With the US credit rating downgraded, and the stock market dropping with uncertainty, and European governments fighting to control their debt, citizens in the US have a lot to ponder. The least of which is “Where will I take my next vacation”
For decades the American travel marketplace was a huge, growing and somewhat predictable market. New destinations were discovered; new experiences were created (cruising), and new generations happily traveled the world in search of the wonders of travel. Has that all changed now? Will the current economic malaise seriously suppress the demand for travel in the US?
I’m afraid that, for some, the answer is yes. But it is not a universal or unqualified yes. First, let’s look at what has changed.
How Americans evaluate their economic status.
The US economy is surprisingly resilient and so are Americans. They live, for the most part, better than their parents, and have long believed that their children will surpass them. Education is universal and has been a ticket to better jobs and careers. Affordable credit and housing led to high percentages of home ownership. The transition from factory and union work to a service economy, led to fewer jobs with fixed pensions. Individual savings for retirement became the norm throughout the country.
As a result, Americans were optimistic (Consumer Confidence Index?) The value of their homes were steady or increasing, the value of their investments were seen as a tangible key to a worry free retirement and the job prospects were good for them, their family and neighbors. In that environment people were free to think about leisure pastimes and plan their next vacation trip.
For a significant number of Americans that has all changed. Today, every American knows many people whose homes are valued less than their purchase price. I don’t mean the speculators or those unqualified who were the fodder of the 2008 housing mess. I’m talking about everyday people who hold steady jobs, and take vacations today. This is a economic fact that they are powerless to fix. Waiting for housing prices to increase may take some time.
With high unemployment and high underemployment, neighborhoods everywhere are full of stories of struggling families, who are locked in a never ending search for higher paying, steady jobs. This environment affects the psyche of even those with steady and secure work. If a vacation is on their minds, there will be little talk of it.
The final piece of this puzzle is the stock market. Americans are not high risk takers. They tend to invest as they have been told, in a balanced portfolio of mutual funds. The problem is that these funds then invest in the companies which are currently struggling with profits, foreign completion and are slashing workers (see above!)
Will everyone just stay home this year?
Travel suppliers, destinations, attractions and sellers of travel wrestle with this issue all the time. Conventional wisdom tells them that markets will go up and down with economic uncertainties. The key to sustainable growth and profits has been to balance supply and price. With falling demand, cut prices and eventually greed overcomes inertia. This has been the formula employed on and off since 9-11.
Given the predicate above, I believe that an alternative approach is called for by most. Make no doubt about it; Americans see a bleak economic future at least for the immediate future. They are losing confidence in their government’s ability or willingness to make seriously needed changes to fiscal policy. This will affect the volume of travel, the destinations frequented, and the experiences which will resonate in this travel environment.
Mass markets will be dramatically affected. This will curtail new investment in supply and keep rates abnormally low. Bargain prices will be the lead story of everyone selling mass market travel. Players in this segment will rely on volume to survive.
Niche markets will struggle to make their voices heard in such a price driven market. These markets are, by definition, different from, and appeal to other than, the main stream markets. Here the key will be the intelligent use of technology to seek, and communicate to those niche travel consumers who do still exist. They may be harder to find, but they will relish the attention, and appreciate that some travel marketers are speaking directly to them.
Retirees, boomers, millennials, are all known market segments which now must be carefully dissected to reach these new micro-segments. Boomers will inherit unprecedented wealth from the “Greatest Generation” but what was supposed to be available for lifestyle choices such as travel now must cover hard expenses.
All these groups will want to travel. Carefully crafted reasons will empower them to travel.
Marketers must stress the authenticity and uniqueness of the travel experience, not the price. If the travel experience is real, and the benefits are perceptible, Americans will still go. African safaris are doing well. Machu Pichu is on everyone’s bucket list. Families will still travel for reunions, weddings and graduations.
These are the travel threads that when intertwined make the travel tapestry which all Americans treasure and desire. Starting right now, carefully tailored messaging directed at micro-segments is mandatory. Communications should be personal and stress the benefits not the features, functions and prices of true vacation experiences available. In a tough travel environment, the clever always prosper.
Bill is a veteran of over 30 years in the travel & tourism business. He has worked on both the supplier and agency sides. Most recently he served for over a decade as the CEO of ASTA. He is currently associated as a Senior Consultant to Partner Concepts, an Annapolis based marketing company serving Fortune 500 companies and many National Tourism Organizations (NTO). He lives in Alexandria, VA., where he also manages WAM Strategic Development. You can find him on Twitter @WldTrvlBill