Insights February 2009
Seems like the bad news just keeps coming from both within and outside the industry. As such, we were delighted to see, and are now pleased to share, some welcomed good news: the U.S. Traveler Sentiment Index™ is now rising, the first increase we have observed since January of 2008.
The Traveler Sentiment Index™ is measured in our quarterly travelhorizons™ survey, a nationally-representative survey we have co-authored with the U.S. Travel Association (formerly the Travel Industry Association) since early 2007. The survey is the only national survey that tracks the near-term travel intentions of Americans viewed through the lens of emerging economic, social and political developments. The most recent survey flight was conducted the week of February 7 (2009) with a national sample of 2,270 U.S. adults.
The Traveler Sentiment Index™ is a derivative of six variables: interest in travel, availability of time to travel, availability of money to travel, perceived affordability of travel, quality of travel services and safety. All six measures increased from the levels observed in October 2008 (the last survey flight). And four measures displayed double-digit increases: interest in travel (+10.3%), availability of time to travel (+12%), quality of travel services (+14.1%) and perceived affordability of travel (+97.2%). The result was a 15.3 percent increase in the overall Index from the level recorded in October 2008, although the February 2009 index remains 3 percent below the level recorded in February 2008. The trend line we have observed since early 2007 is revealed below:
U.S. Traveler Sentiment Index™
The significant spike in the perceived affordability of travel appears to be a direct result of many travel suppliers’ recent efforts to stimulate short-term demand through the aggressive promotion of discounted fares and rates. Promotional pricing and related incentives are now offered by suppliers representing practically every segment of the travel industry including airlines, cruise lines, hotel companies, attractions, restaurants and rental car companies, some of which are featuring up to 50 percent off fares and rates they were quoting just 6 months ago.
Let’s hope this positive shift in consumer sentiment now translates into a positive shift in demand for travel services.
For further information on travelhorizons™ visit the Publications section of www.ypartnership.com.
March 2nd, 2009 at 12:45 am
Peter,
It is good to see a rebound in the consumer travel sentiment. While I hope that sentiment will convert to meaningful demand, it comes at the cost of deep discounting without evidence that the industry will be able to rebuild rate anytime soon. As a vacation rental management company what we are experiencing is that as hotel rates fall the value proposition of vacation rentals narrows. With increasing supply there is pressure to discount vacation rental rates as well. The vacation rental industry must seek to capture more market share, not only by rate competition and product awareness campaign but more effective destination marketing, better vacation packaging and higher conversion rates. Or more simply stated… increase demand and sales using every tool we can.
If professional managed vacation rentals learn to operate and market more similar to our hotel / resort lodging accommodations counterparts, we have the opportunity to grow market share through this industry cycle. As brand concepts like the VRMA DVH initiative become more recognizable, the Rent-By-Owner element of vacation rentals will become perceived more like the unbranded Ma and Pa lodging segment, while professionally managed vacation rentals continue to grow market share…more demand.
Unlike hotels vacation rental managers can change operating margins by increasing commissions charged to our owners. That is a very difficult sale in this economy. Setting aside discussion on economies of scale, if rates continue to be highly discounted there is really no realistic alternative but to increase occupancy to cover fixed costs. Whether a vacation rental or hotel accommodation, in my opinion RevPAR(room/rental) is the key management index to track.
Alan Hammond
VRMA Board Member
March 2nd, 2009 at 5:55 am
[...] to ypartnerships: The Traveler Sentiment Index™ is measured in our quarterly travelhorizons™ survey, a [...]
March 2nd, 2009 at 7:28 am
Many thanks for sharing your thoughts on this. With respect to strategy, discounting is not the only option. The “premium route” (offering guests something of perceived value you normally wouldn’t, tied to a nightly rate that allows you to pass along the premium at cost) can be equally effective as revealed in the national Promo Power study we conducted last fall. And as for the ability to raise rates once the gray clouds pass, I am a firm believer that the consumer is very well informed and understands that leisure travel is demand-elastic. As such, they expect rates to fall in times of declining demand, and understand they will rise in times of increasing demand. Thus the road out may be shorter than you think!
March 7th, 2009 at 8:08 pm
As the innkeeper at a small, intimate bed & breakfast on Cape Cod, my experience has been an increase in requests for one-night stays over the winter, and especially this past month. I have discounted winter/spring rates but will not do one-night stays because of the work involved, plus cost of heat, amenities, linens, and let’s not forget breakfast, which we try to make organic. Of course, in summer, no one will want to stay for one night, but it makes life tough in the meantime. I tell folks to stay at a motel if they only plan to be in town one night. The bed & breakfast experience cannot be fully appreciated if people only want to sleep and run.
March 13th, 2009 at 12:41 pm
I’m absolutely amazed at how people like “intimate bed and breakfast” absolutely refuse to change the way they do business, despite the fact that the entire world around them has done exactly that. Can you honestly tell me you’d rather absorb the cost of a room rather than find a way to make it cover costs simply because you won’t realize a “profit”? Why not offer a scaled-down version of your organic breakfast? Why not make a special “one-night” package? Why not partner with another local business for a special mid-week package? Or maybe why not be a bit more explicit in telling people what they’ll get for what they’ll pay if you think your value proposition is valid (because clearly your customers don’t currently have the same perceptions you want them to).
People. The world has changed. Figure it out and you’ll do just fine.
March 17th, 2009 at 4:58 pm
I totally agree with David S, We have many clients in the Bed & Breakfast Industry and some our very inventive.
One client who requires two night stays normally, will send out an e-mail to her preferred list giving them a one-night -gap special for that rare midweek looser night. She touts it as a chance to get away and pamper yourself in this economic crisis. She has about a 90% fill rate for nights she would have lost. A night lost is revenue lost forever…..too many of these and a property is out of business sooner than later.
March 23rd, 2009 at 12:32 pm
I agree with David S as well - regarding the one night stay at B&B. If a person can stay one evening now in winter/spring (off-season) and have a great experience…they may be more likely then to return in the busier summer season for a longer (and usually more expensive) stay — and then the B&B has a repeat customer. My two cents.
April 3rd, 2009 at 10:27 am
You should stay at a cookie cutter American chain hotel if you want cheap.
We too run a B&B. We use the Frette linens and down sleeping pads with wool covers. 4 down pillows at $400 a piece. Our beds actually are over $10,000 each. We serve breakfast on bone china, cut crystal, sterling silver and linen napkins No we do not give discounts. No we don’t need to wear out our stuff on cheapo customers. Please don’t call us. You want bed bugs and rooms cleaned with Febreze don’t come. You want to spend an hour chatting with the owner? Stay here. You won’t likely get to chat with Paris if you stay at the Hilton.
April 7th, 2009 at 5:21 pm
Way to go Wally. You tell them. The value proposition is one we struggle with every day and yes a night lost is revenue that is not made up. You pay the rate or go somewhere else. Everyone does it all the time. I also run a BB in Maine and have walkins expecting rooms at a cut rate. They don’t want what i offer, they want cheap and will ask for a discount at the motel 6. I am the most affordable Inn in the entire region and according to my online ratings, the best. I am comfortable with my offering and either you pay it or you don’t. My off season rates are almost the same as peak season, i don’t cut anything from your stay regardless of the time of year. But you are right in that small properties have trouble establishing constant value and because of the lack in consistancy between small properties we have trouble showing the people what makes a good BB or a bad BB.
January 5th, 2010 at 8:26 pm
This was a very good read, please keep updating!
February 1st, 2010 at 3:49 am
Great post! Lovely!
March 10th, 2010 at 8:27 pm
I have a video from the Paris Hilton movie on my website. To bad it got leeched onto the net for everyone to look at. She did not want it to be released as it was her ex Rick Salomon that lost it.
April 14th, 2010 at 1:51 am
Enjoyed your coverage of this interesting idea. Noted and visit again for more good reading. thank you