A recent report published by Unity Marketing entitled Forecast for Luxury Travel Through 2010: A Luxury Trend Report provides light at the end of the tunnel.  As many of our property managers and owners know, the luxury travel sector has been one of the categories slower to recover from the most recent recession.

Data collected by Unity Marketing shows spending on luxury travel was down 22 percent for the first 3 quarters of 2009 when compared to the same period in 2008. In plain-speak, luxury travel was slower going into the recession and is slower coming out as evidenced by the continued discounting and incentives offered by marquee hospitality brands and resort areas.

The report looked at both business and leisure travel. While the majority of our partners are “leisure oriented” we at The Society understand some of our partners are intrinsically tied to the business and corporate travel markets.

Concerning the business traveler, the report mentions “More business travel will be planned on reduced budgets”:

• 75% of business travelers expect to spend less or the same on business travel during the next 15 months; yet will be actually increasing the pace of business travel.
• Business travelers will be looking for “value” from the brands they patronize.
• Increased demand for budget and business-oriented hotels and dining options.
• Lower demand for luxury business hotels, dining and 1st class air.
• Deluxe and luxury hotels which catered to business travel must revise their messaging to attract the luxury pleasure travel market.

Concerning leisure travel, the picture is much brighter. In general when the affluent travel for personal pleasure, they are more likely to move up-scale into lodging considered 4-5 star.

While pricing has been the buzz-word for the past few quarters, as we climb out of the recession, increasing rates will not be on the immediate horizon. Most lodging entities reacted to the recession by driving down rates increasing supply while demand has remained static. The end result, an uphill climb to rates of the years pre-recession.

What we suggest our property managers and owners do:

1) Enhanced Differences: Competitive pricing while conducive to many bookings is complex, especially when pitching a vacation home rental. In reality you will not be able to compete apples-to-apples with the Ritz-Carlton down the street. Thus, we suggest “play up your differences” such as:

All of us in the industry are aware of how world events, the economy and general psychology can affect our transient lodging business. During the initial months of the two wars with Iraq, bookings dropped. Last summer (2008) as oil prices spiked and air/car travel increased in cost, bookings dropped. The implosion of Lehman Brothers and subsequent fallout, well, we are still dealing with the aftermath. What about “economic indicators” during this quarter?

The Dow Jones Industrial Average: While the average of 30 stocks is considered a gauge of the health of the stock and equities market, its movement can psychologically affect the leisure travel market. Since June 1, the market has been in a trading range of 8%, volatile yes, significant pattern, no. At present i.e. post Goldman Sachs blowout earnings, most analysts feel the market will continue to trade in a range and not set a course i.e. up or down until the fall i.e. post Labor Day. Trading thus summer has been on light volume thus exaggerating moves to both the upside and downside.

The Conference Board Consumer Confidence Index: This gauge of consumer psychology (based on a representative sample of 5,000 U.S. households) can reflect the overall mood of the consumer. The Index bottomed out at an all-time low of 25.0 points during February, 2009, a few months after the stock market downturn and increases in unemployment claims which continue today. As of June 30th, the Index now stands at 49.3 (1985=100), down from 54.8 in May. Of interest: Lynn Franco, Director of The Conference Board Consumer Research Center says: “After back-to-back months of strong gains, Consumer Confidence retreated in June. The decline in the Present Situation Index, caused by a less favorable assessment of business conditions and employment, continues to imply that economic conditions, while not as weak as earlier this year, are nonetheless weak. Looking ahead, Expectations continue to suggest less negative conditions in the months ahead, as opposed to strong growth.”

USTA/Travel Price Index: The Travel Price Index, TPI, dropped 9.4 percent compared to May 2008. Gasoline prices were up 9.2 percent from April and down 39.9 percent from one year ago. Lodging prices decreased 7.5 percent compared to May 2008 and 1.6 percent from last month. Airfares dropped 13.3 percent against twelve months earlier and 0.5 percent from previous month. The Consumer Price Index, or CPI-U, was down 1.3 percent from May 2008.