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Snapshot
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ECONOMIC INSIGHTS ---
THE ECONOMY:
2004 vs 2005
After experiencing an up and down year in
2004 with adverse economic impact from the Iraq war,
another SARS scare and multiple weather related items
including a series of devastating hurricanes, the year
ended on an up note with most indicators climbing including
the all-important consumer confidence. There is no doubt
that leisure travel, lead by a very successful cruise
industry, was back with strong gains in 2004. And the
ever-crucial business and corporate travel including
the meetings industry showed significant signs of recovery
in 2004. With all that positive upswing, all expectations
are for a continued gain in all areas of the hospitality
business for 2005. But, don't celebrate yet as forecasters
are still predicting the recovery to move slowly and
not be complete (with numbers returning to pre-2001
levels) until 2006 or beyond.
TIA SURVEY
INDICATES TRAVEL INDUSTRY RECOVERY IS HERE
The recent annual Travel Industry of America
Travel Business Status Survey shows that most of the
travel industry has recovered from September 11, 2001,
the weak economy, and other world events. More than
two-thirds of respondents said their business is back
to pre-9/11 business levels. And 82 percent expect an
increase in business in 2005. Major changes in travel
patterns reported by TIA members include increases in
online requests for information, online booking, and
last minute booking. As a result, many TIA members report
increasing their e-marketing activities, and even more
plan to do so in 2005. "Domestic travel trip volume
by all modes showed an estimated 4.6 percent increase
over last year. This is above our midyear estimate,
and reflects a continuation of strong travel demand
in the second half of the year, particularly for business
travel," said James V. Cammisa, Jr., Travel Industry
Indicators. "This year's gains end the prolonged
slump in travel that began in 2001," he added.
IMPROVING
CORPORATE DEMAND IN 2004 BODES WELL FOR 2005
Improving corporate travel demand in 2004
and limited new supply has set the stage for strong
fundamentals and improving profitability in the lodging
sector in 2005 and beyond. According to Smith Travel
Research (STR), industry demand (room nights sold) increased
4.8% year-to-date through September, outpacing industry
supply growth of 1.1% over the same period last year.
Revenue per available room (revPAR) grew 7.5%, driven
by improvements in both average daily rate (ADR) (plus
3.7%) and occupancy (plus 3.6% bps), over that of the
prior year period.
PWC FORECASTS
ADR, REVPAR INCREASES IN 2005
Looking ahead, similar ADR increases are anticipated
for 2005 (3.5 percent) and 2006 (3.4 percent). The forecast
also predicts increased occupancy. Occupancy rates climbed
to an estimated 60.6 percent in 2004 and are projected
to rise to 61.5 percent in 2005 and 62.1 percent in
2006. The increase is attributed to a combination of
favorable economic growth and moderate (1.3 percent)
expansion in hotel room supply. Luxury properties are
the biggest benefactors of the economic recovery: Occupancy
rose 2.8 percent in 2004. Revenue per available room
is anticipated to increase 6.3 percent in 2004, the
largest one-year hike since 1984. Hoteliers have experienced
negative or flat RevPAR numbers the past three years.
The outlook remains positive as PWC projects a RevPAR
jump of 5 percent in 2005 and 4.5 percent in 2006. -
eHotelier.com
PKF HOSPITALITY
RESEARCH GROUP OFFERS CAUTIONARY NOTE
Hospitality Research Group (HRG), the research
affiliate of PKF Consulting, offers a cautionary look
at the hotel industry profit outlook noting that despite
positive trends, the industry still lags far behind
its past peak performance in 1998. The firm said that
it doesn't expect unit level hotel profits and profit
margins to reach 1999-2000 levels until 2006 or 2007.
"As we expected a year ago, hotel revenue has improved
significantly in 2004 as travelers returned to the road
and hotel prices continued to rise," says R. Mark
Woodworth, executive managing director of HRG. The tremendous
bottom-line growth in hotel profits starts with the
strong gains made in top-line revenues. "The gain
in rooms sales certainly has the most influence on hotel
profitability, but I'm sure hoteliers are glad to see
improvement in their other sources of revenue,"
says Woodworth. "Of note were the 7.4 percent increase
in food revenue and 4.5 percent growth in 'Other Operated'
departments. If operated properly, these supplemental
revenue sources can be significant contributors to a
hotel's bottom-line." The only revenue source to
show a decline from 2003 to 2004 was the telephone department
(-5.2%). "This continues a trend we have observed
since 2001. Clearly, guests using their own cell phones
and calling cards has cut into the use of hotel phones
to make toll calls," notes Woodworth.
---
HOTEL HIGHLIGHTS ---
THE HOTEL
INDUSTRY: 2004 vs 2005
The past year began with a war between the
hotel industry and the online agencies as both were
battling for supremacy with rates and availability.
Little by little, the hotels began to win out as more
and more rate guarantees drew users to the brand web
sites. The war is not over, but the hotels have won
the first skirmish. One positive thing that has evolved
during these battles is that hotels are returning their
attention to what makes their product standout and get
repeat business. Sales and marketing disciplines are
getting a renewed pass and while there are many challenges
facing hotels in 2005 such as costs, technology and
most important, human resources, the outlook is very
bright.
HORST
SCHULZE PLANS TO LAUNCH SIX-STAR HOTEL BRAND
The new mark of ultimate hotel excellence,
service and amenities may now be six stars, as some
hoteliers are going beyond the traditional five-star
laurels to introduce such features as personal butlers
and private swimming pools to gain a six-star label
for their properties. Horst Schulze, the former chairman
of Ritz-Carlton, is planning to introduce a six-star
hotel chain next year in such locations as Austria,
Mexico, Ireland, Southern Italy and Atlanta. Schulze
is currently finalizing financing and construction plans
for roughly eight to ten six-star hotels and wants his
properties to at least compete with the likes of the
Setai hotel in Miami and the Burj Al Arab in Dubai,
United Arab Emirates, according to the report. -- The
Wall Street Journal
HYATT
CORP TO BUY AMERISUITES CHAIN
Hyatt Corp. plans to buy the 143-hotel AmeriSuites
chain in an estimated $600 million-plus deal that analysts
said makes the luxury hotel company more of a well-rounded
rival to much bigger Marriott and Hilton Hotels. The
deal expands Hyatt into mid-price-range hotels targeting
business and convention travelers, four years after
it ventured into economy lodging with the acquisition
of U.S. Franchise Systems Inc. and its budget Microtels.
---
AIR TRAVEL TRENDS ---
THE AIRLINES:
2004 vs 2005
The airline industry continues to struggle
with costs and the survival of several major airlines
remains in doubt even after a year in which load factors
were up significantly. The market share mentality and
corporate ego that put many of the major carriers into
apparently strong positions over the past decade have
eroded their bottom line as costs of maintaining extensive
schedules rose beyond yield. We would love to say that
2005 portends well for these airlines. However, history
bears a more accurate projection for the future with
expectations that the list of surviving airlines will
not read the same by 2006.
DOMESTIC
AIR TRAFFIC UP IN 2004 WITH MORE EXPECTED FOR 2005
"Domestic airline enplanements rose an
estimated 4.8 percent, outpacing travel by other industry
modes for the first time since 2000. The strengths in
air travel were driven by low airfares set by the discount
carriers. Average domestic fares through October were
3.6 percent below the prior year," according to
James V. Cammisa, Jr., Travel Industry Indicators, Domestic
airline enplanements should increase by 3.5 percent
in 2005. Discount carriers again will be the stimulant
as they expand their presence into more domestic markets
and set industry pricing levels," said Cammisa.
---
INTERNATIONAL INFO ---
INTERNATIONAL
TRAVEL: 2004 vs 2005
Pent up demand has helped propel the international
arrivals to all-time records in many destinations in
2004. While the numbers are up overall, the outlook
for international travel in 2005, especially from the
U.S., will be challenged by the relation of the dollar
to other markets, especially in Europe. The flip side
to this scenario is that more Europeans are expected
to flock to the U.S. because their money, especially
the British pound, will buy more than ever before.
---
BIZ/LEISURE TRAVEL ---
BUSINESS
TRAVEL: 2004 vs 2005
Business travel is coming back. More businesses
are increasing their spending and more companies are
going to meetings and conventions. It began early in
2004 and will continue to increase in 2005. However,
the business travel scene has changed forever as meeting
planners, hotels, airlines, car rental companies, convention
and visitor bureaus and convention centers are all doing
business based on a new economic mindset. Spending may
never be as free as it once was and 2005 is expected
to set some new patterns for cooperation in a new market.
BUSINESS
TRAVEL REBOUNDED IN 2004, EXPECTED TO GAIN IN 2005
Group travel, along with travel in general,
rebounded in 2004 and looks to build on those gains
in 2005. Companies are spending more money on meetings,
holding more of them, and sending more people to meetings
and conventions. They're spending, but cautiously, to
liven up meetings with theme parties, offsite events
and upgraded food and beverage, with cost-consciousness
still the dominant operating mode. On the upside of
increased demand, the specter of groups paying huge
sums in room-block attrition damages is receding as
increased attendance more easily fills the downsized
room blocks that planners adopted over the past few
years as a survival strategy. In fact, attendance is
proving an embarrassment of riches for some groups as
planners are filling blocks and then scrambling for
additional rooms for unexpectedly large numbers of attendees.
Look for planners to adjust block sizes slightly upward
next year. -- Meeting News
YPB&R
SURVEY INDICATES MORE MEETINGS PLANNED FOR 2005
A survey of meeting planners found that 19
percent of them expect to book more meetings in the
year ahead. "This translates into good news and
the reversal of a stagnant meetings market trend that
has persisted since the events of Sept. 11," said
Peter Yesawich, chairman and CEO of YPB&R, the Orlando,
Fla.-based marketing services firm that conducted the
study. The number one concern expressed by the 904 corporate
and association meeting planners interviewed was "making
the meeting agenda relevant." Planners cited the
cost of lodging accommodations as the second most important
concern. Although 23 percent of corporate meeting planners
expect to book more off-site meetings in the year ahead,
they also indicated they were likely to shorten the
length of those meetings and replace larger meetings
with one or more smaller meetings. All planners rated
"site inspections" as the most important source
of new information on both destinations and lodging
accommodations, and planners expressed a clear preference
to work directly with the host hotel and/or resort sales
personnel when negotiating and booking meetings. Orlando
was cited as the number one destination for future corporate
meetings (by 53 percent of corporate planners), while
San Diego was rated the preferred destination by association
planners (48 percent of association planners). - Meetings
Media
BUSINESS
TRAVEL EXPECTED TO BE A LOT STRONGER IN 2005
Business travel will grow at normal rates
that should now parallel the anticipated GDP gains (+3.4%).
While companies will still monitor T&E budgets closely,
cost savings will come from purchasing economies (e.g.,
online buying) and the types of service used (e.g.,
discount air carriers). Corporate meeting and group
business, which lagged during last year's recovery because
of its long booking lead times, will be a lot stronger
in 2005, according to James V. Cammisa, Jr., Travel
Industry Indicators. Domestic leisure travel will benefit
from the higher costs of foreign travel, benefiting
destinations in the Caribbean, Mexico, Canada and the
cruise sector, he added.
IRS UPS
MILEAGE RATES TO 40.5 CENTS FOR BIZ TRAVEL
The Internal Revenue Service increased the
standard mileage rate for automobile business travel
in 2005 to 40.5 cents per mile, a record rise of three
cents. The standard mileage rate is used to compute
the deductible costs for operating a vehicle for business
travel. The new rate is effective Jan. 1. The historic
rise in the mileage rates was attributed to higher prices
for fuel and vehicles in the 12-month period ended Sept.
30.
---
CRUISE NEWS---
CRUISE
LINES CONTINUE TO RIDE THE WAVES IN 2004
The Cruise Lines International Association
(CLIA), which collects data on the passenger carry of
its 19 member lines, said 2.9 million people cruised
on its member fleets during the third quarter, a 9.7%
increase over third-quarter 2003. For the year to-date,
CLIA said nearly 8 million people worldwide cruised
on CLIA lines, a 9.9% year-over-year jump. CLIA said
the lines' average 109.4% occupancy figures in the third
quarter were "impressive" and that when final
figures are in, they expect more than 10 million people
will have sailed in 2004. The lines also expect a huge
increase in booking for 2005 during the "Wave Season"
- a two-month sale and heavy cruise booking period which
begins in mid-January, 2005 and runs through early March,
effectively accounting for the lion's share of all cruise
bookings for the year.
---
ONLINE ISSUES ---
THE ONLINE
TRAVEL WORLD: 2004 vs 2005
Travel spending online continues to grow at
a record pace in 2004 and is not expected to slow in
2005. The GDS industry is looking for new ways to cut
their share of the changing distribution of travel and,
at the same time, a new level of search engines have
evolved that will have an impact we have yet to see.
As all this is happening, the traditional travel agent
continues to remain a factor with consumers researching
online and using live travel agents and meeting planners
to book their travel. As we enter 2005 we expect new
technology to keep us on our toes as personal computers
in pocket sizes are becoming the new wave of communications.
TIG GLOBAL,
HSMAI PUBLISH DISTRIBUTION STRATEGY GUIDE FOR HOTEL
INDUSTRY
With so much to learn about managing a hotel's
distribution channels, TIG Global, an Internet marketing
firm, and HSMAI have released a just-completed Special
Report designed to "de-mystify distribution"
in the hotel industry. It is a comprehensive guide that
was developed in response to a need in the industry
to better understand how to take advantage of the new
and growing distribution network for hotel services.
Click Here for more.
HARRIS
INTERACTIVE SURVEY SHOWS ONLINE TRAVEL PLANS UP
According to the latest 2004 Travel Report
from Harris Interactive, 28% of US adults planning leisure
travel within the next six months will book their plans
using a travel Web site. Further, 22% of those making
business trips in the next half-year will do so on travel
sites as well, while 31% of those planning combined
business/leisure trips say they will also turn to travel
sites. It is interesting to note the behavior of people
planning such combined trips, as the lines between business
and personal time become increasingly blurred. The Internet
is the preferred medium for planning combined trips,
but adults are also likely to turn to a corporate travel
department, though the number citing such means of making
combined trip arrangements (13%) is notably lower than
those who go to travel Web sites or to travel supplier
Web sites.
SURVEY
SHOWS CONSUMERS WANT BETTER SITES, LIVE AGENTS
The Harris Interactive 2004 survey also learned
that besides the standard issue of price, consumers
say they would be more loyal to travel sites if they
were designed better (18%) or if they were able to speak
to a live agent (22%). What's more, providing more travel
options and more travel packages was cited by 14% of
respondents, respectively, as qualities that would make
them more loyal to travel sites.
JUPITER
SAYS ONLINE TRAVEL WILL REACH $91 BILLION BY 2009
"Market Forecast Report, Travel 2004"
from JupiterResearch, a division of Jupitermedia Corp.,
finds that the U.S. online travel market has grown at
a fast pace over the last year, totaling $54 billion
in 2004, or 23% of travel purchased. The online market
is projected to grow to $91 billion in 2009, or 33%
of travel purchased. Sales are growing for both online
agencies such as Orbitz, Expedia and Travelocity, as
well as supplier Web sites, with supplier sites capturing
the majority of the online market. In this highly price-sensitive
industry, search engines are becoming a critical part
of the marketing mix: more consumers are prompted to
visit travel sites as a result of a search than through
any other media source.
CERTIFYING
INTERMEDIARIES & ONLINE TRAVEL SEARCH ENGINES TOP
HSMAI'S 3RD INTERNET MARKETING STRATEGY CONFERENCE
Timely and pertinent issues of certifying
intermediaries and the new generation of online travel
search engines headlined the agenda at the Hospitality
Sales & Marketing International's (HSMAI) 3rd Hotel
Internet Marketing Strategy Conference held in Los Angeles.
Travel and hospitality executives from more than 40
hotel companies attended the day-long event, which also
addressed trademark protection and defending the brand
online. Click Here for more.
WEBSITE
TRAFFIC UP 13 PERCENT
One in four Americans, or 68 million Web surfers,
used online travel sites in November, up 13 percent
from a year earlier, Nielsen//NetRatings reported. The
market research company said 23 percent of Americans
and 46 percent of all active Web surfers visited a travel
site during the month. Online consumers spent $919 million
on travel during November, up 11 percent from the $828
million spent a year earlier, according to the Holiday
eSpending Report by Goldman Sachs, Harris Interactive
and Nielsen//NetRatings. In November, MapQuest, part
of Time Warner Inc., ranked number one in online travel
destinations with 31 million unique visitors, while
Expedia, owned by IAC/InterActiveCorp, followed with
14 million visitors, the market research showed. Travelocity,
owned by Sabre Holdings Corp., drew 11 million online
surfers, while Orbitz, a unit of Cendant Corp., and
Southwest Airlines rounded out the top five online travel
destinations with 11 million and seven million unique
visitors, respectively. - HotelMarketing.com
The first-ever,
all-encompassing, online source for information, research,
contacts and best practices, eConnect is an HSMAI Foundation
program hosted by the University of Houston's Conrad
N. Hilton College. Click
Here to go to eConnect
and access the exclusive HSMAI Member Only areas.
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Dear HSMAI friends and family,
