Travel from Japan to U.S. posts double-digit drop

by Tom Johansmeyer on

There aren’t as many Japanese tourists walking the streets of the United States as there were a year ago. The latest data from the U.S. Department of Commerce, which covers the third quarter of 2009, puts Japanese travel to the United States down 10 percent to 15 percent on average relative to the same quarter in 2008, and the situation is forecasted to be grim for the fourth quarter results, as well, which are expected to show a continued decline. Seventy-eight percent of the Japan travel trade has projected a drop in fourth quarter travel results year-over-year.

And it doesn’t look better for the beginning of this year. Fifty-two percent of the travel firms in Japan that were surveyed anticipated a decrease in travel bookings to the United States for the first quarter of 2010 relative to the first quarter of 2009. Economic concerns, airfare and fuel charges and pandemic/epidemic fears were reported as the leading drivers of the travel slump for the Japanese market (for travel to the United States).

In the third quarter of 2009, 849,687 people traveled from Japan to the United States, a drop of 5 percent from the third quarter of 2008. July 2009 was particularly tough, with 244,412 arrivals resulting in a year-over-year decline of 15 percent. September was the lone bright spot, with 309,435 arrivals resulting in an increase of 8 percent – the first monthly year-over-year increase in 15 months.

South Carolina looking for tourism comeback this year

by Tom Johansmeyer on

Are you going to South Carolina this year? Well, someone you know must be. The state expects its tourism busines to bounce back this year. This business is good for $18.4 billion in South Carolina economy, which is a pretty good reason to celebrate the revival of the tourism business. In 2006, tourism brought in only $16 billion,according to the South Carolina Department of Parks, Recreation and Tourism.

Of course, it’s going to be tough to tell how many people actually sink money into the state until 2011. We still don’t even know how much the recesion cost South Carolina in 2009, as the $18.4 billion result is for the year before. The 2009 data won’t be around for another year, so we probably won’t know about a 2010 recovery until 2012.

According to Chad Prosser Director of the Department of Parks, Recreation and Tourism, golf is the key to South Carolina tourism, explaining to The Associated Press, “You see it very profoundly in the golf market. When they can’t golf up north it does increase our numbers.”

American travel overseas up 1 percent

by Tom Johansmeyer on

U.S. travelers understand that it’s as important to give as it is to receive. Thus, it’s almost just that American travel to foreign destination was up 1 percent from October 2008 to October 2009 — exactly the same rate at which foreign travel to the United States grew. The outbound air market posted a decline of 4 percent year-over-year, though it’s up from 8 percent in June.

Spending by Americans traveling to other countries reached $2.07 billion in October, a decline of 26 percent from the year before. Overseas spending for the first 10 months of 2009 amounted to $21.3 billion, representing a drop of 21 percent from the same period the year before.

Travel to most markets was down significantly, with Canada off 8 percent for October and 9 percent for the year and Mexico down 6 percent for the month and 12 percent for the year. Asia and Europe were flat for the month and 6 percent and 4 percent for the year, respectively.

Markets showing improvement in October were the Caribbean (up 11 percent), Oceania (up 12 percent), Africa (up 2 percent) and the Middle East (up 40 percent).

Online agencies bright spot in Spanish travel market

by Tom Johansmeyer on

The slump in the travel market has certainly affected Spain, which is among the top leisure destinations in Europe. Both foreign travel to Spain and domestic excursions within the country have suffered as a result of the global recession, with travel industry research firm PhoCusWright putting the decline at 12 percent for 2009. The traditional booking channels were hurt more than the online travel agencies, though, which only saw a 1 percent decline in the action. This is a bit of a shock, the research team reports, because the Spanish market has a lower rate of penetration for travel than other countries in Europe.

“While all travel segments contributed to the total market’s decline, each travel industry vertical has experienced varying levels of consumer pullback,” says Carroll Rheem, PhoCusWright director, research. “Car rental and hotel companies, particularly in Spanish cities like Madrid and Barcelona, have experienced some of the sharpest declines.”

The hotel industry in Spain had its worst drop in decades, losing 7 percent in 2008 and 9 percent more in 2009. International visitors, especially from the United Kingdom, plunged, and domestic tourism was squeezed, too. Excess capacity made the situation worse for the hotel business, as new properties hitting the market in 2008 upped the number of rooms to be filled by 3 percent.
Unlike many European markets, low-cost carriers did not post the market share gains against traditional carriers seen other markets. Both airline sectors suffered declines in demand due to both the travel slump and competition from high-speed domestic rail companies.

Online travel agencies, on the other hand, fared much better. They posted a revenue growth rate of 2.7 percent, with packaging becoming an increasingly lucrative service. PhoCusWright basically indicates that this is “a bright spot in the currently bleak Spanish travel landscape.”

Guests to stay in control of hotel industry until at least 2012

by Tom Johansmeyer on

The light at the end of the tunnel is always cause for hope. When market conditions are at their worst, the promise of a recovery keeps morale from plummeting and gives a reason to keep pushing forward. For the hotel industry, however, there’s nothing but darkness for the next year. The latest research from PhoCusWright paints a pretty dismal picture, evident immediately from the title of its most recent announcement: “Why Hotels Are Not Recovering Any Time Soon.” But, it could just as easily have been called, “Why Travelers Can Get Dirt-Cheap Rooms in 2010 and Probably 2011.”

Ouch.

If you’re looking for a culprit, start with those two traditional factors — supply and demand.

Demand is off substantially. Conditions right now are worse than they were in the dismal 1990/1991 season and during the post-9/11 recession. Last year, demand fell between 5.5 percent and 6 percent. This is far worse than the 2 percent decline posted in 2002 and the 1 percent drop in 1991. This year, PhoCusWright expects demand to inch higher by 1 percent to 1.5 percent, but this is relative to the severely depressed baseline of 2009. So, we’ll likely reflect at this time in 2011 on a slow recovery that still has some road in front of it.
Fortunately, a 5 percent increase in demand is expected in 2011, followed by a few years of growth in the range of 3 percent to 4 percent. This means that we’ll get back to 2007 levels by the end of 2011 and start to see net hotel market growth in 2012.

Part of the problem that the hotels face is an increase in supply. So, while demand is down, the industry has more beds that need heads in them. The ill-timed increase in demand is the result of projects that began before the financial crisis and subsequent recession. Nobody saw the credit market collapse coming, let alone the downstream effects, as evidenced by the 3 percent increase in supply last year. From 2011 to 2013, supply growth will slow down, though, as bone-dry credit markets and general financial malaise have led many development projects to stall. In fact, PhoCusWright expects hotel supply falls next year and the two years after.

The increase in supply and decrease in demand has put incredible pressure on occupancy. In 2006, hotels were able to put 63 percent of their room-nights to work, but last year, that fell to 55 percent. PhoCusWright expects the increase in demand and decrease in supply over the next few years to support an industry-wide recovery to 60 percent occupancy by 2012. At this level, hotels can usually pick up some pricing power, which translates to an improvement in rates.

In 2009, hotel room rates were of course impacted by the disparity between supply and demand, not to mention the general squeeze on consumer spending. But, these factors weren’t exclusively responsible for the 9 percent drop in rates last year. The hotels themselves bear part of the blame, according to PhoCusWright’s study. In an effort to fill rooms, they engaged each other in a “race to the bottom,” in which they tried to undercut each other for market share at any price.

Given the anemic growth in demand expected in 2010, expect room rates to continue to fall until 2011. The return to pre-recession levels will take a while, particularly given the economic conditions that will be with us this year. The result is another year of depressed revenues for the hotel industry. Last year, revenue per available room-night (RevPAR), the primary metric by which the hotel industry is judged, plunged 17 percent last year and will continue to slide in 2010. PhoCusWright expects the bleeding to stop in 2011, with 2012 RevPAR reaching only 90 percent to 95 percent of the peak levels sustained in 2007.

So, what does all this mean? A full recovery is likely four years away for occupancy and room rates. In 2011, the situation will stop worsening, and it will pick up in 2012, but it’s two years past then than you’ll see the hotels regain their strength. Until then, it’s the consumers’ show. Travel often. Slap a few more nights onto each of your stays. You’re in the driver’s seat.

[Photo via MigrantBlogger]