
Americans say they aren't likely to travel much more in 2010 than they have this year, despite optimism that they will from many Wall Street and travel industry analysts and industry leaders.
A new USA Today/Gallup Poll finds that only 16% plan to fly more or stay more often in hotels next year than they did in 2009. About 30% say they actually will fly less frequently and have fewer hotel stays. The primary reason: a still-weak economy.
The plight of
Doug Henning, a software consultant from Jacksonville, is typical of why Americans -especially business travelers- say they're not likely to travel more.
For years, Henning flew so much for work that earning elite status in airline frequent-flier programs never was in doubt. Then he got laid off last spring, and his flying came to a near stop. A short-term consulting gig in South Carolina had him commuting to work by car every couple of weeks. But now that contract is completed, and he's looking for work again.
"I used to travel probably 35% of the time, 50% in some years. But I couldn't fly a whole lot less than I did last year," Henning says.
"I've got a couple of possibilities for jobs, but I don't think I'll be traveling nearly as much as I used to in anything that's on my (job) radar right now."
Jeane Frear, a registered nurse from Johnson City, N.Y., hasn't lost her job, but the fear that she or her husband might in 2010 will be keeping them out of the skies and off the road in 2010.
"In the past year, we didn't do any flying, in part because of the economy, but we did a lot of driving," she says.
"But we'll do very little of either next year. We've decided we want to do more work on the house, and with the way the economy is, we don't think we can do that and travel, so we're curtailing our travel."
Industry analysts nonetheless say the slowly improving economy is likely to increase demand in 2010 for airline tickets, rental cars and even hard-to-sell travel services, such as hotel meeting spaces and catering services. But the improvement is measured against a recession-ravaged 2009.
American Express, the world's largest travel agency and travel advisory firm, says demand for most travel services likely won't return to pre-recession record levels in the foreseeable future. American Express says the industry should adjust itself to a "new normal" for travel demand.
"We have seen signs that there's been some stabilization and that maybe we've turned the corner," says
Lane Dubin, vice president and general manager of American Express' business travel sales efforts in the Americas.
"But that doesn't mean things are going back to the way things were before."
Corporate travel policies imposed during the recession to reduce travel spending won't slowly vanish, as they have after previous economic slowdowns, Dubin says.
Here's what key sectors of the travel industry foresee:
Some airlines are encouraged
Many airlines and airline industry analysts see signs that a turnaround could be underway. They point to a year-over-year rise in demand for seats on their planes every month since May.
United Airlines CFO
Kathryn Mikells told investors at the Next Generation investors conference earlier this month that
"while the numbers still aren't where we would desire them to be, it is a very, very encouraging trend line."
US Airways President
Scott Kirby, speaking at the same event, said that since spring, when corporate spending on air travel was down 30% to 35% from the previous year, US Airways has seen steady improvement and that in November corporate spending on air travel was, for the first time in more than a year, higher than in the corresponding month a year earlier.
Airline stock analysts figure that carriers have reduced their non-fuel operating costs so much in response to the tough business conditions that any improvement in the economy will translate into more passengers - and that any increase in revenue will go mostly to airlines' bottom lines. Even a modest rise in the USA's gross domestic product in 2010 will mean a return to profitability for most, they say.
However, the CEO of one of the few airlines that's expected to post a small profit for all of 2009 -Southwest- warns that expectations are overblown.
"Business travel still lags, and I don't know that I'm comfortable in reporting that we've seen any improvement in that market," Southwest CEO Gary Kelly says. "I'm not expecting strong economic growth in 2010. And, likewise, I'm not expecting a rebound in business travel in 2010."
Hotel industry is more subdued
Hotel industry leaders and the analysts who follow their companies aren't trying to put a positive spin on their industry's prospects for 2010.
Occupancy rates and average daily room rates that have plummeted over the last two years aren't expected to rise much in 2010, especially in big business travel markets with a glut of business-class rooms.
PricewaterhouseCoopers' U.S. lodging forecast shows that U.S. hotel occupancy fell to 55.2% this year from a peak of 63.3% in 2006. And it will rise almost imperceptibly in 2010 to just 55.8%, 7 percentage points below the long-term average of 62.8%. Worse for hoteliers -but better for travelers- the weak demand for rooms has undermined hotel pricing.
The average daily room rate across the USA has remained below year-ago levels throughout 2009, producing a 16.4% decline in the industry's average revenue per available room. While occupancy rates will improve slightly in 2010, PricewaterhouseCoopers expects revenue per available room in 2010 to be even lower than in 2009.
Scott Berman, the firm's industry leader for the U.S. hospitality segment, says,
"The worst appears to be over," barring unexpected circumstances. But,
"to what degree the industry experiences recovery is predicated on an improving economy."
Modest rise in conventions
The conventions and meetings segment of the travel industry is expecting only a modest increase in demand for hotel rooms and meeting spaces in 2010.
Roger Dow, president of the
U.S. Travel Association, says that while he's "
hearing a lot of positive news about 2011 and 2012," next year will continue to be a buyer's market for corporate and association meetings and convention planners looking for lower prices.
Roughly 40% of all corporate and association meeting planners expect to postpone or cancel off-site meetings through the end of 2010, according to an American Express study done for the Professional Convention Management Association.
Convention and meeting hotels trying to drum up business in 2010 also aren't being helped by airlines drastically cutting flights.
That makes the airlines less interested in negotiating rock-bottom deals to carry conventioneers and meeting attendees. That leaves proportionately fewer dollars available to spend on hotels and catering at conventions and meetings.