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U.S. Travel Outlook…Look Out

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U.S. Travel Outlook…Look Out. What We’re Going to Review Today. The Economy and the Consumer Domestic Leisure Travel Domestic Business Travel The Lodging Industry The Airline Industry International Travel New and Continued Challenges What You Can Do. Getting Right to the Point.

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what we re going to review today
What We’re Going to Review Today
  • The Economy and the Consumer
  • Domestic Leisure Travel
  • Domestic Business Travel
  • The Lodging Industry
  • The Airline Industry
  • International Travel
  • New and Continued Challenges
  • What You Can Do
getting right to the point
Getting Right to the Point
  • If you didn’t like 2008 you’re not going to like 2009
  • Business travel under attack
  • Leisure travel – just how resilient is it?
  • No longer “patriotic” to travel
  • As with the auto industry and retailers, leisure travelers are looking for “deals”
  • One glimmer of hope - travel intentions and attitudes improve in February 2009
economic trends
Economic Trends

Abrupt drop in GDP in Q4 ‘08 continued into Q1 ’09; U.S. recession may last into 2010

4.4 million jobs lost since recession began in December 2007 – more than half occurring in past four months

651,000 jobs lost in February 2009 alone – largest single monthly loss since 1974

200,000 travel-related jobs lost in 2008 and another 247,000 job losses likely in 2009

Unemployment rate surges to 8.1% in February -- highest rate in 25 years and forecasted to exceed 9% this year

“Companies are in survival mode and are really cutting to the bone…out of fear of an uncertain future.”

Ken Mayland, ClearView Economics, February 6, 2009

Source: U.S. Department of Labor

u s economic outlook
U.S. Economic Outlook

20082009F

Unemployment Rate 5.8% 9.2%

CPI +3.8% -0.7%

Real Personal Disposable Income +1.3% 1.8%

Real Consumer Spending +0.2% -1.5%

Real GDP +1.1% -3.6%

Total Profits -9.4% (f) -22.1%

Source: Oxford Economics

consumer confidence at record low
Consumer Confidence At Record Low

Consumers increasingly pessimistic

about future

25.0

1985 = 100

Source: The Conference Board

traveler sentiment index tm tsi improvement driven by gains in interest affordability and time
Traveler Sentiment IndexTM (TSI)Improvement driven by gains in “interest,” “affordability” and “time.”

100

93.0

90.2

  • Interest
  • Time Available
  • Money Available
  • Affordability
  • Service Quality
  • Safety of Travel

78.2

March 2007 = 100

Source: U.S. Travel Association/YPartnership Travelhorizons™

traveler sentiment affordability index perceived affordability of travel rises
Traveler Sentiment Affordability IndexPerceived affordability of travel rises…

March 2007 = 100

Source: U.S. Travel/YPartnership Travelhorizons™

slide10
Largely based on smaller increases or declines in travel-related costs(Percent change YTD through February 2009/2008)

Food away

from home

Recreation

Airfares

Lodging

Motor

Fuel

Source: U.S. Travel Association – Travel Price Index

gas prices plummet from 4 00 but are beginning to rise
Gas prices plummet from $4.00+, but are beginning to rise

Source: AAA Daily Fuel Gauge Report

www.aaa.org

leisure travel trends
Leisure Travel Trends
  • First half of 2008 was doing well, flat summer and then fall off in 4th quarter
  • Shorter, closer-to-home
  • Less costly – quest for values and “deals”
  • Trading down, not out
  • Most Americans still view leisure travel as a “right” and will forego spending on other items to travel
leisure travel intentions among u s adults are up
Leisure travel intentions* among U.S. adults are up

* Intend to take leisure trip in next six months

Source: U.S. Travel Association/YPartnership travelhorizons™

financial issues affecting leisure travel g o beyond travel related factors percent worse
Financial issues affecting leisure travel go beyond travel-related factors(Percent “worse”)

To what degree is each of these financial issues affecting your vacation plans over the next 12 months? (Somewhat/great deal)

Source: U.S. Travel Association/Ypartnership travelhorizons ™ , February 2009

slide16
Money Available for Travel IndexIndex improves in February 2009, but still below February 2008 level

86.8

March 2007 = 100

Source: U.S. Travel/YPartnership Travelhorizons™

looking for deals and deep cost savings
Looking for Deals and Deep Cost Savings
  • Level of motivation by type of discount varies by generation
    • Need to look at target markets to determine which programs have best chance to succeed
  • Discounts can motivate vacation travel, but some more effective than others
    • $25 gift or gas cards not enough
    • Free golf – forget it
deep discounts needed to influence americans travel decisions
Deep discounts needed to influence Americans’ travel decisions

Which of the following incentives would be likely to influence your decision

to select one destination or travel supplier over another?

Source: U.S. Travel Association/Ypartnership travelhorizons™, February 2009

destinations promoting special deals to generate both leisure and meeting travel
Destinations promoting special deals to generate both leisure and meeting travel
  • HAWAII CVB LAUNCHES HOT RATES, HOT DATES PROGRAM.
  • To help generate new business bookings through 2010
  • In partnership with HCVB member hotels and resorts statewide
  • Provides money-saving deals on accommodations, meeting facilities and other specials.
  • BusinessAloha.com (HVCB's business meetings Website) has an online clearing house
consumers open minded to the destination discounts may help close the deal
Consumers open minded to the destination Discounts may help close the deal

“Which of the following destinations do you plan to visit in the next 12 months?” (check all that apply)

A third likely to choose destination

based on the best deal

Source: Travelzoo Subscriber Study

domestic leisure travel outlook for 2009
Domestic Leisure Travel Outlook for 2009

Domestic

Leisure Travel

Down 3.5%

Source: U.S. Travel Association and Tourism Economics

business travel
Business Travel

Total Business

  • $244 billion in expenditures
  • 2.4 million jobs
  • $39 billion in federal, state and local tax revenues

Meetings and Events

  • $101 billion in expenditures
  • 1 million jobs
  • $16 billion in federal, state and local tax revenues
2009 tough for business travel
2009 tough for business travel
  • 93% of companies implementing cost-cutting measures – Of these, 87% report travel and expense restrictions (up from 63% in July/August 2008) (Association of National Advertisers)
  • 45% expect to take fewer business trips in first half of 2009 versus 2008 (U.S. Travel/Ypartnership’s TravelHorizons)
  • 47% of executives plan to take fewer business trips over next 12 months (Economist Intelligence Unit) – and will downgrade class of air travel and accommodations
  • 51% of business travel decision makers report declines in business travel in recent months (APCO/Kellogg Survey)
association attendance expected to experience the largest drop in 2009
Association attendance expected to experience the largest drop in 2009

*Survey conducted November 11 – 27, 2008

Association

Government

All Planners

Corporate

Source: FutureWatch 2009 – MPI and American Express

corporate meetings are expected to take the largest hit in terms of cancellations
Corporate meetings are expected to take the largest hit in terms of cancellations

% reporting cancellations

*Survey conducted November 11 – 27, 2008

The economy, jobs, need for industry to cut costs and demonstrate value – Add “image” to the list

Source: FutureWatch 2009 – MPI and American Express

meeting planners expect to do more with less in 2009
Meeting planners expect to do more with less in 2009

% predicting budget cuts in 2009

*Survey conducted November 11 – 27, 2008

Source: FutureWatch 2009 – MPI and American Express

business travel alternatives fewer hotel room nights fewer travelers less spending
Business Travel Alternatives =Fewer hotel room nights, fewer travelers, less spending
  • Teleconferencing
  • Video Teleconferencing
  • Telepresence
  • Technology Replacing Trips?
    • 81% of travel buyers think so, but…
    • 20% said that this technology complements trips rather than replace it

Source: NBTA’s Impact of Economic Downturn Survey 2008

business travel outlook
Business Travel Outlook

Domestic

Business Travel

Down 5.6%

Source: U.S. Travel Association and Tourism Economics

how the lodging industry fared in 2008 started strong ended weak
How the lodging industry fared in 2008Started strong…ended weak
  • Compared to Year-End 2007
    • Occupancy down 4.2% nationally and down in all but five states (Iowa, Louisiana, North Dakota, Texas, Vermont)
    • Average daily room rates up 2.4% nationally and higher in all states except Nevada and Rhode Island
    • Revenue Per Available Room down 1.9% for U.S. and down in 31 states

Source: Smith Travel Research

lodging industry begins 2009 on a sour note ytd through february 2009 2008 change
Lodging industry begins 2009 on a sour note(YTD through February 2009/2008 % change)

ADR

RevPar

Supply

Occupancy

Demand

Source: Smith Travel Research

total united states lodging industry forecast
Total United StatesLodging Industry Forecast

% change over prior year

Source: Smith Travel Research, Inc.

but other forecasts much more pessimistic
But other forecasts much more pessimistic
  • PKF-HR – Current decline in U.S. lodging industry will be deeper and last longer than previously predicted.
  • Rev-Par now expected to drop 13.7% in 2009
  • 5.4% decline in demand, 7.8% decline in occupancy and 6.4% drop in ADR expected
  • 30.1% decline in profits projected for 2009
  • Greatest declines expected in Q1 2009 and should begin to subside by mid-2009
domestic and international enplanements percent change 2008 2007
Domestic and international enplanements (Percent change 2008/2007)

International

Domestic

Total

Source: Bureau of Transportation Statistics

air capacity cuts
Air Capacity Cuts
  • 10% reduction annually through 2011
  • Flights dropped 7% worldwide in Q4
  • Cuts impact business and leisure travel
fewer flights fewer seats fewer options decline in seats nov 2008 vs nov 2007
Fewer flights…fewer seats…fewer options(Decline in seats – Nov 2008 vs. Nov 2007)

Source: Official Airline Guide

international visitors to u s 2000 2009
International Visitors to U.S. (2000-2009)

Arrivals in Millions

Sources: U.S. Department of Commerce, ITA, Office of Travel & Tourism Industries;

Secretaria de Turismo (Mexico); Statistics Canada & Tourism Economics

slide43
After sizable increases, overseas visitors to the U.S. likely to “take a holiday” in 2009(Year-over-year percent change)

2011f

2005

2006

2007

2008p

2010f

2009f

p = Preliminary; f = Forecast

Source: U.S. Travel Association, Tourism Economics and Office of Travel and Tourism Industries

international visitation was strongest segment in 2008 reverses predicted for 2009
International visitation was strongest segment in 2008…reverses predicted for 2009

International

Visitors

International Down 4.8%

Overseas Down 7.1%

Sources: U.S. Travel Association ,Tourism Economics and Office of Travel and Tourism Industries

spending by international visitors drops from double digit increases year over year percent change
Spending by international visitors drops from double-digit increases(Year-over-year percent change)

p = Preliminary; f = Forecast

Source: U.S. Travel Association, Tourism Economics and Office of Travel and Tourism Industries

total travel spending in u s
Total Travel Spending in U.S.

Percent change in travel spending from prior year

2010f

2008p

2006

2007

2005

2009f

p = Preliminary; f = Forecast

Source: U.S. Travel Association’s Forecast Model

summary 2009 forecast
Summary – 2009 Forecast

Domestic

Leisure

Domestic

Business

Expenditures

International

- 4.8% (international)

-7.1% (overseas)

-3.5%

-5.6%

-6.7%

bailouts and business travel a dangerous road
Bailouts and Business Travel – A Dangerous Road
  • Incentive travel perceived as symbol of excess
  • Bailout recipients facing new guidelines on conferences and events
  • Potential to extend to non-bailout companies
  • Temporary changes in travel policy could become permanent
  • Potential impact on hotels, airlines, attractions, resorts, travel agents, online bookers, etc.

Source: U.S. Travel Association, February 6, 2009

barriers to international travel
Barriers to International Travel
  • The global economic meltdown
  • U.S. does not make entry easy for visitors
  • United States lacking national program to promote the U.S. internationally (Tourism Promotion Act)
  • Late to the table in signing MOU with China
importance of travel and tourism to the economy
Importance of travel and tourism to the economy
  • Industry has little success convincing elected officials and budget analysts that travel and tourism is taxrevenue generator
  • State travel office budgets being slashed
    • Budget increases = opportunity to gain market share
  • Destination marketing organization budgets should not be cut, especially in an economic downturn
  • Argument for “police versus tourists” hard to make
  • U.S. Travel working with destinations to develop compelling argument for relevance of travel and tourism promotion
1 learn about and target new niches
1. Learn about and target new niches
  • Hispanics: 16 million who travel are a $60 billion travel market
  • Millennials: 70 million people born 1980 - 1995. $360 total spending power – diverse, love to travel
  • Gay/lesbian/bisexual/transgender (G/L/B/T): 15 million people, $690 billion total market , $61 billion travel market
2 offer value
2. Offer value
  • Flat out price reductions may back fire
  • Price reductions may jeopardize your market position and product perceptions
  • Price reductions lessen your ability to raise prices too strongly when the market recovers
  • People want a good value for their money
3 deliver outstanding customer service
3. Deliver outstanding customer service
  • Distinguishes you from your competition
  • Makes the experience (positive) memorable
  • Brings customers back
4 heighten customer engagement at each step of the experience
4. Heighten customer engagement at each step of the experience
  • Social media, feedback and excellent service are ways to increase customer engagement
  • High engagement shown to have strongest impacts on loyalty and repeat visitation
  • Need to look at (and address) every facet of the operation from the initial media contact up through the minute of departure
5 don t despair be resourceful
5. Don’t despair!! Be resourceful
  • Perception ≠ Reality
  • Create own reality
  • Use existing resources
  • Use existing data
  • Market smarter not necessarily more
  • Competition can be a partner
  • Look at new ways of doing business – the market has changed – you must change with it!
6 join our campaign
6. Join our Campaign
  • Write to your officials, sign our petition, and utilize the resources found on this site to help spread the word about the value of meetings and events to communities around the country.
  • Watch for and use new research
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