The Year Ahead

As the eve of the New Year approaches our thoughts turn to the forces most likely to affect demand for travel services in the year ahead and, specifically, the manner in which consumers will plan, shop for, book, consume and even share commentary on travel experiences and suppliers. Some trends are perfectly clear; others less so. Still others are the object of considerable speculation:

• Demand for leisure travel services (both domestic and international) will continue to grow, although at a more modest rate than observed this year because of consumers’ unprecedented level of personal debt and creeping anxiety about job security, the price of gas at the pump, interest rates and the volatility of the stock market. Nevertheless, leisure travelers will continue to fill more airline seats and hotel rooms than business travelers as the gap between the two sources of demand widens;
  
  
• Demand for business travel services (again, both domestic and international) will also show marginal growth, coming principally from an increase in corporate and association meetings rather than trips taken by individual business travelers, one third of whom now tell us they are seeking ways to get their business done without traveling;
  
  
• Saturday night will remain the busiest night of the week in the U.S. lodging industry as “time poverty” continues to dictate when Americans actually travel for leisure (weekend trips now represent the majority of vacations taken by Americans);
  
  
• The incidence of Internet usage by consumers to plan travel experiences will remain flat (at roughly 70% of the population of business travelers, and 65% of the population of leisure travelers) while the incidence of Internet usage to book reservations will continue to grow, albeit at a much slower rate than observed in recent years;
  
  
• Meta search and comparative shopping sites for travel services will attract greater traffic as they receive more exposure in the consumer press and more consumers discover the power of these tools to manage the cost of travel in an increasingly value-conscious world (thereby placing greater pressure on suppliers’ margins at a time when the cost of product/service delivery continues to rise);
  
  
• The social networking buzz will continue to build, and for good reason: one-third of travelers regularly visit advisory web sites like tripadvisor.com to seek the opinions of those who have “been there,” and fully one-third have visited myspace.com to read a travel review. Remarkably, there are now more travelers who are likely to read a review authored anonymously online than one published by a credentialed journalist! Nevertheless, fewer than one out of five Internet users expresses interest in sharing photos of travel experiences (note: these and related subjects will be the focus of an in-depth study we are planning on the “next generation” of travelers defined by attitudes toward and usage of technology during the first quarter of 2008);
  
  
• The incidence of family travel (with children) will continue to grow as more parents who live in households with children succumb to the sense of guilt they don’t spend enough time with their children and, therefore, look to vacations as a surrogate for the “family time” they didn’t have at home. Demand for leisure travel services will also get a boost from grandparents (one third of leisure travelers are now grandparents, one out of five of whom took at least one leisure trip with their grandchildren last year) as the “multi-generational” travel market comes of age both literally and figuratively;
  
  
• The Golden Era of Baby Boom Travel will begin to unfold as the 78,000,000 adults who meet this demographic description begin to turn 60 years of age and exercise their robust sense of wanderlust (fueled by good health and more discretionary income). Hence, adult couples will continue to dominate demand for leisure travel services;
  
  
• The cost of air travel will escalate faster than we have observed during the past two years as operating costs (particularly for fuel) continue to rise and these increases are passed on to fliers. The nominal “low cost carriers” will be the primary beneficiaries of this trend as more consumers actively shop for better fares regardless of the frequent flier programs to which they belong (when asked which type of airline they would prefer to fly if all are available at their point of departure, 23% of travelers now state a preference for “legacy” carriers, 33% for “low cost carriers,” and a remarkable 44% say the type of airline “doesn’t matter” because the most important thing to them is simply getting the best fare);
  
  
• Unfortunately, you can pretty much count on one out of every three flights you take being delayed, regardless of the carrier you fly or fare you pay;
  
  
• More travelers will discover and support travel service suppliers who demonstrate their commitment to environmental responsibility (eight out of ten U.S. adults now claim to be “environmentally conscious”) as the debate about carbon offset programs enters the mindset of enlightened consumers;
  
  
• The full impact of the meltdown of the sub-prime mortgage market remains a source of great speculation (because the tremors will continue throughout 2008), but there’s no question the industry will feel the repercussions: 12% of U.S. adults state the crisis has already affected their leisure time and travel behavior. Fully 17% say an unexpected increase in their monthly mortgage payment would have a similar effect on their future travel behavior. The only silver lining in all this news is that the expected outcome is less likely to be the cancellation of travel plans and more likely to be the election of less expensive vacation alternatives;
  
  
• Concerns about the price of gasoline at the pump have reached an all-time high (62% of Americans now identify this as an issue of concern), presumably driven by the recent anxiety-inducing headlines about the price of oil. But will this translate into a wave of cancelled vacations? Probably not. If fact, both historical travel patterns and recent market intelligence we have gathered on this subject reveal that the most likely response to the elevated price of gas at the pump will be vacations taken closer to home, for a shorter duration, and on which expenditures for accommodations, food and beverages, etc. are actively managed to stay within the planned budget;
  
  
• The languishing value of the U.S. dollar is also likely to affect outbound traffic from the U.S. to international destinations (according to our recent travelhorizons™ survey, four out of ten U.S. travelers stated that further declines in the value of the U.S. dollar would affect their international travel plans), yet the outcome is likely to mirror that anticipated as a result of the increase in gasoline prices: the incidence of international travel may even grow, but the destinations selected, accommodations used, and length of stay may all be amended to remain affordable;
  
  
• The cruise industry will begin to absorb the oversupply of cabins that has plagued most operators during the past year through the continuation of aggressive pricing and promotional programs, as well as the redeployment of vessels in emerging market areas;
  
  
• Timeshare sales will continue to grow as more consumers fulfill their dream of owning vacation time (there are now as many Americans interested in purchasing vacation time during the next two years as there are who currently own vacation time) as the escalating cost of resort real estate makes both timeshares and longer fractional ownership interests look more attractive (and sensible).

And so, on balance, we approach the year ahead with a cautious sense of optimism, yet mindful the industry remains vulnerable to forces well beyond its control: the price of oil, a possible recession, the ever-present threat of terrorism, and the policies of the soon-to-be new administration in Washington. But as we peer through the haze we are comforted by what appears to be an immutable tenet of contemporary life:  to Americans, travel is a birthright, and one we will continue to exercise in one form or another regardless of uncertainty about the future.

To learn more about these and other insights from our National Travel Monitor, click here.