2018 outlook for luxury travel industry buoyed by stronger economy

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A strong economy and a desire to experience the world will lead to further growth in the U.S. luxury travel sector in 2018, according to a new survey of top travel management firms. The survey, conducted in December 2017, reflects even more confidence about the industry than it did last year, despite industry challenges such as terrorism, hurricanes, and Zika virus.

“High-end travelers are feeling bullish about the economy, which should lead to another banner year for luxury tourism in 2018,” says Peter J. Bates, president of the firm that conducted the survey. “They’re determined to see the world and seem to be shaking off concerns about political upheaval and natural disasters.”

In this year’s survey, 37% of advisors said their clients feel cautious about international travel, down from 47% last year. Eight percent said clients are delaying decisions about international trips, vs. 18% last year. That said, seven percent of advisors said clients had canceled international travel plans this year, up from only 4% in the 2017 survey.

In addition, 87% of respondents forecast an increase in revenues this year. The growth is driven mostly by an expected rise in leisure travel (where 84% predict an increase), as well as meetings and incentives (61%) and corporate travel (57%). In addition, 66% see their cruise business rising in 2018.

To keep up with the growth, 68% of respondents anticipate increasing their head count of travel advisors, with only 3% expecting a decrease and 29% seeing no change. As in 2017, the challenge of attracting and training new talent was cited by many respondents as one of the principal issues their businesses face.

Most of the travel management firms surveyed cited positive economic conditions as driving their optimism. The combination of a rising stock market, low unemployment, and the prospect of lower taxes is prompting consumers to spend more on luxury travel. “Travel volumes have increased due to the strong U.S. economy and the sense of couples and families wanting to be together, says Randy Yaroch, Owner and Managing Director for The Travel Society.

While consumers do express some caution about troubling events such as terrorism, natural disasters, and health crises, their financial stability seems to be outweighing any concerns. “Clients still want to travel and have come to the realization that events can and may happen anywhere in the world—including their hometowns,” says Stacy Weigant, Director of the Diamond Luxury Division for Forest Travel Miami. “Most are not letting this stop them.”

Survey participants said that their clients are circumspect about some specific destinations, including Mexico, with its reports of drug-related violence and tainted liquor; the Caribbean, where hurricanes have caused damage on some islands; and Paris, London, Turkey and other European destinations buffeted by terrorism and political unrest. That said, most survey participants felt that such concerns may lead travelers to change plans, but not cancel them. “They influence where folks travel,” says Scott Milne, President of Milne Travel American Express, “but seem to have almost no influence on whether folks travel.” Gail Grimmett, President of Travel Leaders Luxury Brands, concurs: “People are being more thoughtful about destinations, rather than just not traveling.”

Asked about the specific challenges faced by the industry, respondents said that terrorism and crime were having the greatest impact, with one-third characterizing the impact as high (defined as a greater than 30% effect on their business). Of lesser but still substantial significance were hurricanes and other natural disasters (17%), followed by economic concerns (15%). Ten percent said Zika virus, which still affects much of the Caribbean and Central and South America, is having a strong effect, a slight uptick from last year. While Zika is especially troubling for travelers planning to start a family, the concern has a knock-on effect on multigenerational trips as well.

Respondents expected such apprehensiveness to lead to decreases for the Caribbean (73%) and Mexico (42%). That’s a much weaker showing than in last year’s survey—when only 33% of respondents foresaw a decrease in Caribbean and Mexico business combined—perhaps reflecting the stream of bad news from both regions. “The Caribbean is down due to the hurricanes, but will be back once hotels reopen and things settle back to normal,” says Judy Stein, Co-President of Ovation Vacations.

On the positive side, respondents predicted strong increases in interest to North America (81%), Australia (75%), Southeast Asia (65%), and Europe (65%). Travelers are being choosy about where they go on in Europe, said respondents. “Clients are traveling to Italy, Spain, Portugal, Scandinavia, and Iceland because they are perceived as safe,” says Martin Rapp, Senior Vice President Leisure Travel at Altour. “Paris is coming back after the terrorist attack last year.”

The 2018 survey asked about the effect of changing technology and other disruptions to the industry. Half reported that clients occasionally ask them to research Airbnb, onefinestay, and other alternative accommodations for their trips. Even more, 63%, say they believe clients have booked those types of lodging on their own.

Asked what technological challenges their clients express the most concern about, cybersecurity was the number one issue (60%), followed by charges for using cell phone data when abroad (45%), availability of Wi-Fi on flights (43%) and cost of Wi-Fi at hotels (41%). A third said that their clients are interested in “digital detox,” or taking a break from their devices.

Technology also came up when participants were asked to identify the key issues they face in running their business today. Many mentioned the difficulties of keeping up with rapid changes in technology, especially GDS platforms. Several spoke of having to make sense of the glut of information (and misinformation) on the Internet. Jack Ezon, President of Ovation Vacations, sees this as an opportunity for travel advisors to provide value to clients, by “navigating the noise from sensationalized mainstream and social media—and putting things into perspective.” Another effect of technology is that clients expect rapid responses 24/7. “The expectation is that we answer immediately and have confirmations instantly,” says Mary Ann Ramsey, President of Betty Maclean Travel, Inc. “Clients email all day long about every little detail.”

The complexities of the travel management industry are exacerbated by what many respondents consider the difficulty of attracting new talent to their firms and keeping them well trained. “Continuing to find the best talented young people to enter this industry and show them it will be a rewarding career” is a key issue that Linda Raymer, President of the Vacation Travel Division at Travelink, says her business faces, echoing the sentiments of many other respondents.