GLOBAL REPORT—Booking windows continue to lengthen, shifting direction in 2011 and steadily increasing on both the business and leisure sides through the first quarter of 2012, according to data from Pegasus Solutions.
In North America, the average lead time for leisure travelers is approaching pre-recession levels; globally, leisure lead times are meeting and exceeding pre-recession levels.
Most notably, average reservation lead time for business travelers in North America—which almost always trails the rest of the world, sources said—has surpassed international numbers and pre-recession levels. The average lead time for North American business travelers in February 2012 was 22.99 days while lead time for the rest of world was 21.4 days. In February 2007 it was 19.38 days.
Lead time in February for business travelers was 11.8% longer in North America and 4.8% longer internationally, compared to February 2011 data. For leisure travelers, lead time in North America in February 2012 was 6.4% longer than in February 2011, while international leisure lead times were 8.3% longer.
Pegasus collects data from more than 63,000 travel agencies—online and off—and processes nearly 5 billon transactions a month. The company does not collect data on brand.com sites.
Hoteliers said they’ve noticed group travel lead times lengthen as demand increased during the past 18 months. To get the required availability, groups now need to book further in advance.
“In the first quarter of 2012, we are starting to see that a lot of these advanced purchases are starting to expand,” said Paul Wood, VP of revenue management for Greenwood Hospitality Group, which has ownership and/or operates eight hotels, both branded and independent. “People are seeing the need to plan earlier and are trying to look for better deals. Advanced purchases let travelers save a couple of dollars.”
Wood said longer lead times are a direct result of increased demand because, as rooms or meeting space fills up, travelers feel the need to reserve rooms and space earlier. Also, in high demand periods, effective revenue managers will shift inventory to channels with longer lead times and reduce inventory on opaque channels and flash sales, which is another driver of extended booking windows.
Increased lead time on the leisure side is a result of several factors, including growing consumer confidence and an economic recovery, said Julie Parodi, senior director of strategic planning for Pegasus and analysis editor of The Pegasus View.
“It’s an indicator that travelers are willing to commit time and money,” she said. “More people are getting back to work; therefore more people are spending money on travel.”
Parodi said longer lead times often occur as a result of travelers going farther distances and spending more money, both positive signs for the industry.
Because mobile bookings tend to be closer to travel times—tablets and smartphones are ideal mediums for flash sales and making booking changes on the fly—increased mobile demand typically would shrink the average booking window. However, while the number of mobile bookings certainly is growing at a fast pace, it is not yet making up a bulk of the transactions processed. Mobile, Parodi said, is being used mostly for research, and bookings are still occurring on more traditional mediums.
Mobile is “definitely something we’re strongly monitoring,” Wood said. “We have seen a lot of increases in smartphone use and application. We get some detailed reports from the brands.”
Wood said corporate travelers are more and more in-tune to the mobile channel. “How can we capitalize on it?” he said.
Revenue managers adapt
Wood said, as a revenue manager, he’d much rather take a mobile booking from brand.com than a booking from an online-travel agent because of the reduced commission cost.
However, smart revenue managers will price rooms strategically to encourage advanced lead times, he said. One example is offering travelers who book seven days or more in advance a discounted, non-refundable rate. “Straight off, you’ll see a longer booking window,” he said.
In addition, non-refundable rates will help avoid sites including BackBid and Tingo—new OTAs that tend to drive demand at lower average daily rates.
“You can build up that compression and then shut it off,” Wood said. “It definitely helps us build a foundation, which allows us to maximize yield when we have future cash flow already guaranteed.
Parodi said it is important for revenue managers to keep current on shifts in their market and adapt to lengthening lead times. “Who are your frequent guests and what are their habits?” she asked. “If that is changing, you want to adjust your marketing and operational strategies.”