Posted on: January 7, 2013
The bang! moment
In the endless economic discussions leading up to the fiscal cliff deadline, reference was occasionally made to "the bang moment," which occurs when lender confidence in a financially challenged system collapses, interest rates rise and economic chaos ensues. Even after the congressional deal was struck last week, I still heard concerns about bang! if the U.S. does not more seriously confront its debt demons.
But, judging from the comments of most of the nine industry chief executives I spoke with while preparing an article for last week's Preview 2013 issue
, financial confidence within the travel industry is on the rise.
The CEOs of Delta, Four Seasons and Hertz all said they believe that with certain geographic exceptions, underlying economic fundamentals are sound or repairable. In fact, eight of the nine executives could be classified as optimistic. Only Ray Snisky, executive vice president of LaMacchia Enterprises (parent of Funjet, Southwest Vacations and Blue Sky Tours, among other package brands), expressed concern that Obamacare-related costs will place an undue burden on businesses, which will lead to layoffs, resulting in fewer discretionary dollars to spend on travel.
On the whole, I was buoyed by the discussions. I've been conducting these interviews annually for the past four years, and this was the first time I spoke with an airline exec who wasn't overly concerned with fuel costs and a hotelier who talked excitedly about expansion. Last year's "cautious optimism" was replaced by a more confident optimism.
Ultimately, of course, you can't take optimism to the bank, and it's an underlying assumption of bang-moment theorists that challenged economies will carry on blindly for years without collapse. But collapse they will, often at surprising moments. On the individual level, confidence, after all, is not controlled by a rheostat -- it tends to toggle either on or off.
Although our fiscal issues still need work, there is reason to believe the confidence is justified.
Every October, Travel Weekly publishes the Travel Industry Survey, in which we ask thousands of travel agencies about how they operate and how well they've done. In 2008, the year the economy unraveled, 80% of agencies reported an overall decrease in business. What's more, business stayed in the dumps for the next two reporting cycles, with a majority of agencies -- 78% and 63%, respectively -- again reporting a decrease.
This past year, however, a painfully slow recovery accelerated significantly, and only 17% reported business was still falling.
That's not, of course, to say we've recovered to 2007 levels, but it's reasonable to assume it reflects a rising confidence among consumers, at least as regards their willingness to spend on travel. The late, great travel researcher Stanley Plog showed that, although travel is on one hand fragile and thrown off track by anything from weather to pocketbook concerns to terror, it is also very resilient because when people deny themselves a vacation year after year, pent-up demand builds, and they eventually get cabin fever. Their desire to travel after three years is much greater than, say, their desire to buy a new refrigerator or other consumer goods.
And during and following the recession, our survey also revealed clear trends manifested by agencies that did well during the economically challenging times and those that did not. Those that did poorly retrenched and were still retrenching after things turned around for other agencies. They cut marketing spend, let staff go or reduced operating hours. They dropped affiliations with consortia or franchises to save a few dollars.
On the other hand, those who did well continued to market aggressively, even as they watched expenses in other areas.
During the interviews, I didn't really hear anything that would lead me to believe we'd be hitting a bang moment in 2013, but I did experience an "aha!" moment. For the retail sector, I interviewed Van Anderson, co-president of Avoya Travel. His host agency was among those whose business increased every year during the economic crisis, and in fact every year since it was established in 2001.
The secret to his success? Speaking before it was known if Congress would act to circumvent automatic spending cuts and tax increases, he observed: "Focusing on the things we can change, like making calls to customers we haven't spoken to in six months, is a much better way to spend time than worrying about the fiscal cliff." Email Arnie Weissmann at firstname.lastname@example.org and follow him on Twitter.
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