Travel-planning apps promise endless information to help us execute the perfect trip. Yet, our research shows us that these apps haven’t yet reached their fullest potential. How can destinations make the most out of their apps? The answer might be as simple as developing trust and personalization.

Every year brings new, cutting-edge technological advancements. As many of us know by now, smartphones are reliable and capable tools to assist with day-to-day tasks and provide a plethora of knowledge. It feels like technology is always one step ahead of us, keeping us connected and organized.

But according to our recent The State of the American Traveler survey, technology isn’t always the preferred source of knowledge used when it concerns travel planning. The report, published every quarter, asks a representative sample of 2,000 American leisure travelers about their travel plans for the upcoming year. The Spring 2019 findings show a notable decrease in American traveler’s use of apps to plan their trips compared to Spring 2018.

The most drastic difference compared to Spring 2018 is the decrease in use of company-specific hotel apps. There was a 13 percent drop in usage among travelers between Spring 2018 and 2019. Additionally, while a solid 60.0 percent of American leisure travelers used an online travel agency last year, this year the corresponding figure has sharply dropped to 52.0 percent. Similarly, only 44.0 percent of travelers report using online recommendations such as TripAdvisor, Yelp, or Trippy compared to 47.1 percent one year earlier. Airline and last-minute travel detail hotel apps both decreased somewhat as well.

 

Three apps did, however, appear to be on the rise. Weather apps increased in Spring 2019 from 25.5 percent in 2018 to 29.7 percent. Travel logistics and management apps increased from 8.4 percent in 2018 to 12.3 percent. Lastly, language translation apps increased to 7.6 percent, which is up from 5.5 percent one year ago.

So, why is this? Naturally, travelers want to feel a certain level of trust familiarity when receiving recommendations to plan their trips. As seen in the graph below, face-to-face interactions with relatives and friends score high in frequent use and assert the highest level of trust. But when travelers observe friends and family over social media to glean travel advice, both use and trustworthiness decrease.

 

Word of mouth is clearly the dominant travel-planning source, because leisure travelers value face-to-face interactions when receiving travel advice and use it to plan their trips more frequently. It makes sense: why would you take advice from a stranger through a screen when you could take that of a family member’s, who is more likely to know your idea of a perfect vacation?

Travel apps have the potential to provide greater variety and quantity of information compared to the knowledge and experience of a fellow traveler, there is no doubt about that. Recommendation Apps such as TripAdvisor and Yelp offer a plethora of honest opinions from real-life travelers. Travelers clearly appreciate the quantity of information travel apps provide, but maybe these applications haven’t yet reached their potential to include what travelers would consider a “quality” recommendation.

So, how can travel marketers generate the same level of trust as word of mouth? Providing user-generated content on the app or website, such as photos and videos of the traveler’s experience, could increase trust beyond a recommendation they write. Another idea is having filter options that allow the user to “customize” their ideal vacation experience and then receive recommendations based on their results. If destination marketing organizations and travel brands could incorporate the relatability and personalization of word of mouth, while maintaining the quick, accessible plethora of information that is appealing about travel-planning apps, it could have a significant impact on the future of travel planning.

Search engine optimization for websites is now commonplace among companies, but image SEO isn’t as widely practiced and holds potential for unique user engagement. Whether images of your destination are used by travelers for in-market planning or merely travel inspiration, ensuring that these images are optimized across search engines is vital to destination exposure and capturing interest of the traveler.

When I was young, my family and I would sit around the dinner table contemplating where our next family vacation spot would be if money weren’t a factor. These conversations launched my sister’s year-long campaign to plan a trip to Bora Bora. At least once a week, she would whip out her smartphone and scroll through photos of tropical, Bora Bora beaches on her Instagram feed, stream videos of Bora Bora snorkeling adventures, and search photos of Bora Bora sunsets on Google. It was relentless, but quite effective and did spark some interest from my parents thanks to the quantity and variety of photos my sister found online.

Fast forward to now, and my sister’s travel planning methods are not far off from the average American leisure traveler, according to our The State of The American Traveler study. The study (a report on which is published every quarter—go here to subscribe), asks a representative sample of 2,000 American leisure travelers about their travel plans for the upcoming year. In the most recent survey, we asked travelers if they use their mobile phones to find inspiration and ideas for where to travel for leisure, and unsurprisingly, 61% of travelers reported using their mobile devices to, at the very least, find travel inspiration.

 

 

Mobile phones provide access to many types of information, such as DMO, hotel, and airfare booking websites. This information was clearly valued by travelers in our study, as the most common approach to find travel inspiration was a search engine for a general web search (69.8%). But the second largest percentage was a search engine for images or photos (39.4%). I found this interesting and it got me thinking: can image SEO help DMOs influence travelers beyond the reach of website SEO?

 

Image SEO is becoming more popular as companies realize the power of a photo. An article published in November 2018 by RedJavelin Communications gives tips on how to optimize image SEO. These tips include making the image certain dimensions so it is device-friendly and giving the image a thoughtful name so that it will appear in a search with relevant keywords. The article cites a study (see below for data) done by Jumpshot in September 2018, identifying the top SEOs used in the United States. Google Images emerged as a significant SEO (21.03%), supporting the data above from The State of The American Traveler.

 

It isn’t new news that when users see an image and text together, it is stored in memory for longer. Images not only broaden the type of user engagement but strengthen the chance that your destination will be remembered for the next potential vacation spot. And the exploration of the destination doesn’t end once the traveler sees the photo: Google Images provides a “visit” button on the righthand side of the photo, creating a new channel into your website.

Additionally, as seen on the chart above, using social media intentionally to create more photo exposure is another SEO method to consider. Travelers can like, share, and send images they find on Facebook or Twitter, for example, of your destination with a simple click of a button. The likelihood that your images will appear on these platforms increases with the frequency that you post. And as professionals in marketing know, including a photo with the information you post increases the likelihood of user engagement.

Image SEO is clearly an emerging tool to consider when trying to reach more travelers. Ensuring that images of your destination are easily accessible on the web not only offers a new channel to your website, but these images can then circulate through social media and increase visibility. When I finally land on a beach in Bora Bora, it’ll be image SEO that I thank.

 

Complete results from our January The State of the American Traveler survey will be released in February.  As an early sneak peak, this post looks at domestic traveler sentiment and what may be early signs of a softening leisure market.

The new year has started with undertones of considerable uncertainty. While economic indicators had remained strong for much of the past year, talk of a slowdown now is in the wind. Sluggish growth, trade wars, higher interest rates, inverted yield curves, political gridlock and government shutdowns are all part of the conversation. We are currently experiencing what may be early signs of a pessimistic shift in the collective traveler psyche, as our latest sentiment tracking survey point toward a potential weakening of the domestic leisure travel market.

Every quarter, Destination Analysts ask a representative sample of 2,000 American leisure travelers about their travel plans for the upcoming year. In the most recent survey wave, the percent of travelers who said they expect to travel more in the next 12 months decreased. Only 33.4 percent said they would be taking more trips, compared to 37.0 percent one year earlier. As this data typically has a seasonal pattern, comparing past January waves is likely to be the best point of reference. The chart below shows how travel expectations have dipped significantly below performance levels seen in the past two years.

 

 

 

 

 

 

 

 

 

 

 

 

 

This moderate degree of pessimism seen in trip expectations also extends to future travel spending. When asked if they expect to spend more in the upcoming year on leisure travel, only 32.2 percent of American leisure travelers said that they would be beefing up their expenditures. This is down from 36.5 percent one year ago.

 

 

 

 

 

 

 

 

 

 

 

 

 

Travel volume and spending expectations have indeed softened, but potentially more unsettling is a drop in the general sentiment of how important leisure travel is as a budgetary item. Once a year, we ask how much priority travelers intend to place on leisure travel as they allocate their family budgets. At this time last year, nearly two-thirds of American leisure travelers (65.3%) said that leisure travel would be at least a “somewhat high priority.” This year, the corresponding figure has sharply dropped to 59.6 percent. The chart below shows the results from this year.

 

 

 

 

 

 

 

 

 

 

 

 

So, what’s the bottom line? It may be too early to tell. As we move further into 2019, we expect that the domestic leisure market will likely remain robust, however a significant downside potential exists. With uncertainty on so many fronts, we’ll hold our breath and hope for a positive outcome.

Americans love the great outdoors. Two out of three say experiencing nature (away from urban areas) is usually an important part of their leisure trips. Furthermore, over 40 percent say the idea of taking leisure trips focused primarily on being outdoors and experiencing nature is appealing. With this in mind, we look at which destinations are set to capitalize on this passion in 2019.

No doubt about it—the winter days are upon us. Time to slow down, cozy up and dream of the tropics. What’s that? Humidity’s not for you? Right then—maybe the slopes. Saguaro and desert blooms? Mangroves and mossy trees? Amber waves of grain? Lucky for us, our beautiful country has it all.

If you’re like most Americans, you probably have a pretty good idea of where you’ll go next to soak up the great outdoors. (Forest bathing in the Redwoods, anyone?) But if you’re looking for further inspiration, we’ve got you covered. In our latest The State of the American Traveler survey we posed the following scenario to a nationally-representative sample of leisure travelers. “Imagine a friend wants to take a leisure trip focused primarily on being outdoors and experiencing nature. This friend comes to you for advice and asks where to he or she should go. Which two states would you be most likely to recommend for being outdoors and experiencing nature?”

Here’s a list of the top states. Where would you recommend your friends go in 2019? Will you take your own advice?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wherever your greener pastures lie, take advantage of these extra-long winter nights to conjure the outdoor odyssey of your dreams.

In this most unusual of moments, there is a great deal of angst in the destination marketing world about the outlook for international visitation to the United States. Travel bans and outrageous rhetoric suggesting the possibility of “extreme vetting” for tourists from markets like Germany and France have analysts predicting that foreign demand for American travel product will fall sharply this year.  While this situation is an extraordinarily serious problem, signs from domestic travelers point in the other direction. Our recently finished Spring edition of The State of the American Traveler™ shows that, at least on the home front, the outlook for leisure travel is surprisingly positive. In fact, Americans are planning more trips and more spending in the upcoming year than ever before, pointing to a strong performance in the remainder of 2017.

According to our April The State of the American Traveler™ tracking survey, more Americans than ever are expecting to increase the number of leisure trips they will take in the upcoming year. Leisure travel optimism is at a record high, mirroring positive trends seen in more general consumer confidence indices. This enthusiastic outlook is illustrated by a record 39.7 percent of Americans saying they expect to travel more for leisure in the next year, up from 37.9 percent in January. Leisure travel spending expectations are also high, with 39.3 percent of American travelers expecting to increase their leisure travel spending in 2017.

The chart below shows this strong optimism, illustrating the share of American leisure travelers who (in the next 12 months) expect to travel more, less and the same as they did in the most recent 12-month period.

Travel Optimism on a Roll
(Percent of all leisure travelers)
 

Meanwhile, future travel sentiment across the country remains somewhat uneven, with residents of the West coast showing the highest levels of optimism for travel in the upcoming year.  42.4 percent of residents of the Pacific Coast region expect to travel more in the upcoming year, while 39.9 percent of travelers living in the Northeast and 40.9 percent in the Southeast expect to increase the number of trips they will take in the next year.

 Regional Expectations
(Percent of leisure travelers)
 

 

So, there we have it. Despite the fact that international visitation to the U.S. is predicted to decline, American leisure travelers are ready to go; planning to take more trips and spend more on travel compared to previous years.  One force pushing upward, and one downward. The specific impacts of these countervailing effects on individual destinations will, of course, vary. Whatever the ultimate outcome, it looks like we’re in for a very interesting year.

 

Early to bed and early to rise makes a man healthy, wealthy and wise.

— Benjamin Franklin

Ben Franklin understood something we modern folks have forgotten.  Getting ample rest and relaxation is vital to a happy and productive life.  Not only are we a chronically sleep deprived nation, with 40 percent of us getting less than the recommended amount of nightly slumber, our use of vacation time has plummeted in recent years.  The U.S. Travel Association reports that (on average) Americans take only 16 days of vacation a year, one full week less than in 1980.  The list of problems and health risks associated with our “always-on” lifestyle is well-known and includes an array of detrimental effects including heart disease, depression, cognitive impairment, diabetes, anxiety disorders, obesity and even the potential for a dreaded loss of enthusiasm for bedroom fun!

At Destination Analysts, we don’t need research to tell us that this is simply no way to live.  And, possibly in response to this crisis, many Americans now seem to share our concern and are taking their vacation advice from Poor Richard’s Almanac.  Many of us are now building vacation experiences specifically around health and wellness.  In a recent The State of the American TravelerTM survey, we explored Americans’ interests in travel specifically to nurture personal health and wellness.  The results are intriguing, and suggest that destination marketers would be well-advised to keep their eyes on this market and be ready to take advantage when possible.  Consider the chart below.

Health & Wellness Trips Taken (Past 12 Months, American Leisure Travelers)

Question: How many of these leisure trips were focused primarily on trip activities to promote your personal health and wellness? Base: Percent of American Leisure Travelers.

Nearly one quarter of American leisure travelers have taken a “health and wellness” trip in the past year.  However, one such annual trip is simply not enough for many of these travelers.  The average health and wellness traveler took 2.96 such trips in the past year, with one in twenty who took four or more such trips last year.  That’s a lot of trips and likely a lot of money spent.  Health and wellness travel is clearly a very significant and possibly under-serviced niche market.

Interestingly, it seems as if those travelers most in need of health and wellness trips may be the least likely to actually take them, and vice versa.  The graphs below show that Millennial leisure travelers are most likely to have taken at least one health and wellness trip in the past year.  Undoubtedly a result of their relative youth, they are also the least likely generation to report that personal health concerns had kept them from traveling in the past year.  In short, they are twice as likely as Baby Boomers to take health and wellness trips, and half as likely to say they reduced their travels this last year over health concerns.

 

Health & Wellness Trips Taken (Past 12 Months, by Generation)
Reduced # of Leisure Trips Taken for Health Reasons (Past 12 Months, by Generation)
Question: How many of these leisure trips were focused primarily on trip activities to promote your personal health and wellness? Base: Percent of Leisure Travelers.
Question: In the PAST 12 MONTHS, which (if any) of the following kept you from traveling more for leisure than you would have otherwise preferred?  Base: Percent of Leisure Travelers.

Gen X actually looks like it may be a sweet spot for health and wellness travel.  Fully a quarter of American Gen X travelers have taken a wellness trip in the past year and these Gen X wellness travelers have taken 3.6 trips such trips in the past year on average (compared to 2.4 such trips amongst Millennial health and wellness travelers).

What does health and wellness travel really entail?  To find out, we asked survey respondents to tell us what health-related activities they would be interested in doing on their leisure trips.    For the most part, American travelers as a whole are most attracted to better known, relaxation-related activities like massages (36.3%), hot springs (35.5%) and spa treatments (32.2%).  Other health and wellness-oriented activities fell further behind amongst the general traveling public, although younger travelers clearly exhibit more diversity in the health and wellness activities they are enthusiastic for.  The diagram below shows the proportion of leisure travelers in each generation who say they’re interested in an array of health-related activities tested.

Interest in Health & Wellness Activities (Percent of travelers, by generation)

Question:  Which of the following would you be interested in doing on your leisure trips? Base: Percent of Leisure Travelers.

Health and wellness travel clearly represents a very large potential market, but one that appears to be more alluring to Millennial and Gen X travelers.  While surely niche markets exist for other healing activities outside the mainstream, the health and wellness activities these travelers will most commonly desire are likely to revolve around more traditional spa-related ways to reduce stress.  With this focus, we hope that destinations that can position themselves as a unique place to relax and rejuvenate will cash in on those seeking relief from the harried, always-on lifestyle of the American traveler.

New York Post Page 1

There’s little denying that we’re living in uncertain times. Just days ago, who would have predicted mass protests at U.S. airports or newspaper headlines suggesting America’s tourism industry is closed for business? Our industry, and in fact, the American economy as a whole, depends on robust international travel.  International travelers spent $246.2 billion in the U.S. in 2015, supporting 1.2 million jobs. Putting this in perspective, travel to America supports more jobs than there are people in San Jose, California, the heart of Silicon Valley.  For further comparison, a manufacturing giant like Ford Motor Company employs about 187,000 people in total, with a profit of $6.3 billion. International travel is not mere big business, it’s enormous business, comprising one-third of all U.S. service exports. So it should come as no surprise that travel professionals have been grappling with how the whole of Donald Trump—from his ethos, hospitality experience, and leadership to his many surrounding controversies—will affect the U.S. travel industry.

To look into the matter for our anxious travel industry colleagues, we added a number of questions to our The State of the International TravelerTM survey, our annual study tracking traveler sentiment in 14 of America’s key international feeder markets across the globe.  In early January, we surveyed a representative sample of 800 likely international travelers in each of these 14 countries, for a total of over 11,000 total surveys collected worldwide.  As anticipated, the 2017 study (available now) yielded some very interesting insights into how international travel audiences feel about Mr. Trump.

Overall Sentiment Leans Negative

Feelings about America’s new leader can, of course, range from the very positive to the very negative.  Overall, it appears that President Trump is more disliked than liked.  Figure 1 (below) shows that about 43 percent of likely international travelers say his election has worsened, to some degree, their opinion of America. Only 16.3 percent reported that his ascension has improved their overall view of the country.

Figure 1:  Effect of Election on Opinion of America
(Average, All Countries Surveyed)

Question – Did the results of the recent U.S. Presidential election change your overall opinion of the United States of America?  If so, how?  (Please select the answer that best fills in the blank below) As a result of the election, my overall opinion of the United States is _________.

Overall opinion about America

Nevertheless, this sentiment is far from equal across countries. For this same question, Figure 2 (below) illustrates what researchers call the Bottom 2 and Top 2 box scores, or the proportion of survey respondents saying the election has made them feel “Worse” or “Much worse” or “Better” or “Much better” about America.

Figure 2: Effect of Election on Overall Opinion of America
(Detail by Country)

Question – Did the results of the recent U.S. Presidential election change your overall opinion of the United States of America? If so, how? (Please select the answer that best fills in the blank below) As a result of the election, my overall opinion of the United States is _________.

Improved and worsened opinions on America

Countries with a net improvement—where the percent of international travelers’ whose opinions of America improved as a result of the election is greater than the percent whose opinions of America worsened—include Brazil, China and, most notably, India. India’s net opinion changed significantly, with 44.1 percent rating their opinion of America as “Better” or “Much better” post-election. However, as seen in the chart at the right of Figure 2, the majority of countries studied have a declined opinion. Residents of some of our country’s largest international travel markets—i.e. Canada, Mexico and the UK—reported “Worse” and “Much worse” opinions about America as a result of the recent presidential election. This is not good news for our industry, but then the question remains, does the lower overall opinion translate to decreased likelihood to visit America? Figure 3 below offers insight.

Figure 3: Effect of Likelihood of Visiting America
(Average, All Countries Surveyed)

Question — How have the results of the U.S. Presidential election effected the likelihood you will visit the United States in the NEXT FIVE (5) YEARS? (Select the answer that best fills in the blank below) I am ____________ to visit the United States in the NEXT FIVE (5) YEARS.

Likelihood of visit

The net negative feelings President Trump generates are evident in most countries, but it may not translate into a measurable impact on visitation. In fact, slightly more international travelers are more likely (to some degree) to visit the U.S. than less likely. Still more than half are neutral, indicating the election had no impact on their travel plans. This is of course intuitive; simply disliking a politician doesn’t mean America isn’t an entirely awesome visitor destination. For fun, our researchers interviewed a few tourists here in our hometown of San Francisco. The response of one Chinese tourist sums up the consistent sentiment we heard from these travelers: “It doesn’t matter to me. Many Chinese don’t like Trump, but we want to visit America.”

Figure 4: Effect on Likelihood of Visiting America
(Detail by Country)

Question — How have the results of the U.S. Presidential election effected the likelihood you will visit the United States in the NEXT FIVE (5) YEARS? (Select the answer that best fills in the blank below) I am ____________ to visit the United States in the NEXT FIVE (5) YEARS.

More likely and less likely to visit America

Even though the overall impact may be relatively muted, again there are large differences by country. There is a larger net number of international travelers in India, Brazil, and China who indicate that they are more likely to visit because of the election results than less likely. These countries have become prominent international travel players as their economies have developed over the past fifteen years. The combined visitation of India, China and Brazil makes up 7.6 percent of all international travel to the U.S. Thus, as a result of the election, we may potentially experience continued, or even slightly higher, increases in visitation from these markets.

On the other hand, Mexico, Germany, Holland and Canada indicate that they are net less likely to travel to the U.S. because of the election results. The unfortunate reality we face with this finding is that Canada and Mexico are our nation’s greatest sources of international travel volume and spending. Combined, visitation from these two important countries account for half of all international travel to the U.S.

Describing Trump: A Tale of Two Countries

The different national perspectives on President Trump amongst international travelers are striking. To dig a little deeper, we asked international travelers in these 14 countries, “What one word best describes Donald Trump?” With this, we hoped to gain a broader sense of how each country viewed the 45th President of the United States. Comparing two countries reporting the greatest impact by the Trump election, India and Mexico, vividly illuminates the differences in perceptions across markets. The word cloud below summarizes responses written in by Indian travelers.

Figure 5: India’s International Travelers’ Descriptions of Donald Trump

Question – What one word best describes Donald Trump?
 

India Trump word cloud

Amid all the controversial news and executive orders flying around, it may be difficult to easily understand why Indian travelers have such positive feelings about President Trump. In India, it appears that the Trump brand is primarily associated with luxury. The brand is a glitzy, golden, rich business that offers prestige and the appearance of wealth. Trump Towers Mumbai, is expected to open next year with 300 apartments available to purchase. Its apartments are reportedly selling at a 30 percent premium over other apartments in the area. Indians may also see similarities between Trump’s election and their own Prime Minister. Both ran on platforms of being an outsider to the political dynamic and ability to take charge and get things done. Additionally, India is largely untouched by Trump’s well-publicized ire, which seems mostly directed at Mexico, China and the Middle East.

While India, for the most part, views Trump positively, it’s no surprise that our neighbor to the south rates him differently. The word cloud below illustrates Mexican sentiment.

Figure 6: Mexican International Travelers’ Descriptions of President Trump

Question – What one word best describes Donald Trump?
 

Mexico Trump word cloud

President Trump’s relationship with Mexico is well documented and hardly needs repeating—and the word cloud above very clearly and directly describes the nation’s sentiment. One man, two countries, and their opinions of him are like night and day.

The overall impact of President Trump’s actions is yet to be seen. However, as evidenced by the response to President Trump’s recent travel ban, it is likely to be pronounced and uneven across international markets. Destination Analysts’ eye is firmly on this for the industry, and we will share with you what we learn from travelers as this presidency progresses.

outlook-image

 

The U.S. travel industry will continue to grow in 2016, fueled by a strong domestic travel market.   While regional performance will vary and the strong dollar and economic challenges abroad will test our ability in the short-term to grow international markets, overall the picture looks positive. In the absence of unexpected shocks, our model suggests that we will see the number of leisure trips taken by Americans to grow by 2.1 percent in 2016.  Overall leisure travel spending will climb 4.0 percent in the coming year.

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The American tourism industry deserves a gold medal for its performance in the post recession world, consistently growing and generating taxes and jobs in an environment fraught with uncertainty.  We expect a winning performance to continue in 2016, driven in part by strong demand for the nation’s varied and compelling leisure travel products. In what follows, we have sketched our thoughts and expectations for leisure travel performance in the coming year.

 

THE UPSIDES

Strong Traveler Optimism

American optimism about their future leisure travel reached record levels last summer, and consumer confidence has continued to push further forward.  As 2015 drew to a close, the University of Michigan’s consumer sentiment index rose to 92.6. That’s just below the year’s average of 92.9, the highest annual average in 11 years. Consumers’ moods have been boosted by steady job growth and lower gas prices which have improved their overall buying power.

An Expanding Economy

U.S. economic growth continues to be positive, if unimpressive by historical standards.  In 2016, we expect the global economy to follow a slow growth path but, barring unforeseen circumstances, America’s GDP will grow by at least 2.8 percent. This growth means more income in travelers’ pockets and more jobs.  Recent moves by the Federal Reserve reveal its confidence in our economy’s near-term prospects, as well.

Job Growth Continues

The labor market continues to improve, with the most recent national unemployment rate trending consistently downward to a seven-year low of 5.0 percent.   Many analysts expect that, if these trends continue, the domestic economy will reach a full employment level some time the next year.  There are also indications that businesses are offering higher pay to attract and keep workers.  Wages and salary growth showed signs of strength at the end of last year.

Travel Costs Flat

Gas prices grab most of the headlines, with national averages below $2.00 per gallon.  But airfares are also expected to see only moderate growth this year. Unfortunately, the bonus travelers will feel from lower transportation costs will likely be absorbed by increased hotel room rates.  Even with the additions provided by sharing economy services, continued elevated demand for rooms in a marketplace with relatively little increased hotel inventory will push lodging costs up this year.

 

THE DOWNSIDES

International Woes

America’s travel industry has been buoyed in recent years by big spending international visitors. Change is in the wind though, driven by weak foreign economic performances abroad and a very strong dollar.  As recently as December, the US dollar index (which measures the greenback against top currencies) was up 10 per cent for the year, after gaining nearly 13 per cent in 2014. Foreign exchange impacts can often take time to be realized, and we already seen drops in foreign travel spending.  At best, we expect this segment to remain stable in the upcoming year.

Safety Concerns

The biggest source of uncertainty is, of course, the potential for terrorism and a resulting decline in travel demand.  American traveler concerns about safety while traveling has been relatively stable in recent years.  Over the past several years, only about 1 in 10 Americans reported cutting back on the number of leisure trips taken due to safety concerns.  However, recent terror attacks in Paris and San Bernardino cast a shadow. Since its tragedy, Paris has seen sharp declines in demand and a wave of painful cancellations.  At present, our domestic industry has not been so touched, but the destructive potential must once again be on our radar.

 

THE BOTTOM-LINE

If you are amongst our fellow travel industry professionals, get ready to enjoy another positive year.  Despite the real and potential challenges we face, the good times much of the travel industry has been experiencing should continue to roll in 2016, buoyed by increased domestic leisure travel volume and spending and strong consumer confidence and optimism.

1.  Skift goes old school. The popular travel industry website Skift is launching a print magazine, scheduled for release in January.

2.  Gasoline prices are continuing to fall.  In much of the country, the price of gasoline is now below two dollars–and overall it’s down more than a dollar from last year.

3.  AAA analysis says that lower gas prices will save consumers $75 billion this year. More money in our pockets means more money spent in our destination’s hotels, restaurants, attractions and shops.

4.  American consumer confidence increased in December.  The Conference Board reports that we’re feeling the improved job market and our sense of overall economic conditions haven’t been this high since February 2008.

5.  Aloha record-breaking year.  Hawaii’s tourism industry is reported to be on pace to beat last year’s record performance.

6. Destinations around the country report similar outstanding performances and outlooks.  Here are a few checking in during the past week:  Asheville. Philadelphia. New Orleans.

7.  Hilton Head and San Francisco hit home runs.  Our latest client and our fabulous hometown win a prestigious award.

8. The lodging sector outlook also feels good.  Our friends at PKF have released their Lodging Insights: U.S. Lodging Industry Forecast for 2015.  Take a watch.

9.  It turns out the tourism industry worldwide is big. Really big.  The World Travel and Tourism Council reports that the travel industry’s total contribution to the global economy rose to $6,990 billion, or 9.5% of the GDP.  It is expected to jump up by 4.3% to $7,289 billion, or 9.6% of the GDP for 2014.

10.  Airbnb gets really creative.   Airbnb sets out to help rid the world of strangers and turn us all into interior designers.

Travel Outlook for Q1 2015: Low Gas Prices, Fatter Wallets and a Counter-balancing Airfare Effect

As travel moves into the depths of the off-season, our industry is poised for a stronger than normal performance.  Conditions are ripe for increased travel volume and spending this winter.  Driven by an improving labor market and sharply lower gasoline prices and the very significant bump this will provide to consumers’ pocketbooks, travelers will be hitting the roads.  Airfares, however, are not moving in this positive direction, which will counter balance to a limited degree the positive gas price-fueled momentum.

MONEY

Destination marketers should be thrilled.  Fatter wallets and lower gas prices are here (at least for now), which is excellent news for all of us working to lure leisure travelers and their dollars to our communities, attractions, parks and states.

Why?  When Americans travel for leisure, they mostly do it by car.  Our biannual The State of the American TravelerTM Survey consistently shows that nearly 80 percent of leisure travel is done by car.  When gas prices rise we typically see expectations for future travel drop.  Conversely, when gas prices are low, expectations for future travel tend to rise.  It’s a solid, immutable relationship.

The chart below shows recent changes in weekly U.S. retail gasoline prices (all grades in dollars per gallon).  The positive direction is clear and the implications for travel are obvious.  The average price we pay at the pump is down by nearly one dollar since June. The cost of gas dropped to a nationwide average of $2.82 a gallon from as high as $3.71 in June.  This is a national average and in certain markets prices are even lower.

Average Weekly U.S. Retail Gasoline Prices

(All grades in dollars per gallon)

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Source: U.S. Energy Information Administration

As we move deeper into the off season, not only will travel by car be cheaper, travelers will feel wealthier.  Economists talk of something called the Wealth Effect, referring to the tendency on the part of consumers to spend more when they feel wealthier or more financially secure.   We’re likely to see this come into play in the next few months.  Analysts suggest that the average American household will save nearly $1,100 a year if petroleum stays at these levels.   A $1,100 average bump in disposable income is very significant and most of it will be spent on things like travel.

The good news about gasoline prices presents itself to an enthusiastic traveling public already feeling fewer and fewer constraints on their ability to travel.  Our research shows that in recent years, fewer travelers are seeing gasoline prices and their personal financial situations causing them to cut back on their leisure travels.  The table below (from last summer’s State of the American Traveler report) shows that even when gas prices peaked last summer the proportion of travelers who felt gasoline was keeping them from traveling was in steep decline.  In July 2011, more than half (53.6%) of Americans said gas prices were keeping them off the roads, this metric reached a new 32.4 percent last July.  We’ll be excited to see where this stands when we field the survey again in three weeks.  It will likely be much lower given the gas price trends we have discussed.

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Further, a growing share of travelers report that concerns about their personal financial situations are also consistently improving.  The table above shows that far fewer Americans now feel their financial situation is keeping them from traveling than just a couple of years ago.  Add stronger labor market conditions and the aforementioned $1,100 gasoline price income bump to their pocketbooks, and conditions for improved travel industry results seem rock solid.

Improving Employment Situation

As we move into the off season, we also see significant recent improvements in labor market conditions, which is key to consumer (traveler) confidence.  The American economy added a massive 321,000 jobs last month, as the nationwide unemployment rate remained at 5.8 percent.  This marks the most robust burst in job gains in several years, and comes alongside upward revisions of 44,000 more jobs added in September and October than previously estimated.  Overall, it looks like 2014 will be the strongest year for hiring since 1999, with average monthly additions to the labor force of over 240,000 jobs.

Airfares Buck the Trend and Airline Profits Soar

A slight downside to our bright outlook for the offseason is in air travel.   Anyone who has recently traveled by air has seen the shift toward full planes and crowded boarding areas.  Sadly, long gone are the days of comfort where we spread out and took the middle seat and didn’t share an arm rest.  Unfortunately, long gone too are the days where travelers benefited from commodity price fluctuations like decreasing jet fuel prices.

Competition is Good.  Consolidation is Bad.

This counter intuitive situation in the marketplace for air travel is powered by the slew of airline mergers in recent years, allowing these companies significant power in manipulating their capacity and prices.  More market power by the airlines doesn’t work in the best interests of travelers–and fares paid by the two million daily American air travelers tell a striking story.   Airfares have not fallen of late despite the downward fall in jet fuel prices that have accompanied those seen in gasoline.

Over the past 12 months, jet fuel prices domestically have dropped about 11%, according to the International Air Transport Association.  However, airfares have not responded to decreasing fuel costs, actually going up 0.2% this year.  Looking at the somewhat longer term, average U.S. domestic airfares bottomed out over five years ago, and have been rising since. Airfare has steadily increased in recent years, growing 10.7 percent in the past five years, according to an Associated Press analysis.

Travelers, however much they’ve lost through reduced competition in the air industry, are nothing if they aren’t resilient.  Despite changes resulting in steadily increasing ticket prices, our research shows that the degree to which airfares are getting in the way of travel is stable and even slightly improving.  Since January 2010, the proportion of American leisure travelers cutting back on travel due to high airfare has fallen slightly from 32 percent (in July 2011) to 24 percent last summer.  It appears that travelers may have adjusted to the marketplace and worked expectations for higher airfares into our budgeting and travel decision making.

Fortunately, too, for the destination marketing industry, fewer than 20 percent of ALL leisure trips are taken by air.   The outlook for leisure travel as we move into the new year is very positive.  I’m excited to field our next The State of the American Traveler survey in a few weeks to test these waters and see if travelers are feeling the optimism that I expect.

Readers can check back soon for the next The State of the American Traveler study or sign up here for the report that I’ll release in a mid January.