2011 Travel Outlook

There was a major retrenchment in the travel industry in 2009, as the U.S. economy started to slump, and travel hit a 3.4 percent downturn after years of increases. Travel in 2010 picked up slightly in the second half of the year and is expected to continue its upward path this year. Below is a forecast in numerous hospitality sectors for 2011…

Hotel Room Rates
Smith Travel Research is forecasting hotel room rates nationally to rise 3.9% in 2011.

Corporate Travel
The difficulties the industry faced during this last recession, corporate travel buyers welcome the improved conditions, and companies are already getting their teams back on the road to help build business. With that said Corporate Travel is poised to grow by 4.45% in 2011.

Leisure Travel
Orbitz survey of 3,000 U.S. travelers is forecasting the following:

• Some 36 percent plan to spend more on leisure travel in 2011 than in 2010, and 42 percent plan to spend the same amount.
• Ninety percent plan to take two or more leisure trips in 2011, slightly more than in 2010.

Meetings and Conventions
For the Meetings & Convention industry there is also optimism for 2011 and 2012. From the airlines, hotels and restaurants perspective they have seen improvements beginning in the 3rd quarter of 2010. The traction gained will cause an increase in fares and hotel room rates in 2011. Some signs of recovery started to emerge as companies who had three quarters of positive earnings immediately began holding meetings. Other emerging trends include:
 

• National Associations are trending away from planned food and beverage functions thus pushing F&B revenue at convention centers food courts. “Brand name” concession stands are greatly sought after by convention planners and their attendees such as Panera Bread, Subway, Pizza Hut, etc.
• Room blocks are lower due to the severe penalties associated with attrition clauses. Planners are trending towards contracting only 50% of their required room block upon selecting a city. They are waiting one year out before picking up the remaining rooms needed to fill their room block requirements.
• Hotel meetings will likely continue to have relatively few amenities as companies maintain a watch on the cost of holding meetings. According to the American Express Business Travel Global 2011 Forecast.
• Third Parties are adding a double layer of incentives that cities have to pay. Third parties are asking for a commission and for free or greatly reduced convention center rentals.
• Third Party Companies are growing their business every year as Corporate and National Associations are increasingly frustrated with the consolidation of hotel sales offices nationwide. Planners are increasingly turning to third party companies in assisting them in room blocks and contract negotiation.
• Key to working with Third Party planners are:
  1. Speed and accuracy of answering their questions
  2. Adhere to the RFP instructions
  3. They are shopping multiple cities at once so offer your best deal on your proposal
  4. Check with them first before placing their groups name in a public convention calendar

There are still plenty of wild-card variables remaining such as the state of the overall economy and the price of oil. But if all goes according to the experts’ expectations, the meetings industry should see gradual improvement through next year and into 2012. Attendance at conventions and trade shows is on the rebound.

Trade Show Growth Encouraging
The second quarter of 2010 marked the ninth consecutive decrease in major trade show and exhibition industry metrics year-over-year, and the same was anticipated for the third quarter. However, the Center for Exhibition Industry Research found attendance was up 6.6%, revenue rose 5.6%, the number of exhibitors climbed by 5.2% and net square footage was up 5.2% over the same period in 2009. The trade show market mirrors the industry it serves. So for the trade shows market to fully recover it will need the U.S. and world economies to get back to full strength. The 4th quarter of 2010 and the 1st quarter of 2011 will dictate how well the trade show industry is recovering from its post recession lows.

Virtual Elements
The use of virtual meetings has finally gained a foothold in the meetings industry.

• 15% of planners incorporated virtual elements into their meetings in 2010
• 7% said virtual events replaced face-to-face gatherings in 2010
• Virtual attendance has allowed time crunched attendees to participate in some elements of meetings without losing time traveling

Customers Expectations
Several new developments are emerging from the meeting planner’s perspective that we must be sensitive to.

• Planners are seeking greater assistance in marketing cities and hotels to build attendance
• Attrition was a huge issue until they figured out that by blocking fewer rooms they wouldn’t be as susceptible to attrition fees
• Planners are expecting complimentary Wi-Fi
• They want more services than ever before
• Planners are using less F&B to save costs
• Planners are increasingly incorporating virtual elements in some of their meetings

Lead Times to Increase
Increasing demand coupled with a reduction in hotel construction suggests that meeting lead times will begin to grow again. In major markets this has already begun as companies will find it more difficult to find meeting space if they wait until the last minute. The days of planning a meeting 1-3 weeks out may be over for now.

The Cost of Flying
According to the 2011 Global Forecast, released in October 2010 by American Express Business Travel, the constrained capacity and higher demand will likely drive fares up. Amex predicts global fare increase from 2 to 8 percent for short-haul and economy class fares from 3 to 10 percent. Following the Delta-Northwest merger, United and Continental sealed its merger agreement in October, and now Southwest Airlines has announced its intention to acquire AirTran. If you follow conventional wisdom, joint ventures usually push prices higher. With the airlines mergers in place, and the reduction of flights to match demand, airfares will definitely be on the rise in 2011.

Restaurant Industry Projecting Growth
In the January 11th USA Today article titled “Hiring rises at bars,” restaurants stated that consumers are going out again which bodes well for jobs. The food industry added 25,000 jobs in the month of December which was the biggest contributor to the 47,000 jump in employment for leisure and hospitality – and also was the top job creator among 14 broad sectors the government tracks. The restaurant industry was among the biggest job producers of 2010 adding 188,000 positions. The outlook for 2011 is that people are ready to be waited on again and restaurant sales are forecasted to increase by four percent

Incentive Market
Though Louisville is not considered as an incentive market here are a few trends happening in this segment.

• Use of international destinations will increase
• Top management will make more decisions
• Suppliers will be less flexible
• Events will get greener
• More meetings will be held
• Programs will get shorter
• Groups and program perks will shrink
• Budgets will grow