REACTION TO ECONOMY IN MOUNTAIN TRAVEL
“STOPLIGHT” REACTION TO ECONOMY IN MOUNTAIN TRAVEL
Red light. Green light. Yellow light. “As the economic news remains mostly unfavorable, mountain destinations moving closer to their prime booking season are tracking the indicators and wavering between moments of seeing a green light to get going and then a red light to stop,” says Ralf Garrison, author of the monthly Monitor produced by the Mountain Travel Research Program (MTRiP).* Last month’s Monitor reported on some positive indicators pointing at a move from a yellow to green light but this month’s data has lapsed back into a red light mode says Garrison.
According to the MTRiP mountain market indicators as of June 30, the “red light” indicators for mountain travel are consistent with national trends. Business for June followed the winter pattern with low volume and less strength than last year. Occupancy was down 14.5 percent and room rates were down 10.2 percent compared to last June. Reservations taken in June for arrivals in June-November were down 15.7 percent which mimics the booking patterns for the past six months while short-lead, “last minute” bookings were flat, or about even, with last June’s figures.
“Although reservations for the 4th of July holiday brought a welcome bump to mountain communities, the much-anticipated improvements in the market didn’t really materialize,” observed Garrison. “In our view, the positive signs in the market through the spring didn’t sustain their momentum into this summer and we’re seeing more red lights than green lights this month.”
MTRiP’s forward-looking projections revealed that summer business (May-October) continues to show significant declines from last summer to-date and no evidence of optimistic consumers. Reservations reveal dramatically decreased occupancy—down 24 percent—and a 15 percent decrease in room rates. Like June’s booking results, there was no evidence in the data that short-term bookings are filling lodging space as is more typically seen during summer months at mountain resorts.
The data further revealed that consumer confidence and positive market performance shifted from green to red on the MTRiP indicator graphic, amid growing concerns that a Fall 2009 recovery may not materialize. The Dow Jones Industrial Average continued to react quickly but indecisively to positive and negative news. The Consumer Confidence Index reacted to both positive and negative economic news and forecasts. After three consecutive months of increases including a rebound from an all-time low of 25.0 points in February, the CCI declined 5.6 points in June to 49.3 points. And finally, the Travel Price Index which had been relatively stable for several months during the winter due to sharp declines in lodging rate, airfares, and gasoline prices, continued to react to overall increases in travel-related costs. Crude oil prices, while well below 2008 record levels, have increased steadily in the past six months and are being reflected as an upward force on the TPI. Additionally, discounts being offered industry-wide on lodging, while still dramatic, have settled down somewhat from the 50-60% discounts offered at the beginning of the financial crisis. In May the TPI increased 0.5 percent, the fifth consecutive month monthly increase, bringing the index to 239.9 points, down just 2.1 percent from November 2007.
“Despite the need for caution based on all the indicators, it appears that this will be a “less-bad” summer for mountain communities than last winter,” said Garrison. “Certain travel segments seem to be holding steadier than others: family vacations, reunions, special occasions, and ‘one-tank’ vacations are doing comparatively well while luxury, group, and conference travel segments are weakest.”
“MTRiP’s recommendations to mountain communities are for continued diligence until market conditions provide some relief and we can shift to a green light,” concluded Garrison.
*Data is derived from a sample of 216 property management companies in 15 mountain destination communities across Colorado, Utah, California, and British Columbia. Data is representative of a comprehensive cross-section of the community and may not reflect the entire mountain destination travel industry.
