Whether it is because of pent-up demand after two years of personal austerity, or that families are seeing their financial situation improve, or the simple fact that people value their vacations and realize “you only live once” and your kids will never be this age again, or whether it is that there are so many options to travel, you can always find a vacation to fit a budget, experts are projecting that travel will boom this summer and may even post new records.
And their advice: book early or risk being shut out by “no vacancy” signs or high rates.
“It may be the psychology of travel or the fact that the hotel industry had come off three strong years of recovery, there wasn’t an abatement of demand last year,” Dorothy Dowling, senior vice president, marketing and sales for Best Western International. “It’s about people making choices and prioritizing how to spend money.”
And vacation has a high priority.
“The ‘You Only Live Once (YOLO), ‘experience’ economy is here. People want to invest in family, and the things they care about,” she told the 2013 Best Western Leisure Travel Summit.
It’s more than that: it’s The Travel Effect – people intuitively recognize that travel improves health and wellness, relationships. “Now we can prove through research that travel makes you healthier, keeps you well, deepens and improves relationships with family and friends, and travel, whether kids becoming more curious or adults learning something new, is done through travel,” says Gary Oster, senior vice president, US Travel Association.
“Family vacation memories last lifetime,” he says. In the study, “62% said their earliest memories were of family vacation from when 5-10 years old; that they remember childhood trips more clearly than any school event or birthday celebration. Like their parents, children cherish family vacation memories – they see, do things on vacation that will remember for lifetime and family vacations bring family together. Respondents say, “I never saw my dad do those kinds of things,” they see parents in a different light when travel.” Moreover, when grandparents join the vacation – a burgeoning trend known as multigenerational travel – the grandkids get to spend quality time, and say they feel closer with them.
“These are things that we intuit, but now we have data to back up.”
Indeed, multigenerational travel – where grandparents travel with their grandchildren or three generations travel together – is burgeoning, perhaps fueled by the fact that 10,000 BabyBoomers turn retirement age every day, are becoming grandparents. The Babyboomers grew up traveling in the Jet Age, backpacking around Europe in the 1960s, and travel is something they value. So is experience, and so is family. And in many cases, the grandparents are footing the bill for these multigenerational trips.
Another key trend is that travelers look for value, regardless of their income level – even the most affluent look for value. This means that savvy consumers look beyond a room rate to inclusive features like free WiFi, parking and breakfast when booking a hotel that prompts the choice.
Other trends include continued growth in the use of mobile media, especially to research travel offerings, though there is a return to actually calling to complete a booking.
“What we see and hear from our 3800 travel agents and 7500 auto travel counselors in the AAA network is very positive,” says Bill Sutherland, Vice President for AAA. “Things look good, advance bookings are strong in tour and cruise and also in domestic road travel as we see in requests for the online Triptiks. Summer looks great for consumer confidence and the decision to travel.
“We think we will see a record year in 2013 – one of strongest years in history. Growth will be strong, but not at same year over year increase, but still a record,” Oster says.
Last year, leisure travel grew by 2%, exceeding the 1.3% increase in business travel. “Leisure demand is continuing to increase, outpacing corporate.”
AAA (which releases its summer travel forecast on May 21) “is seeing increases in a lot of sectors, particularly cruise, through 2013, which will be exceeding 2010 levels, which is a big hurrah, Sutherland says. “66% in a survey said they plan to take at least one trip 50 miles or more from home this summer – a good sign. Leisure travel is outpacing economy – a good sign.”
Another reason to anticipate strong sales is that gas prices are 25 cents lower this year, and April/May is usually the peak for the year.
Other prices will likely go up, though because of strong demand.
The hospitality industry saw growth last year, and is eyeing stronger growth this year, Dowling says, “which speaks to how consumers are driving the recovery and will continue to do so.” Demand is up 2%, while rates are running 3-4% higher from last year.
“The hotel segment is bullish,” Dowling says, “which is good news for the overall economy.” While economic reports show that there are still headwinds for the economy (the sequester is part of this), “we’re not seeing in hotel sector. We’re still seeing continuing demand – a lot lends, Americans as a whole view vacation travel as a right, an investment they make with families in terms of relationship development. Vacation travel is a priority for families and couples today.”
Indeed, growth might have hit double-digit levels otherwise.
Airline prices domestically are remaining flat, Sutherland says, but the overall cost, because of higher cost for ancillary services, may mean that airline travel costs will rise, encouraging families on a budget to take to the roads, instead, and look for value in other services.
And despite the high air fares for international travel, AAA is anticipating that 2013 will be an extraordinary year for Americans traveling outbound this year, with travel to Europe growing dramatically in 2013, “and that hasn’t happened in years.”
The strong demand for leisure travel this summer bodes well for the economy because travel does not just reflect the economy, but actually is an engine of growth.
The travel industry employs one in seven Americans, and the growth in employment has outpaced other sectors, adding 351,000 jobs since 2011, USTA’s Oster says.
“As travel goes, so does the economy. The more people we can bring into the business, the healthier economy is.” Consequently, a strong outlook for vacation travel this summer ” bodes well for state of economy.”
The USTA reported that:
- Direct spending on leisure travel by domestic and international travelers totaled $597 billion in 2012.
- Spending on leisure travel generated $89 billion in tax revenue.
- 3 out of 4 domestic trips taken are for leisure purposes (77%).
- U.S. residents logged 1.6 billion person‑trips (50 miles or more from home) for leisure purposes in 2012.
- Top leisure travel activities for U.S. domestic travelers: (1) visiting relatives; (2) shopping; (3) visiting friends; (4) fine dining; and (5) beaches.
I question whether travel spending could have even been better last summer, except for the 2012 election rhetoric, where one party had a stake in Americans feeling as bad as possible about the economy.
“There was some muting in demand,” Oster says, “however our country is incredibly resilient, it bounced back” pointing to the underlying pent-up demand for travel and the value that Americans place on their vacation.
This year, the Sequester may also depress demand and not just because of dampening consumer confidence. But as federal workers are furloughed – cutting their pay by 20% or being eliminated altogether – as well as many industries that have government contracts put off hiring – that will cut into consumer spending, which feeds that cycle that depresses economic growth.
“Travel should be seen as absolute economic engine for country, can spur not only national but state and local economies as well,” Oster says “This is an industry that is turnkey, already exists, and will expand to meet the demand.”
Don’t expect discounts on hotels and cruises, though, even if the economy does show the anticipated 1-2-point weakening due to Sequester, and wage growth remains weak. That’s because travel companies, particularly cruise lines, get their customers from a global market and major countries, like China, Brazil and India are seeing a growing middle-class with the desire and wherewithal to travel.
This has benefited the US economy, because travel is one of our key “exports” – something that brings foreign money in.
After a “lost decade” of virtually no change in the US share of the international travel “explosion,” 2012 finally saw a rebound in international visitors – 7.;3% more overseas travelers than 2000, the last high water mark, Oster says.
The number of overseas travelers increased 14% from 2011 to 2012, to 29 million, while total international arrivals including Canada and Mexico were up 46% in 2012 from 2011, to more than 66 million travelers.
The biggest increases in international visitors are coming from Brazil, Russia, India, and China.
“International travel is very lucrative for the US,” Oster says. “International spending increased by 10%, but when you look at overseas travelers, they stay longer, spend more – averaging $4450/per visitor – so magnifying by millions, that has dramatic impact.
“Travel is now the #1 services export in America.” Significantly for local communities, the foreign money comes in, and the folks go home without requiring services from local government or taxes. “That’s the benefit of an export, which travel is. It is a really powerful segment of the travel economy, generating $150 billion in revenue to the US a year.”
“The US is still considered a good deal – vacations priced in Euros or Sterling, the kind of things they purchase is seen as extraordinarily good value,” adds Dowling. Best Western International operates 110 countries around world, so enjoys high brand awareness when visitors come to the US, as well as the benefits of its loyalty program.”
A key reason that the US is now tapping into that explosion of international visitors is improvements in its visa program.
“In countries where travelers only need a passport and not a visa, we do a great volume” Oster notes. “When you look at South Korea, which gained visa waiver status in 2008, in one year, we had 500,000 more travelers from South Korea, spending $3500 per traveler in the US – the impact is important.”
The travel industry is hoping that Brazil will also be granted visa waiver status, which could result in millions of new travelers to the US, and spending by Brazilians exceeds $4500 per traveler. “So if you are looking for a country that would give an immediate surge of economic impact with a visa waiver, , it would be Brazil.”
One of the obstacles for Brazilian travelers to the US was that there were only four consulates for a Brazilian to go to in order to get the visa, and the cost was extremely expensive.
Now the State Department is exploring various alternative solutions, such as video interviews, where interviews can take place between Brazilians and members of the American consulate.” This incredible increase in number visas issued for Brazilians.
“There used to be 160-170 days wait, now it is down to single digits, because of we are working hand in hand with US Travel and the State Department to give them solutions to process more, be more efficient, effective, and get more visa travelers into the country.”
There is a similar effort to expedite travel from China, where there are 150 million middle class prospective travelers to North America from China.
This all points to the globalization of travel – which means that cruiselines, for example, don’t have to discount rates in order to fill their ships with Americans, they are seeing huge increases in demand from other countries.
That is another reason that Americans should not wait for deep discounts before they book, and why bookings are being made with much longer advance than in recent years.
If you are a woman, chances are the travel industry will be appealing to you. Women, notes Best Western’s Dowling have traditionally been the family decision-makers and planners for vacations, and now, women also have greater power of the purse – it’s the “She Economy – two-thirds of American wealth is driven by women,” she says. Women also are a growing share of loyalty programs, like Best Western’s, are are half of new members. And women are different than men in how they purchase, Dowling notes. “They do more planning, book sooner than men.”
“We’ve spoken to women for a long time because we recognize they are making the decisions,” Dowling says.
One change in behavior among travelers has been the increased use of mobile devices to shop for travel services, book and even confirm travel arrangements on the go.
“But we’re also seeing the need for service when the itinerary is complex, expensive,” says Sutherland, whose network of AAA travel agents is one of the largest. “More and more people – a growing curve – use a qualified agent to help break down the clutter people are finding in the market today.”
Dowling says that the typical consumer visits 27 websites before they book. The habit of booking closer and closer to travel date will not work this year, though, because of heavy demand and limited supply, particularly in places like national parks.
Loyalty programs also play a part in travelers’ decision making.
“33% of surveyed people consider frequent travel programs or points when they are considering what hotel to choose – which is significant – and when look at behavior, value is key, folks are relating value as being part of loyalty program, utilizing the benefits,” Sutherland says.
In this respect, Best Western has chosen to deviate from the competitors in not raising thresholds to qualify for free nights.
“Travelers want to be recognized, rewarded for choice,” Dowling says. “Best Western has not devalued its loyalty program as other direct competitors have.”
Indeed, Best Western is in the midst of marking 25 years of its guest loyalty program (bestwesternrewards.com) with 25 weeks of promotions and giveaways, like “Jump Start to Summer” (bestwestern.com/jump).
The travel experts see strong bookings for gateway cities – places like Boston, San Francisco and New York City are seeking double-digit growth in the number of tourists.
As for new and emerging destinations: check out the Mississippi River. the concept of river cruising that has enthralled European travelers is taking hold in the US, with companies like American Cruise Lines.
“We will see that evolve in the next 3-4 years as very hot destination again, thanks to what happened in Europe, from Americans experiencing that kind of travel.”
Another growing market Sutherland says is Anaheim, largely because of the new Cars Land attraction at Disneyland, “which a significant contributor to growth in travel to California, and we are seeing some spinoff in 2013, also.”
Dowling says that based on Best Western’s bookings, traditional destinations in US are front and center – early patterns, downtown and resort locations, including properties surrounding national parks are up 6% already in terms of longer lead-in bookings.
“I should think about booking earlier because those hotels fill first.”
Oster says “all 25 of the gateway destinations around the country are doing well. But what is interesting is what is happening beyond the gateway – the next geographic destination 25-50 miles passed because they are raising dollars to market themselves and being really proactive at attracting visitation. That’s where next level of new destination experience will happen – travelers who have gone to the big places, the same hot spots, and will look to alternative trip and vacation.”
And they might not have a choice, if there is no room at the inn in the major cities. In fact, more savvy travelers are learning to stay outside the major centers and travel in.
In this respect, they are helped along with mobile and social media, that puts them in touch with what is close at hand.
“Book now. You really do need to book now,” Oster says. “This will be great summer, will have a lot of demand, you need to make your reservations now.”
“All the fundamentals suggest an extraordinarily strong travel year,” Best Western’s Dowling says. “What’s contributing: ‘You Only Live Once’ mentality, the experience economy, people want to reinvest in what is important to them – the people they love, care about, experiences. The emergence of the ‘She Economy’ and the fact that women are driving the decision making. The convergence of all these factors combined speaks well about where the travel business will land. Best Western will be a part. We expect to have a very good year.”
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