Travel forecast, Expedia’s philosophy and more

 

05 October 2010 10:04 AM
By Jeff Higley
Editorial Director
jeff@hotelnewsnow.com

SCOTTSDALE, Arizona—As the International Society of Hospitality Consultants began looking toward the second decade of the 21st century, members in attendance at the group’s annual conference heard some interesting observations regarding where the travel-and-tourism industry is heading.

Approximately 150 consultants attended the event at the InterContinental Montelucia Resort & Spa, and opening day speakers addressed the conference’s “New Decade: New Ideas” theme.

“It really is an amazing period of time we’ve been through,” said conference chair Sean Hennessey, CEO of Lodging Advisors. “The pace of change and what you need to know to be successful keeps changing.”

Mike Reichartz, VP Market Management, Expedia

Reichartz told the consultants that Expedia does not dictate pricing to hotels.

 

Mike Reichartz VP Market Management Expedia

“We have never told a hotel that they must price here. That’s not what we do,” he said. “All we’re here to do is to share with hotels what we see in the marketplace.”

Notable trends from Expedia data include:

• Travelers in the United States, European Union and the United Kingdom are trading down while more are trading up in Australia and Japan.
• Thirty-four percent of Expedia’s largest corporate clients said they expect to allocate more funds to their travel budgets next year (4% said they would reduce their budgets). Last year it was 13% and 9%, respectively.
• While the company is seeing corporate rates starting to increase, the average year-over-year length of stay was down 4.5% in August.

Reichartz said the importance of social media can’t be overstated in the travel industry.

“Everything is about user-generated content now,” he said. “User-generated content has leveled the playing field against the brand name.”

Reichartz said Expedia is starting to see signs of airline capacity returning.

“Hotels figured out how important and how relevant airlines are,” he said. “What we really want is healthy competition among profitable carriers.”

Peter Yesawich, chairman & CEO, Ypartnership

Yesawich pointed to technology as one of the key elements reshaping the travel-and-leisure business. In 1996, 11% of households had access to Internet at home, but that has reached 70% today. Furthermore, 80% of the households that travel have Internet access at home, he said.

Therefore, “there is a culture of impatience now among consumers,” because of the instant gratification that the Internet provides, Yesawich said.

Yesawich said the penetration of the Internet in America as it relates to travel planning flat lined three years ago. It has held steady in the 56 % to 57% range for the past three years, he said.

According to Ypartnership’s annual study, 87% of respondents rank being able to check lowest fares/rates as the top reason to use the Internet for travel purposes—the 10th straight year it has been No. 1.

 

Peter Yesawich chairman & CEO Ypartnership

“With the advent of the Great Recession this has become more pronounced,” Yesawich said.

Other top reasons travelers use the Internet: easy-to-use booking feature (74%) and photos of rooms/facilities (72 percent).

Meta search engines—sites such as kayak.com, yapta.com and dealbase.com that enable users to enter search criteria once and access several search engines simultaneously—during the past 18 months is having a profound effect on the travel business, according to Yesawich. Twenty percent of all travelers use this type of site, and the number is growing.

The increasing popularity of private sale sites and collective buying sites—think jetsetter.com, sniqueaway.com, groupon.com and tripalertz.com—could further change booking habits at hotels and other travel-related business, Yesawich said. Groupon.com will achieve a billion dollars in revenue on the Internet faster than any previous company, he added.

Yesawich specifically pointed to tripalertz.com, a collective buying site, as one that could change the hotel industry. The general concept is that the more people that book rooms through the site, the lower the price goes.

“Do you think this will hit the meeting side of the hotel business? Well, buckle up,” he said.

One result of the increased reliance on the Internet is that for the first time in 18 years of measurement, brand recognition in hotels is important to less than 50 percent of the survey’s respondents. It fell to 44 percent in 2009.

“Rate now trumps brand in the hotel business,” Yesawich said. “As it turns out, free Internet trumps brand names. As prices become more transparent, brand clarity becomes more urgent.”

As a result of all of this, Yesawich had some not-so-good news for hoteliers: “There will be no pricing power in the market in 2011. Value is vogue. The consumers have the toys, the wherewithal and the desire to find the right places. Consumers aren’t angry, they’re resourceful.”

He added that 2011 will be a year of trading down. The primary way people traded down this year was to reduce the length of their stay, and Yesawich said he expects that trend to continue.

“The biggest challenge in the hotel business today is recapturing that lost night,” he said. “Half of the vacations this year will be weekend trips.”

Humberto Rivero, regional director, the Americas for the International Air Transport Association

IATA, which represents airlines in all countries except Cuba and North Korea, has been surprised by the rate of economic recovery, Rivero said.

“We did not expect the recovery to be so fast and so furious,” he said. “We were prepared for a long ‘L,’ not a ‘V.’”

The association projected profitability for the global airline industry to be US$8 billion to US$8.5 billion during 2010 and approximately US$2.5 billion during 2011.

“There is a flattening out of the business internationally,” he said. “There is a slowing down of traffic.”

The good news for travelers is that during the first quarter of 2011, nearly 1,400 airplanes will come into service—many of those will be new planes rather than the reintroduction of planes that have been parked in the Mojave Desert for the past few years, he said.

“There is a concern, especially in Europe, that there might be too much too soon,” Rivero said. “The outlook looks good, but we’re getting concerned that capacity is coming back, but the bookings and passengers are slowing down.”