The U.S. is a popular destination for European travelers, but some hoteliers stateside have noticed their reservations are down a bit recently.
REPORT FROM THE U.S.—U.S. hoteliers have reported seeing a decline in bookings from European travelers heading into 2017 and are looking to explain what has caused the drop.
Possible factors include economic uncertainty in the continent, coupled with a new U.S. president who is unpopular in several European countries. But it’s hard to say what combination of things, if any, is keeping Europeans away.
PM Hotel Group began watching reservations originating from other countries shortly after the presidential election, President Joe Bojanowski said. Company officials had serious concerns about foreign inbound travel in the New York City and San Francisco areas, he said, and the company has seen a decline in reservations in those markets.
At the same time, U.S. transient reservations have grown, he said, particularly the business transient segment. November closed strong, he said, and the portfolio looked strong through December. The two more or less balance each other out, he said, but there isn’t a great deal of foreign transient leisure during December, January and February.
For example, foreign transient leisure guests make up less than 5% of his PM Hotel Group’s New York City occupancy this time of year, he said. During June and July, that occupancy jumps to 20%. Half of 5% is not a big loss, he said, but half of 20% is a bigger deal.
“The latter part of Q1 is where we see our biggest influx of foreign leisure transient reservations, taking spring into summer vacations,” he said. “There’s no way that domestic transient can increase at a level that would offset … the declines in the peak months.”
Crescent Hotels & Resorts manages eight hotels in the New York and New Jersey area, said Dawn Gallagher, EVP of sales and marketing, and those properties are seeing strong international demand year over year. Wholesale production through international sources is strong, she said, and while rate might be down, occupancy is still ahead of last year.
Even in markets where European travel is down, such as Chicago, Asian travel has increased significantly year over year, Gallagher said. Overall, the company is seeing strong travel from Asia, she said.
Europe is an important inbound market to the U.S., said Douglas Quinby, VP of research at Phocuswright, and Europeans spend a lot of money when they visit the U.S. Following the election, Phocuswright surveyed European travelers to learn if their perception of the country had changed.
“You don’t normally have such high-profile or emotionally charged contentious issues that could have such a direct impact on travel and tourism and perception of the U.S. abroad as (we had) this election,” he said.
According to a survey Phocuswright conducted in December 2016, the majority of 1,500 British, French and German travelers surveyed said the election would have no influence on their decision to travel to the U.S. While some responded the election results would make them more likely to visit, 18% of travelers from the U.K., 20% from France and 32% from Germany said they would be less likely to travel to the U.S.
The results of the survey can’t be used to predict that the U.S. will see a 20% decline in travelers from the U.K. or a 32% decline in German travelers, Quinby said. These types of attitudinal surveys can’t project findings into quantitative macro forecasts, he said, and the purpose of the study was to gauge European travelers’ emotional response to the outcome of the election and how travelers are thinking of the U.S. as a potential destination.
The survey itself isn’t a cause for alarm, Quinby said, but companies should be mindful of this and consider preparations if the survey results translate into reality.
“What if we see negative sentiment increase?” he asked. “If more travelers are turning away from the U.S., what plans do destinations and hotels have in place to counter some of that potential shift in attitude?”
Seeking answers and solutions
The largest decline PM Hotel Group has seen is in reservations from guests coming from the U.K., Bojanowski said.
“The water is a little muddy there because of the strength of the dollar against the pound,” he said. “There’s no way to bifurcate those reasons. We saw cancellations, and we are seeing a slower pace in reservations of leisure transient, particularly from Western Europe and the U.K.”
Hotels in the company’s portfolio book reservations about three to five months ahead, Bojanowski said, so the company will start taking reservations for the summer months in March and April. At the moment, officials aren’t concerned, he said, but they are closely monitoring bookings.
Hoteliers Bojanowski has spoken with said they would hedge against a possible downturn in European travel by looking to book higher levels of group business than normal during peak foreign transient leisure months.
“To the extent that there’s uncertainty, you can (reduce) uncertainty or hedge against it by booking groups,” he said. “It’s a little less lucrative in there’s higher rate and lower cost associated with (transient). Groups are more expensive but a certainty.”
Any drops in reservations from European travelers at properties under Crescent Hotels & Resorts management don’t seem to be election-related, Gallagher said, so the company hasn’t put itself in a defensive position following the election.
“When looking at European travel, namely the U.K. and Germany, we’re hearing it’s more due to economic uncertainty (on) their part and the fluctuation of the dollar, not necessarily a change in administration,” she said.
The new year is looking strong so far, she said, but the future is still uncertain.
“We’ve got to know the strength of what countries come to different gateway cities and where we need to go,” she said.