For U.S. hoteliers and online travel agencies, the living may be easy in summertime. In the fall? Not so much.
That’s the crux of three recent reports from travel analysts and trade groups that are forecasting strong year-over-year gains for U.S. travel spending this summer and, from one analyst, a prediction of a spending drop-off once the weather cools.
About 64% of U.S. adults, or 154 million people, are planning at least one leisure trip during the next six months, up from the 56% that were planning summer and early fall trips a year earlier, the U.S. Travel Association said, citing an April survey of 2,200 people that it conducted with MMGY Global (click on chart
U.S. Travel also said that the number of business trips during the past 12 months is at a five-year high and is expected to rise “slightly” during the next six months.
Meanwhile, Deloitte, in a separate report, said 31% of respondents to its April survey of 1,000 people planned on traveling on Memorial Day weekend, while 54% said they expected to take a leisure trip between June 1 and Labor Day.
Those numbers are up from 24% and 52% a year ago, according to Deloitte, which added that 80% of those polled will spend as least as much on summer travel as they did last year.
“Room rates are back to levels reminiscent of pre-financial crisis peaks,” Tim Mullaney, financial analyst at PhoCusWright, said in a webinar conducted on May 16. “People were waiting for the price of gas to spawn some pullback in consumer spending, and it didn’t happen.”
(PhoCusWright is owned by Northstar Travel Media, which also publishes Travel Weekly.)
Those predictions are consistent with a report released this month by Smith Travel Research (STR) that said U.S. hotel-room revenue will reach summer-
record highs this year.
Revenue per available room for June, July and August will rise 5.7% from a year earlier to $73.59, beating out the previous summer record of $73.26 in 2007, according to STR.
But PhoCusWright’s Mullaney said such a boom might be short-lived, noting that the travel industry is in for “one to one-and-a-half more good quarters.”
After that, he expects consumers and businesses to pull back on travel spending, owing to uncertainty over both the upcoming presidential election and what Congress will do to address national debt issues.
Similar questions over the proposed debt ceiling caused a travel-spending lull last summer that “really froze the market,” according to Mullaney.
“There are going to be so many stories in the paper about these crazy Congress members driving us over the cliff,” Mullaney said. “There’s a pretty good chance we’re going to see some version of that movie again.”
As for sectors within the travel industry, online travel agencies (OTAs) will handle the business fluctuations better than hoteliers, Mullaney said. That’s because OTAs are almost exclusively dependent on consumers who are less likely than businesses to shelve travel plans as the economy softens, even if they downgrade on a hotel class or trip length.
Additionally, hotels, which allocate anywhere between 6% and 12% of their rooms to OTAs, depending on travel expectations, are often hit harder in a downturn like the one forecast for fall because they lack the flexibility to push available rooms out to the OTAs quickly enough when economic hiccups occur.
“They make these [OTA] allocation decisions months in advance and don’t have the flexibility to turn the tap on and off as nimbly as they want to,” Mullaney said. Follow Danny King on Twitter @dktravelweekly.