Thus far, 2018 has proven to be a prosperous year for many
in the industry, thanks in no small part to the strength of the U.S. economy.
And while economists are predicting a slowdown in growth next year, the next 12
months, barring unforeseeable incidents, should remain strong, with few signs
of a pullback on the horizon.
"The economy is clearly strong," said Andrew Lo, a
professor at MIT's Sloan School of Management and director of the MIT
Laboratory for Financial Engineering. "We've got pretty low unemployment,
very reasonable inflation, and all eyes are on the stock market, which has done
quite well. I think, overall, both in the United States and more broadly around
the world, things are going quite well. In that kind of an environment, it's no
wonder people are confident about the future and willing to spend money on
things like vacation and travel."
There is little doubt the travel industry is benefiting
from the strong economy, with many networks reporting record sales years. For
example, Oasis Travel Network recently said it has seen a "noteworthy rise
in business in recent months" and saw an "unprecedented jump" in
bookings and sales in July, with cruise bookings up 108% year over year and
land sales up 25%.
The health of business travel, too, is largely tied to the
Mike Eggleton, senior manager of analytics and research at
BCD Travel, asserted, "There's a pretty compelling correlation between the
performance of the U.S. economy and growth in spending by businesses on
Both 2016 and 2017 saw strong 6% growth in spending on
business travel, said Eggleton, who was the primary author of BCD's 2019
Industry Forecast released in September. That growth slowed a little in 2018,
to 4.5%, a rate that is expected to stay level in the coming year.
According to BCD's forecast, U.S. economic growth is
expected to strengthen to 3% in 2018, up from 2.3% in 2017, thanks to a number
of factors, including a healthy labor market, consumer spending and investment
"The U.S. economy was in really good shape when Trump
came to power, and that economic momentum has been boosted by some of the
things he has done, like the tax cuts and Jobs Act and the Bipartisan Budget
Act," Eggleton said.
Brian Schaitkin, senior economist with the Conference Board,
also pointed to a number of factors contributing to today's strong economy: the
strength of business and consumer confidence, "at highs for more than a
decade each," and an unemployment rate of 3.9%, the lowest since the late
"What you have is a situation where the number of people
who feel confident about their job prospects is much higher," Schaitkin
said. "That's leading to more and more consumption, and when people have
more money to spend, they spend that extra income on discretionary items,
typically. Of course, travel and leisure is a key part of that."
The economy took a long time to recover following the Great
Recession that began in 2008, Schaitkin said. A number of things needed to
happen to enable that recovery. Businesses were conservative in investments in
an uncertain environment, as were consumers. Consumers had lower incomes and
net worth, so their spending on consumption of things like travel was down.
"The process of getting people's credit back in order,
the labor market back in order, all of that took a long, long time," he
Evidence of the economy growing more quickly emerged around
2016, and it has accelerated since then. Tax cuts and cuts to government
programs by the Trump administration this year added to the strong economy.
MIT's Lo also pointed to population growth and a productive
workforce as well as technological innovations fueling new jobs and
opportunities for investors.
According to Eggleton, growth in the U.S. economy is
expected to slow a bit in 2019, but "that's not a problem. That's more of a
shift into a moderate growth mode."
Lo pointed to a number of risks the economy faces going
forward, including potential political instability, inflation, rising interest
rates and the potential for the economy to cool too quickly and cause a small
"But so far," he said, "it doesn't look like
that's as much of a risk as it might have been in the past. So as long as we
don't see any geopolitical issues or tremendous political instability, I think
we should be in good shape."
Asked how long that will last, Lo predicted that the economy
will at least be in "reasonable shape" for the next six to 12 months.
"If you look at the jobs numbers, housing starts,
inflation and Fed policy, we're still in a period of relatively low interest
rates, and business is still growing," he said.
Geopolitical disruptions remain one of the biggest risks,
according to Lo. For example, a significant conflict with North Korea could
cause a pullback of business growth.
"But apart from that, I think that certainly all indications
point to strong growth through the end of this year and hopefully into next,"
Schaitkin also predicted the growth of the economy will
likely slow going forward. The chances of another recession are "fairly
low" over the course of the next year.
"We already know that the labor market is pretty
strong," he said. "There are not any clear financial market
imbalances that seem like they're going to trigger a domestic or global
financial crisis in the near term."
Interest rates will be raised, he said, but it would take an
"unexpected shock" to trigger a recession in the near-term. As an
example, he cited 2000-2001, when the shock was overinvestment in new
technology firms that resulted in the bursting of the dot-com bubble.
"It's hard to say what exactly that shock will be,"
Schaitkin said. "But history suggests that that shock will indeed come