During the general session of the 2020 RLH Corp. Virtual Conference and Expo, MMGY founder Peter Yesawich shared some updates on industry trends from the travel and hospitality marketing agency’s Travel Sentiment Index.
Peaks and Valleys
The index, Yesawich explained, is the travel industry corollary of the consumer confidence index, dating back to 2007 and the beginnings of the global financial crisis. “As we look back into 2008 and 2009, there was a significant increase in the TSI,” he said. “What was interesting is that it was only one of the six things that we measured that was producing that, and that was the affordability of travel.”
At that time, he said, the marketing strategy embraced by not just the lodging business, but every travel service supplier, was discounting. “And the publicity ... of those discounts is what, in fact, drove the increase in the TSI.”
Since 2014, the industry has been doing well, with occupancies rising and more pricing power in terms of rates, Yesawich said. The index plateaued about 18 months to two years ago, holding steady until the COVID-19 pandemic caused a “precipitous decline.”
Today, the aggregate value of the TSI is now about 91 percent or 9 percent below what it was in the first quarter of 2007 when the index began. Nearly half—44 percent—of American adults surveyed told MMGY as of this past spring that they were planning an overnight trip in the course of the next six months. In 2019, Yesawich said, that number was 61 percent.
In addition, as of this spring, only 25 percent of adults expressed intention to take at least one business trip. “Our intention to take a leisure trip is twice as high as it is for business,” Yesawich said, emphasizing that demand for leisure travel services is not only what is driving primary demand for the lodging business in America today, but is what's going to help drive recovery after COVID.
Yesawich said two thirds of the market actively expects to take a leisure trip within the next six months, but the actual likelihood of respondents taking a leisure trip within the next six months is lower, at 42 percent. However, that is the highest it’s been since March, and up from its nadir of 31 percent in April. “There’s a little bit of encouragement here,” he said.
Another notable find is that while discounting helped the industry 12 years ago, the same tactic may not work twice. Attractive travel deals will have less influence on future travel decisions than a demonstrated decline in the spread of the virus, Yesawich predicted, and safety—or perceived safety, at least—will unlock pent-up demand. “Deals will not bring demand back,” he said. “You’re not going to be able to discount or price your way out of the dilemma.”