ALHI Update: Leisure to Lead the Recovery

ALHI Update: Leisure to Lead the Recovery

By: Matt Swenson
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Forget what you know about how the travel industry rebounds from crises.

Traditionally, though 9/11, the Great Recession and other disruptive events, corporate gatherings and group business travel has flown in to the save the day. COVID-19 isn't necessarily Kryptonite for the MICE market, but as has been the case since the coronavirus began rearing its ugly head early last year, the pandemic is proving to be a different animal than we're accustomed to.

MMGY Global, leading integrated marketing firm specializing in the travel, hospitality and entertainment industries, recently issued a report tracking an about-face among American travelers. A confluence of economic and social factors is flipping the script in what MMGY Global CEO Clayton Reid describes as "reverse compression."

In short, as corporate groups make their long-awaited return to hotels and other venues, it will be the leisure travelers doing the heavy spending. The good news is business is coming back faster than some dared to imagine.

"Those who forecast low U.S. travel in late Q1 and into Q2 were just flat out wrong. Unusual booking patterns and travel shaming have masked a demand that we have seen coming for some time," Reid writes in a recent blog post.

The Cause

As you might imagine, a society stuck at home for more than a year is ready to make up for lost time. That desire doesn't necessarily have to give way to the calendar, but it does need to adapt to certain realities.

Three months are already in the books and summer vacation is coming up rapidly. Vaccine distribution is gaining momentum any adult American who wants one will have it available by May 1. Soon, it will be off to the races.

While not everyone, vaccinated or not, will be comfortable flying, MMGY Global seems demand across the board as driving remains a popular alternative, in part because of the sustainability benefits.

No matter how they get to their final destination, a lot of travelers have the same idea. Reid predicts weekend getaways and social "catch-up" among friends and family will quickly fill the inventory. Not willing to be denied for another year, travelers will create new patterns.

"Leisure demand will move into the mid-week, creating a base for Sun-Thursday travel that is non-traditional," predicts Reid, adding cruise lines will see unconventional customers for ocean and river trips because many people will turn to Plans B or C to get away.

"Rate and fare discounts will be more common for weekdays versus weekends and suppliers will reset packages to appeal to leisure travelers searching for a deal in the mid-week because weekends offer higher than normal rates," adds Reid.

This sort of flexibility is a product of unused vacation time, funds in reserve from last year's missed trips and airlines' advantageous booking/rebooking policies accommodating mass cancellations. MMGY sees record booking back for many parts of the industry.

Numbers to Watch

Younger generations, including Gen Z and millennials, are expected to travel more often but have less disposable income than Gen X and Boomers, who were first in line for vaccines. MMGY reports active travelers expect to take 3.7 overnight leisure trips this year and spend an average of $2,415 on those trips.

Popular destinations (based off interest level, in parentheses) appear to be:

Hawaii (64%)
Florida (62%)
California (53%)
Colorado (50%)
Alaska (49%)
New York (49%)

Destinations where there has been social unrest, including Portland, Oregon, and Washington, D.C., may lag behind as they ramp up marketing to improve public perception, MMGY notes.

American household savings will be up to $10 trillion, a 10-year-high, and travel is second only to home improvement in terms of spending priorities.

The Meetings Side

Reid sees the recovery among the corporate and SMERF markets to take hold in Q2, filling in gaps left by the spiking leisure travel. This is "the inverse of what we have always known to be true about building revenue," notes Reid.

Interest in international travel is returning in another positive sign.

For hoteliers, Reid has sage advice for these unusual times: "Do not rely on traditional demand curves to dictate rate strategy."