Positive Economic Signs Fuel Travel Optimism

From hotel room demand to ARC sales figures, indicators are growing that both travel and the economy and strengthening

By: Dennis McCafferty

Western travel agents’ optimism about the year ahead reflects not only their strengthened positions, but the growing signs of growth in both travel and the economy.

Overall, the national economic outlook has improved significantly with the stock market roaring back, positive corporate quarterly earnings, and the fastest economic growth in nearly two decades.

And there have been recent signs that the travel industry is following suit: Hotel room demand rose 3.4 percent in September compared to the same time last year, marking the second-largest 12-month comparison this year, according to Washington-based Travel Industry Association of America.

Total travel agent sales in October rose 3 percent compared to last year, and average sales per location set a new high of more than $49,000, according to Arlington, Va.-based Airlines Reporting Corp. Even the beleaguered airlines, while still struggling, are showing signs of recovery with Continental and Northwest airlines reporting profitable recent quarters.

“I can tell by booking flights these days that the planes are packed, especially on Friday, Saturday and Sunday nights,” says Keith Heiniger, agency manager of Los Angeles-based American Travel Marketing. “The hotels are starting to get a little nuts, too. In New York, you could get great rates in the summer, but all of that stopped in September and they’re filling up. Our cruise-travel people are pretty busy these days too, so that industry seems to be coming back quite well now.”

There are telling anecdotal signs as well: Advance travel bookings in Hawaii for 2004 are up 10 percent over the same time last year, according to AAA Hawaii, and sales figures through September are up 6 percent over the same time last year.

E-commerce is up at sites such as Waltham, Mass.-based e-Travel North America, where customer transactions have increased 90 percent in recent 12-month comparisons.

“As a frequent traveler myself, I’m personally seeing more crowded planes and airports,” says Scott Gutz, the site’s CEO.

Customer-service phone lines are also getting jammed. New York-based TravelBound Inc., which links travel agents to wholesalers representing more than 10,000 hotels and resorts, expanded call center operations for North American tour operators after a surge in bookings this summer.

Growth areas forecast for the year ahead include the family, leisure and business travel markets as consumers’ incomes gradually increase and fears of layoffs and terrorism diminish.

Among other research findings, family-travel specialists have been encouraged by a recent report from Orlando-based market researcher Yesawich, Pepperdine, Brown and Russell that indicates families are fed up with the daily grind and are seeking to spend more quality time traveling together.

Already, Web sites such as FamilyTravel.com are seeing a surge in user traffic and interest.

“Agents would be wise to recognize that Americans are eager to spend more vacation time with family,” says Lynn O’Rourke Hayes, editor of the Web site, where traffic was up 24 percent in the peak summer months of 2003 compared with the summer of 2002. “That can mean mothers and daughters at the spa, sisters exploring Europe together, or a father and son on a fishing trip. Short holidays are mini family reunions now. Our time and energy-starved travelers are looking for three to four-day getaways and agents who can provide travel solutions for them will garner their business.”

And, if agents really want to take advantage of the economic-travel recovery on the leisure side, they need to take advantage of emerging trends such as a shakeup in the traditional airline provider model.

“On the leisure side, the gap between mainstream airlines and discount carriers is narrowing,” says Tim Winship, publisher of FrequentFlier.com.

“Food service has largely been factored out of the equation. And the perky, high-energy service of the low-fare carriers appeals to many consumers, who are growing tired of the grudging, ‘service-with-a-frown’ that they get from the full-priced airlines,” he says. “All of this leaves the consumer wondering: Why would anybody pay more to fly an aging, crowded United jet, when they can fly JetBlue for less, with more leg room, and seat-back TVs on a brand, new plane?”

Winship forecasts discounters will increase their share of the overall air-travel market to 40 percent by the end of 2005.

Tour operators are finding that special-interest travel is a growing industry segment whether it’s adventure travel or grandparent/grandchild travel or any one of a host of emerging niches.

“We are constantly receiving positive, upbeat reports from our tour operator members,” says Hank Phillips, president of the Lexington, Ky.-based National Tour Association.

“The combination of economic improvement, pent-up demand for travel and an increased acceptance of uncertainty as a fact of life are contributing to the rebound,” Phillips said.

Salt Lake City-based wholesaler, Western Leisure Inc., is seeing average persons-per-tour load factors increase from 35 to 45 per tour now, compared with 20 to 30 per tour in the earlier summer months.

“The small rebound we have seen, along with a rise in the stock market, makes people feel more at ease and, therefore they are more likely to take a vacation,” says Keith Griffall, CEO at Western Leisure.

“For seniors, the stock market and interest rates are more important than the overall economy. So when the market seems to stabilize, they travel more,” Griffall says.

And Western travel agencies are taking notice.

At Marina Del Ray, Calif.-based PNR Travel, sales this past summer doubled those of the summer of 2002.

While the trend is more than welcome for PNR, it also represents a mixed blessing.

“There are fewer brick-and-mortar travel agencies for the consumer to pick from,” says Bob Kern, president of the agency. “This concerns me for the industry as a whole. Travel agencies do a lot of local grassroots marketing. “With less marketing going on, there is more of a chance that the consumers will utilize their dollars on different luxury items, such as cars and appliances.”

On the corporate travel side, growth is also forecast, but is not expected to swing back to the freer-spending days of the late 1990s.

“We predict, for 2004, the beginning of a recovery in business travel,” says Carol Devine, president and chief executive of the Alexandria, Va.-based National Business Travel Association. “Yet, corporations will still be focused on the bottom line, and the cost-consciousness of the past two years will remain.”

But Devine does note a particular lodging-industry niche to watch.

“Business travelers are also turning more to the extended-stay lodging sector, which is now the fastest-growing segment in the hotel industry,” Devine says.

“This market is catching the interest of business travel professionals and people on extended work assignments because it offers room rates much lower than other hotels while providing similar amenities,” Devine says. “This demonstrates that travel is still an essential part of doing business.”