Travel pains amid recession
Orlando, Florida (eTN) - Will the current recession stop the Americans from traveling?
Orlando, Florida (eTN) – Will the current recession stop the Americans from traveling? Despite the price of oil having been reduced at its all time low in the last five months, will the slowdown turn off the travel mood?
Experts who attended by the American Society of Travel Agents’ THETRADESHOW, which was held from September 7-9, expressed travel patterns during a time of weaker economy are just plain cyclical. If one looks back at the patterns after 9/11, which saw more serious dips in the industry and needed rebuilding of the travel economy, this one is just a breeze.
Looking at the long-term trends of travel, the market can look to the ageing US population which is getting richer and enjoy traveling more as they get older. “But now they realize too that they need two cars instead of three, or 2,000 square foot homes instead of 8,000. We’ve seen the effect of that on our industry over the years,” said Michael Batt, chairman of Travel Acquisitions Group.
Travel has increased five percent year after year due to the graying of the US population, and increased incomes and new technology bringing down the cost of air tickets. “Furthermore, the business of the ‘brick and mortar’ agencies is over! The only travel agencies who’d survive are the ones who remain much better and more professional than the rest. The travel business will only get better for the better ones,” he added.
“For now, we see a slowdown,” said Ellen Bettridge, vice president, Retail Travel Network, American Express. “But if we look into our year-over-year numbers, we are still up 11 percent. People feel very positive. In Texas, business is doing great. In California, there’s a little bit of a slowdown. In Michigan, there’re still some challenges. In the Midwest, there will be some more downturn. But overall, we’re still moving along depending on local economy,” she said, adding that the key is to diversify business and to support effective channels for business such as online, walk-in, Internet, and any data distribution agents use and manage.
Bettridge stressed that they know that people still want to travel, despite the downturn. Americans are working so hard and need a break at the end of the day. American Express’ 2009 and 2010 bookings are coming in. She said that although people are cutting back on expenses, they still look forward to their vacations. “Americans still want what they want,” she said.
“Demand remains the same. It had slightly fallen in the last 10-12 weeks. There was a price fallout; however, travel industry people make sure they can still make profit. There have been major adjustments in fixed and variable costs,” said Batt. There’s really nothing wrong in having some tightness in the market because it just makes people work better and appreciate this business.
Cruise lines can only get bullish in a market such as the current one. Maurice Zamati, CEO and president, Costa Cruise Line, North America said that cruising is recession-resistant. “Buying the cost of crude in the US in dollars vis-à-vis buying it in Europe in Euro automatically gives us a 50 percent discount. Secondly, considering that about 12.6 million from North America are cruising this year and many travel destinations feed this industry, pit that against tourists who travel over land within the US, we believe that we are growing and we’ll continue to build regardless.”
According to Zamati, under the current condition, he disagrees with the picture painted by Peter Yesawich, president of Ypartnership,that a situation of over-capacity exists. He thinks it is more of an under-demand scenario today. “Considering that we had 44 million guests on the ships, out of 250 million people, that number is a lot for an industry that penetrates the vacation industry by only 4 percent. Another 125 million are predisposed to take a cruise. We have a lot of room to go and we need to create more demand,” he said.
Fuel prices however have affected the cruise industry on the bottom-line profit. Zamati said a number of cruise lines have done well in the last years and have given money back to the investors already. “So at this point, they are not really concerned about the fuel prices going up or down, but we believe we are going to see better times ahead. We know that people would want to get away and would put off buying the next home accessory and jewelry, rather than not travel,” he said.
Batt, however, said that at times like these, people also need to invest more money in the travel industry to create that demand. “People will only keep this business going if they make money. And the more they sell and make more money, the more they will keep it healthy and growing,” he said.
While consumer confidence is at its all-time low in 25 years, given that Americans still want to travel, this hotel company thinks the road ahead is for their growth in Asia. “Overall we’re doing well, and being a global company keeps us afloat in the Middle East and Central America too,” said Julius Robinson, vice president, Global Sales Intermediaries, Marriott International. He said Marriott is quite satisfied with what’s happening with the company outside the US. The major gateway cities in the country are full with international guests.
“Overall, this is a pretty short cycle of about 12 to 18 months,” Robinson added. In addition, he said that the volatility of oil prices have really swayed their summer numbers. “We’ve worried that we might have the worst situation than we had previously thought; the scale back in some places with higher oil prices have helped us in this scenario. We’ve concentrated in offering guests to travel 2 to 4 hours from their home as the best place for them to be. But what we need to work on now are our strongholds like the Caribbean islands and destinations where we don’t have the lifts but where we need to generate traffic and develop our business as quickly as we can in this economic climate,” he added.
“When the dollar weakened, we only overcame our problems. In a recession, you can better service your customers and give them anything they want for a better deal,” said Imad Khalidi, president, Auto Europe LLC.