performance and prospects for travel and the group market

Performance and Prospects for Travel and the Group Market

Adam Sacks

President

Tourism Economics

[email protected]

March 2019

US TRAVEL PERFORMANCE IN 2018

0%

2%

4%

6%

2017q1 2017q2 2017q3 2017q4 2018q1 2018q2 2018q3 2018q4

US Travel Indicatorsyear-over-year % change Hotel room nights

US carrier pax

Source: STR, Tourism Economics

US: unabated growth in 2018

• Flying has increasingly been the mode of choice

2017 2018

Focus on 2018: international is slowing

0%

2%

4%

6%

8%

2018q1 2018q2 2018q3 2018q4

US Travel Indicatorsyear-over-year % change

Hotel room nights

Domestic air pax

International air pax

Source: STR, BTS, Tourism Economics

0%

2%

4%

6%

8%

2015 2016 2017 2018q1 2018q2 2018q3 2018q4

US Travel Indicatorsyear-over-year % change

Domestic air pax

International air pax

Source: STR, BTS, Tourism Economics

2018 contrast recent years is striking

2017 2018

Performance in 2018: subpar and uneven

US continued to lose market share; international travel expanded 6% globally.

5.8%

4.6%

4.6%

3.9%

3.5%

3.4%

2.0%

-0.9%

-2% 0% 2% 4% 6% 8%

North America

Latin America

Africa

Total

Middle East

Europe

Overseas

Asia Pacific

International visits to the US in 2018% change

Source: Tourism Economics

Some surprises on the upside and downside

Europe was remarkably resilient last year …except for Germany

Big story is that key emergers in Asia –China and S Korea -- changed course

Brazil, Canada, and Mexico continued to recover

11%

11%

10%

10%

6%

6%

6%

5%

4%

3%

3%

3%

2%

0%

-2%

-3%

-4%

-7%

-10% -5% 0% 5% 10% 15%

SpainItaly

BrazilNetherlands

FranceMexico

CanadaIsraelTotalIndia

United KingdomAustralia

OverseasChina

ArgentinaSouth Korea

JapanGermany

International visits to the US in 2018% change YTD


Net overseas gains led by Brazil

Brazil now slightly below its peak from 2014

The UK remains 6% below its 2015 peak

Canada remains 9% below its peak in 2013

Mexico remains 1% below its peak in 2016

-200 -100 0 100 200 300

BrazilUK

ItalyFrance

ColombiaSpain

NetherlandsIreland

AustraliaIndia

TaiwanSweden

ChinaArgentina

S KoreaVenezuela

JapanGermany

2018 gains/losses in visits to the US Difference from prior year, '000s


The last two years have marked a shift

6.4%

2.0% 2.0%

0%

1%

2%

3%

4%

5%

6%

7%

Average 2011-2016 2017 2018

Overseas Visits to the US% change

Source: NTTO, Tourism Economics

ECONOMIC OUTLOOK AND RISKS

World trade growth will continue to slow

The global economy is moderating

4.4%

4.2%

4.5%

2.2%1.9%

1.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

20

18

20

19

20

20

Emerging Markets Advanced Economies

World GDP

% change

Source: Oxford Economics

US will be fastest G-7 economy in 2019… by wide margin!

Trade war still seen as #1 risk followed by China

The US economy is also set to slow

Business investment poised to cool

1. Domestic demand → moderating

2. Tax incentives & deregulation →

diminishing boost

3. Financial conditions → tightening

4. Global growth → slowing

5. Energy activity → slowing

Business confidence still high, but fell in December

Small business optimism index: • Lowest since Nov2016 & largest m/m

decline in 3.5yrs • Government shutdown weighed on

confidence • Overall level still solid • No signs of inflation

Headline inflation below 2%, while core at Fed target

Lower gasoline prices supports consumer spending

Consumer confidence remains strong

Wage growth is firming “gradually”

• Hourly earnings reached

3.2% y/y in December –

3rd month above 3%

since 2009

• ECI for private wages

and salaries 3.1% y/y in

Q3 – also the fastest in

this cycle

On track for longest expansion on record

Recession odds at 25% in 2019 and 40% in 2020

Recessions odd still

relatively low, but we

will watch for negative

feedback to real

economy from tighter

financial conditions

Leading indicators: cautionary but not alarming

<= slowdown ahead)

Weakness apparent in near term international inbound

3-mo, 50.7

6-mo, 51.1

6-mo, 50.9

3-mo, 51.0

48

50

52

54

Jan

-18

Feb-1

8

Mar-

18

Apr-

18

May-1

8

Jun

-18

Jul-

18

Aug

-18

Sep

-18

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Feb-1

9

Mar-

19

Apr-

19

May-1

9

Jun

-19

Jul-

19

International Domestic

January Domestic and International Travel Index

Index (>50=expansion, <50=decline)

Source: Oxford Economics, U.S. Travel Association

The dollar is a notable headwind

Most major markets have lost visitor purchasing power

50

60

70

80

90

100

110

2013 2014 2015 2016 2017 2018 2019

$US Exchange rates, $/LC2013=100, annual average

Source: Oxford Economics

China (-10%)

Brazil (-42%)

Mexico (-35%)

Canada (-20%)

EU (-12%)

Japan (-9%)

UK (-14%)

Air travel bookings remain steady – but slowing

But vacation intentions remain comparable to a year ago

0

20

40

60

80

US Household Vacation Intentions% planning to take vacation in next six months

2018 2017 2019

Source: Conference Board, Tourism Economics

ST outlook: travel demand is tapping the breaks

Hotel demand is setting new norms (and trending upward)

2.0

2.5

3.0

3.5

4.0

87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19

Room nights per capita, US

Annual room nights

Note: Seasonally adjusted

Source: STR; Tourism Economics

2018 Q4: 3.9 room nights per

capita

But the slowdown is underway

4.0%

2.5%1.5%

2.5% 2.5%1.9%

1.7%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Room demand and GDP% change

GDP

Demand

Note: Real GDP.Source: STR; BEA; Tourism Economics

Hotel performance will be drive by rate

3.8%4.2%

3.8%

4.7% 4.5%

3.0%

2.2%2.4% 2.3% 2.2%

5.6%

4.2%

2.4%

1.4%

3.4%

1.5%

0.1%

0.7%0.5%

0.0%

-0.2%

-2%

1%

3%

5%

7%

9%

10 11 12 13 14 15 16 17 18 19 20

Occupancy and ADR growth% change

Source: STR; Tourism Economics

ADR contribution

Occupancy contribution

-20%

-15%

-10%

-5%

0%

5%

10%

15%

03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Group demand and capex spending

US, annual growth

Note: Capital expenditures measured as nonresidential fixed investment, private, real.Source: STR; BEA; Oxford Economics

Capex

Group demand

Business confidence is flowing through to group room demand

With group room demand actually outpacing transient last year

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

10 11 12 13 14 15 16 17 18

Transient and group room demand

US, annual growth

Note: Capital expenditures measured as nonresidential fixed investment, private, real.Source: STR; BEA; Oxford Economics

Transient

Group

© 2019 STR. All Rights Reserved.

Transient Performance: Full Hotels Lead To Some ADR Growth Acceleration

0%

1%

2%

3%

4%

Jan-17 Jan-18 Jan-19

Demand % Change ADR % Change

*Transient Demand and ADR % Change, 12 MMA, 1/2017 – 01/2019


Group Performance: Group Demand Growth Is Finally Real and Really Strong

-2%

-1%

0%

1%

2%

3%

4%


Demand % Change

ADR % Change

*Group Demand and ADR % Change, 12 MMA, 1/2017 – 01/2019

Easter Shift

Jewish Holiday Shift Easter Shift


Segmentation ADR % Change: Finally Some Growth Across The Board

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%


Transient ADR % Change

Group ADR % Change

*ADR % Change, Transient & Group, 12MMA, 1/2017 – 01/2019


Monthly Segmentation ADR % Change: Good Growth. Could be Better.

0.0%

1.0%

2.0%

3.0%

Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18

Transient ADR % Change

Group ADR % Change

*ADR % Change, Transient & Group, by Month, 02/2018 - 01/2019


Demand Growth is Transient Driven

0

20

40

60

80

100

120

140

160

180

200

2011 2012 2013 2014 2015 2016 2017 2018 R12 2019

Mill

ion

s

Transient Demand Group Demand

*Total Number of Rooms Sold, Group and Transient, by year 2011 – R12 2019

Demand % Change ‘11 – ’19:Transient: +23%

Group: +9.5%


ADR: Lately ADR Is Hardly Moving

$150

$175

$200

$225

2011 2012 2013 2014 2015 2016 2017 2018 R12 2019

Transient ADR Group ADR

ADR % Change ‘11 – ’18:Transient: +27%

Group: +24%

*ADR$, Group and Transient, by year 2011 – R12 2019

MEETING TRENDS TODAY

• Attendees have many more choices

• Access to free learning and networking on-line

• More difficult to get them to spend their time and money

MEETING TRENDS TODAY

ATTENDEES WANT• Authentic and one-of-a-kind experiences

• Immersive learning environments

• Access to knowledge & experiences I cannot get on my own

• Inspiration & engagement

MEETING ORGANIZERS ARE LOOKING FOR:

• New ways to create attendee experiences that are unique and inspiring

• Attendance support and new audiences

• Access to fresh thought leaders and interesting content providers

• Cost-effective solutions

CVBs ARE LOOKING FOR:

• New ways to provide unique value to meeting organizers

• Opportunities to differentiate themselves

• Demonstrate value and engage a broader base of their community

WHAT IF A CVB COULD CONNECT PLANNERS WITH “LOCAL KNOWELDGE” RESOURCES?

• Local companies, organizations and thought-leaders

• A variety of non-traditional venues

• How would they activate these non-traditional partners into valuable assets for their meeting & convention clients?

INDUSTRY SECTOR CONNECTIONS:

Education, manufacturing, the arts, healthcare, etc.

• New, local speakers and experts

• Potential new attendees

Unique Learning Environments:

• Specialized training facilities, simulation labs or cutting edge research facilities

CONNECTED CAPITAL• Washington, DC is an attractive destination for education-related

meetings.

Group room demand is larger than we know

Block Pickup

In hotel, outside block

Outside hotel

• Easily tracked

• Majority of demand

• Bookings inside contracted hotel

• Takes place when block is unavailable

• Bookings outside of contracted hotel

• Variety of motivations

Un

kn

ow

nC

urre

nt

Vis

ibility

Larger events tend to produce greater spill-over

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Less than1000

1000-2500 2500-5000 5000-10000 10000+


Share of rooms outisde block by event size


And city-wides / convention center events also create non-block demand

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Hotel CC


Rooms booked outside the contracted room block by facility


Takeaways

Economic growth is moderating

While it premature to call a world recession, a slowdown appears imminent and downside risks to growth have risen

Key risks: unresolved trade war, financial turmoil, disorderly Brexit

However, the domestic market is showing signs of stable, albeit slowing, growth

Group room demand performing well with opportunities for DMOs, hotels, and venues to deliver innovative program solutions

1

2

3

4

5

ABOUT TOURISM ECONOMICS

Tourism Economics is an Oxford Economics company with a singular objective: combine an understanding of tourism dynamics with rigorous economics in order to answer the most important questions facing destinations, developers, and strategic planners. By combining quantitative methods with industry knowledge, Tourism Economics designs custom market strategies, destination recovery plans, tourism forecasting models, tourism policy analysis, and economic impact studies.

With over four decades of experience of our principal consultants, it is our passion to work as partners with our clients to achieve a destination’s full potential.

Oxford Economics is one of the world’s leading providers of economic analysis, forecasts and consulting advice. Founded in 1981 as a joint venture with Oxford University’s business college, Oxford Economics enjoys a reputation for high quality, quantitative analysis and evidence-based advice. For this, it draws on its own staff of more than 120 professional economists; a dedicated data analysis team; global modeling tools, and a range of partner institutions in Europe, the US and in the United Nations Project Link. Oxford Economics has offices in London, Oxford, Dubai, Philadelphia, and Belfast.

For more information:

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