Travel Pulse | Frank Belzer | December 16 2022
In a recent survey of travelers conducted in October of 2022 (by Destination Analysts), we learned that more than 40 percent of potential vacationers believe that as we enter a potential recession, this is a very bad time to plan travel or vacations.
Is that a big deal?
After all, hasn’t history taught us that some people still plan trips even when they believe the economy is poor? Additionally, maybe the concerns around a slump in the economy will not be realized or at least not reality for a significant enough number of people.
The bottom line for many of us is that we have been through slumps before and survived, and we made it through COVID which was the biggest disaster for our industry in decades. Both are true and relevant but surely its worth asking if anything has changed this time? In other words, were the almost 5,000 people sampled in this survey feeling or thinking any differently about travel during economic hardship, than others might have felt when asked similar questions at similar times prior to the pandemic?
And if they did feel differently then perhaps the market will not be as resilient or conversely more resilient than previous downturns. To answer we need to think about what has changed pre and post:
The Cadence or Cycle of Vacation Planning was Interrupted
For many families there was a routine that had developed around travel planning, this year here, next year there, another trip here and then back to the first destination. It's not how I travel, but these patterns are representative of a huge portion of the travelling public. What happens to this cycle, this cadence when for two years it is put on pause? Maybe it’s a mistake to assume, as I have heard so many people say, “it’s coming back” when we may not know for sure.
Options Previously Unexplored Were Now Considered
With travel restrictions in place many Americans explored national parks, RV and camping vacations and many Europeans and Brits turned to canal tours and self-guided road trips. Many have commented that in addition to being less expensive, the quality time close to home translated into family ties being strengthened. It’s easy to view these as necessary substitutions but what if instead they became viable alternatives? That can mess up predictions and forecasts in a hurry.
More and More Dynamic as Opposed to Static Pricing
It seems as if everyone in the industry invested time and effort into getting their dynamic pricing systems up and running, so consumers (who never asked for or wanted dynamic pricing) were welcomed back to a world where prices changed quickly and dramatically. While dynamic means prices can go up and down it has been noted that they only seem to go up. Has this focus on price fed the belief that travel is expensive and that it is a bad time to plan?
Reservation Systems Limiting Spontaneity
Cruise lines and theme parks are leading the way in forcing consumers to select activities before, long before, they travel. Ask any consumer and they will tell you how frustrating it is to decide where you want to dine seven months from now on a Wednesday at 7 p.m. (what will I be in the mood for) or which experience you want to reserve (will it be raining) and yet we have plowed ahead believing somehow that our efficiencies as a destination will translate in guest satisfaction. The jury is still out on this and even the most advanced systems are causing a lot of unrest and criticism from guests.
Maybe the survey is wrong and maybe the factors listed will have no impact on tourism in 2023. We can be hopeful of that. On the other hand, think about what might happen to your value proposition if you were to assume that everything I list has affected the consumer's mindset. It might sound like this:
We are going to treat our potential guest like it is the first time they ever traveled to our destination, we are going to woo and sell them on their visit all over again. They will feel important and valued as we message this to them.
We are going to assume that our potential guests have explored options that were less expensive and more focused on family fun together, closer to home. We will recognize and honor that by ensuring we offer value and design experiences that allow families to build on those connections.
Yes, there are many options with pricing, we know it can be tiresome, but we will help accommodate your needs and ensure you get the best value and don’t pay more than you need to pay. We have kept our system simple so that even non calculus majors can comprehend and understand the booking path.
We know that having flexibility is important and respect that, at the same time we try and assign times so that you can get the greatest value out of your time with us. In the event that something happens, we will work with you to manage and adjust your schedule as much as possible during your visit. We have live concierge agents available to make those changes and to ensure your happiness.
To me, looking at the world with a perspective of adding value for customers at every stage is always going to drive a strategy in the right direction. We are referred to as the “hospitality industry” and that is not just a sic code designation.
Hospitality should be an adjective that describes what we do and how we operate.
Travel Pulse | LACEY PFALZ | DECEMBER 16, 2022
Americans are incredibly eager to travel and explore, and they’re not picky about when they do it, according to a new survey of 500 travelers conducted by https://www.adventure.travel/ a division of the Adventure Travel Trade Association in partnership with adventure travel insurance provider World Nomads.
An overwhelming majority of travelers have plans to travel (94 percent), while 93 percent also say they plan on taking two or more trips in 2023. While the majority of Americans are still traveling domestically (65 percent), the rest of those surveyed mentioned they’d be visiting Europe (52 percent of international travelers), Asia (19 percent), South America (19 percent) and Mexico (15 percent).
Americans Ditch Travel Seasons, Prioritize Cost
Sixty-seven percent of travelers are most concerned about the value they get for the money they spend while traveling, but they never agreed on the best season to travel. Remote work might be a factor here, as is a greater desire to travel, despite factors like less pleasant weather during certain seasons.
Other factors they identified as important when choosing their destination were availability of locally owned accommodations or restaurants (50 percent) and the ability to walk or bike during their stay (44 percent).
“We are seeing a trend in more urban, international destinations in the coming year,” said Christina Tunnah, general manager of marketing and brands, World Nomads. “Maybe that’s due to a renewed comfort level in visiting dense population centers.
“But there are also indicators in the data that point to travelers wanting to seek out cities that are both bikeable and walkable, and cities that are in close proximity to green spaces, where within just an hour you can enjoy nature and wildlife and participate in outdoor recreation such as cycling and hiking,” said Tunnah. “What is also quite interesting is that our 2022 versus 2023 travel insurance sales data is showing a dramatic increase in Americans planning travel to truly long-haul and off the beaten path destinations such as Australia and Antarctica.”
Desire to Travel Comes from Exploration & Adventure
Americans are focusing more on exploring a destination (70 percent), experiencing nature or wildlife up close (46 percent) and relaxing/reconnecting and immersing themselves in an entirely new culture (31 percent each). About 20 percent of respondents identified adventure sports and activities, like hiking, snorkeling and more, as main drivers for traveling.
“These findings align with what we at Adventure. Travel and the Adventure Travel Trade Association (ATTA) have seen recently from the supply side of the industry,” said Jason Reckers, head of ATTA Labs and https://www.adventure.travel/
“Travel companies reporting into our 2022 Adventure Travel Industry Snapshot indicated an increase in travelers of 142 percent over the previous year. The most popular motivations for traveling were new experiences, to go off the beaten track, and to travel like a local. Seventy-three percent are seeing an improvement in domestic travel demand, and 62 percent are seeing an increase in international travel demand.”
Americans Still Have Concerns About Traveling
While travelers are more eager to explore, they’re also still cautious about the rising cost of travel and inflation’s impact on prices (64 percent). Thirty percent were still worried about COVID-19 resurging, while another 34 percent worried about global or economic instability impacting their 2023 travel plans.
Fifty-four percent of respondents are also more concerned about environmental concerns and are likely to take the environmental impact of their trips into consideration while planning them.
These concerns have led to the majority of Americans likely to opt into purchasing travel insurance, at 76 percent.
“It’s reassuring to see that the pent-up demand for travel that began in 2022 is truly starting to accelerate as we look towards 2023. However, it’s not without consumer health, safety and economic concerns. Travelers want to get back out there,” said Tunnah.
“They want to go farther afield and try new things including active and adventure pursuits, but they also see the need to protect their vacation investment with travel insurance. Yes, they also want to seek out more sustainable ways to travel, but no doubt the value for money proposition will weigh heavily on decisions. Tour operators, airlines and hotels all need to consider how to offer sustainable options without passing along significant additional costs to the consumer.”
The Business Standard | December 14 2022.
The International Air Transport Association (IATA) has developed industry standards that will make passport-free travel a reality if adopted worldwide.
The newly released Recommended Practice on Digitalization of Admissibility will enable travelers to digitally prove admissibility to an international destination, avoiding a stop at the check-in desk or boarding gate for document checks, according to an IATA release issued 6 December.
Under the IATA One ID initiative, airlines are working with association to digitalize the passenger experience at airports with contactless biometric-enabled processes.
Programmes are already in use in various airports enabling travelers to move through airport processes such as boarding without producing paper documentation because their boarding pass is linked to a biometric identifier.
But in many cases, travelers would still have to prove their admissibility at a check-in desk or boarding gate with physical checks of paper documentation (passports, visas and health credentials for example), the IATA release added.
The Digitalization of Admissibility standard will advance the realization of One ID with a mechanism for passengers to digitally obtain all necessary pre-travel authorizations directly from governments before their trip.
By sharing the "OK to Fly" status with their airline, travelers can avoid all on-airport document checks.
"There is good incentive for airlines and governments as well with improved data quality, streamlined resourcing requirements and identification of admissibility issues before passengers get to the airport," said Nick Careen, IATA's Senior Vice President for Operations, Safety and Security.
What travelers will be able to do in future:
IATA reports that total air traffic in October 2022 (measured in revenue passenger kilometers or RPKs) rose 44.6% compared to October 2021. Globally, traffic is now at 74.2% of October 2019 levels.
Domestic traffic for October 2022 slipped 0.8% compared to the year-ago period as stringent COVID-related travel restrictions in China dampened global figures. Total October 2022 domestic traffic was at 77.9% of the October 2019 level. Domestic forward bookings remain at around 70% of pre-pandemic level.
International traffic climbed 102.4% versus October 2021. October 2022 international RPKs reached 72.1% of October 2019 levels with all markets recording strong growth, led by Asia-Pacific. Forward bookings for international travel increased to around 75% of pre-pandemic levels, following the re-openings announced by multiple Asian economies.
“Traditionally, by October we are into the slower autumn travel season in the Northern Hemisphere, so it is highly reassuring to see demand and forward bookings continuing to be so strong. It bodes well for the coming winter season and the ongoing recovery,” said Willie Walsh, IATA’s Director General.
International Passenger Markets
Asia-Pacific airlines had a 440.4% rise in October traffic compared to October 2021, easily the strongest year-over-year rate among the regions, but off a very low 2021 base. Capacity rose 165.6% and the load factor climbed 39.5 percentage points to 77.7%.
European carriers’ October traffic climbed 60.8% versus October 2021. Capacity increased 34.7%, and load factor rose 13.8 percentage points to 84.8%, second highest among the regions.
Middle Eastern airlines saw a 114.7% traffic rise in October compared to October 2021. Capacity increased 55.7% versus the year-ago period, and load factor climbed 21.8 percentage points to 79.5%.
North American carriers reported a 106.8% traffic rise in October versus the 2021 period. Capacity increased 54.1%, and load factor climbed 21.4 percentage points to 83.8%.
Latin American airlines posted an 85.3% traffic rise compared to the same month in 2021. October capacity climbed 66.6% and load factor increased 8.7 percentage points to 86.0%, the highest among the regions.
African airlines’ traffic rose 84.5% in October versus a year ago. October 2022 capacity was up 46.9% and load factor climbed 14.5 percentage points to 71.3%, the lowest among regions.
Domestic Passenger Markets
Australia almost tripled its October domestic traffic from last year (+292.9%); traffic now stands at 15.8% below pre-pandemic levels.
China’s domestic RPKs fell 58.7% in October and is now 69.4% below October 2019 levels.
The Bottom Line
“People are enjoying the freedom to travel, and businesses recognize the importance of air transport to their success. A recent survey of European business leaders doing business across borders showed that 84% could not imagine doing so without access to air transport networks and 89% believed being close to an airport with global connections gave them a competitive advantage. Governments need to pay attention to the message that air travel is fundamental to how we live and work. That reality should drive policies to enable aviation to operate as efficiently as possible while supporting the industry’s 2050 Net Zero emission goals with meaningful incentives to encourage the production of Sustainable Aviation Fuels,” said Walsh.
> Read the latest Passenger Market Analysis (pdf)
IMF | November 11, 2022
This paper improves short-term forecasting models of monthly tourism arrivals by estimating and evaluating a time-series model with exogenous regressors (ARIMA-X) using the case of Aruba, a small open tourism-dependent economy.
Given the importance of the US market for Aruba, it investigates informational value of Google Searches originating in the USA, flight capacity utilization on the US air-carriers, and per capita demand of the US consumers, given the volatility index in stock markets (VIX).
It yields several insights:-
First, flight capacity is the best variable to account for the travel restrictions during the pandemic.
Second, US real personal consumption expenditure becomes a more significant predictor than income as the former better captured impact of the COVID-19 restrictions on the consumers’ behavior, while income boosted by the pandemic fiscal support was not fully directed to spending.
Third, intercept correction improves the model in the estimation period.
Finally, the pandemic changed econometric relationships between the tourism arrivals and their main determinants, and accuracy of the forecast models.
Going forward, the analysts should re-estimate the models. Out-of-sample forecasts with 5 percent confidence intervals are produced for 18 months ahead.
The Covid-19 pandemic triggered containment measures and disrupted businesses worldwide, severely affecting the economy in many countries, particularly in tourism destinations.
Aruba became no exception. To protect its citizens, in early March of 2020, the Government of Aruba introduced various safety measures and closed its borders for inbound travelers for almost three months. In June 2020, Aruba began to welcome tourists back, and the number of arrivals has been slowly recovering. In 2020 and 2021, country received about 34 and 72 percent of the 2019 tourist inflows, respectively.
Accurate predictions of tourism inflows, used by Aruban policymakers to project Real Gross Domestic Product (RGDP) 1, became even more critical than before the pandemic. The COVID-19 pandemic affected consumers' behavior, caused flight cancellation and movement restrictions and reduced flights' capacity. Thus, it becomes necessary to include these factors in the model to foresee future tourist inflows more accurately.
To forecast tourism since the pandemic accurately, I need to find variables containing information about the drastic decline of tourism during the COVID-19 pandemic and tourism recovery in the post-pandemic world, which would be available in the past, present, and future.
This paper improves the modeling and forecasting of tourism arrivals since the pandemic, highlighting that a structural change affected relative importance of some regressors over time. It tests the ARIMA model (with monthly dummies) over three samples.
Given that visitors from the USA constitute over 80 percent of all tourists, the model focuses on the explanatory variables related to the US markets. The original estimation sample uses 2004m1-2019m12, while the models’ forecasting properties checked over 2020m1- 2022m6. Then, the model is re-estimated, expanding the sample to include 2020 and 2021 respectively, yielding several insights.
First, the Real Personal Consumption Expenditure (RPCE) became a more significant predictor than Real Personal Income (RPI) as the former was affected by the mobility restrictions while the latter was contaminated by the pandemic fiscal support not directed to spending.
Second, Google Trends for All-Inclusive Hotels in Aruba (GT) and flight capacity utilization (CAP, also called the load factor) are always significant and strong predictors of tourism arrivals regardless of the sample or model specification.
Third, inclusion of the VIX improves the model before the intercept correction but loses significance once the model incorporates the binary indicator for covid-19 pandemic. Intercept correction helps to normalize residuals in the full sample.
Fourth, the estimates are not sensitive to the use of the alternative to VIX risk measures, which include two variants of the US Economic Policy Uncertainty Index and the US unemployment rate.
Finally, REER is dropped from the baseline specification because being weakly significant in the estimation sample, it does not improve the forecasting properties of the model.
The paper produces the out-of-sample forecasts of tourism arrivals to Aruba 18 months ahead. It suggests that Aruba will invite on average 92.8 thousand tourist arrivals per month, with 78.9 and 106.6 thousand tourists indicating the lower and upper bounds of the 5 percent confidence level around the point forecast.
Click on the link below to access the paper itself.
Jim Hepple is an Assistant Professor at the University of Aruba and is Managing Director of Tourism Analytics.