INTERNATIONAL REPORT—The summer travel season in the northern hemisphere has long been a respite for weary hoteliers plagued with dreary year-to-date balance sheets. From June through August, leisure travel rises with the mercury, and occupancy, average daily rates and revenue per available room follow suit. 

But if these tumultuous economic times have taught us anything, it’s that the hotel landscape as we knew it has changed—at least for the short term. So what does this summer hold? It depends on who you ask. STR’s Mark Lomanno’s forecast was laden with cautious optimism, while Mark Woodworth’s of PKF Hospitality Research was not as rosy. And across the pond, Bob Cotton of the British Hospitality Association offered a different perspective altogether on the varied outlook for Europe.

What follows are the summer travel forecasts from five industry experts:

Mark Lomanno
President, STR

Lomanno expects the summer travel season to be the beginning of “an improving situation for the (U.S.) lodging industry.” But that doesn’t mean he’s forecasting a rebound—call it an easing of the pain.

The president of the Hendersonville, Tennessee-based research firm said demand decline, which has been hovering in the 8-percent range during the past few months, will slow to a two- or three-percent drop. 

Attribute that slowdown to the leisure segment, Lomanno said. With consumer confidence up, job losses stabilizing and travelers looking to take their minds off so much bad economic news, transient leisure travel is making a comeback and is up slightly on weekends.

“If the transient weekend travel is already relatively healthy, then there’s no reason to expect the summer vacation season won’t mirror that trend,” he said.

Just don’t expect to see a lot of business travelers on the open road. Corporate bookings will continue to be down. 

To capitalize on this leisure travel uptick, Lomanno stressed the importance of value combined with a strong marketing front.

Discounting, not surprisingly, did not make his list of best practices.

“I would stay away from the rate thing,” he said, adding that hoteliers should hold their rates longer as booking windows to continue to shorten.

Mark Woodworth
President, PKF Hospitality Research

Woodworth doesn’t share Lomanno’s cautious optimism.

“The continued weakness in the economy, the ongoing reality of unemployment levels continuing to go up, and the constant reminder at the pump that it continues to be more and more expensive to fill up the tank have created a level of uncertainty in the marketplace that will really have a negative impact on summer travel,” said the president of Atlanta, Georgia-based PKF Hospitality Research.

That negative impact is manifested in lackluster demand, which is expected to be down 4.6 percent compared to the third quarter of 2008, according to the research firm’s revised third-quarter forecast for the U.S. hotel industry.

By segment, demand declines are forecasted to range from 10.5 percent in the luxury segment to 4.6 percent in the upscale segment, Woodworth said.

In this difficult environment, Woodworth advised hoteliers keep a focused eye on the changing needs of customers and the changing behavior of competitors.

“For many consumers, right behind the price question is the value question. … There’s still a very meaningful part of the traveling public that says, ‘If I’m electing to travel, that’s a discretionary decision. In exercising that decision, I’m not going to totally ignore value.”

Bob Cotton
CEO, British Hospitality Association

Things are looking up in the U.K., where a stable domestic market and weak sterling has set the stage for a strong summer season in Britain, Cotton said.

“For the next three months, and probably September as well, we’re seeing quite a good performance in tourism and hospitality in hotels,” he said.

But while occupancies in major markets such as London should hold steady in the 70-percent range, hotels still are cutting costs to adjust to lower-yielding guests.

“The weakness everywhere is international corporate business has totally disappeared. Domestic corporate business is extremely tight. … Hoteliers have to replace high-yielding corporation business with lower-yielding leisure business,” Cotton said.

“You’ve got to change your business model so you’re not focusing on a person who pays his own bill as opposed to a corporate customer. Your staff has to offer a different style of service, and you have to cut your costs accordingly,” he continued. “Broadly, a lot of people will have taken 10 percent out of operating costs (whether in head count or other savings).”

Elsewhere in Europe, the outlook is not as rosy for the Mediterranean countries given the strength of the euro and absence of U.K. travelers.

“Central Europe was the weakest of all,” Cotton said. “France, Holland, Belgium, Germany and northern Europe were not very good but were in the next league, and then Britain was doing the best because of this very strong stay-at-home mood and the weakness of the sterling against the euro.”

The budget segment will fare best across the board, Cotton added, as cost-conscious guests look to get the most bang for their buck. Additionally, smaller hotels that offer distinct value and quality will boast above-average performance.

Peter Yesawich
Chairman and CEO, Ypartnership

Yesawich shared Lomanno’s cautious optimism, predicting summer demand levels that are higher than they were during the spring season, but lower than they were the previous year.

“That means probably flat-to-down occupancy slightly,” said the chairman and CEO of the Orlando, Florida–based travel marketing firm. 

The source of that optimism? Ypartnership’s quarterly travelhorizons survey, conducted in part with the U.S. Travel Association.

According to the survey, which gauged respondents intentions to travel from June through December 2009, 65 percent of U.S. adults were planning on at least one overnight trip, compared with 60 percent the same time last year. When asked for the purpose of that trip, eight out of 10 were planning at least one for leisure, while only two out of 10 were planning one for business.

“No question it’s driven by leisure,” Yesawich said. “We continue to see degradation in demand for business travel services.”

The other major trend driving the next few months will be a continuation of one that started at the beginning of this year: “More and more travelers are trading down.

“Either they’re seeking more affordable accommodations, or what they’re gong to be doing is altering their travel habits if they pay a premium for their accommodations (and will stay fewer nights),” Yesawich said.

Looking ahead, he said hoteliers should be mindful that “the consumer today is absolutely looking for better value,” but that doesn’t necessarily mean they’re looking for something cheaper—just something they couldn’t otherwise afford.

Secondly, new distribution techniques, such as flash selling e-mail blasts which send last-minute offers to potential guests, are contracting the lead time of reservations.

“The third would be that the biggest creative challenge for the industry right now is trying to figure out how to extend length of stay. That could be the single biggest challenge that is facing the business over the course of the next 18 months.”

Roger Dow
President and CEO, U.S. Travel Association

Though corporate bookings will continue their stagnant trend, leisure travel will remain resilient in the months ahead, said Dow.

“(Despite the down economy,) it seems like Americans are saying, ‘I’m going to take my vacation anyway,” he said.

Those same consumers are expected to take an average of two trips this summer, stay about seven nights away from home and spend more than US$900 on their longest summer trip, Dow explained, drawing conclusions from the USTA’s annual travelhorizons survey, conducted in conjunction with Ypartnership.

Overall, leisure travel is expected to be down 2.2 percent from the summer of 2008.

Those trips won’t look the same as they have in past years, as consumers adapt their behavior to the downturn by taking shorter trips, multiple day trips and trips closer to home, Dow said. All the while, travelers likely will trade down and shop for the best possible value.

“People are searching out that value,” he said. “They’re shopping like crazy. … That’s bad news from a revenue standpoint, but if you’re a consumer, there’s probably better value than you could ever get.”

Dow advised hoteliers to shape their marketing efforts to match the changing needs of travelers. Instead of focusing on long-term promotions in far-away markets, promote within a shorter timeframe to consumers closer to home.

And don’t forget to stress value-add packages.

“You’re just not going to get away with, ‘Here’s our rate. Give us a call.”