U.S. Travel Outlook…Look Out

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U.S. Travel OutlookLook Out
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What Were 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

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Getting Right to the Point

• If you didnt like 2008 youre 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

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The Economy and Consumer Pessimism
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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 boneout of fear of an uncertain
  future.

Ken Mayland, ClearView Economics, February 6, 2009
Source U.S. Department of Labor
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U.S. Economic Outlook

• 2008 2009F
• 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
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Consumer Confidence At Record Low
Consumers increasingly pessimistic about future
25.0
1985 100 Source The Conference Board
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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
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Traveler Sentiment Affordability IndexPerceived
affordability of travel rises
March 2007 100 Source U.S. Travel/YPartnership
Travelhorizons
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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
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Gas prices plummet from 4.00, but are beginning
to rise
Source AAA Daily Fuel Gauge Report www.aaa.org
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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

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Vacations Are Needed More Now Than Ever !
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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
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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
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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
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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

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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
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The deals are out there!
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Las Vegas is largely on sale
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Discounts of 50 or more, especially for last
minute trips, are common
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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

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DiscoverAmerica.com links to deals
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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
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Domestic Leisure Travel Outlook for 2009
Domestic Leisure Travel
Down 3.5
Source U.S. Travel Association and Tourism
Economics
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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

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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)

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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
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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
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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
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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 NBTAs Impact of Economic Downturn Survey
2008
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Business Travel Outlook
Domestic Business Travel
Down 5.6
Source U.S. Travel Association and Tourism
Economics
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Lodging Industry Feels the Impact
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How the lodging industry fared in 2008Started
strongended 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
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Lodging industry begins 2009 on a sour note(YTD
through February 2009/2008 change)
ADR
RevPar
Supply
Occupancy
Demand
Source Smith Travel Research
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Total United StatesLodging Industry Forecast
change over prior year
Source Smith Travel Research, Inc.
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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

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The State of the Airline Industry

• Not so good

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Domestic and international enplanements (Percent
change 2008/2007)
International
Domestic
Total
Source Bureau of Transportation Statistics
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Air Capacity Cuts

• 10 reduction annually through 2011
• Flights dropped 7 worldwide in Q4
• Cuts impact business and leisure travel

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Fewer flightsfewer seatsfewer options(Decline
in seats Nov 2008 vs. Nov 2007)
Source Official Airline Guide
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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
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After sizable increases, overseas visitors to the
U.S. likely to take a holiday in 2009
(Year-over-year percent change)
2011f
2005
2007
2006
2008p
2010f
2009f
p Preliminary f Forecast
Source U.S. Travel Association, Tourism
Economics and Office of Travel and Tourism
Industries
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International visitation was strongest segment in
2008reverses 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
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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
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Total Travel Spending in U.S.
Percent change in travel spending from prior year
2010f
2008p
2007
2006
2005
2009f
p Preliminary f Forecast
Source U.S. Travel Associations Forecast Model
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Summary 2009 Forecast
Domestic Leisure
Domestic Business
Expenditures
International
- 4.8 (international) -7.1 (overseas)
-3.5
-5.6
-6.7
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Challenges Facing the Travel Tourism Industry
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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
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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

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Importance of travel and tourism to the economy

• Industry has little success convincing elected
  officials and budget analysts that travel and
  tourism is tax revenue 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

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What TO DO to Survive?(beyond learning to swim
tread water)
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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

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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

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3. Deliver outstanding customer service

• Distinguishes you from your competition
• Makes the experience (positive) memorable
• Brings customers back

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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

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5. Dont 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!

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6. Join U.S. Travel Associations Campaign
meetingsmeanbusiness.com
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Industry CEOs meet with President Obama
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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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Suzanne D. Cook, Ph.D. scook_at_ustravel.org www.ustr
avel.org