Mountain Travel Monitor: Destruction of demand |

Mountain Travel Monitor: Destruction of demand

Ralf Garrison
special to the daily

With continued bad economic news, economists and analysts are forecasting that economic recovery may be measured in years rather than months. Many are claiming that there is more evidence that consumers are digging in for the long haul and significantly changing their spending habits, the consequences of which are becoming increasingly apparent and have been aptly described as a destruction of demand.

On a more micro-economic level, deterioration in demand is impacting the ski industry, too. With less than a month left in the 2008-’09 season, the end is in sight and marketing momentum is waning. While overall lift ticket sales appear to be holding up surprisingly well, demand for destination mountain travel is slowing, and resorts and lodging operators are beginning to turn their promotional attention to the greener pastures of the forthcoming summer, next winter, and the associated planning and budgeting cycle for the next year.

– Economic Stimulus dollars are beginning to trickle into both the U.S. and worldwide economies in response to legislation passed in most G-8 nations (a group of major industrialized nations) over the past three months. While much can be said for the relatively speedy enactment of these major investment initiatives, so far there has been little evidence of significant positive effects.

– Unemployment rates rose dramatically for the third consecutive month in February, with just over 650,000 jobs lost for a total of 12.2 million unemployed, and bringing the rate to 8.1 percent, the highest rate since 1983.

– The Consumer Confidence Index reached a new record-low in February, settling at 25.0 points, down from 37.7 points in January and currently 66 percent lower than during the same period last year. Consumer’s lack of confidence comes from increased unemployment, troubled banks and automakers, new lows on Wall Street, and no immediate economic relief resulting from the infusion of federal funds. All of these factors, especially when combined, tend to discourage discretionary vacation spending either for the remainder of the season and into the foreseeable future.

– The Consumer Price Index figures for February showed a slight increase to 211.4, a curious reversal of its steady decline since June 2008 and in spite of continued discounting in many retail sectors and low oil prices. Consumer prices may begin to rise as the $1 trillion in stimulus package money moves into the economy and may create the possibility of an inflationary economy in the coming months.

– The Travel Price Index continued its five month decline with a further -1.6 percent as downward pressure on pricing continues and discounting increases. This situation is not good for suppliers but is an increasingly compelling incentive for consumers who are quickly learning that a deal, discount, or bargain is a prerequisite for most purchases.

What does this mean to the mountain travel industry? Overall, tourism continues to slow along with the economy and is evidenced in some segments more than others: Anecdotally:

– Business travel is slowing rapidly as company’s institute spending cuts and non essential travel.

– Meetings and conventions have been hit hard because of their negative association with widely publicized vacation junkets for bank officials and the increasing social pressure toward frugality. The meeting and convention industry is fighting back but with little success and drastic consequences for many destinations.

– Luxury brands appear harder hit, indicating a shift from conspicuous consumption to considered consumption even among affluent segments.

– The mountain resort long-haul destination segment is being impacted, but overall skier/boarder visits are rumored to be holding up quite well, particularly in New England, where proximity to large population centers, decent winter weather, and good management have combined to maintain business levels close to previous years.

– Snowfall, often described as the “wild card” in the ski industry business plan, is losing its magnetic power as the season wanes, pent up demand for skiing diminishes, and warm weather stimulates thoughts of spring and summer activities instead of snow sports.

– February 2009 occupancy was 54.5 percent compared with 63.9 percent last year; down -14.9 percent comparatively. Average daily rate for the same time period was down -8.6 percent.

– Reservations taken in February (for the next six months) actually improved slightly, up 3.0 percent over last year’s pace and showing strength for short-term February arrivals.

At this time of year, booking momentum slows dramatically. While MTRiP data does not literally forecast future bookings, little significant change is anticipated for March or April business.

– March business as of Feb. 28 is still significantly under-performing last year. Occupancy is down -25 percent and rates are down -12 percent. The combined impact of low occupancy and reduced room rates compound to generate considerably less overall revenue to resort communities and pose a related challenge for local government entities with a variety of consequences in the coming months.

– April is holding steady with occupancy flat (0 percent) and rates up 7 percent, primarily because of Easter’s timing which is on April 12 this year and was March 23 in 2008. This shift helps account for weakness in March and strength in April of this year.

– The potential for some possible last-minute bookings from short-haul regional guests still offers some positive prospects, but are unlikely to significantly change season totals.

– This brings the entire winter (November – April) occupancy to levels down -16.3 percent from last year in percentage change, with average daily rate lagging by -7.6 percent. Both indicators varied only slightly from last month’s view and are likely proximate to season’s end totals.

Perhaps the best news is that the 2008-2009 season will soon end. With the certain knowledge that all markets are cyclical, better times will come, and with them, a shift from destruction to re-construction of demand for mountain travel.

Ralf Garrison is director of MTRiP, the Mountain Travel Research Program at

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