MTRiP’s annual May report presents a unique look back at winter (November – April) and a forward look at the upcoming summer (May- October) and offers a broader perspective than the usual monthly version.

The past six months have seen historic shifts in national and global economies as the recession that began in the U.S. in December 2007 and spread worldwide through early 2008. The winter of 2008/09 made records, but not the kind one hopes for: record jumps in unemployment, record-setting lows in consumer confidence and spending, and dramatic shifts in the fundamentals of the worldwide banking system — now being referred to as a “systemic” financial crisis. Collectively, these events have had a profound impact on travel and tourism sectors, and the timing of all these factors coincided directly with the start of the 2008/09 winter ski season.

Looking forward, a recent reduction of bad economic news has caused a corresponding uptick in the financial markets and consumer confidence, both beat down and anxious for any reprieve. However, pundits agree that market fundamentals remain weak and further corrections are likely before the bottom is reached and recovery begins. Being forewarned, an opportunity exists to be forearmed and better prepared for both the imminent summer season and forthcoming winter, already being planned.
 

Indicators

Dow Jones Industrial Average: Though not typically cited by MTRiP as an indicator, the DJIA is the most visible of all indicators and has a dramatic impact on consumer’s perspective of overall economic health. Looking back, the DJIA, which had peaked around 14,000 in early 2008, was at 9,325 points when the season started and reached a low of 6,547 by March (-44 percent from November) then recovered to 7,996 by April 30. The recent recovery has been greeted with much enthusiasm by consumers starved for good news, but Wall Street holds widely different views about prospects for the future and some feel the DJIA is now driven more by speculation than hard data, making it an interesting but unreliable upstream indicator of what may be ahead.

Unemployment Rate: Unemployment is a downstream indicator of financial crises reaching the consumer. The rate had been stable, averaging 5.4 percent during much of 2008, but then climbed to 6.7 percent by season’s start (November 2008) and has continued to climb in subsequent months, now at 8.9 percent nationally — the highest in 26 years. The Bureau of Labor Statistics & Conference Board has indicated unemployment should be expected to increase for at least the next six months and perhaps into 2010.

Consumer Confidence Index: The compounded effect of the financial crisis is depicted most dramatically by tracking consumer confidence, which began to slide in August 2007 to 111.2 points and was dramatically lower by November 2008. It bottomed at a record-setting 25.0 points in February. At the end of April, the CCI was showing signs of recovery, rising to 39.2 points. As markets continue to stabilize and news becomes “less bad,” the CCI is expected to move slowly upward.

Consumer Price Index: The price that consumers pay for goods and services has gone full circle from a historic high in July 2008 (219.9 points), followed by a dramatic decline at the beginning of winter in November (212.4 points). In December, the CPI hit bottom at 210.2 but has since begun to climb at a healthy pace and near the end of the season in March was at 212.7. The highly inflated CPI last year has resulted in a deflationary economy in March, where year-over-year prices are 0.38 percent below the same time last year.
 

Mountain Travel Industry effects

Discretionary spending has been hit hard. Travel, while clearly in the discretionary category, has been most impacted in business and meeting/convention categories, and is doing least bad in lifestyle-leisure categories like the ski industry, where consumer loyalty and passion is creating resilience.

• The historical long-distance, long-lead destination guest continues to be underrepresented while the short-haul, short-lead guest has been stronger as consumers travel closer to home.

• Snow has proven to be a positive influence, especially for these nearby customers, but it did not offset the effects of the economy where long-haul destination visitors were concerned.

• Price-based discounting was widely in evidence and produced more short-term visitation, but had some long-term consequences as consumers have learned to expect deals and may wait for them.

• Consumers have made a distinct move toward frugality (“frugal is the new black”) with predictable negative consequences for in-resort spending on luxury retail and lodging brands.
 

Looking Back

Citing MTRiP data, which tracks lodging and measures the destination guest:

• The finally tally for the full winter season revealed a 15 percent decrease in occupancy and 9 percent decrease in rate. The season was helped across the finish line with April business, since Easter helped push occupancy and ADR up over last year (0.8 percent and 6.5 percent respectively). The combined effects of lower occupancy and rate, compound to an approximate 25 percent decrease in overall revenues, an unparalleled single year decrease with the impact of such declines yet to be fully realized.

• Skier/boarder visits as reported by the National Ski Area Association, are down 5 percent from the 07-08 record of 60.5 million visits, and down only slightly from the past five-year average.

• This difference between lodging and skier/visit metrics shows that these two segments of the winter economy have unique attributes and are food for thought going forward.

• The “elephant in the room” is the real estate industry and its impact on resort communities and their tourism dependent businesses — a topic beyond the scope of this document.
 

Looking forward

The upcoming summer (May – October) reveals continued softness in the destination market in both occupancy and rate.

• The forward looking six month summer view shows low occupancy (-26 percent), despite a proactive approach to attract guests with reduced pricing (-7.4 percent).

• Bookings made during April for arrival May – September are down (-14.7 percent) from last year. This pattern of short lead times is shown by declines less prominent in the short term (May down -17 percent) than the long term (July, August down -28 percent, -31 percent respectively).

Armed with the experiences of last winter and little prospects for a significant improvement in fundamentals through summer, resort marketers are forewarned and attempting to arm themselves with tools to better manage uncertain market conditions. Interestingly, a look between the lines of the data suggests some cause for tepid optimism:

• There should be fewer surprises for either the resorts or their consumers and both are showing signs of slowly getting numb; even a decrease in bad news is being perceived positively;

• Bargains are plentiful with summer rates half of those in the winter and more deals to come

• Short-lead, near-in travel is easy in the summer and gas and air travel is very affordable;

• Short-lead, last minute reservations are easily accommodated in most summer destinations where plenty of supply makes it easy to be accommodating.

Finally, resort and lodging operators have learned to watch market and consumer trends carefully, react decisively and remain nimble to the ever changing market conditions, all signs that Darwin attributes to the survival of those most readily able to adapt to change.

The Mountain Travel Monitor is based on MTRIP’s advanced reservation data as of 04/30/09, submitted by lodging property subscribers in the western U.S. and may not reflect the entire Mountain Destination Travel Industry. For further information contact MTRIP, LLC directly at info@mtrip.org or phone at (303) 722-7346. All rights reserved.