While a number of aspects of the U.S. economy could affect
people's propensity to travel, economists largely believe the outlook will
remain strong for the foreseeable future. And at the moment, travel agencies
are benefiting from a period of strong bookings for the next several years,
signaling continued strength.
Yet some indicators, including a drop in consumers' intent
to travel for leisure, have led travel marketing firm MMGY Global to predict a
MMGY CEO Clayton Reid predicted the market will change in
the next 12 to 18 months. In part, that's because MMGY is seeing some rate
sensitivity in the market, typically a sign of challenges to come.
The company periodically polls travelers about how important
price is in their travel decisions. Travelers who indicated they are sensitive
to price have increased from 18% of those polled to 34% in the past 2.5 years.
"When consumers start telling us they're more sensitive
to price, we know that creates rate challenges for suppliers, and we know that
it's also a sign that demand is softening," Reid said.
MMGY's travel sentiment index has declined for eight
straight quarters. Before that, it had been rising since mid-2009, hitting its
peak in mid-2017.
Reid said he doesn't expect a "catastrophic"
travel recession, saying that certain segments, such as affluent consumers,
tend to be resilient and continue to travel even when there is an overall
Phocuswright is predicting a slowdown in growth of travel
spending, albeit a small one.
"We are projecting 6% growth for travel in 2019 and
2020, down to 5% in 2021," said Phocuswright senior director of research
Adam Sacks, president of Oxford's Tourism Economics group,
said he believes it's "premature" to predict a travel recession.
"There's certainly a risk of that, and we acknowledge that,"
Sacks said. "Those risks relate to some fundamental economic risks that
connect to things like how does the trade war play out and the potential for
financial market volatility to spiral. But there's nothing apparent in any of
the data that we track that indicates things are turning south."
According to Sacks, wages continue to increase. The
unemployment rate is at a low 3.6%, and while consumer confidence has "bobbed
around a little bit lately," it remains near historic highs. Tourism
Economics' leading travel indicators are all up, as well, he said.
While he does expect some slowing of growth in travel and
the economy through 2019 and into 2020, Sacks said, "There's nothing that
indicates things are turning in a sharply negative direction."
Tourism Economics prepares the U.S. Travel Association's
monthly Travel Trends Index, which looks at both the next three months and the
next six months. Both of those windows show growth, Sacks said, substantiated
by several factors, including economic fundamentals and survey data from the
Conference Board indicating that the number of households planning to take a
vacation is higher than it has been in the past three years.
He placed the probability of a recession in 2020 at around
40%. While he allowed that those odds are "not insignificant," he
also said, "That means that the more probable outcome is that the U.S.
economy will continue to grow all the way through 2020."
Brian Schaitkin, senior economist at research organization
the Conference Board, concurred that the U.S. economy overall remains strong,
as do consumer confidence levels. He said he believes that the travel sector
will remain healthy.
"There's no reason to think, in the current economic
environment, that this is going to be a bad time for the travel industry,"
Schaitkin said. "Growth may not be as strong as it's been for the last
year or two, but growth should still be healthy. Current economic trends
indicate that consumers will continue to have a fair amount of discretionary
income and should still be willing to spend that income."
Eric Maryanov, president of All-Travel in Los Angeles, said
that agencies are experiencing strong sales right now. If there is some type of
travel recession brewing, he said, "it's not yet showing in the numbers."
Maryanov is also the president and CEO of the agency
benchmarking firm Travel Agency Management Solutions, which currently tracks
data from 82 travel agencies of all kinds. Across the board, he said, those
agencies are up more than 17% in revenue for the first quarter.
He attributed that jump to strong consumer confidence as
well as to changing psychographics among travelers who today view travel as a
necessity, not a luxury.
Even if travel were to hit a point of significant slowdown,
MMGY's Reid said travel advisors would be well positioned.
"The good news for travel agents is we know that when
things get tight and rates become an issue, consumers want advice," he
said. "We also know that brick-and-mortar travel agents continue to be a
credible and valued source for travelers, so I think it's an opportunity for
travel agents to say to travelers, 'As this changes and it gets more confusing,
we can help you.'"