21 July 2009

The Spending Down Turn Impacts Across The Board

By now everyone knows that while the passenger numbers have been falling the revenue numbers are even worse.

So three key indicators have recently confirmed this. If we look at the USA market as a proxy for the whole world (I will come back to this), it shows that all aspects of travel are down.

1. Passengers are down
2. Fares are down
3. Amounts that people spend are down.

This is now across the board with average spend down reported by the US - TIA at 22%. With regard to airfares - they have been falling since September of 2008. For passenger spend, May 2009 marks the seventh straight month in which U.S. travel and tourism-related exports were lower when compared to the same period of the previous year, having declined in November 2008 (-4%)for the first time. This shows that the fall off of bookings that started with effect from September 2008 didn't work themselves into the tourism spend till November of that year.

This should give us some clue as to if - or hopefully when - we can see an uptick. So far those indicators are not there. As an aside - there is a common held belief that freight precedes passengers with regard to economic cycles. I have not actually been able to find (mostly because I have never looked) to see if this was true historically. But I do know that freight traffic is STILL falling. Both Air and Sea/Land.

In economic terms there is still too little demand for the available supply. However the economic cost of cutting more supply works to the point of actually increasing the costs.

It is at this point that tourism stimulation is required by all concerned. I read an intro by Trailfinders' Mike Gooley CBE. He clearly states that travel is at its lowest ever. I agree. But its not enough.

I don't want to dampen people's spirits nor be the naysayer - but so far I cannot find any evidence of an uptick. I have previously predicted that we will see some stabilization come September. I do believe by that time that the worst of the cuts will have worked their way through the system. One indicator however may give us cause for concern. A recent survey by WWF as part of their one in five campaign has attracted a growing number of people to reduce corporate/business travel.


So there you have it. Save the Planet or Economic Poverty.... It may get as stark as this.

And what do you think?

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