Vail Valley: Summer reservations still soft | VailDaily.com

Vail Valley: Summer reservations still soft

Ralf Garrison
Vail, CO, Colorado

With the winter of 2008-09 behind us – thankfully – this monitor is changing its focus to summer business and to sift through the current market conditions for clues about where consumers, and the mountain travel industry in the Vail Valley and elsewhere, are heading.

In short, actual reservation activity (based on our May 30 reservation activity reporting system) is playing the same song as last winter, but consumers appear more upbeat about future prospects. Even though economic fundamentals remain bleak and the news continues to report major business failures, consumers may be growing weary of the chronic stream of bad news and are beginning to ignore all but the more dire headlines. Consumers’ perception is the foundation for their behavior and may be self-fulfilling – which could help fuel a new and more encouraging reality.

Here’s a look at some of the trends:

Automakers move onward

Perhaps the most significant economic developments in the past 30 days are the reorganizations of two of the nation’s three major automakers, General Motors and Chrysler. Both actions are intended to result in new and improved organizations. Consumers appear to be receptive to the spin that both companies will emerge stronger and more competitive.

The old adage, “What’s good for GM is good for the country” is getting a second life and may serve as a symbol of hope for the re-emergence of the U.S. economy with a humbled, right-sized, and more competitive and sustainable foundation.

Dow Jones Industrial Average

While not typically cited by us as an indicator for mountain travel, the Dow is the most visible and recognizable of the major economic indictors and has a dramatic influence on consumers. Since Feb. 2, the Dow has increased 676 points (8.52 percent) at a cautiously steady pace.

While still more than one-third below its pre-recession highs the recent sustained increases have had a significant impact on consumer confidence as spenders get more comfortable with the new prospect of slow growth and stable portfolios.

Stock market activity is often a leading indicator of the broader economy six months in the future, and provides a glimmer of insight into the economic environment this fall when prospective destination skiers and snowboarders are contemplating a winter vacation.

Consumer Confidence Index

The index has risen in four of the past seven months, with dramatic increases in each of the past three months that can be attributed in large part to a more stable news cycle and reports of ongoing growth in the Dow. The index has increased from an all-time record low of 25 points in February to a 54.9 points in May. While the point value of the index and its underlying measurements are still very low relative to numbers experienced during a robust economy, it is the future indicator portion that is driving the increases.

Unemployment

Although unemployment continues to increase and have a negative impact on the overall economic health of the country, there are signs of a slowdown in the pace at which jobs are being lost. In December 2008 and January 2009, the economy lost more than 550,000 jobs, per month, a pace that has slowed in the months since. In May there were 340,000 job losses recorded and the unemployment rate reached 9.4 percent. In all, 210,00 more people found a job in May than in December – a small first step forward.

What does it mean?

While consumers may be feeling better about the future, they continue to be economically cautious and vacation travel continues to be soft, although not as soft as many other discretionary products and services. A typical summer travel pattern includes drive traffic that stays closer to home, bookings made nearer to travel time, and more affordable lodging than winter. These are all attributes that the 2009 traveler is looking for. This should allow resort marketers to create and promote attractive offers to a receptive audience.

However, this upbeat scenario has yet to result in significant tangible results. Suppliers still need to make attractive, well-timed offers.

May, typically a slow month in mountain destinations, continued the winter pattern with low volume and less strength than last year.

• May occupancy was down 15 percent in the mountain region. The average daily rate was down as well.

• Reservations taken in May for arrivals in May through October were up 9.3 percent, the strongest monthly showing in some time. While volume was low, the uptick is a refreshing and positive indicator for the future and will be watched closely in the next several months for the establishment of a trend.

• Also noteworthy is that reservations taken in May for arrivals in May stayed flat with May 2008.

Looking forward

Overall, summer business continues to show significant declines from last summer to date with no indication yet of an improving market or more optimistic consumers.

• The forward-looking six-month summer view shows occupancy down 20 percent, and average rate off 10 percent for a combined decrease of 29 percent in revenue per available room.

• While supporting information is anecdotal, individual family vacations and those based on reunions and special occasions appear to be holding; while group, conference, and luxury travel segments are weakest.

To sum up, there appears to be a drum beat of optimism showing up in consumers’ perception about the future and mountain resort communities have the opportunity to present an attractive product to those consumers.

What hasn’t changed is the volatile nature of market conditions, the need to remain nimble, and the obligation of resorts and their marketers to step forward and properly invite their prospective consumers to the party.

There you have it.

Ralf Garrison is the director and co-owner of the Mountain Travel Research Project. The Mountain Travel Monitor is published monthly in the Vail Daily.




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