SGTP eNews 04/10/06
“Travel Industry Marketing Trends & Ideas – A Big One”
1.Thank You! SGTP AnCon’06 Results
2. And The Travel Mart Winners Are...
3. Travel Industry Indicators 1/28/06
4. Travel Industry Indicators 2/28/06
5. Reeling In The Years
6. Hotel ADR / Renovations Climbing
7. U.S. Per Diems Above $300 Mark (BTN Corporate Survey)
8. Top 25 Markets To Drive Country
9. Large Companies Reap Air Discounts…Feds?
10. International Meetings Grow Globally
11. Brands Focus On Worldwide Growth
12. Brands Push Standards To Stay Competitive
13. Lower-Priced Categories Outperform
14. Rate Push Tops Extended Stay Priorities
15.Travel Agents Vital To Hotels
16. Lead; Recreation News 108,000 D.C. Members
17. E-Mail For Customers Can Win!
18. Embrace Your Competition
19. The Myth Of Customer Loyalty
20. Top Reads For Work And Play
1. AnCon’06 Evaluations
SGTP hosted 445 delegates during AnCon’06; 51% (225) buyers; with an overall 8.7 rating vs. 8.6 a year ago. The AnCon’06 Evaluation has all time highs for 11 of the 15 categories scored, Overall Conference Experience, Ice-Breaker Reception, Breakfast (opening), Hosted Reception, Breakfast & Annual Meeting, Awards Lunch, E-Travel Mall/E-Commerce St./Foyer, Mentor Program, Hotel & Arrangements, Faculty, Hand Out Materials.
32% of the delegates earned 723.4 CEUs for their career and professional advancement!
2. AnCon’06 Best Travel Mart Booth Winners
Choice Hotels International, Arlington Residence Court Hotel, Days Hotel & CC Dulles/Crown Plaza Dulles, Florida Keys & Key West/Monroe County TDC, OAG, All Nippon Airways, Starwood Hotels & Resorts/Sheratons, Woodfin Suite Hotels.
Congratulations To All!!
3. Travel Industry Indicators
January 28, 2006
By James V. Cammisa, Jr.
Travel Industry Analyst
305/868-3818
Fourth-quarter performance continued to reflect travel patterns seen in the first three quarters of the year.
Domestic travel by all modes in 2005 rose an estimated 3.1 percent. The 3.1 percent gain is down from the more robust 2004 increase of 4.6 percent. From a historical perspective, 2001-2003 were the years of post-9/11 softness; 2004, the rebound year; and 2005, a return to normalcy.
Domestic airline traffic for the year showed a 1.6 percent gain in passenger enplanements. This is also below the 2004 rebound year increase of 4.8 percent. While planes are flying full, and the traffic gains respectable ones, domestic passenger counts are still below the peaks reached in 2000. The primary reason is that the major airlines have withdrawn numerous aircraft from service, or shifted them to international routes. With less domestic capacity, load factors have risen sharply, reaching 78.0 percent in 2005, 2.7 percent higher than the prior year.
Domestic hotel occupancy for the year climbed to 63.1 percent, almost at the 63.3 percent level reached in year 2000, the industry’s most profitable year.
Travel pricing increases were the best news for our industry in 2005. Our composite index of domestic travel prices was up 5.4 percent. Domestic hotel ADRs were up 5.3 percent, based on Smith Travel Research data. In the top 25 metro markets, the increase was even greater, at 7.4 percent. New York City recorded a 13.9 percent increase.
Business travel economic fundamentals are uniformly positive. Corporations are now reporting their fourth-quarter earnings, and these are meeting Wall Street analyst expectations. Profits for S&P 500 companies will record their tenth consecutive quarter of double-digit gains.
Business optimism surveys are also all consistently positive. A recent Business Roundtable Survey, conducted among 117 major corporations, shows respondents citing positives in their ability to rebuild profits, streamline their cost structures, and accumulate cash. An NABE survey of 142 corporate economists cites the optimistic outlook for new hirings and capital spending, both indicative of a climate of growth and expansion. Increases or decreases in capital spending closely parallel ups and downs in business travel.
Possible weakness in business travel, if they occur, will largely result from our own industry’s inability to meet the business traveler needs. With hotel occupancies moving higher and higher, this means more sold out rooms on prime week days, In October of last year, for example, occupancy in New York City reached 85.5 percent. Average room rates soared to $245. As for air travel, fewer domestic airline flights mean more crowded planes and fewer upgrades for business travelers. While all the economic fundamentals are right for business travel, the non-economic factors could be an impediment to strong growth.
Changes in the business environment have crippled the legacy airlines. In another area of travel, change has had the same effect. Year-end 2005 data on the travel agency market, released by the Airlines Reporting Corporation (ARC), show the number of full-service agency retail locations now down to 15,400. Since the year 2000, more than 12,000 agency locations have closed their doors. They’ve clearly been replaced by the Internet. Today, more than twice as many travelers use the Internet for travel, than those using travel agents.
4. Travel Industry Indicators
February 28, 2006
By James V. Cammisa, Jr.
Travel Industry Analyst
305/868-3818
Early-year Distortions in travel patterns are evident, traceable to a warmer than normal winter in the Northeast, Midwest and parts of the South.
Close-to-home tourism interests benefit most, while distant escape-from-the-cold sun destinations and cruises don’t get the early season boost in advance bookings they normally do. In January, on a national basis, average temperatures were 8.5 degrees above normal. Winter snows didn’t arrive in the North until mid February.
Additional consumer economic data over the next four months will tell us whether the positives will outweigh the negatives. And, for travel, Spring Break performance will tell us how the summer leisure market is likely to perform.
Business travel continues the strength we saw in the fall of last year. Both transient business travel and meeting and convention business are working to boost hotel room demand in major business centers, and business travelers are paying significantly more for their rooms. Marriott reports that its negotiated corporate rates are up 7-9 percent this year.
Higher prices are also evident now for car rentals and for airline fares. Surveys of rental car rates in six major cities, by The Tennant Report, show a 10 percent year-over-year increase. Airline fares in January were up 8.8 percent over a year ago. But airfares are still 15 percent below what they were in 2001. Typically, hotel and rental car expense, when combined, account for essentially the same portion of the T&E dollar as airfares do alone.
Hotel sector financial performance shows a picture that is quite different, with the industry likely to record its best year ever as profits pass the $25 billion mark. Pricing is of course the key factor, as most every dollar generated from pricing increases falls to the bottom line. Smith Travel Research projects that for 2006, domestic ADRs will be up 6.0 percent and RevPar up 8.0 percent.
Hotel room inventories are being controlled a lot better, and this is accounting for some of the improvements in pricing. Online travel agencies are no longer getting the deeply-discounted inventories that they had when the hotels were trying to recover from the industry’s 2001-03 downturn.
Overseas markets are attractive also to the major hotel chains. The recent Hilton-Hilton International Group takeover by the domestic company reflects this interest. The combined company will operate in 80 countries. The acquisition of Fairmont Hotels & Resorts by an investment group that also own Raffles, is another example. It will operate in 24 countries, with 120 hotels. Particularly attractive to chains such as these are emerging mega markets such as China and India.
Trend Watch
Legacy Airline Restructuring Now Showing Progress
Most everyone in our industry has closely followed the fortunes, or lack thereof, of the legacy airlines. Their staggering losses have totaled more than $40 billion over the past five years, with four Chapter 11 bankruptcies: USAirways, United, Delta and Northwest. While external factors that included the shock of 9/11, the Iraq War and soaring jet fuel prices were at work, the legacy carriers were all operating with outdated business models, unprepared for a changed business environment.
For the airlines, what is most encouraging to us is that their new business plans now include clearly defined and distinctive strategies that didn’t exist in the past. In a landmark book, published twenty-five years ago, entitled Competitive Strategy, Harvard Business School professor and consultant, Michael Porter, pointed out that it is essential for every company in every industry to adopt one of three strategies if it is to succeed: (1) Differentiation, a strategy which sets one apart from the competition with value added benefits for the customer, or (2) Cost leadership, that enables one to underprice the competition, or (3) Focus, a strategy directed toward a particular customer or geographic market segment underserved by the competition. Without either of these, he said, one is “stuck in the middle,” likely to be viewed as a commodity with low profitability and highly vulnerable to new competition. All suffered the same fate. The only exception was Southwest, which since deregulation, has continued to be profitable.
In today’s airline restructuring plans, we now see Porter’s principles finally being adopted. United is trying to differentiate itself with distinctive business traveler services. USAirways/AmericaWest, newly merged, wants to become the industry’s largest low cost leader. Northwest has set geographic focus on Upper Midwest; Delta and American, on international routes, where they have a competitive advantage with long range aircraft and experience in business class service.
There are lessons here for us all. When the business environment changes, you’ve got to change with it. Jack Welch, retired GE chairman, put it this way: “If change is happening on the outside faster than on the inside, the end is in sight.”
5. Reelin’ In The Years
Meeting News
January 30, 2006
Source: Meeting News survey of 381 meeting buyers
Are shifting age demographics causing changes in your meetings or in the planning process?
Yes significantly 6.0%
Yes moderately 20.7%
Yes slightly 32.3%
No 40.9%
With three-fourths of planners saying they’re not doing much or anything differently in the face of generational changes, some experts say they’re missing the boat.
6. Hotel ADR Could Climb, Renovations At Record Level
Convention South
March 2006
NEW YORK---According to PricewaterhouseCoopers’ latest forecast, average daily rates (ADR) per occupied room at U.S. hotels will rise by 5.6 percent this year. “Although the national average rate of increase of 5.6 percent is high, the increases in many cities will be even higher---7 to more than 10 percent,” said Bjorn Hanson, Ph.D., and partner, PricewaterhouseCoopers Hospitality and Leisure practice. “Also, guests will see even larger increases during peak periods.”
The increase is a result of rapidly increasing occupancy, Hanson said, adding that hotel owners are recovering record levels of investment in room renovations and enhancements, including improved beds, flat-screen TVs, high-speed Internet connections and other enhancements, like irons and ironing boards at limited service hotels; 24-hour business center services; triple draping window treatments; kiosks and in-room check-out options; enhanced quality bath amenities, such as status branded items and larger soap bars; cordless telephones; quality sound systems (radios and CD players); easy-to-use clock radios; and in-room exercise equipment (treadmills, exercise bikes, stair climbers).
7. U.S. Per Diems Rise Above $300 Mark
Business Travel News
2006 Corporate Travel Index
February 20, 2006
By Jennifer Merritt
Business travelers who paid non-negotiated corporate rack rates for travel services at the end of 2005 racked up an average tab of $309.58 for hotel room rate, car rental and three meals a day in the 100 largest U.S. metropolitan areas. That dollar amount is up almost 7.5 percent from the previous year’s total of $288.13.
Of the three travel per diem components, hotels in 2005 saw the most significant increase, of approximately 15 percent. The average daily car rental rate, on the other hand, took a dip, dropping from $80.98 in 2004 to $77.58 in 2005. Index numbers did spike in 2004 from 2003, so the dip may have been flatter than the index suggests.
8. Top 25 Markets Expected To Drive Country Through 2006
H&MM
March 6, 2006
By Mark Lomanno
H&MM Columnist
As with any analysis of lodging performance, the place to start is room availability. The cycle of building over the past several years in the top 25 markets reveals a remarkable pattern change.
In the early part of the decade new construction in these markets was not only well ahead of the rest of the country, but increasing at the same time when building elsewhere was slowing. That all changed in the last couple of years as the slowdown in new product openings in these markets ground to a halt.
As supply growth in most of the top 25 markets was virtually non-existent, lodging demand has made a remarkable turnaround, not only in these markets but all across the country. However, demand growth in these largest markets has been especially robust consistently outpacing the accelerating demand growth in the rest of the country. This disequilibrium in the supply/demand relationship has helped drive record occupancy percent change increases in these markets.
With occupancy levels strong and still accelerating, it is not at all surprising that average room rate growth looks to still be in the beginning stages of a long run.All underlying fundamentals that tend to drive room-rate growth are favorable at this time. In addition, it seems highly unlikely that a major change in those fundamentals will occur in the next year.
Therefore, from our perspective, it appears there is still the distinct possibility of upward lift in the pace of room-rate growth, especially in the top 25 markets.
9. Large Companies. Reap Air Discounts
Business Travel News
March 20, 2006
Source: Topaz International
Average Domestic Negotiated Discount By Corporate Air Volume, 2005
Corporate Air Volume Average Negotiated Discount
More than $100M 19.0%
Feds—32%? Is this a survivable WIN/WIN?
10. State Of The Industry Report: International Meetings
MEETINGNEWS
February 20,2006
By Marshall Krantz
Compared to 2005, the number of attendees at your international events this year will:
Increase24.4%
Decrease11.1%
How does your current lead time for international meetings compare to before 2001?
Shorter27.1%
Longer11.1%
61.8% of respondents answered “same as before 2001.”
Source: MeetingNews survey of 288 meetings buyers
Amid a healthy level of activity, site selection, costs and security are major concerns.
Driven by globalization and economic expansion, U.S.-based organizations are ramping up their international meetings, with more events and more attendees.
Another conclusion: As with real estate, location is the most important factor for U.S. organizations when picking destinations for their international meetings.
The same considerations that apply to corporate meetings domestically apply to international meetings: an easily accessible destination, quality accommodations and service, security and value.
Although quality trumps cost, according to the survey, companies continue to watch the bottom line as sharply as they did during the recession of 2001, especially for their largest meetings. So planners sometimes chose destinations based on their ability to get quality accommodations and service at the best price.
Still firms don’t let cost considerations get in the way of business objectives.
11. Brands Focus On Worldwide Growth
H&MM
March 6, 2006
By Stacey Mieyal Higgins
American hotel companies know that franchising beyond our borders is a necessary step for continued growth. While global franchising does not compare to the scale of domestic business, industry players agree there’s a world of opportunity.
CHINA
Without a doubt, China is attracting attention from American franchisors.
With the 2008 Olympics in Beijing, an emerging middle class and a population of more than one billion people, it’s no wonder hoteliers are looking east.
INDIA
India also is seeing an emerging middle class. The National Highways Development Project is scheduled to be complete by 2007, according to the National Highways Authority of India Web site.
India has a lot of potential, according to Mike Leven, president and c.e.o. of U.S. Franchise Systems. The company franchises Microtel and Hawthorn Suites internationally.
MIDDLE EAST
There are opportunities and challenges for franchising in the Middle East, according to Ed Fuller, president and managing director, international lodging, Marriott International.
EUROPE
Europe will be Choice’s largest market outside the United States, but it is important to remember the different regions have different needs.
12. Brands Push Standards To Stay Competitive
H&MM
February 20, 2006
By Shannon McMullen
Contributing Editor
National Report --- The fight for competitive advantage has led to a phenomenon in the hotel industry known as continuously evolving hotel brand standards.
With lodging companies focused on keeping their products fresh and meeting guests’ needs and expectations, many are using the power they hold over enforcing brand standards as a means of making sure their chains are up to par for today’s savvy travelers.
These brand edicts, however, often require significant investments from hotel owners and are strictly enforced by their respective lodging companies.
Many owners agree that this evolution—and investment--- is necessary to keep guests happy and coming back to their hotels.
Change Is Good
Although there are some hotel owners in every system that view ever-changing brand standards as burdens on their bottom lines, others embrace the opportunity to improve their operations.