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:
Coming off the summer 2009 vacation season, there were glimmers of hope on the horizon. The term “staycation”, popular amid the depths of the economic downturn during the first quarter of 2009 seemed to slowly be eradicated from the popular press. Hotels and resorts lured clients by offering $99/night rates with value-added amenities thrown in (children eat free at Ritz-Carlton). Gas prices stabilized with a national average of $2.49/gallon a 37% decrease when compared to July 2008. Better economic news was the catalyst to spur travelers to consider at minimum a short vacation within their drive-time markets. Those opting for air travel were surprised by higher air-fares (due to reduction in capacity) and an increase in over-sold flights.
The following White Paper recognizes the changing outlook concerning vacation culture.
The acceptance of “last-minute bookings” as the new normal
Reduced rates/REVPAR (Revenue Per Available Room Night) for the foreseeable future
Increase in incentive/corporate travel as businesses exit the recession
The value orientation proposition
Even during the past two quarters of economic uncertainty, the growing popularity of vacation home rentals continues. Although supply has exceeded demand at present, future growth coupled with a diversity of supply worldwide may provide a healthy balance in the marketplace.
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