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From a projected increase in Americans traveling this Memorial Day weekend to a steady growth in air travel, all signs are pointing to a very healthy industry, one of the most robust that some executives say they have seen.
“If I look at this historically, I think we are currently at one of the healthiest times we have ever been at on the leisure side of the business.” said Scott Koepf, senior vice president of sales at Avoya Travel.
Consumer confidence, an end to uncertainty surrounding the 2016 election and pent-up demand for travel are among the factors contributing to that health.
“If you combine all of that into one big batch,” said Bill Sutherland, AAA’s senior vice president of travel and publishing, “it ends up being the perfect storm leading in the direction of a very healthy 2017.”
AAA last week released its annual Memorial Day weekend travel forecast, which anticipates that travel during the holiday weekend, May 25 to 29, will hit its highest level since 2005: 39.3 million Americans are expected to travel 50 miles or more away from home, an increase of 1 million travelers from the Memorial Day weekend last year.
That expectation, Sutherland said, “mirrors the positive growth seen throughout the travel industry this year. Higher confidence has led to more consumer spending, and many Americans are choosing to allocate their extra money on travel this Memorial Day.”
While the vast majority of travelers, 34.6 million, will drive over the holiday weekend, the number projected to travel by air saw a 5.5% bump this year, to a total of 2.9 million, and rental car bookings are up 19% year over year. Travel by other modes, including cruises, buses and trains, is projected to see a 2.9% increase, for a total of 1.8 million travelers.
The first quarter of 2017 was one of the best first quarters AAA has seen, Sutherland said, adding that based on his conversations with suppliers, his organization is not alone. He largely attributed the positive start in 2017 to the end of election uncertainty that plagued the tail end of 2016.
Pent-up demand is a factor, he said, as is consumer confidence.
“People did lay back a little bit, I believe, in 2016,” he said. “I think they’re opening up their wallets a bit more. I think there is a strong sense of consumer confidence at the moment. Obviously, unemployment is down and personal income is up, so I think that contributes.”
Another factor, in Sutherland’s mind, is the value of the dollar relative to other currencies, especially in Canada, Mexico and Europe. AAA is currently experiencing an “unprecedented” resurgence in travel to Europe, he said.
Airfare and hotel costs have also increased this year. According to AAA’s Leisure Travel Index, the average fare for the top 40 domestic flight routes is 9% higher than last Memorial Day weekend, at $181 for a roundtrip ticket. A night at the average AAA Three Diamond hotel is $215, up 18% year over year.
“While there is more demand, obviously the suppliers are trying to get back some of what they didn’t quite get last year, and I think that’s a good thing,” Sutherland said.
Data from ARC also indicates a healthy industry. In April, the average U.S. roundtrip ticket price was $501, up about $20 from the previous year. The value of air tickets sold by U.S.-based travel agencies increased 1.3% in April, for a total of $7.8 billion vs. $7.7 billion.
“ARC’s latest analysis of air travel continues to show a strong industry performance,” said Chuck Thackston, the company’s managing director of enterprise information. “The multiyear trend of steady growth in air travelers does not seem to be changing for the upcoming summer travel season. The trend is seen for all travel, but even travel internationally continues to be strong despite some uncertainty about the rules of travel.”
ARC recently found that inbound travel to the U.S. showed “strong” growth of 5% year over year in the first quarter, according to Thackston. That growth represented nearly all regions except the Middle East.
“This healthy growth continues in an environment of gradually increasing average ticket prices,” Thackston said. “Generally, high consumer confidence and healthy economic conditions are providing more discretionary income that is allowing more people to travel.”
The agency community is also seeing a solid 2017.
“We’re having a very strong year,” Avoya’s Koepf said. “We’re seeing tremendous demand. We’re seeing a lot of people making longer decisions for traveling into ’18, even into ’19, so I think generally there is just a very good consumer attitude toward leisure travel right now.”
Consumer confidence and high demand present opportunities for agents, said Sam McCully, Avoya’s vice president of marketing: They can capitalize on it to sell their clients on higher-end products, moving them up the ladder. They can also upsell their clients within products like balcony cabins or suites on cruises.
Virtuoso said that it, too, is experiencing a strong year. The consortium sells $21.2 billion in travel annually, a figure that was recently adjusted from $15.5 billion, representing a 37% increase. Virtuoso has now grown to more than 800 agency locations and over 15,000 advisers.
Right now, Virtuoso is experiencing year-over-year sales growth of between 9% and 10%, said Mike McCown, senior vice president of finance and analytics. He attributed that growth to a variety of factors, including pent-up demand following last year’s election and a longer Wave season in 2017.
“If Virtuoso sales are a barometer, the travel industry appears very healthy,” McCown said.
Indications are that the health the industry is enjoying will continue through 2017. While AAA does not produce an annual summer forecast, Sutherland said its Memorial Day weekend forecast is usually a good indicator of what the summer season will look like. First-quarter sales were strong, representing bookings throughout the year.
“It’s showing us that those who are even thinking about traveling have now converted that into a booking,” he said. “So it’s gone beyond the dream stage now to people really looking to take that next step and to make that booking. To me, that’s an extremely encouraging sign for our industry.”
Sоurсе: travelweekly.com