Arnie Weissmann
Arnie Weissmann

So far in August, we've seen these Travel Weekly headlines:

"New York's dropping RevPAR dampens outlook for 2020."

"Disney park attendance falls despite Galaxy's Edge debut."

"Inbound travel slump forecasted to be long-lasting."

"Hyatt reports decline in group business."

"CWT's forecast for 2020: Cloudy, with slowdown in price growth."

"Cox & Kings of India misses debt payments; U.S. business unaffected."

Go back a week further, and you can add:

"Hotels in Mexican Caribbean are struggling."

Of course, I've cherry-picked these headlines; I could have focused on others over the same time period that would give someone reason for economic optimism: 

"Hilton soon to launch 'upscale lifestyle' brand."

"Royal Caribbean raises earnings forecast for 2019."

"Air Canada reports record revenue despite Max grounding."

But what caught my attention in this brief snapshot of time was not that the bad economic news outnumbered the good by 2-to-1, but rather that unsettling reports seemed to be coming from several sectors in travel all at once: theme parks, inbound visitation, hotels, business travel and tours.

If I went back a little further in time, I could add that Carnival Corp.'s June earnings report reduced profit expectations by $242 million, thus adding cruise to sectors experiencing headwinds.

Carnival pointed to a confluence of events, including the loss of Cuba as a port of call and a propulsion issue on the Carnival Vista, both unrelated to supply and demand issues. And, significantly, year-over-year profits were still pacing ahead of 2018.

But troubling, from a macroeconomic viewpoint, was acknowledgement that yields in Asia were lower than expected and that there was a slowdown in the company's Europe businesses, a region CEO Arnold Donald characterized as "a contracting travel market."

Disney placed the blame for its drop in attendance primarily on consumer nervousness about potential crowding at Galaxy's Edge. Operating income declined, though the park division nonetheless managed to produce record revenue.

And Cox & Kings' troubles are centered in India, where the company is headquartered, with significant aftershocks in the U.K. But those problems are walled off from its independent U.S. affiliate, which said it has been unaffected. While one certainly can't draw conclusions about a nation's or region's economic health based on one company's performance, Cox & Kings of India's difficulties come amid a general decline in corporate earnings in India.

Throw into the mix strong American consumer confidence, legitimate global concern about the tariff war between the U.S. and China, decent but flat domestic job growth, volatile stock markets, rising wages in the U.S. and heightened geopolitical tensions, and what do you have? Is it partly sunny or partly cloudy? A chance of rain or the approach of hurricane season?

There are two other pieces of intelligence to add to this mashup that I think clarify, rather than muddle, the economic situation. They, like all the puzzle pieces mentioned in the paragraph above, reflect a bit of ambiguity, but (if you'll forgive an oxymoron) defining ambiguity.

First, the Conference Board (which produces the Consumer Confidence Index) reported at the end of July that the number of survey respondents who believe business conditions are good increased from 37.5% to 40.1%. Those who think business conditions are bad also increased slightly, from 10.6% to 11.2%.

This aligns with what sources in the tour sector have shared with me. For many of them, 2018 was a phenomenal, record-breaking year of growth. In 2019, there is still growth, and therefore it is also record-breaking. But growth has slowed and is generally below projections. Not a bad year by any means, but decelerated growth.

These business-is-good-but-not-as-good-as-expected midyear results suggest a partly cloudy forecast, with microclimatic variances depending upon where in the travel ecosystem a company falls. The headlines at the top of this article reflect a mix of systemic challenges, economic uncertainty, possible mismanagement and simple bad luck.

The only travel sector where the phrase "bad luck" is technical and appears without elaboration in earnings reports is gaming. I'm told that if just a couple of "whales" (extremely high-stakes gamblers) walk away from the tables after a winning streak, the overall odds in favor of the house can be significantly impacted.

But in reality, we all work within an environment where there are circumstances beyond our control. Sometimes good luck, sometimes bad luck. A series of unfortunate events will impact our quarter or our year, but economic softness -- or an out-and-out recession -- requires a significantly different approach to operations and planning.

For now, this period of defined ambiguity strikes me as a signal to shift our footing a bit. Not to fully brace for bad times or put the brakes on growth plans but to pay more attention to the macroeconomic "what if?" risks associated with specific expansion plans. If you wait to prepare until you see the surefire indicator of trouble -- widespread discounting across several travel sectors -- it may be too late.


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