Numbers show travel growing again
For some time now, we have all been awaiting stop signs for a travel industry in freefall.
Based on recent analysis we have seen from Piper Jaffray and Citibank, it can now be said that perhaps travel – and more specifically, leisure travel – may be bottoming out.
After the global economic meltdown, Silicon Valley investors had a tongue-in-cheek saying that “flat is the new up.” By that definition, and taking into consideration the trends and data discussed below, the good news is that U.S. Travel is growing again!
Yes, this is a bullish view on our sector, but even if it’s premature, who couldn’t use good news?
US Hotel Industry RevPAR
Source: Smith Travel Research
2009 is trending to be the worst year for travel since 2002, but there might be good news amidst the carnage.
The U.S. hotel industry’s occupancy and average daily rate (ADR) – and therefore revenue per available room (RevPAR) appears to have stabilized during the course of the summer, albeit at low levels.
US Hotel Industry - Key Operating Statistics
More evidence comes in the form of the steady weekend rates for leisure travel, which also points towards the existence of a stable revPAR.
US Hotel Industry - Weekend Operating Metrics
Across the Atlantic, the recovery is even more impressive, with European revPar showing signs of bouncing back already.
EU Hotel Industry - Operating Metrics
The situation with online travel remains fluid. According to Citibank and comScore data, online travel spending dropped 9% Y/Y in July, representing a deterioration compared to the 7% Y/Y decline seen in June.
This July decline can be attributed to a 15% Y/Y decline in hotel reservations, which represents 24% of the total online travel spend. Also contributing to the drop was a 16% Y/Y decline in Travel Packages (6% of spend).
The 16% drop in travel packages was partially offset by a 4% Y/Y bump in car rental spending (11% of spend). And the online spend on Air Travel declined only 8% Y/Y in July, a slight improvement compared to the 10% Y/Y decline reported in June by comScore.
These are notable changes for the month in individual categories within online travel, but we recommend a focus on the direction of aggregate spend.
From here on, the year-on-year comparisons for 2009 are going to look increasingly better every month, in part due to the weak performance in the last quarter of 2008, and in part because travel is finally on its way up.
Photo by rednuht
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17 Responses
This is interesting to see–not only that it’s leveling off, but just how far it had dropped.
It seems premature to get excited about a possible stabilization.
I agree with Claude. The deals just to keep cash flow have been coming for so long, it will be difficult to convince the consumer to pay more. I think it will take something more innovative than a cruise or trip to Vegas to shake them out of the “how low can you go” mindset.
And I’m not so sure these stats will hold unless we see corresponding trends on the employment side and overall consumer confidence ratings. Without those two biggies, you really have just guesses.
I’m glad to see people feel more comfortable traveling. I think it says a lot about the state of the economy when people feel like they can take a trip and enjoy themselves. Whether or not they spend more when they get to where they are going is another thing, but they will, eventually.
That makes sense, even from personal experience. After staying close to home for the past several months, I’ve started to research and book trips for the holidays and into 2010. Let’s hope the economy is finally rebounding, and bringing the travel industry with it!
Flat is the new up. Love it. Glad it may not be true much longer, but still, I’m a sucker for a turn of phrase.
I see packed crowds of tourists at home and on the road. I have noticed many of them are foreign travelers. I have also sensed sentiment that there should be better deals to be found to encourage travel bookings – so maybe some are staying home waiting for better options to arise.
as a consumer, I am feeling very optimistic about travel. There are some great deals to be had online, especially packages with air and hotel, and I am looking forward to the next year full of travel. That said, I am also taking the opportunity to evaluate the travel that is important to us and prioritize. And, I am looking to see what is available closer to home.
Our economic woes over the past few years have forced people to reassess what is really important in life. Many are now limiting or eliminating unnecessary luxuries. However, people I speak with about this issue also seem to regard travel as an essential rather than a luxury – not hard to believe in our stress-ridden times – and indicate they will soon resume traveling. The only downside will be that the amazing budget hotel rates I have seen over the past two years will begin to inch up again.
Our family seems to have traveled quite a bit this year, for business and for pleasure. Surprisingly so, seeing as prior to the recession we did not travel quite as much. As someone who lives in a tourism driven town and knows many families who depend of travel dollars to keep their jobs, I hope travel makes a comeback.
I think it’s a combination of things:
1] There are some really great deals out there as suppliers lower prices to entice people to book. Vegas hotels for under $30 on the Strip? Airfare for under $100 r/t? Who wouldn’t be encouraged to travel at rates like that?
2] People are getting creative with how they book their vacations. What I mean is that in the past, a typical vacationer would just book their airfare, grab a hotel and set up a rental car at their destination. Now, they investigate alternative forms of lodging like hostels, house swaps and even using sites like Couchsurfing to save on lodging. They might travel by bus or train, look for a rideshare on Craigslist or even vacation closer to home so they can drive their own car. They use coupon books for attraction discounts, pack coolers to save on dining, etc. They’re not shy about investigating ways to to get away for less money, whereas in the past, they might not have put so much effort into planning a trip.
3] The stress of the recession is actually encouraging people to travel, just to get away from it all, if even for a few days. Not to mention, a lot of people I know who were laid off from jobs actually used some of their severance pay and the sudden availability of free time to travel, just to clear their minds. A fresh start, if you will.
But as some of the previous commenters noted, many people are dependent upon tourism for their incomes, so any stop in the decline of travel, much less a slight growth spurt is always great news.
I’d say I’m cautiously optimistic. First, I agree with Julie that people are still in a how-low-can-you-go mindset. But second, I see a time confound here. I mean, it’s summer – people are going to take vacations. Especially in Europe, vacation time is something sacred and not to be wasted. So I’ll be curious to see if the numbers continue to stay up after August.
I’ve stayed close to home for more than a year but with lots of family taking advantage of deep travel discounts and decent exchange rates, have booked a trip to Spain later this year. I’m all about optimistic travel…
I’ve honestly been surprised to see it dip as much as it had. There are just so many discounts and deals out there, although many in the travel industry have had to bite it to be able to offer. I know my wife and I are already traveling more and have plans to by the end of the year. I think we could see it go up quite a bit come november and december.
This is great news! I have a feeling it will be a slow recovery though, so many people have lost their homes and jobs. Good deals will be found for at least another year I bet.
As others have already noted, in order to “stabilize” things, it seems that it required serious discounting to occur. So whether this is a “recovery” or whether hotels and such just finally hit the “too good to pass up” point with low prices will remain to be seen.
Whether the numbers will be able to remain “stable” as prices attempt to go back to normal will be interesting to watch as time goes on.
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