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Downturn Projected in Business Travel, International Arrivals Increasing

The Travel Industry Association (TIA) recently released its annual travel forecast indicating that an uncertain economic climate is leading American and global travelers to change their behaviors. Although leisure travel is stable, business travel is projected to decline and the United States is likely to be hit hard by a further decline in international arrivals.

"Consumers are responding as we might expect during an economic slowdown," said Dr. Suzanne Cook, Senior Vice President of Research for the Travel Industry Association. "But travel should not simply be viewed as an economic indicator; it should be seen as a part of the solution to our economic woes. There's no doubt that if we can spur travel, we can help to turn the economy around."

Despite current economic conditions and lagging consumer confidence, the forecast shows that leisure travel volume remains stable for 2008 (-0.2 percent) and is expected to decline modestly in 2009 (-1.3 percent). According to the latest travelhorizonsTM survey co-authored by TIA and Ypartnership, seven out of ten (71 percent) respondents intend to take an overnight trip of 50 miles or more from home during the next six months. Fully half (48 percent) of all respondents stated they were not planning any changes to their future travel plans as result of the recent turmoil in the financial markets.

According to Dr. Peter Yesawich, Chairman of Ypartnership, "The results corroborate what we have been preaching now for several months: American travelers are trading down, but not out."

Consumers are likely to plan and purchase leisure trips differently with the pursuit of a "good value" as the primary reason why. Three quarters (76 percent) "expect to book a packaged vacation to save money" and six out of ten (58 percent) "plan to comparison shop for prices and rates specifically on the Internet." Seven out of ten (67 percent) "plan to stay fewer nights" and a comparable percentage expects to "spend less on food, beverages and entertainment" when traveling.

The outlook for business travel is more challenging, with a 3.7 percent decline in volume projected for 2008 and another 2.7 percent decline forecasted for 2009, according to TIA's annual travel forecast. Companies are making decisions to scale back in the current environment and business travel is no exception. Business, meeting and convention travel volume is expected to begin to recover in 2010 (+2 percent).

"By no means is the sky falling," said Dr. Cook. "After years of growth, we're now looking at modest declines. The travel industry can manage the downturn, but it is in the country's interest to stimulate travel as one of the best means to stimulate our economy."

Although overseas travel to the United States still has not returned to pre-9/11 levels, recent increases in international travel have cushioned the blow of declining domestic travel. This is not expected to hold true in 2009. The Department of Commerce estimates that international arrivals will decline by -1.6 percent in 2009. Overseas travel to the U.S. is expected to decline 3 percent in 2009 and grow very modestly in 2010. By the end of 2011, overseas arrival still will not exceed the record level in 2000.

"As the dollar gains strength and the global economy cools, the need to make America more attractive to international travelers grows," said Dr. Cook. "America's visa process, the entry experience and the lack of communication and promotion all need a second look in this difficult environment. Now is not the time for unnecessary barriers and inefficiencies."

(Source: Travel Industry Association, 10/30/08)

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