Travel report: Market conditions a drag for resort reservations |

Travel report: Market conditions a drag for resort reservations

Inside Business Staff
Aspen, CO Colorado

The news is not good for bookings and reservations for resorts like Aspen, according to market research.

The Travel Research Program (MTRiP) reports that overall market conditions remained negative in November which reduced consumer confidence, discretionary spending, and mountain travel booking patterns.

“At this point, this season is unlike any other in memory,” said Ralf Garrison, MTRiP founder and author of the report. “The final results for this season will depend on several key factors including the economy, amount of snowfall, and the aggressiveness of promotional efforts and programs.”

As consumer spending slowed, retail prices began dropping, leisure travel discounts appeared, and the price of ski resort lodging decreased 4.6 percent for November.

That data is derived from a survey of 216 property management companies in 15 mountain resorts in the western United States and Canada.

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The report noted that downward pricing appears to be attracting hesitant consumers and travelers who saw some decreases in transportation, living expenses, and travel-related costs.

Mountain travelers are reacting to market conditions and changing their historical booking behavior as indicated by booked reservations as of Nov. 30, 2008:

– Advanced bookings for the winter season are down 19.5 percent from last year’s pace, and lower (-6.2 points) from October, which was down 13.3 percent. Reservations taken during November for all future dates are down 25.1 percent from last November but aren’t as far down as October, which was off 33.7 percent from the previous year.

– Lead time for reservations are getting dramatically shorter based on observations from various resorts that reported.

– Long-lead reservations for late February and March slowed as prospective visitors anticipated reduced air and lodging costs.

– Reservations for January and early February show moderate strength but are being offset by cancellations that have occurred when final reservation prepayment was due, particularly among international visitors.

– Short-term reservations are strong, and were particularly solid in late November when snow and last-minute deals sparked an increase in visitors.

– Second-home owners in resort communities may be increasing personal usage as their rental units remain vacant in peak periods. This could boost business at ski areas, restaurants, and shops but does not appear in advance reservation data.

The assessment

A short-lead booking cycle is expected to continue as lodging availability exceeds demand and consumers continue to delay bookings. Other potential impacts include:

– Transportation relief from lower gas prices. However, a myriad of factors including fewer airline seats, reduced capacity, airlines struggling to maintain pricing, and many skiers and riders staying closer to home, will have an impact on destinations. Attractive rates and last- minute availability may help generate short-lead bookings, especially if combined with discounted lodging and lift packages.

– Pressure on pricing will continue to increase as past guests remain uncommitted and holiday lodging remains available. Many resorts and lodging properties are shifting marketing efforts to nearby “one-tank” markets. Reduced prices and added-value incentives are likely ” even during peak periods.

– Snow remains the wild card in this economy. The recent heavy snowfall in Colorado has boosted visitor numbers but other western regions have had lower than average snowfall. It’s uncertain whether it has arrived in time to boost lagging holiday bookings.

“Resorts and lodging properties need to remember that ‘it ain’t over ’til it’s over,'” Garrison said. “Businesses that want to weather these turbulent times need to remain up-to-date on changing economic variables and then be flexible in finding ways to take care of their loyal guests.”

Other factors

Consumer confidence is up slightly but remains low ” the Consumer Confidence Index (CCI) increased in November to 44.9, a 6 point (+18 percent) increase from October’s record low of 38.

According to the CCI board, “consumers remain extremely pessimistic and the possibility that economic growth will improve in the first half of 2009 remains highly unlikely.”

Financial markets remained unstable with little evidence of relief from the federal bailout plans. Stock market fluctuations reflected that uncertainty.

Economic news was grim as evidenced by the highly publicized bailout plan for the three major American auto makers followed by reports of a $50 billion pyramid scheme perpetuated by a former NASDAQ chairman.

Retail spending declined despite brief signs of Thanksgiving retail strength. Even with deep discounting, consumer spending declined which created a bleak outlook for holiday sales. The subsequent bargains were good news for consumers but businesses unable to meet profit margins had to cut operational expenses ” including layoffs.

Unemployment grew, with 550,000 layoffs in November and the national figure almost at 4 million ” the highest number in 26 years.

Fuel and transportation costs dropped dramatically with oil averaging $45.72 per barrel, 48 percent below December 2007. Gas prices are currently averaging well below $2 per gallon. This trend benefits consumers with lower travel costs and has contributed to recent cuts in some airfares.

The U.S. dollar has strengthened compared to the 12 major currencies index, increasing slightly (0.5 percent) in early December to 93.7, its highest level since February 2006. This trend has a negative impact on inbound international travel as the price of a United States vacation increases for international visitors.

The travel and consumer price indexes declined over the past 30 days and created a “less-bad” situation than in past months for overall consumer spending and travel.

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