December 2016
U.S. Travel Outlook is a monthly newsletter of the U.S. Travel Association. Visit http://www.ustravel.org/news/us-travel-newsletters/travel-outlook
ArchiveContact Usustravel.org
Examining Current Industry Trends
Current State of the Economy Current State of the Economy

Conditions appear to be improving for the economy as the new year approaches. Third-quarter gross domestic product (GDP) growth showed that the economy accelerated to the fastest pace in two years during the months of July through September. More recently, employers added a solid 178,000 jobs in November, while the unemployment fell to a 114-month low of 4.6 percent and consumer confidence shot up to a nine-year high. At the same time, strong growth in personal disposable income in recent months is a good omen for continued sustainable growth in consumer spending in the near term. On the inflation front, travel prices remained unchanged from 2015 through the first 10 months of 2016 while overall consumer inflation rose a moderate 1.1 percent.

Economic Summary: If it feels like the economy is doing better, that’s because for the most part it is. Upon its standard second revision, the Department of Commerce published findings that the U.S. economy in the third quarter performed stronger than initially expected. Real GDP increased by 3.2 percent in the third quarter of 2016 at a seasonally adjusted, annualized rate (percent saar), 0.3 percentage point (pp) greater than the advance estimate. The upward revision largely reflected improved consumer spending numbers, which is now estimated to have increased at 2.8-percent saar compared to 2.1-percent saar previously. This upward revision was tempered by a downward revision to business investment and inventories, but both indicators still contributed positively to GDP growth over the third quarter.

The revision suggests a strong rebound for the economy in the second half of 2016 after meager increases of 0.8 and 1.4 percent in the first and second quarters, respectively. If the 3.2 estimate holds into the final revision in late December, it will represent the highest quarterly reading for real GDP growth over the past two years. Underlying this growth, as usual, is consumer spending. However, unlike other indicators, consumer spending habits seem to only be putting themselves in stronger positions. Jason Furman of the White House Council of Economic Advisers noted that household debt “has fallen sharply in recent years, driven both by low interest rates and by sharp reductions in the level of outstanding household debt, and is now close to its lowest level on record (with data going back to 1980). This improvement in balance sheets has left households with more disposable income available for consumer purchases, and—along with increases in real incomes—has helped to support strong consumer spending growth.” Furthermore, according to Russell Price, senior economist at Ameriprise Financial, with job gains, wage increases and low debt levels, “[growth] is going to remain heavily reliant on the consumer, but consumers are in very good position to lead that charge. Overall, it’s an encouraging sign for the path ahead.”

Even downward revisions to business investment indicators remained ruthlessly optimistic in scope. For instance, the downward revision of inventory contribution to real GDP growth was explained away by Reuters’ Lucia Mukitani as “businesses... not sitting on piles of unwanted goods. This means they will have more scope to place new orders, which augurs well for economic growth in the coming quarters.” The downward revision to business investment in this same article was quickly supplemented by the 10-percent saar increase in business investment in structures, an indicator that has been depressed constantly by low oil prices and oil divestment. In fact, structural investment still remains depressed by these factors in the current estimate, a testament to the resilience of industry diversity in the U.S. Moreover, positive corporate profits and jobs reports shuffling toward full employment continue to paint a rosy picture for the economic near-future. Upward trajectories for consumer spending and business investment in the near-term could spell greater inflation and higher bond prices in the future.

In fact, economic health has finally raised the federal funds rate, the overnight interest rate for banks and other depository institutions set by the Federal Reserve, for the second time this year, and the second increase since 2008. According to a statement following the meeting:

“Job gains have been solid in recent months and the unemployment rate has declined. Inflation has increased since earlier this year but is still below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports… In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1/2 to 3/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2-percent inflation.”

Trends of higher inflation and interest rates temper future economic expectations despite plans of tax cuts and forecasts of 4-percent annual real GDP growth from President-elect Donald Trump. For the future, Gregory Daco and Oren Klachkin of Oxford Economics suggest in a note to members that: “Overall, we look for Q4 real GDP growth of around 2.3 [percent saar], supported largely by modest consumer spending, rebounding residential investment and modestly firmer business investment.” The New York Fed and the Atlanta Fed’s GDPNow model have released estimates of 2.7 percent saar and 2.6 percent saar for the fourth quarter, respectively.

LABOR

U.S. Travel Dashboard

According to the latest jobs report from the Department of Labor, 178,000 nonfarm jobs were added to the economy in November 2016, a stronger month for job creation than October’s downwardly revised 142,000 job increase. This has led the White House to surmise that “U.S. businesses have now added 15.6 million private-sector jobs since overall job growth turned positive in early 2010.” By the same token, the unemployment rate fell to 4.6 percent in November, the lowest rate since 2007, with labor force population counts staying relatively flat to October 2015 and 2016. Average hourly earnings decreased by 0.1 percent, the first wage decline since December 2015.

“The labor market is still healthy, and perhaps operating at or beyond capacity,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “Wages can be volatile month to month. I’d tend to put a little more weight on the unemployment rate when thinking about future developments and wage inflation.” According to The Wall Street Journal, slack in the job market has tightened precipitously, and across almost all sectors: “Manufacturing jobs and employment in the mining and logging sector have declined over the past year. Jobs in education and health services and in professional and business services have notched the biggest gains.” Leisure and hospitality jobs accounted for the third-largest gains in jobs over the past twelve months.

Reflective of the strong job market, travel industry jobs also spiked in November, adding 6,600 jobs, the highest monthly gain since July, according to the U.S. Travel Association. Job gains occurred mostly in the amusement/gambling/recreation and food/beverage service industries. Employment in other travel-related sectors, including in lodging and airlines, saw little change in November. So far this year, the travel industry has added 54,100 jobs, an average of 4,900 jobs per month. The travel industry remains a consistent job creator for the U.S. economy, adding new jobs 8 out of the last 12 months and continuing to support one in nine American jobs.

Moreover, using data from the leisure and hospitality industry, the Council of Economic Advisers released a new report highlighting that minimum wage increases fueled earnings growth in low-wage jobs. To assess the impact of minimum wage increases implemented by states in recent years, CEA analyzed data from the payroll survey for workers in the leisure and hospitality industry—a group who tend to earn lower wages than those in other major industry groups and thus are most likely to be affected by changes in the minimum wage. In the analysis, hourly earnings grew substantially faster for leisure and hospitality workers in states that raised their minimum wages than in states that did not. Further, the study used empirical evidence to show that minimum wage increases did not affect employment levels in the leisure and hospitality industry, as industry employment levels remained the same across all states regardless of wage levels. In fact, leisure and hospitality employment grew somewhat more quickly than employment in the private sector overall.

CONSUMER CONFIDENCE

Employment and Consumer Confidence

Consumer confidence in the economy reached a nine-year high in November, according to The Conference Board. The index of consumer confidence jumped to 107.1 in November after dropping to an upwardly revised 100.8 in October. “November was a rare case when all of the various consumer confidence measures moved decisively in the same direction, which raises the likelihood that moods actually may have changed in a meaningful way,” said Stephen Stanley, chief economist at Amherst Pierpont Securities to The Wall Street Journal. Consumers’ assessment of current conditions improved in November. The percentage saying business conditions are “good” improved from 26.5 percent to 29.2 percent, while those saying business conditions are “bad” fell from 17.3 percent to 14.8 percent. Consumers’ appraisal of the labor market was moderately more positive than last month. The percentage of consumers stating jobs are “plentiful” increased from 25.3 percent to 26.9 percent, while those claiming jobs are “hard to get” was unchanged at 21.7 percent. Said Jim O’Sullivan, chief economist at High Frequency Economics to The Wall Street Journal: Tuesday’s report is “consistent with an improving labor market and solid growth in consumer spending.”

The rosy outlook continued into early December, according to the University of Michigan’s Consumer Sentiment Index, which rose to a seven-year high of 98.0 from 98.3 in November. Initial analysis of the results, reported by survey director and chief economist Richard Curtin, stated that, “The surge was largely due to consumers’ initial reactions to Trump’s surprise victory.” Peter Boockvar, chief market analyst at the Lindsey Group LLC, wrote in a note following the report reported by Bloomberg: "Bottom line, this is all about Trump enthusiasm… With the rise in optimism, we’ll soon see to what extent this translates into a change in economic behavior." Curtin was quick to say that the outlook was not optimistic across the board, stating that “[there] were a few exceptions to the early December surge in optimism, mainly among those with a college degree and among residents of the Northeast, although no group has adopted a pessimistic outlook for the economy.” More importantly, however, said Andrew Hunter, U.S. economist at Capital Economics to The Wall Street Journal: “It is clear that consumers are in very good shape amidst the crucial holiday shopping season.”

CONSUMER SPENDING

U.S. Travel DashboardPersonal income and outlays were off to a strong start for the fourth quarter of 2016. October personal and disposable incomes spiked upward 0.6 percent to start the quarter, a number consistent with a background narrative of job and wage increases over the past six months. Federal officials, who are mandated by law to pursue maximum employment and stable prices, are “looking at the most recent data with regard to the dual-mandate goals and they’re confident that the economy is ready for one more rate hike, at least,” said Tom Simons of Jeffries LLC. Personal consumption and expenditures also increased by 0.3 percent in October, a solid increase following a 0.7 percent surge in September, revised upward from the advance estimate to be the largest monthly rise in consumer spending in two years. The most promising result of this release is that the savings rate increased—as income outpaced spending—leading Gus Faucher, economist at PNC Group, to tell The Wall Street Journal: “Conditions for consumers remain solid. With more jobs and higher wages, households have more money in their pockets to purchase goods and services.”

More good news for consumer spending: credit card debt is slowing down. From the Federal Reserve’s Outstanding Consumer Credit report, the annual increase in credit outstanding for October slowed down to 5.2 percent from 7.1 percent in September. The credit debt slowdown was led by a revolving (credit card) debt, which slowed down from 5-percent revised annual growth in September to 2.9-percent annual growth in October. Non-revolving (loan) debt slowed down as well from a 7.8 percent 12-month growth rate in September to 6 percent in October.

The structure behind consumer spending remains robust and strong, which turns all pressure, of course, to the Consumer Price Index (CPI), which still remained flat for October. Most likely this was due to global headwinds of low oil and food prices, as the 12-month change in core inflation (that is, CPI less food and energy items) remained at a healthy 2.1 percent. Core inflation has also remained above 2 percent for the 11th consecutive month. The Travel Price Index, a U.S. Travel Association tool using metrics from the CPI, measured October travel price inflation at 1.1 percent. According to the release: “Other lodging (including hotels and motels) increased by 1.8 percent while the prices for motor fuel increased by 6.9 percent. Airline fares were down 2.2 percent.”

This trend of consumer spending has grown stronger for projections of November, including Gallup’s Daily Spending Report projecting an increase of $5 per day per consumer. The survey, which reports an average amount spent “yesterday” by survey respondents, reported an average of $98 per day spent during the month of November, $5 larger than the $93 per day estimate for October. This is also the highest November average daily spending report since the survey began in 2008. Trends between income groups suggested that lower-income households (less than $90,000 per year annual income) were more responsible for the increase in spending.

Strong deals and promotions encouraged more consumers to shop over the Thanksgiving holiday weekend. More than 154 million consumers were expected to shop over Thanksgiving weekend this year, up from 151 million shoppers in 2015, according to the annual Thanksgiving weekend results survey released on November 27 by the National Retail Federation and Prosper Insights and Analytics. Their survey also found that average spending per person over the Thanksgiving weekend totaled $289.19, which was down slightly from $299.60 last year.

According to a new report from Pew Research Center, 24 percent of Americans report earning money from the digital ‘platform economy’ in the past year. The extra income they make is a luxury for some, but a necessity for others. In the context of gig employment, nearly one-in-10 Americans (8%) have earned money in the last year using digital platforms to take on a job or task. Meanwhile, nearly one-in-five Americans (18%) have earned money in the last year by selling something online, while one percent have rented out their properties on a home-sharing site.

EXPORTS

U.S. Travel DashboardThe U.S. trade deficit expanded in October to $42.6 billion, according to the Department of Commerce. This $6.4-billion expansion from September was characterized by a $3.4-billion drop in exports and a $3- billion increase in imports. Reports from The Wall Street Journal suggest that this decline in exports was largely led by the farming sector: the much-vaunted soybean export boom of third-quarter 2016 fame fell precipitously in October; petroleum and oil-related export industries also slowed down in October. The increase in imports was led by pharmaceuticals, cell phones, and capital goods.

Travel exports, on the other hand, technically reached another all-time high, with a $6-million increase from September, remaining effectively flat in October, totaling $21 billion for the month. Travel imports rose in October by $100 million. The U.S. goods and services trade deficit would be 17.1-percent larger in October were it not for the travel industry. Year-to-date, travel exports accounted for 11.2 percent of all U.S. exports.

STATE OF BUSINESS

Investor and former banker Wilbur Ross has been nominated to become the Commerce Secretary in the new Administration. As Commerce secretary, Ross will serve as the country’s chief business promoter and overseer of trade and investment issues, in addition to running such major agencies as the Census Bureau, the Patent and Trademark Office, the National Oceanic and Atmospheric Administration (NOAA), and the National Institute of Standards and Technology (NIST). The Department of Commerce also measures the size of key travel economic indicators, including international inbound visitation and travel exports and imports.

U.S. Travel commented on the announcement, “The U.S. travel community welcomes the selection of Wilbur Ross as our nation’s next Secretary of Commerce. Mr. Ross brings with him decades of business experience, and a deep understanding of multiple industries that we are confident will shape sound economic policies. His longtime focus on increasing U.S. exports aligns perfectly with the goals of our industry, which already accounts for 10 percent of all U.S. exports and is brimming with potential to build in that record.”

The Federal Reserve reported that overall industrial production remained flat in October following two consecutive months of declines. A sharp 2.6-percent decline in Utilities production from September, caused in-part by unusually warm weather in October, triggered the overall drop in industrial output for the month, as Mining and Manufacturing production both posted positive gains. Still, overall industrial production in October was 0.9-percent below its level a year earlier, and capacity utilization, which gauges how much of the country’s industrial capacity is being used in the generation of goods, stands at 75.3, which is well below its long-term average of 80. Overall, the Fed’s report showed that industrial activity is stabilizing, but a significant amount of slack remains in capacity. This signals that industrial-related business investment will likely remain muted in the near-term.

The Institute for Supply Management’s Purchasing Managers' Index (PMI) for November, a monthly survey of manufacturing business conditions, increased 1.3 percentage points from October to a reading of 53.2 percent (any reading above 50.0 indicates expansionary activity). New Orders and Production sub-indices posted positive gains at 1.3- and 0.9- pp increases respectively; Inventory of raw materials also posted a 1.5-pp gain, implying that strong gains would be expected not just for November but for future months as well. While the Employment sub-index trended downward 0.6 pp, prices remained flat.

The ISM’s Non-Manufacturing Index (NMI), on the other hand, gained 2.7 pp in November to 57.2 percent. Leading indicators include employment, which increased at 5.1 pp and Business Activity/Production, increasing at 4 pp, suggesting that services jobs took the lion’s share of employment opportunities in November. New Orders and Orders Backlogs both slowed down in November, suggesting that non-manufacturing industries are moderating toward equilibrium. Travel-related sectors (accommodation & food services; retail trade; and arts, entertainment & recreation) all reported expansions during the month of November, with retail trade specifically noting “increased sales for the holidays."

The Federal Reserve released its last Beige Book of 2016 in late November. A qualitative survey of business conditions across the Fed’s 12 districts, the latest Beige Book released that tourism was “mostly positive to year-ago levels” to start the third quarter, as New England (Boston Fed), the upper midwest (Minneapolis) and the west coast (San Francisco) “experienced strong growth,” while the Kansas City and Philadelphia districts reported “modest growth in activity” and New York “activity has been mostly steady.” Moreover regarding the post-Hurricane Matthew tourism levels, the Atlanta Fed said: “reports from areas in Florida and Georgia directly impacted by Hurricane Matthew indicated that room revenues were negatively impacted. However, other parts of the region benefitted from full occupancies as evacuees relocated. The outlook among most contacts for the remainder of the year remains optimistic.”

TRAVEL TRENDS INDEX

Travel Trends IndexOverall travel volume (person trips to or within the U.S. involving a hotel stay or air travel) continued to grow on a year-over-year basis in October but at a slightly slower pace than the prior two months, according to the U.S. Travel Association's Travel Trends Index. The Current Travel Index (CTI) registered a score of 51.6, which was above the growth threshold level of 50. The decline in the CTI from September’s 51.9 was due to deteriorations in international inbound and domestic business travel, which more than offset an improvement in domestic leisure travel in October. Looking forward, both the 3- and 6-month Leading Travel Indexes (LTIs) forecast that while domestic travel volumes will remain positive, international inbound travel will be stagnant.

dash line
Leisure Travel Leisure Travel
Share of Domestic Search

For the first time since May 2015, the share of U.S. residents (69.3%) interested in traveling domestically fell below 70 percent during the month of November, according to the latest U.S. Travel Barometer. This may be driven by the fact that the value of the dollar continued to increase in November, making travel abroad by U.S. residents more attractive and affordable. Of domestic searches by U.S. residents, the Far West and Mideast regions of the country were searched more (compared to the same month in 2015) while other areas of the country (Southwest, Great Lakes, Rocky Mountain and the Plains) lost share.

A December Travelmarket article reported that half of Americans told American Express they will be traveling this holiday season, doubling the amount they will spend to more than $1,500.

Choice Hotels International officials believe the number of travelers will remain stable heading into 2017 as more consumers say they are too busy for trips, but those who do travel are expected to spend significantly more.

Lodging, travel agencies, and services companies scored 12th among 18 industries in their email marketing open rates, according to a new IBM Marketing Cloud study. That renders these travel companies among the most ineffective when considering higher-performing industries, including automobiles, banks, computer hardware and telecommunications, computer software, and consumer products, for example. The study found that emails sent by lodging companies, travel agencies and cruise lines had an average unique open rate, or the percentage of emails actually opened, of 22.7 percent. That’s lower than 11 of the 18 industries in the study, which also included finance, healthcare, insurance and education.

Millennials currently spend more than $200 billion on travel, according to a new report from FutureCast. Nine out of ten millennials agreed that seeking out new experiences was the most important factor in travelling. The report also noted that nearly half of all millennial vacations are classified as weekend trips and 62 percent of millennials indicated extending business trips for personal vacation. The millennial generation checks an average of 10 sources before making travelling purchases and are directly influencing a new focus on social media within the travel industry.

According to Skift, Airbnb announced in mid-November that it debuted Trips, the company’s official, formal foray into tours and activities, as well as Places, which allows users to find highly curated, hand-picked recommendations for meetups, restaurants and events in a destination. The company also hinted at the debut of Airbnb Flights, and noted that guests can eventually book car rentals, restaurant reservations, and grocery delivery services through the updated Airbnb app.

In October 2016, National Park Service recreation visits increased 5.7 percent and overnight stays decreased 10.5 percent compared to October 2015. Total recreation visits reached at 26.9 million in October 2016. The number of entrance fee-free days in the National Park System is dropping by 40 percent, to just 10 from the 16 available in 2016. Gone are the weeklong free days during National Park Week in April, and a long fee-free weekend in August to celebrate the founding of the National Park Service. "Last year, we added extra fee-free days for the centennial," said Park Service spokeswoman Kathy Kupper. "We had 16 fee-free days in '16. Most years, we've had around nine.” Last year, 307 million people visited a national park. They spent $16.9 billion, which supported 295,000 jobs and had a $32 billion impact on the U.S. economy.

dash line
Lodging Industry Lodging Industry

Lodging PerformanceAccording to STR, total room revenue increased 3.3 percent and room demand increased 1.3 percent from a year ago in the U.S. in October. Total room revenue reached $13.7 billion.

The U.S. hotel industry is projected to experience continued but muted performance growth through 2017, according to STR and Tourism Economics’ final forecast of 2016. “As supply eventually outpaces demand, rate will determine the level of RevPAR (revenue per available room) growth the industry experiences for the next several years,” said Amanda Hite, STR’s president and CEO. “Given the continued lack of pricing power being displayed, we expect performance to weaken a bit for the final quarter of 2016 then decelerate more in 2017 as hoteliers become less confident in pushing rate. Nonetheless, demand is still growing to all-time highs, and RevPAR will continue to reach record levels.”

For total-year 2016, the U.S. hotel industry is predicted to report flat occupancy at 65.4 percent, a 3.1-percent rise in average daily rate to $124.10 and a 3.1-percent increase in RevPAR to $81.18. For 2017, STR and Tourism Economics project the U.S. hotel industry to report a 0.5-percent decrease in occupancy to 65.1 percent, but increases in ADR (+2.8 percent to $127.61) and RevPAR (+2.3 percent to $83.05). Also in 2017, supply (+2.0 percent) is expected to outpace demand (+1.5 percent) for the first time since 2009.

A new report from STR concluded that the level at which gross operating profit hit its peak is higher than some would have expected—hovering between 75 percent and 85 percent for full-service hotels, and between 71 percent and slightly more than 80 percent for limited service. Analysts said operational costs put a burden on profitability after that point, unless hoteliers are able to use the high occupancy to drive up the rate.

“As hotel operators are able to increase occupancies, at a certain point, peak profitability efficiency is realized,” Joseph Rael, STR’s director of financial performance, wrote in the study. “At this point, the data shows that there are diminishing returns beyond this level of occupancy, where profit margins actually decrease with additional rooms sold. At this occupancy, profit margins can only be improved by increased average rates.”

dash line
Transportation Transportation

President-elect Donald Trump named former Secretary of Labor Elaine Chao as Secretary of Transportation in the next administration. In a Business Travel News article, the U.S. Travel Association was quoted, "Candidate Trump exhibited a clear understanding of the urgent need for aggressive investment in our infrastructure in order to keep America competitive and spur economic and job growth, and now President-elect Trump is following through with a strong and capable choice to lead those efforts."

AIR TRAVEL

Transportation OverviewAccording to the International Air Transport Association (IATA), North American airlines' traffic climbed 2.4 percent in October compared to October 2015. While this was the lowest increase among international regions on a seasonally-adjusted basis, passenger volumes have still risen at an annualized rate of around 5 percent since March. Capacity rose 4.9 percent and load factor dropped 1.9 percentage points to 80.1 percent.

“Passenger demand growth in October was consistent with long-term trends but represented a deterioration compared to September. While the negative traffic impact from terror attacks and political instability in parts of the world has receded, the long downward trend in yield—which helped to stimulate travel—has leveled off. Furthermore, the recent OPEC agreement to restrict oil production suggests fuel prices have ended their slide,” said Alexandre de Juniac, IATA’s Director General and CEO.

A4A reported that revenue domestic passenger enplanements on U.S. carriers (AirTran, Alaska, American, Hawaiian, JetBlue, Southwest, United, US Airways) increased 1.5 percent and revenue international passenger enplanements increased 1.4 percent in October 2016, respectively, over October 2015.

The Department of Transportation reported that flight cancellations on U.S. carriers reached an all-time low in September, with just 0.3 percent of scheduled domestic flights cancelled during the month.

An audit of the Federal Aviation Administration’s (FAA) funding by the U.S. Inspector General identified 13 of 23 critical FAA facilities as having inadequate staffing. Many air traffic controllers are at or near retirement age and the FAA does not have enough younger workers to replace those that will soon retire. According to FAA, “the Agency effectively anticipates controller retirements with 98 percent accuracy nationwide,” reads the audit. “However, given the high percentage of controllers eligible to retire at critical facilities, and the fact that eligible controllers can retire at any time with little notice, FAA remains vulnerable to staffing shortages that could impact facility operations.” The legislative process in the new year to authorize the FAA could involve a push for privatization.

The Los Angeles Board of Airport Commissioners approved plans for L.A. International Airport’s Terminal 1.5, bringing the project one step closer to completion. The project will connect LAX’s Terminals 1 and 2 and improve the traveler experience by creating more space for ticketing, security screening and baggage. Final approval by the LA City Council is still pending.

Ground transportation surcharges at the nation’s 50 largest airports have cost travelers more than $183 million in the last year, according to calculations from the Associated Press. Airports across the country add surcharges of up to $5 a ride—typically passed directly on to travelers—for trips originating at their curbs. There are similar charges for limousine, Uber and Lyft drivers as well as shuttle buses for hotels, car rental companies and off-airport parking lots.

Airports across the country say the ground transportation fees are necessary so they can pay to maintain the many miles of roads on their properties. The fees also go, in some cases, to hire staff to direct traffic and to dispatch taxis. With the growth of app-based ride services like Uber and Lyft, airports have also constructed new waiting areas and parking lots. Consumers disagree: “What are we doing that causes the airport to spend more money?” said Kimberly Grubb of Fort Worth, Texas, who was recently awaiting a Lyft pickup at San Francisco International Airport. “It wouldn’t be any different than if we knew people here who could come pick us up,” Grubb adds. “It leaves a bad taste in your mouth.”

Related research released from IdeaWorks and CarTrawler suggested that airline ancillary revenue (otherwise known as fees) was projected to reach $67.4 billion worldwide in 2016. The research, part of the CarTrawler Worldwide Estimate of Ancillary Revenue, projected that this would be a 13.8-percent increase from 2015, and a 200-percent increase from 2010. On a global basis, ancillary revenue is estimated to represent 9.1 percent of airline revenue for 2016. That’s nearly double the 4.8 percent rate from 2010. But the most revealing statistic is the average per passenger bonus of $17.81 based upon IATA’s projection of 3.78 billion passengers for 2016. According to the report: “It allows passengers who seek the absolute lowest price to buy the basic seat-only fare. And for a growing number of consumers, it allows the flexibility of paying extra for more comfort and convenience. For airlines, it provides the level of profit necessary to keep investors happy and millions employed.”

ROADS & RAILS

Ridesharing company Lyft just released an economic impact report based on a survey of passengers and drivers in 20 major cities in 2016. The report includes impacts on increased local spending, reliable transport, driver earnings and opportunities and improved city health including safer roads and reducing congestion. Among some of the top-line estimates: Lyft passengers spend an additional $750 million in local economies, Lyft drivers have earned over $1.5 billion in wages, and Lyft passengers saved over 36 million travel hours compared to alternative modes of transportation.

The national average price of regular unleaded gasoline increased for seven consecutive days, reaching a price of $2.18 per gallon in early December. This average price represents an increase of five cents per gallon compared to one week previous, four cents less than one month ago and 14 cents more than the same date last year, according to the American Automobile Association (AAA). In an AAA press release, the organization lays the cause for the price increase at the feet of the Organization of Petroleum Exporting Countries (OPEC), who elected to cut its collective production in an effort to rebalance the global oil supply and raise prices, effective January 2017.

AAA reported, “markets reacted quickly to the production agreement with crude oil gaining 12 percent and leading to increased retail prices. Traditionally this time of year gives way to lower gas prices as a result of cheaper-to-produce winter-blend fuel and less demand. However, due to the agreement from OPEC it is still unclear if prices will retreat considerably ahead of the upcoming holidays.”

Amtrak posted a banner year in fiscal 2016, reporting record-breaking ridership numbers, aggregate ticket revenues and operating loss (that one’s a new low). The government-backed company’s $227 million operating loss represented a 25-percent drop from last year’s — though the older figure was at least partially inflated by the costs Amtrak incurred because of the fatal May 2015 derailment in Philadelphia. The passenger railroad served 31.3 million passengers in fiscal 2016, a 1.3 percent bump from the previous year. Amtrak ridership increased 2.4 percent in November to 2.7 million compared to a year ago and revenue was up 1.6 percent during the same period.

The Federal Highway Administration (FHWA) released in December that drivers logged 2.4 trillion vehicle miles in the first nine months of 2016, increasing 3 percent from the same level last year. The new data, published in FHWA’s latest “Traffic Volume Trends” report—a monthly estimate of U.S. road travel—show that more than 265.5 billion miles were driven in September 2016 alone which is a 2.9-percent increase over the previous September. The increase in driving highlights the growing demands facing the nation’s roads and reaffirms the importance of the “Fixing America’s Surface Transportation” (FAST) Act, which is investing $305 billion in America’s surface transportation infrastructure—including $226 billion for roads and bridges—until 2020. Furthermore, FHWA data show rural arterial miles (rural interstate and rural other arterial) were up 3.4 percent in September 2016 compared to a year and cumulative rural arterial miles to September of 2016 increased 3.3 percent.

dash line
Business Travel Business Travel

After an uneven 2016 that saw only limited increases in overall pricing, the business travel outlook for next year looks to be similarly subdued, with flat to moderate rate increases expected globally across air, hotel and ground transportation, according to Global Business Travel Forecast 2017 by American Express Global Business Travel.

The continued slowdown of the Chinese economy and depressed oil prices, the United Kingdom’s impending departure from the European Union, growing populist politics and increased security concerns in many countries have together created a higher level of uncertainty in the global marketplace. It remains to be seen how this will impact business travel over the next year.

Prices for hotel rooms and air tickets for business travelers will likely remain the same as they were in 2016, according to Travel Leader’s Group 2017 Industry Forecast. “As a result of ongoing uncertainty and macro-economic projections, we believe that while overall 2017 global travel transactions will experience modest growth, that overall travel spend will be flat,” states the forecast.

“Pricing pressure is mounting in many major markets given an excess of supply and reduction in demand. As a result, while business travel activities will continue to expand, prices will remain largely stagnant across air, hotel and car categories. [Travel providers] will work hard to increase prices but their efforts will be largely unsuccessful with the scale tipped more favorably to buyers. As long as energy prices remain low, modest demand continues and terrorism incidents are low, [travel providers] will continue to record robust profits from their activities.”

Business travelers rank their company’s travel policy as the top impact on decision-making when they book a work trip according to a new study from the Global Business Travel Association and hotel service provider HRS. That won out over other factors including convenience, cost, flexibility and loyalty programs.

But workers and those who manage travel programs aren’t always on the same page, researchers found. Just about half of travel pros said they communicate travel policies by holding in-person meetings, but only 20 percent of travelers agreed. And while 90 percent of travel managers said their workers were using approved booking channels for flights, only 63 percent of employees said they were using the method their company wanted. The rental car split was similar: 81 percent of travel managers thought road warriors were using the approved tools, but just 57 percent to travelers said that was the case.

dash line
International Travel International Travel
Share of International Search

The most recent U.S. Travel Barometer, which covered November, showed that the United States’ share of international lodging searches declined to 10.7 percent, the lowest share since October 2014. This decline comes on the heels of several months (August and September) when the U.S. share was particularly high. The score in November may be more indicative of the U.S. competitiveness globally given the ongoing appreciation of the U.S. dollar.

The Department of Transportation gave final approval to the controversial foreign air carrier permit application of Norwegian Air Group's Ireland-based subsidiary, ending a review process that lasted for nearly three years.

"If ever there were a trade policy that brings jobs to U.S. soil, this is it: Norwegian Air is flying and will buy more American-made planes, their passengers will spend money in American businesses, and American travelers will have more and cheaper options when they fly," U.S Travel Association CEO Roger Dow said. "This announcement is an unmistakable endorsement of competition, connectivity and Open Skies agreements, and a welcome repudiation of protectionist, anti-competitive policymaking."

Qatar Airways will launch service between Las Vegas and Doha, Qatar, sometime within the next two years, but details were still fuzzy on the carrier’s frequency of flights out of McCarran International Airport. Las Vegas and seven other cities will be added to the Middle East carrier’s schedule through 2017 and 2018, an airline spokeswoman said Monday. Additional destinations named were Canberra, Australia; Dublin, Ireland; Medan, Indonesia; Rio de Janeiro, Brazil; Santiago, Chile; and the cities of Tabuk and Yanbu in Saudi Arabia.

According to Chinese Vice Premier Wang Yang, the number of Chinese tourists that visited the United States in the first three quarters of 2016 grew by 14.7 percent year-over-year, and he expects the total arrival number to exceed 3 million by the end of the year.

However, Wang’s growth rate and projected number of total arrivals would actually mean that 2016 was the worst-performing year, as far as tourism growth is concerned, since the global financial crisis—which caused growth in 2009 to plummet to 6 percent year-over-year. While double-digit growth certainly means good news for the U.S. tourism industry, it still signifies the slowest growth since 2010—when growth stood at 53 percent year-over-year.

A recent study by Airbnb found that most millennials in the United States, the United Kingdom and China would prioritize travel over buying a home or paying off debt. Chinese millennials ranked travel as more important to them than paying off debt, investing and saving, buying a new home or buying a car. In the U.K., millennials rank travel over buying a home or paying off debt, and in the U.S., younger people would rather travel than buy a home. Another finding from the survey revealed millennials are more likely to build their own itineraries and are more favorable to creating their own adventures. Millennials place more value on experiences, like interacting with locals, learning customs and eating native food.

Brexit has not affected U.K. resident traveling patterns to the U.S., according to new data released by U.K.’s Office for National Statistics (ONS). In fact, the just-released numbers show that, in the peak travel months of July, August and September, U.K. departures for the quarter increased by 8 percent over the same period in 2015. And, year-to-date, departures for North America increased by 4 percent vs. 2015.

However, results of the U.S. presidential election may influence the number of European travelers coming to the U.S. Phocuswright fielded a survey of 1,500 European travelers days after the election to gauge their sentiment around travel to the U.S. and the potential impact of the U.S. election. The results should give pause: one in five travelers in the U.K. and France and nearly one in three German travelers said they are less likely to travel to the U.S. Across all three countries, women are also significantly less likely than men to visit the U.S.—27 percent vs. 19 percent.

dash line
Project: Time Off Project: Time Off

Planners report greater happiness with their personal relationships, financial situation, and professional success, according to “The State of American Vacation.” The report revealed a strong correlation between planning and the likelihood of taking all available vacation time, as well as greater reported happiness in every category measured. Yet less than half (49%) of households set aside time to plan the use of their vacation time each year. Make a resolution to plan your time off. Read more.

U.S. Travel Updated
 

The U.S. Travel Association celebrated its 75th anniversary at its fall board meeting. On October 16, 1941, the founding meeting of what is now the U.S. Travel Association was held at the Mayflower Hotel in Washington, D.C., with the stated goal of increasing travel to and within the U.S.

"Tonight we will mark more than an anniversary of our industry's voice in Washington," said U.S. Travel Association President and CEO Roger Dow. "This celebration is a look back at the remarkable work we have done to protect and promote travel—and a reminder of all we must continue to do to keep travelers moving to and within our country."

RESEARCH

U.S. Travel’s research team recently updated summary market profiles for major source countries of inbound travel to the U.S. Additional summary profiles as well as a number of full reports for selected countries will be released in the near future.

The research department also updated two additional fact sheets. The Top 20 Inbound Markets (2015) takes a look back and a look ahead at the United States' top inbound visitation markets, and the change in their rankings. The Top 20 Travel Export Markets (2015) ranks the top U.S. travel export markets, and provides a breakdown of travel exports by categories, visitation and average travel spending data.

POLICY

Advocates for airline competition won a significant victory when the Obama Administration decided to allow service to U.S. cities by Norwegian Air International.

Thanks to the passage of a bipartisan bill that sailed through both the House and Senate this month, and was signed into law by President Obama on December 8, the outdoor industry is primed for a gargantuan reveal. The Outdoor Recreation Jobs and Economic Impact Act of 2016, or REC Act, authorizes the Department of Commerce’s Bureau of Economic Analysis to assess outdoor recreation’s contribution to the nation’s gross domestic product, or GDP.

Congress cleared a major defense bill containing a provision to modify onerous restrictions on long-term travel by Pentagon personnel. The bill language allows each Armed Service branch, at the three-star general level, the option to waive current limits on per diem reimbursements for extended assignments. While this is an improvement, it is not as strong as language in the House bill that fully repealed the Pentagon policy.

dash line
Member Resources  •   Toolkits  •   Research Reports  •   Interactive Travel Analytics
1100 New York Avenue, NW, Suite 450, Washington, D.C. 20005 TEL 202.408.8422 FAX 202.408.1255 ustravel.org feedback@ustravel.org
U.S. Travel Association Project: Time Off Power of Travel