John Dale

1
Industry Outlook

• John Dale
• Senior Vice President
• BCD Travel Americas

Chicago BTA First Quarter Chapter Meeting
March 18, 2009
2
Agenda
World Economy/US
Airlines and Hotels
Effects
Outlook
3
Economic indicators from around the globe
Outlook for 2009 is Bleak and Gloomy

• Global GDP slowed to an estimated 2 growth in
  2008.
• Unemployment is growing and expected to continue
  rising.
• Retail sales continue to fall.
• Business and consumer confidence is faltering.
• The travel industry is feeling the effects.

Source IHG Jan 09
4
Forecasts for GDP growth
5
Real U.S. GDP
According to NBER, the U.S. officially entered a
recession in December 2007
Percent Change from Previous Quarter at
Annualized Rate
Source IHG / Blue Chip Economic Indicators,
January 2009
6
Global unemployment situation
Source IHG / US Bureau of Labor Statistics
Dismal Scientist Statistics Canada
7
Global retail sales
Most major economies show sales reflecting loss
in consumer confidence
Change over Prior Year
Mexico data from Oct 08 vs. Oct 07
Source IHG / Moodys Economy.com
8
Global business confidence
Business confidence has fallen, with recent signs
of improvement
Source IHG/Moodys Economy.com
9
Global consumer confidence
Global consumer confidence is reaching new lows
Source IHG / Moodys Economy.com
10
Recession or Depression?
Its a recession when your neighbor loses his
job
Its a depression when you lose yours.
-- Harry Truman, 1958

• Economists do not agree on a textbook definition
  of a depression.
• Depression GDP loss more than 10
• Between1937-1938 GDP declined 18.2
• The term recession was created to differentiate
  between this type of long and severe economic
  state and a milder economic situation.
• The current economic situation is unlikely to
  become a depression due to government
  intervention and policies that were not in place
  during the 1930s.

Source IHG
11
Effect of corporate cutbacks
Pressure to Reduce Costs

• Fewer
• Internal meetings
• Prospect business only
• Cheaper
• Senior management signoff
• Centralized meetings in hub cities
• Utilization of collaborative technology
• Downgrading from 4 5 star to 3 star hotels
• Shorter
• Reduction in length of stay

Source EIU/Amadeus White Paper-Feb 09
12
Expectation of change
Back to Basics

• 28 of Executives expect to be downgraded in
  hotel accommodations
• 36 of Executives expect to be moved from
  Business/First to Coach
• Higher expectation of change in Asia and North
  American markets

Source EIU/Amadeus White Paper-Feb 09
13
Global view
Factors likely to cause curtailment of business
travel in 09
Source EIU/Amadeus White Paper-Feb 09
14
Airlines
15
The rise and fall of oil
200
130
120
180
110
160
100
140
90
Spot fuel price(Left Scale)
80
120
70
100
US/barrel
US billion
60
80
50
60
40
30
40
Fuel costs(Right scale)
20
20
10
0
0
Source IATA - December 2008
16
Government taxes/fees on 300 ticket have nearly
tripled
1972
1992
2008
Taxes 7 (22)
Taxes 20 (60)
Taxes 13 (38)
Airfare Taxes
Sample itinerary assumes one-stop domestic round
trip with maximum passenger facility charge (PFC)
per airport 300 total price includes taxes and
fees.
17
Strategy
The airlines are reacting to the challenging
environment by trying to reduce costs increase
revenues
Reduce Cost
Extra Fees
Capacity Shift
Mergers
Alliances
Increase Revenues
18
Recommend buyers scrutinize their bargaining
position prior to committing to savings cost
avoidance targets
Watch market changes (e.g., schedule offerings
and pricing)
Analyze travel spend and evaluate alternative
control costs
Improve compliance to policy and preferred
vendors
Explore guaranteed fares for incremental savings
and cost avoidance
Evaluate realistic policy changes and strengthen
demand management
19
Hotels
20
U.S. industry room demand
Room demand has declined for five consecutive
months

Estimate
Source Smith Travel Research IHG PSP
21
Global industry room demand
In the broader lodging industry, global hotel
demand has fallen
Year-Over-Year Percentage Change
Source IHG / Smith Travel Research
22
U.S. supply demand change
The supply cycle is currently on the upswing but
will likely be constrained by the credit crisis
12 Month Rolling Average through December 2008
Source IHG / Smith Travel Research
23
U.S. ADR and OCC change
Overall, the industry has been able to maintain
positive rate of growth in the face of declining
occupancy
12 Month Rolling Average through December 2008
Source IHG / Smith Travel Research
24
U.S. industry average rate
ADR growth started to slip into negative
territory in the fourth Quarter

Estimate
Source Smith Travel Research IHG PSP
25
U.S. industry occupancy
Occupancy has fallen for 14 consecutive months

Estimate
Source Smith Travel Research IHG PSP
26
Global occupancy rate growth
Global hotel occupancy for the year is down, but
rate growth has remained relatively strong
-0.9
5.7
Source IHG / STR Global
27
Global occupancy and rates
Global rates continue to rise, particularly in MEA
Occupancy by Region November YTD
Rate Change by Region November YTDConstant USD
Source IHG / STR Global
28
Despite pendulum shift, savings require broader
approach than just negotiation of room rates
Know what you need and focus on total cost of
stay
Review tier strategy, market coverage, bulk buy
dynamic rates
Broaden solicitation list but consolidate final
selection
Be vigilant about dynamic pricing, last room
availability rate loading
Promote compliance, manage booking behavior,
influence travel pattern
29
Global Effects
30
The global economy crisis is the top security
threatNational U.S. Intelligence Director
Dennis Blair
31
Events impacting your employees
Hurricane
32
Where are your employees?
33
Outlook
34
Growth anticipated to return in 2010
GDP Change Annual Change
Source Blue Chip Economic Indicators, January
2009
35
What will it take for U.S. and global economies
to recover?
A powerful Economic Recovery Act
Extensive planning
Taking decisive action
Rebound of external demand
Consumer confidence
36
QA