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What's Hot? What's Not?

Leisure and Business Travel Outlook for 2010


ORLANDO, Fla. (December 28, 2009) - With the arrival of the New Year, there are some encouraging signs that the travel industry is poised for a gradual recovery, although not as quickly as many travel service suppliers would like. The culprit remains the languishing economy.  While recent GDP numbers reflect a positive trajectory and job losses have abated, American consumers have adopted more conservative spending patterns and now maintain the highest savings rate observed in the past eight years.

What does this portend for the travel industry?  Another year in which value will be in vogue, according to the results of the most recent (October 2009) travelhorizons(TM) survey, the quarterly consumer survey of 2,200 U.S. adults co-authored by Ypartnership and the U.S. Travel Association.

The results of the survey also suggest that both business and leisure travelers will sharpen their travel planning and purchasing skills further to ensure they donít overpay, while their discovery and embrace of the next generation of online booking tools is certain to place additional pressure on suppliers' margins.

Leisure Travel Outlook - Value Is King

What's hot?  Drive vacations, mid-priced hotels, low cost carriers, all-inclusive resorts, packaged vacations, and cruises (regardless of duration).

What's not?  Luxury hotels and resorts, first class air, five-star dining.

Ypartnership market tracking studies confirm that Americans still view vacations as a birthright.  And the good news is that the majority of adults in the U.S. - 53 percent according to travelhorizons - are planning to take at least one overnight trip primarily for leisure purposes between now and April of 2010.  The October 2009 survey also revealed that many of those leisure travelers expect to plan and/or take their vacations differently.  Specifically, they are now more inclined to stay in less expensive hotels, spend less overall, drive rather than fly, and look for deals on the Internet than they were the same time one year ago.  The one encouraging shift in travelersí sentiment is with respect to the anticipated length of their leisure trips, with only half now planning to "stay fewer nights" (down from two-thirds a year ago) as revealed below:

Now More Likely To

Stay at less expensive hotels -- Oct 2008-81%  Oct 2009-85%
Overall, spend less -- Oct 2008-75%  Oct 2009-80%
Stay more with friends and family -- Oct 2008-69%  Oct 2009-69%
Drive rather than fly -- Oct 2008-60%  Oct 2009-66%
Look for deals on the Internet -- Oct 2008-58%  Oct 2009-61%
Stay fewer nights -- Oct 2008-67%  Oct 2009-50%
Source:  Ypartnership/U.S. Travel Association, October 2009 travelhorizons(TM)
The survey results suggest that demand for leisure travel services is likely to remain stable throughout the year ahead, but 2010 will be another year of suppliers battling for market share.  One airline's, hotel's or destinationís gain will be another's loss, as overall demand is not expected to grow appreciably.  Perceived "value" will remain king, and leisure travel service marketers will have to demonstrate even greater creativity with respect to their pricing and promotional strategies in order to attract their fair share.

Business Travel Outlook - On The Road Again, Slowly

What's hot?  Same-day business trips, coach-class air, upscale lodging at mid-scale prices, free breakfast, and free high speed Internet access.

What's not?  First/business class air, hotel suites, limo transfers, 3-star Michelin dining, and awakening to read about your company's profligate ways in the Wall Street Journal.

Demand for business travel services continues to languish and is not likely to improve until we experience a significant turn in the economy.  The travelhorizons survey revealed that only 18 percent of U.S. adults are planning to take at least one overnight trip for business purposes between now and the end of April 2010, essentially the same percentage who stated this intention in July 2009 (19 percent), but down from 23 percent in April 2009.  The leading indicator of travel intentions among this group of travelers (the net difference between those who plan "more" versus "fewer" business trips) is also concerning:  seven percent of business travelers are planning "more," while 21 percent are planning fewer during the next six months.  The reasons cited for planning "fewer" business trips, not surprisingly, are a direct result of the current economic malaise.  Contrary to speculation, however, very few business travelers are using new technology alternatives as a surrogate for business travel, as revealed below:

Reasons Not Traveling On Business (next 6 months)  Oct 2009

Company travel restrictions  34%
Current economic conditions  32%
Reduction in people attending meetings  13%
Using technology alternatives  8%
Source:  Ypartnership/U.S. Travel Association, October 2009 travelhorizons(TM)
Both components of demand for business travel services (individual and group) will recover as the economy improves; yet demand from individual business travelers is likely to rebound first.  Demand from off-site business meetings and conventions will take longer to materialize because of the lead time required to plan and host such events, as well as the anxiety that still shrouds decisions to meet in what might be misconstrued to be an overly indulgent manner and/or in venues perceived to be too much fun. This conclusion was evident in the results of a national survey of meeting planners recently conducted by Ypartnership for the PCMA Educational Foundation and American Express wherein 44 percent of professional planners stated an intention to "plan fewer off-site meetings in 2009/2010 than they did last year."  A grass roots campaign just launched by the Convention Industry Council (and eight other national association partners) dubbed "Face Time. It Matters." is intended to revitalize interest in the residual value of hosting meetings "face-to-face," and this effort is expected to accelerate the recovery of demand from the group segment of business travel as well.

Traveler Sentiment Index(TM)

One of the most useful industry tools for navigating the uncertainty of the horizon line (and refining marketing strategy) is the Traveler Sentiment Index(TM) published in the quarterly travelhorizons survey.   The Index is a derivative of six separate measurements on such things as Americans' perceived "time available for travel," the "affordability of travel," etc., and has been calculated since the first calendar quarter of 2007.

After languishing through most of 2008, and falling precipitously in 2009, the index has rebounded to mid-2007 levels, driven principally by a remarkable shift in the perceived "affordability of travel."  No surprise here, as most travel services went on sale during the fourth quarter of 2008, and some of the deals were unprecedented.  Because the incremental demand required to drive pricing power is not evident in the marketplace right now, it is reasonable to expect the perception of affordability will prevail in the year ahead.  As of now, the Index stands at 90.5, essentially in the same place recorded during the fourth quarter of 2007.

The Index is expected to fluctuate around the 90 level for the next 6 months.   What happens after that will be a function of the prevailing economic environment and, equally important, how travel service suppliers price their inventory for the latter half of the year.

So as the industry gathers around the hearth for yet another chorus of Auld Lang Syne, it looks to the year ahead with a sense of cautious optimism.  Demand for leisure travel services will retain the greatest upside potential, yet only those travel service suppliers who deliver what consumers deem to be excellent value will win the battle for share.  Demand for business travel services will recover more slowly, with individual business travelers expected to hit the road sooner, while the merits of meeting "face-to-face" become increasingly evident to those in corporate America who find themselves at a competitive disadvantage because of their hesitation to host or attend "live" meetings and conventions.



travelhorizons(TM) is a quarterly survey of Americans' travel intentions viewed through the lens of emerging economic, social and political developments that is co-authored by Ypartnership and the U.S. Travel Association. The most recent iteration of this nationally representative survey of 2,244 adults was conducted October 6-13, 2009. The corresponding statistical estimates have an error interval of ± 2.5 percent at the 95 percent level of confidence.

Ypartnership is a worldwide advertising and public relations agency that specializes in serving travel, leisure and entertainment - industry clients and is co-author of the widely acclaimed National Travel MONITOR(SM) with Yankelovich, Inc. For more information please visit http://www.ypartnership.com.  Preview the results of our latest research by following Ypartnership Public Relations on Twitter (@Ytravels) or become our fan on Facebook (http://facebook.com/YpartnershipFB). 
 

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Contact:

Noel Perkins, Ypartnership
407-838-1797
noel.perkins@ypartnership.com
http://www.ypartnership.com
 

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Also See: Independents and Limited-Service Properties Growing In Popularity According to National Survey / July 2009
Bucking the Trend: Affluent Travelers Remain Active Travelers / January 2009
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