2005 Travel & Tourism Trends - Randall Travel Marketing

2005 Travel & Tourism Trends

2005The economy is coming back to2000 levels - - but it is acompletely different world**major behavior changewill affect our future

Changing Travel Industry2000• Best year ever2001• Economy tightens• Decrease in business,group, convention• War generation aging out• 9/112002• Consumer confidencedrops• Continued decline inbusiness, meetings, groups• Terrorism fears• New behavior patterns2003• War, SARS, terrorism• Continued economicconcerns2004• Rebuilding – but not at2000 levels until 20052005• Change is good

LodgingHotels: STAR:• 2000 occupancy rates = 63.7%• 2001 occupancy rates = 60.3%• 2002 occupancy rates = 59.1%• 2003 occupancy rates = 59.2%• 2004 occupancy rates = 61.3%• 2005 projections = 63.0%

LodgingExpected Future:• Business travel goes back tohigher quality• Leisure strong and growing• If they ask for a kingsize…..• Chains: “Pleasant surprises”• Customers demand Quality:– Mattress (currently being redesigned)– Linens– Wireless– No waiting in line– elevators• More local flavor- Furnishings reflect local culture

AirlinesAirlines: (Air Transport Assoc)• 2000: + 5% passenger volume• 2001: - 8% passenger volume (from 2000)• 2002: - 10% passenger volume (from 2000)• 2003: - 8% passenger volume (from 2000)• 2004: - 1% passenger volume (from 2000)• Prices still WAY below 2000 levels

AirlinesExpected Future:• Struggle with slow returnto pre-2000• Slow increase in prices• More consolidation• Growth of the smalls• Shrinking hub systems• Government support• 1-2 airlines will drop

Cruise IndustryCruise Lines (CLIA):• strong recovery (5% in 2002) (10% in 2003)• Aggressive selling in 2004 = +11% domestic gain(8.9 million North American in 2004 over 8 millionin 2003)• 10.5 million worldwide in 2004• Expect 11 million worldwide to cruise in 2005

Convention/MeetingU.S. Business/Convention Travel (domestic):• 2001: 153.1 Million (person trips)• 2002: 142.4 Million• 2003: 138.2 Million• 2004: 143.7 Million (not confirmed)• 2005: 148.9 Million (forecast)

Convention/MeetingExpected Future:• Back to 2000 and growth• Aggressive competition• Reluctant attendees• Destination first / programsecond• All-in-one site – no driving

Domestic LeisureU.S. Leisure Travel (domestic person trips) (TIA):• 2001: 912.3 Million• 2002: 929.5 Million• 2003: 956.5 Million• 2004: 972.7 Million (forecast)• 2005: 989.3 (forecast)Increase has never faltered

Leisure TourismIncreases in Leisure travel• “ Respite”• Vacations demanded• Growth in family travel• Growth in affinity travel• Attendance to attractions down

Expected Future:• Beaches & Lakes• Mountains• National/State Parks• Recreation• Winterskiing/snowmobile/snowboarding• Increase in adults travelingwithout children• Year round leisure visitsDomestic Leisure

Consumer Confidence Index• 144.7 January 2000• 115.7 January 2001• 97.8 January 2002• 78.8 January 2003• 103.4 January 2004• 102.4 March 2005Americans are optimistic, but cautious.CEOs = subdued expectations for 2005Consumers are more optimistic than CEOs

Business TravelBusiness travel will finallyreturn to 2000 levels in 2005• 70% will spend about the same as 2004(Business Travel Coalition)• 45% of business travelers in managedprograms used video-conferencing orsomething instead of travel in 2004 (NBTA)• Typically 1/3 of lodging occupancy

Group TourGreat Potential• Designed for Baby Boomers or other agegroups (Dr. on board)• Freedom without the hassle• Cruise ship on land• Something you can’t t get any other way• Blue collar tours• Wireless on board

AttractionsChallenges• Decline in attendance tohistoric sites and lessanimated museums• Boring vs. engaging• Give me fun or else• Desire for less structure• ½ price ticket & then sellfood, beverage, retail

Gains & Losses• Eastern mountain attractionsdown in 2004• Western mountains erratic• Hawaii rebounding• Major business destinationcities (New York, Chicago,Atlanta down 10+%) since2000- finally returning

Gains & LossesLas Vegas up – very aggressive 37.4 millionvisitors in 2004 over 35.8 in 2000

Gains & Losses• Yellowstone down ininternational, up in domestic• 4% increase in total visitationto national parks in 2004 over2003 – but still below 2000• Blue Ridge Parkway 17.9million visitors = largest

Changing Behavior• Americans are tired yet optimistic– want “respite”• Increase in travelto visit friends and relatives• Family reunions are atan all time high

TOP Ten Trends 20051. 3% % growth in overalltravel & tourism revenues• We must learn the newbehavior patterns

TOP Ten Trends 20052. Sleep late, nap, and goto the spa

TOP Ten Trends 20053. “Bargain-Brained”customers• Who paid more?• Expedia / Travelocity / Orbitz• Endless price shopping

TOP Ten Trends 20054. Continued last minute tripplanning & purchase• 64% leisure = 1 trip at last minute• 24% planned all their leisure tripsat last minute (TIA)• 52% business & 17% of leisure planwithin 2 weeks (Penn, Shoen, , and Berland)

TOP Ten Trends 20055. Cost-contained businesstravel (affects conventions too)• Continued tight restrictions ontravel budgets• Per diem paid to employee• Consolidating meetings

TOP Ten Trends 20056. Technology-dependent• Over 50% of business travelers useinternet for trip planning/purchase• 59% leisure currently use internet fortrip planning/purchase

TOP Ten Trends 20057. Safety, personal comfort andconvenience are primary travelconcerns• Safety• Less hassle / non-stress• Give me comfortable• Up to 40% of decline in lodgingoccupancy related to safety andconvenience(PricewaterhouseCoopers)

TOP Ten Trends 20058. Changing demographicsGen Group 2000 2005 2010 2020 2030 2040War Gen 80 85 90 95 100Silent Gen 65 70 75 85 95 105Baby Boom 47 53 58 68 78 88GenX 29 34 39 49 59 69Gen Y 8 13 18 28 38 48By 2010 ½ of all Americans will be over 40

9. Vacations:TOP Ten Trends 2005- Quick/short (4-5 5 day)- PLUS Longer “sabbatical”vacations• 4-55 short trips per year on avg.• 2 weeks + But not every year• Traveler looking for products that simplifylife or offer escape and luxury (Source:MarketResearch.com)

TOP Ten Trends 200410. The definition of“vacation” has changed(Go/See/Do vs. Chill & Immerse)Travelers looking to escape

Other TrendsGrowth in off-season travel:•Increase in winter vacations.•59% for at least 5 days.• 55% = U.S.• 13% = Caribbean• 7% = Asia• 5% = Europe(Source: National Geographic Traveler and Yahoo!Travel)

Other Trends• Growth in RV market(2% growth/year)Last minute planning• Traveling with pets –catering to pets

Thriving in 2005Research is the answer to growwith the new behavior patterns!• Research as a foundation• DMOs must know theircustomer!

How to in 2005?Research• Who & why (age, origin, trippurpose, etc.) Look for changessince 2000• Who is NOT coming & why• How do they choose destination?• What source of info do they use?• Expenditures – by category

Market Mix by Loudoun AreaGeographic Segment and (%) ofTotal Lodging Room InventoryHighway 7EastLoudoun(49.6%)DullesAirportSterling(33.6%)Town ofLeesburg(13.4%)WesternLoudoun(1.8%)Town ofMiddleburg(1.6%)Market SegmentTotal Convention/Meeting/Group(Corp, Gov’t, Sports, SMERF, Ass.)82.3%42.9%15.9%0.0%13.5%Individual Corporate/Business7.7%28.7%49.1%0.0%2.4%Total Leisure(Tourists, Weddings, VFR,Overflow)8.6%17.1%34.2%100.0%84.1%Group Tour0.2%3.7%0.4%0.0%0.0%Other0.4%7.6%0.0%0.0%0.0%Golf or golf package0.8%0.0%0.4%0.0%0.0%

Total LCVA FundingSupport and IncomeCategoryFY03%FY02%FY01%Loudoun County Tax Revenue$ 1,547,50082.2%$ 1,158,98287.9%$ 928,34081.1%Town of Leesburg$ 54,0002.9%$ 50,0003.8%$ 50,0004.4%Town of Middleburg$ 5,000.3%$ 5,000.4%$ 10,000.9%LCVA Partnership$ 47,9312.5%$ 49,5493.8%$ 46,0654.0%Cooperative Advertising$ 92,9344.9%$ 43,9963.3%$ 86,5357.5%Interest/Miscellaneous Income$ 4,903.3%$ 10,789.8%$ 24,2092.1%*Prior Year Designated OperatingFunds$ 131,2276.9%Total Revenue$ 1,883,495100%$ 1,318,316100%$ 1,145,149100%

InquiriesFY03FY02FY01Phone6,3377,0117,046Outside Fulfillment/Advertising3,6516,9844,560Mail562765Website Inquiries416Total Inquiries10,46014,02211,671Leisure Advertising Expenditure$ 113,992$ 80,002n/aTraditional Cost Per Inquiry$ 10.90$ 5.71n/aUnique Website Visitor Sessions*63,42154,435n/aTotal Inquiries( including unique website visitor sessions)164,37078,34455,628Lead generating advertising expenditure**$ 385,632$ 335,449n/aNew Cost Per Inquiry$ 2.35$ 4.28n/aWalk-ins22,82835,82033,202

Lodging Market MixEconomic Impact from Leisure Travelers21,874 / 1.53 nights per travel party = 14,297 parties14,297 parties x $307 per party spending = $4,389,097$4,389,097 x $.07 sales tax = $307,237 taxes$307,237Sales taxes generated by leisure visitors!

Bartlesville, OKAverage daily expenditures:20032001CategoryAmount% ofwholeAmount% ofwhole1. Lodging$113.8030.28%$81.2134.11%2. Shopping$104.7027.86%$70.8629.76%3. Food / meals$57.7115.36%$31.4013.19%4. Transportation$50.5113.44%$28.5311.98%5. Attractions/amusements$49.0113.04%$26.0710.95%Average Daily Expense$375.73100.00%$238.08100.00%

Research FindingsAverage daily expenses & taxes generated:LodgingShoppingAttractions/PlaceFood/MealsTransportationTotalsAmount$99.73$73.41$63.18$41.81$29.10$307.235%Lodging$4.99$4.997%Sales$6.98$5.14$4.42$2.93$2.04$21.51

Return on InvestmentAdvertising and Marketing Return on Investment55,456 inquiries at a53.37%** conversion rateyields29,597 travel parties who stayan average of 3.72** nightsyields110,100 nights at an averagereported daily expense of $291.17**yields$32,057,817 in direct economic impactfrom advertising generated inquiries

Return on InvestmentConvention and Meeting Sales Return onInvestment40,999* room nights occupied at an estimatedaverage stay of 2.25 nights per attendeeyields18,221 attendees at an averagereported trip expense of $1,206.25**yields$21,979,081 in direct economic impactfrom convention and meeting attendees

Day vs. OvernightCategoryLodgingFood / mealsShoppingTransportation/FuelAttractions / AmusementWineriesOvernightExpenditures$295.12$179.34$151.43$128.27$108.80$78.64Day tripExpenditures$0.00$67.55$132.39$19.24$40.94$144.09Totals$941.60$404.21Average Length of Stay3.31 nights1 day

Convention & Meetings• Customer perceptions of your strengths &weaknesses• What types of meetings are you successful inrecruiting? (type, geography, price,demographics)• Which meetings had the highest satisfaction?• Which meetings spent the most?• Where are other similar groups?

Critical ReviewDetermine very strategically whichmarket segments• you can target• that will really be satisfied• and will spend the most.

New Tourism EconomyOld research & advertisingparadigms have changed also…

New Tourism Marketing• Research as foundation• Website/technology• Measured ROI• Niche targeting• Geographic targeting• Don’t t assume traditional advertisingwill do the job

Make Them Say “yes”1. HOOK: Compelling attractors2. “Cruise ship on land”…”…..make iteasy to have a good time and makeme want to stay longer3. Offer they can’t t refuse (value)4. Know thy competition5. No stress

Summary• Significant changes since 2000• Strategic market segmentationapproach works best now• You need research and a vision• Know which market segments offeryou the greatest potential• Create and promote uniqueexperiences for leisure tourismsuccess