The business travel market has been outperforming the leisure side for two years, but the gap is beginning to narrow, according to analysts with ITG Investment Research.
“The pickup in business is starting to level off,” said Matthew Jacob, a senior leisure analyst with ITG.
Jacob said business travel during the summer is traditionally slow, and that its performance this fall will indicate whether its strong growth since November 2009 will begin to dip or is simply leveling off.
At the same time, Jacob said, leisure travel is picking up.
He cautioned that leisure’s improvement will depend on the avoidance of a double-dip recession.
Despite the negative economic news during the current quarter, Jacob said there has been no obvious evidence in recent booking trends, except a modest drop-off in the number of hotel bookings in the first week of September.
“Cruise is very strong as of late,” Jacob said, noting that the Caribbean is performing well, and so are exotic destinations. Europe, however, continues to drag.
“Europe is weaker than you’d think, but the bright side is everything else is better than you think,” he said. “Europe pricing [this summer] was worse than people expected and worried it would be. Now the fourth quarter is weaker than expected because of Europe.”
Jacob said Europe cruising has been hit by concerns about traveling in the Middle East and Africa and the European economy.
In both the cruise and lodging sectors, ITG has found, the upper ends of the market are performing better than the middle and lower ends.
“People migrated down over the last few years, and now they are paying up because the prices are not as high as they were,” Jacob said.
In the cruise sector, that is evident with the strength of exotic cruises and Alaska sailings, which were weak during the recession and are now picking up, Jacob said.
Within lodging, ITG found that high-end chains have enjoyed particularly strong year-over-year increases in average daily rate relative to midscale and economy chains in recent months, with luxury leading the pack.