The Official Monthly Newsletter Of The NJTIA

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This column contains a listing of Bills which pertain to the New Jersey Travel Industry Association. Each month the list will be updated to include Bills whose status has changed.

U.S. Hotels To Bottom Out In 2009

by Ferrari & Partners, LLC

A new study by PKF Hospitality Research reveals that demand for U.S. hotel rooms will contract for the next two years. Compounding the negative impact of declining demand is a projected concurrent increase in supply reports HotelMarketing.

PKF Hospitality Research (PKF-HR) is forecasting a combined net increase in 2008 and 2009 of nearly 275,000 new hotel rooms compared to year-end 2007. This represents a 6.2 percent jump in accommodations over this two-year period.

With supply and demand levels moving in opposite directions, occupancy rates are projected to decline in both 2008 and 2009. Considering the 0.3 percent occupancy decline reported by Smith Travel Research in 2007, the result is three consecutive years of fewer accommodated roomnights for the average U.S. hotel.

Amtrak Ridership Through The Roof

by Ferrari & Partners, LLC

The U.S. government-owned passenger rail company known as Amtrak is finally having its moment in the sun. After more than three decades as a money-losing symbol of government waste, bureaucratic ineptitude, and U.S. consumers' overwhelming preference for car travel, Amtrak's ridership is surging, bolstered by high gas prices and a growing distaste for short-distance air travel.

According to the blog Jaunted, this a watershed moment for U.S. train travel, it does represent an opportunity to reacquaint people with the joys of riding the rails - and might also be a rare opportunity to bring the 1970's-era rail line into the 21st century.

One of the biggest problems Amtrak has had to face throughout the years is its lack of exclusive railroad tracks. Almost all of the train tracks in the U.S. are owned by rail freight companies, which means that Amtrak trains are often delayed by freight trains that have priority on the tracks. Of course it would be a huge expense, but now just might be the time to lay down a new system of tracks across the country for passenger trains only. It could represent a way to put the rising ranks of the unemployed to work, and would also be a huge step toward this "energy independence" thing people keep talking about. After all, train travel has a lower environmental impact than both flying and driving, and it's smoother and more comfortable to boot.

Global Economist: Corporate Profits, Travel To Take Hit Until 2010

15 October 2008  -  The U.S. economy will continue its downward spiral--impacting corporate travel--through 2009, and several European countries are already in recession, but a global recovery and potentially strong growth are expected by 2010 and 2011, said Global Insight chief economist Dr. Nariman Behravesh at an Association of Corporate Travel Executives conference in Rome last week.

"We don't expect a global recovery until 2010, so just to be clear, 2009 will be worse than 2008, but 2010 should be better in the sense that we'll get some bounce back," said Behravesh. "The U.S. economy is probably already in a recession, and we are expecting to see worse growth at least at the end of this year into next before the economy recovers."

Taking an optimistic view of the U.S. economic situation, Behravesh said U.S.-based companies now facing negative profit growth domestically are experiencing quite the opposite internationally. He expected that corporations would not cut international travel as much as domestic travel, although a temporary slowdown is still on its way.

Perhaps the biggest international surprise, Behravesh noted, was Europe's "very weak" second-quarter economic growth figures, which were negative while the United States grew by 2.8 percent.

"With European growth, clearly the numbers are looking bad. All of the data coming out is quite problematic," said Behravesh. "A number of economies are already in a recession: U.K., Italy, Spain ... I suspect that it will be very tough, for example, for Germany to avoid a recession in this type of environment with the U.S. and the U.K. being hit with a recession, where they rely very much on exports."

Behravesh said the travel industry can expect to see some relief on energy costs, though perhaps only temporarily. He expected the per-barrel price of oil to drop to as low as $85 (it actually fell below $80 this week) and then rise again to around $100. "Oil prices have been coming down, and actually they will probably come down some more," he said. Though there may be some relief on oil, "the prices are still going to stay high mostly because of the very strong demand that is coming from the emerging world."

"The good news/bad news on the cost side is that there will be relief in terms of energy, but the negative side, is there will be a lot of pushback on corporate travel," Behravesh continued. "But inflationary pressures worldwide are coming down--very low in the industrial world and higher in the emerging world. In the industrial world, inflation is really not a problem despite there [being] a lot of talk about it. It's sort of a nonissue.

"We're starting to see some leveling off of travel prices," he added. "The actual prices are volatile, but if you smooth them out in the sense of looking for trends, already we sort of have an inflection point and I suspect we're going down." Behravesh warned against comparisons between the current slowdown and the Great Depression, and blamed the financial press for being "in the eye of the storm" and "taking a bleaker view." During the Great Depression, bailing out the U.S. economy cost taxpayers an estimated 50 percent to 75 percent of gross domestic product, as opposed to this recession where the "extreme estimate" is about 6 percent of GDP, according to Behravesh.

"It is also important not to get too carried away with the doom and gloom," he said. "It is important not to lose sight of the longer-term dynamics of the global economy. We do believe globalization will continue not because of anything other than the inherent dynamism in the global economy and the very powerful market forces that are driving it."

Asia-Pacific and the Middle East are expected to emerge from this financial crisis relatively unharmed, although their high growth rates may be tempered, Behravesh said. Japan's economy, however, is vulnerable to outside forces because of its dependence on exports.

"The good news is that Asia, China and India will be able to avoid a terrible scenario because they are starting off with very high growth rates. A fair amount of their growth is domestic-led in the sense of consumer spending internally, investment spending and so forth. China, of course, depends a lot on exports--India less so--but [they] should be able to survive this downturn, I wouldn't say intact, but better than most," said Behravesh. Other emerging markets that are expected to perform reasonably well include Brazil and Russia, which, like China and India, also have high-growth "buffers" in place, he added.

"Longer term," said Behravesh, "I would be very optimistic about the economic growth around the world and about corporate travel."

by Ferrari & Partners, LLC

In a weak economy, price becomes an even more important purchase determinant. But using exclusively price-oriented promotions (including free shipping and handling) is a slippery slope that can result in permanently reduced margins. By focusing on price, customers are trained to wait for the next sale. So sale- and price-related promotions should be used sparingly says an article in ClickZ.

            Marketers must change their communications to provide an open channel with their customers and prospects. This translates to creating a variety of ongoing messaging that moves beyond a sales promotion to build relationships and to continue to be read using a variety of means, including e-mailings, onsite content, blog postings, RSS feeds, and tweets. Remember, consumers may take longer between initial research and purchase, do more comparison shopping, and look for ways to reduce expenditures.

            Consider the following four types of non-price-related communication to engage prospects and build relationships (you can always add some information related to a targeted product at the end of your message):

·         Budget stretchers. Think creatively about how to help your customers extend the purchasing power by using your product, either directly or indirectly. For example, offer customers larger quantities to save money and provide helpful hints, such as decanting large containers into smaller ones so that family members aren't overzealous in their use of the product.

·         Timer savers. Before the recent economic turmoil, time was consumers' most scare resource, and they were willing to spend money to save time. Since money is now tighter, highlight how your products can help customers save time without incremental cost. For example, buying online can save shopping trips.

·         Affordable treats. People need something to brighten their lives and reward themselves during difficult times. Assess your offering and consider how to position your products differently to appeal to these goals. For example, a consumer may forgo an expensive luxury vacation but treat herself to a day at a local beauty spa.

·         Entertainment. Consumers want to take their minds off their troubles. This translates to making customers smile. As a result, consider how to position your products and communications to meet these needs. Use entertainment or humor to get customers and prospects to keep receiving and opening your e-mail, making your firm look like an advertiser or sponsor.

Travel Industry Shaken By Economic Downturn

by Ferrari & Partners, LLC

The travel industry has been hit hard by the economic slowdown, particularly in the last few weeks says The New York Times.

Airlines reported sharp declines in passenger traffic for September. Hotel occupancy rates are down, and corporate travel managers are demanding new concessions on previously negotiated deals. Cancellations are starting to rise even at four- and five-star hotels, which previously seemed immune to the economy’s travails.

            Months ago, the nation’s airlines, which are grounding some of their older jets, announced plans to cut 8 to 10 percent of their domestic flights after Labor Day, so traffic was expected to be down. At the same time, the airlines planned to raise fares on their remaining flights.

            But passenger traffic is down beyond the cuts already planned. To be sure, fall is usually a slower season for air travel than spring and summer. Until the holiday season begins at Thanksgiving, flights are dominated by business travelers. So the slower traffic reflects the impact the business crisis is having on the airlines. In September, the top seven airlines averaged a 9.47 drop in domestic passenger miles traveled compared with September 2007. Domestically and internationally, the major airlines carried 9.2 percent fewer passengers than in September 2007.

            Fares are 15 to 25 percent higher on many routes than they were a year ago. But that portion of the strategy seems to have stalled.

            “After 21 increases, almost one a week for the last year, we didn’t see any after July 4,” said Rick Seaney, whose booking site, Farecompare.com, closely tracks airfares. “There is a consensus in the industry that they pretty much have hit the end of the rope on fare increases.”

            Hotels are also feeling the slowdown. In September, domestic hotel occupancy was down 5 percent from the previous September, according to Smith Travel Research. And the higher-price segment of the hotel industry, which had been holding its own, now also seems to be feeling the pain.

“For the last two weeks, cancellations of existing reservations are running about 50 percent above normal” at full-service hotels, said Bjorn Hanson, an associate professor at the Tisch Center for Hospitality, Tourism and Sports Management at New York University.

            That niche — including five-star hotels and four-star hotels that do major business in conventions and meetings — has been propped up by corporate deals negotiated last spring, when “the balance of power was still on the side of the sellers,” Mr. Hanson said. While rates remain high, Mr. Hanson said, corporations locked into hotel contracts are intensely “negotiating for concessions — free breakfasts, free use of fitness rooms, no charge for business center services, free late checkout.”

            Third-quarter profit fell 28 percent at Marriott International, which is considered an industry bellwether because of its big global presence and its wide range of hotel brands, from midlevel lodgings like Courtyard by Marriott to five-star luxury hotels like Ritz-Carlton.

Survey: Business Travel Spending A Mixed Bag

by Ferrari & Partners, LLC

According to a new business travel survey conducted by the Association of Corporate Travel Executives (ACTE), 36% of the respondents said they'd be spending more on business travel next year reports The Center for Media Research, 33% indicated they'd be spending less, and 31% said they'd be spending the same. ACTE Executive Director, Susan Gurley, expects that those spending the same would ultimately be traveling less as the cost of travel has climbed significantly, and "...even those who stated they are spending more may find they are barely keeping up with cost increases."

The number one cause of the cutbacks in travel spending, according to 47% of the survey's respondents, is a combination of economic uncertainty and rising fuel costs. (15% cited the economy alone as did 12% for fuel costs.) 26% cited other reasons such as internal changes and a restructuring of business focus.

"Equally significant is the manner in which corporate travel managers are directing the cutbacks," said Gurley:

Gurley said "Many international travel markets thought the economic downturn was restricted to the United States... yet the fuel crisis hit everyone at the same time... "

As International Airfares Soar, Americans Stay In USA

by Ferrari & Partners, LLC

The days of flying to Europe for a long weekend are over for Diana Koziupa.The Pennsylvania psychiatrist says she and her husband, Ken Swanson, flew to Europe three or four times a year but have stopped because of high airfares. They instead went to Oregon this summer on their first domestic vacation in years and are considering other trips stateside.

"Coach airfares for international flights are over the top," says the frequent traveler, who lives in Perkasie, Pa., about an hour's drive from Philadelphia. "Europe is totally out of the question for leisure and a remote possibility for business."

Travelers feel the pain of high domestic airfares, which rose this summer more than any year in the past quarter century. Meanwhile, says USA Today, many international tickets have risen to levels too steep for the budgets of many American vacationers and companies. That's translating into softer demand.

Growth of international passenger traffic worldwide slowed to a five-year low in July and dropped further in August, according to the International Air Transport Association, which represents 230 airlines. Passenger growth on North American airlines' international routes dropped to 4.2% in July and 5.2% in August, compared with 8.2% in May.

The cheapest round-trip coach ticket this fall — an off-peak travel time — costs more than $1,000 on 40% of the 50 most-traveled international routes and more than $900 on half the routes, according to a study by FareCompare.com at USA TODAY's request. The study included U.S. and foreign airlines.

Many travelers pay more than those fares, which require a Saturday-night stay abroad and are available for a limited number of seats. Without a Saturday-night stay, fares on more than a third of the most-traveled routes can be at least 50% more expensive.