s no question that the more a client knows the better. Part of our fundamental job as travel agents is to insure our customers have proper knowledge. Examples include knowledge about: destinations, weather, hotel options, cruise line amenities, cabin location, food choices, flight choices, excursions and insurance options. Past performance of an agent in providing proper knowledge to a customer is probably a pretty good predictor of how they will perform on the next trip. Ask yourself if your agent provided you with the proper information before you made key travel decisions. But keep educating yourself so that past performance bias doesn’t affect you.
In the world of investing, this refers to not chasing the latest yields (keeping asset allocation consistent regardless of the current bull market for example). In travel, I view discipline as keeping to your budget and scope (how much time, how many people, how luxurious of a vacation). It’s also staying consistent on what you want. For example, some clients go back and forth on if they want a pre cruise extension or not. Another example of discipline is making sure you read documents and contracts sent, paying when required (not letting options expire) and filing all documentation like Visas or flight information as required. As travel agents we try hard to keep our clients disciplined in all these areas.
Focus on what you can control
This is great advice for travelers. Travel is fun and exciting and sometimes that’s because things are not always in your control. The weather for example. Or geo-political events. Or airport shutdowns or airline strikes. And for some peice of mind there’s the matter of getting travel insurance to mitigate the things you can’t control. Focus on the choice of destination or mode of travel. Focus on whom you trust as your travel agent. Focus on which cruise line to use. Focusing on things you can control vs what you can’t will help you make better travel decisions.
Using past performance
So in travel, it’s OK to use past performance to predict how your future vacation should turn out. But it’s also good to take Vanguard’s advice and educate yourself, be disciplined and focus on what you can control. The travel industry is dynamic which means what was true before may no longer still be true. Here’s one example. We were on a Crystal Cruise from Boston to Quebec. This particular cruise happened to attract a particularly elderly group. But that doesn’t mean that the demographics of the next Crystal Cruise would be similar. That’s where education comes in.
And that’s where using a really good travel agent comes in as well. They can provide the education you need to make your travel decisions easier and better.
Using future aspirations
Deciding where to go, how to get there and what to do when you get there are all travel planning decisions. You should use your experience with your travel agent to decide to use them again. And if you had a great time aboard an AmaWaterways river cruise on the Danube, its very reasonable to assume you’ll have a great experience with AmaWaterways on the Rhone. But in travel (as opposed to investment) decision making, you should be using your future aspirations. You should create your bucket list as well as let yourself dream. Sure, consider past performance of your suppliers. And yes, research, be disciplined and focus on what you can control. But please don’t let your future aspirations be pushed away – that’s really the best travel planning advice we can give.
By the way, the full Vanguard research paper is here.
And here’s one way to education yourself on using a travel agent.