Tourism: 5 things to watch over the next 6 months
As March comes in and the booking window for winter mountain travel starts to compress, it’s time to take a look ahead and ponder what the industry might expect from markets, consumers, and travel suppliers over the coming six months.
And, with March 11 marking the second anniversary of the World Health Organization’s pandemic declaration, we’re reminded of the sheer longevity and complexity of the crisis and looking to understand the new variables – pandemic and otherwise – impacting the short-term destination travel outlook.
Here are five things that the Insights Collective is keeping an eye on for the next while.
• A return of the “short lead” booking: Since November, booking pace for lodging at mountain resort hotels, condos, and private homes arriving within 60 days — and particularly arriving within 30 days — has been soft as consumers danced cautiously around Omicron safety, holiday cheer, and snow play. With the retreat of Omicron and the typical end-of-season compression in bookings, we expect that the next few weeks will bring a late-season surge in short-lead arrival bookings. The x-factor here will probably be the value proposition; despite recent fresh snow, quality has declined since January while lodging and other costs remain at record highs.
• A slowing of in-migration and easing of housing churn: Housing churn, which has dramatically impacted most destination resorts’ workforce and short-term rental inventories and upended the fundamental look and feel of many communities, will slow down and indeed has already begun to at a majority of western mountain resorts, according to data from Realtor.com.
Available inventory in 15 of 19 western mountain destinations is ticking up while prices are ticking down. Imminent interest rate hikes will further soften transactions, giving destination resorts a chance to breathe, assess, and mitigate against further disruptions to inventory. But despite these trends, the end isn’t here yet. “While some mountain newcomers are now permanent residents, many will continue to have one foot in their urban residence and one foot in their mountain community. It is anticipated that this trend will continue to evolve, which makes monitoring it critical to destination success,” notes Dave Belin, Director of Consulting Services at RRC Associates and an Insights Collective member.
• A return of group bookings: As Omicron restrictions are lifted and vaccination rates slowly continue upward, we anticipate a return of group destination events this summer. Focus is likely to be on social events around entertainment and organized sport, but keep an eye on weddings, as that industry looks to clear a massive backlog. Business travel, more important to some destination communities than others, is likely to lag behind because hybrid work models continue to extend into the business meeting space. A wedding twist – according to the New York Times and Fortune, couples are saving on their destination weddings by booking midweek, taking advantage of the lower weekday room and facility rates. This dynamic works in the destination’s favor, spreading volume out and smoothing the peaks and valleys of visitation.
• An increase in discussions around infrastructure: It’s become clear to many mountain destination communities that they’re not entirely equipped to handle the new level of peak day visitation. Systems that were already being tested on typical busy weekends – parking, public facilities, traffic flow, sewage, internet bandwidth, and their support personnel – are now being pushed beyond limits during sustained periods of high-volume tourism. With no easy means – and in many cases no desire — to curtail visitation, systems will have to improve to ensure that long-sought brand promises from the top down are upheld and systems remain in-tact. Look for town and county leaders to build remediation coalitions and manage visitor messaging. Legislative measures such as Colorado state bill HB22-1117, which if passed will allow counties and marketing districts to redirect lodging taxes to meet community needs such as infrastructure and housing, among others, is one example of a fundamental policy shift in response to increased social and infrastructure pressure.
• Downward pressure on industry prices: The cost of travel in general has skyrocketed since reopening in mid-2020, and most segments have sustained rate growth since then. But price increases really took off as vaccinations picked up in 2021. We’re now starting to see some leveling in room rates, with the prices of other services anecdotally also smoothing out as last year’s hyper-inflation of mountain travel begins to have an impact. With markets reeling from a combination of inflation, interest rate hikes, and now conflict in Europe, consumer confidence — already on shaky ground – is likely to decline as prices further increase from the pump to the bread counter. All this combines to apply downward pressure on the price travelers are willing to pay, and the fourteen-month stretch of 15- to 20% gains in prices aren’t likely sustainable for much longer, though mountain communities have bucked traditional market trends around rate in the past.
What was looking like a return to a version of normal is likely being delayed — or altered — by geopolitical forces that will almost certainly have domestic consequence. The five topics above represent key components of the destination travel dynamic that were either a consequence of or magnified by the pandemic. But despite the as-yet unknown new challenges ahead the Insights Collective members remain optimistic that, as it has in the past, destination travel will continue to flourish at a level that outpaces the greater economy, adapting as necessary and providing what many might call a passionate service in good times and an essential one in bad.
The Insights Collective is a group that includes individuals from a variety of specialty niches. Their stated goal is to help any destination-related tourism business create a plan based on updated data and best practices to navigate a path to whatever the new normal will be for the tourism industry. Recommendations will be based on the ever-changing and emerging guidelines for operating a variety of tourism-related businesses in this new environment.
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