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U.S. Travel Outlook…Look Out

U.S. Travel Outlook…Look Out. What We’re Going to Review Today. The Economy and the Consumer Domestic Leisure Travel Domestic Business Travel The Lodging Industry The Airline Industry International Travel New and Continued Challenges What You Can Do. Getting Right to the Point.

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U.S. Travel Outlook…Look Out

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  1. U.S. Travel Outlook…Look Out

  2. What We’re Going to Review Today • The Economy and the Consumer • Domestic Leisure Travel • Domestic Business Travel • The Lodging Industry • The Airline Industry • International Travel • New and Continued Challenges • What You Can Do

  3. Getting Right to the Point • If you didn’t like 2008 you’re not going to like 2009 • Business travel under attack • Leisure travel – just how resilient is it? • No longer “patriotic” to travel • As with the auto industry and retailers, leisure travelers are looking for “deals” • One glimmer of hope - travel intentions and attitudes improve in February 2009

  4. The Economy and Consumer Pessimism

  5. Economic Trends Abrupt drop in GDP in Q4 ‘08 continued into Q1 ’09; U.S. recession may last into 2010 4.4 million jobs lost since recession began in December 2007 – more than half occurring in past four months 651,000 jobs lost in February 2009 alone – largest single monthly loss since 1974 200,000 travel-related jobs lost in 2008 and another 247,000 job losses likely in 2009 Unemployment rate surges to 8.1% in February -- highest rate in 25 years and forecasted to exceed 9% this year “Companies are in survival mode and are really cutting to the bone…out of fear of an uncertain future.” Ken Mayland, ClearView Economics, February 6, 2009 Source: U.S. Department of Labor

  6. U.S. Economic Outlook 20082009F Unemployment Rate 5.8% 9.2% CPI +3.8% -0.7% Real Personal Disposable Income +1.3% 1.8% Real Consumer Spending +0.2% -1.5% Real GDP +1.1% -3.6% Total Profits -9.4% (f) -22.1% Source: Oxford Economics

  7. Consumer Confidence At Record Low Consumers increasingly pessimistic about future 25.0 1985 = 100 Source: The Conference Board

  8. Traveler Sentiment IndexTM (TSI)Improvement driven by gains in “interest,” “affordability” and “time.” 100 93.0 90.2 • Interest • Time Available • Money Available • Affordability • Service Quality • Safety of Travel 78.2 March 2007 = 100 Source: U.S. Travel Association/YPartnership Travelhorizons™

  9. Traveler Sentiment Affordability IndexPerceived affordability of travel rises… March 2007 = 100 Source: U.S. Travel/YPartnership Travelhorizons™

  10. Largely based on smaller increases or declines in travel-related costs(Percent change YTD through February 2009/2008) Food away from home Recreation Airfares Lodging Motor Fuel Source: U.S. Travel Association – Travel Price Index

  11. Gas prices plummet from $4.00+, but are beginning to rise Source: AAA Daily Fuel Gauge Report www.aaa.org

  12. Leisure Travel Trends • First half of 2008 was doing well, flat summer and then fall off in 4th quarter • Shorter, closer-to-home • Less costly – quest for values and “deals” • Trading down, not out • Most Americans still view leisure travel as a “right” and will forego spending on other items to travel

  13. Vacations Are Needed More Now Than Ever!

  14. Leisure travel intentions* among U.S. adults are up * Intend to take leisure trip in next six months Source: U.S. Travel Association/YPartnership travelhorizons™

  15. Financial issues affecting leisure travel go beyond travel-related factors(Percent “worse”) To what degree is each of these financial issues affecting your vacation plans over the next 12 months? (Somewhat/great deal) Source: U.S. Travel Association/Ypartnership travelhorizons ™ , February 2009

  16. Money Available for Travel IndexIndex improves in February 2009, but still below February 2008 level 86.8 March 2007 = 100 Source: U.S. Travel/YPartnership Travelhorizons™

  17. Looking for Deals and Deep Cost Savings • Level of motivation by type of discount varies by generation • Need to look at target markets to determine which programs have best chance to succeed • Discounts can motivate vacation travel, but some more effective than others • $25 gift or gas cards not enough • Free golf – forget it

  18. Deep discounts needed to influence Americans’ travel decisions Which of the following incentives would be likely to influence your decision to select one destination or travel supplier over another? Source: U.S. Travel Association/Ypartnership travelhorizons™, February 2009

  19. The deals are out there!

  20. Las Vegas is largely on sale

  21. Discounts of 50% or more, especially for “last minute” trips, are common

  22. Destinations promoting special deals to generate both leisure and meeting travel • HAWAII CVB LAUNCHES HOT RATES, HOT DATES PROGRAM. • To help generate new business bookings through 2010 • In partnership with HCVB member hotels and resorts statewide • Provides money-saving deals on accommodations, meeting facilities and other specials. • BusinessAloha.com (HVCB's business meetings Website) has an online clearing house

  23. DiscoverAmerica.com links to deals

  24. Consumers open minded to the destination Discounts may help close the deal “Which of the following destinations do you plan to visit in the next 12 months?” (check all that apply) A third likely to choose destination based on the best deal Source: Travelzoo Subscriber Study

  25. Domestic Leisure Travel Outlook for 2009 Domestic Leisure Travel Down 3.5% Source: U.S. Travel Association and Tourism Economics

  26. Business Travel Total Business • $244 billion in expenditures • 2.4 million jobs • $39 billion in federal, state and local tax revenues Meetings and Events • $101 billion in expenditures • 1 million jobs • $16 billion in federal, state and local tax revenues

  27. 2009 tough for business travel • 93% of companies implementing cost-cutting measures – Of these, 87% report travel and expense restrictions (up from 63% in July/August 2008) (Association of National Advertisers) • 45% expect to take fewer business trips in first half of 2009 versus 2008 (U.S. Travel/Ypartnership’s TravelHorizons) • 47% of executives plan to take fewer business trips over next 12 months (Economist Intelligence Unit) – and will downgrade class of air travel and accommodations • 51% of business travel decision makers report declines in business travel in recent months (APCO/Kellogg Survey)

  28. Association attendance expected to experience the largest drop in 2009 *Survey conducted November 11 – 27, 2008 Association Government All Planners Corporate Source: FutureWatch 2009 – MPI and American Express

  29. Corporate meetings are expected to take the largest hit in terms of cancellations % reporting cancellations *Survey conducted November 11 – 27, 2008 The economy, jobs, need for industry to cut costs and demonstrate value – Add “image” to the list Source: FutureWatch 2009 – MPI and American Express

  30. Meeting planners expect to do more with less in 2009 % predicting budget cuts in 2009 *Survey conducted November 11 – 27, 2008 Source: FutureWatch 2009 – MPI and American Express

  31. Business Travel Alternatives =Fewer hotel room nights, fewer travelers, less spending • Teleconferencing • Video Teleconferencing • Telepresence • Technology Replacing Trips? • 81% of travel buyers think so, but… • 20% said that this technology complements trips rather than replace it Source: NBTA’s Impact of Economic Downturn Survey 2008

  32. Business Travel Outlook Domestic Business Travel Down 5.6% Source: U.S. Travel Association and Tourism Economics

  33. Lodging Industry Feels the Impact

  34. How the lodging industry fared in 2008Started strong…ended weak • Compared to Year-End 2007 • Occupancy down 4.2% nationally and down in all but five states (Iowa, Louisiana, North Dakota, Texas, Vermont) • Average daily room rates up 2.4% nationally and higher in all states except Nevada and Rhode Island • Revenue Per Available Room down 1.9% for U.S. and down in 31 states Source: Smith Travel Research

  35. Lodging industry begins 2009 on a sour note(YTD through February 2009/2008 % change) ADR RevPar Supply Occupancy Demand Source: Smith Travel Research

  36. Total United StatesLodging Industry Forecast % change over prior year Source: Smith Travel Research, Inc.

  37. But other forecasts much more pessimistic • PKF-HR – Current decline in U.S. lodging industry will be deeper and last longer than previously predicted. • Rev-Par now expected to drop 13.7% in 2009 • 5.4% decline in demand, 7.8% decline in occupancy and 6.4% drop in ADR expected • 30.1% decline in profits projected for 2009 • Greatest declines expected in Q1 2009 and should begin to subside by mid-2009

  38. The State of the Airline Industry • Not so good…

  39. Domestic and international enplanements (Percent change 2008/2007) International Domestic Total Source: Bureau of Transportation Statistics

  40. Air Capacity Cuts • 10% reduction annually through 2011 • Flights dropped 7% worldwide in Q4 • Cuts impact business and leisure travel

  41. Fewer flights…fewer seats…fewer options(Decline in seats – Nov 2008 vs. Nov 2007) Source: Official Airline Guide

  42. International Visitors to U.S. (2000-2009) Arrivals in Millions Sources: U.S. Department of Commerce, ITA, Office of Travel & Tourism Industries; Secretaria de Turismo (Mexico); Statistics Canada & Tourism Economics

  43. After sizable increases, overseas visitors to the U.S. likely to “take a holiday” in 2009(Year-over-year percent change) 2011f 2005 2006 2007 2008p 2010f 2009f p = Preliminary; f = Forecast Source: U.S. Travel Association, Tourism Economics and Office of Travel and Tourism Industries

  44. International visitation was strongest segment in 2008…reverses predicted for 2009 International Visitors International Down 4.8% Overseas Down 7.1% Sources: U.S. Travel Association ,Tourism Economics and Office of Travel and Tourism Industries

  45. Spending by international visitors drops from double-digit increases(Year-over-year percent change) p = Preliminary; f = Forecast Source: U.S. Travel Association, Tourism Economics and Office of Travel and Tourism Industries

  46. Total Travel Spending in U.S. Percent change in travel spending from prior year 2010f 2008p 2006 2007 2005 2009f p = Preliminary; f = Forecast Source: U.S. Travel Association’s Forecast Model

  47. Summary – 2009 Forecast Domestic Leisure Domestic Business Expenditures International - 4.8% (international) -7.1% (overseas) -3.5% -5.6% -6.7%

  48. Challenges Facing the Travel & Tourism Industry

  49. Bailouts and Business Travel – A Dangerous Road • Incentive travel perceived as symbol of excess • Bailout recipients facing new guidelines on conferences and events • Potential to extend to non-bailout companies • Temporary changes in travel policy could become permanent • Potential impact on hotels, airlines, attractions, resorts, travel agents, online bookers, etc. Source: U.S. Travel Association, February 6, 2009

  50. Barriers to International Travel • The global economic meltdown • U.S. does not make entry easy for visitors • United States lacking national program to promote the U.S. internationally (Tourism Promotion Act) • Late to the table in signing MOU with China

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