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PhoCusWright Predicts Decline in Travel Demand

May 15, 2009 By: George Dooley


The total U.S. travel market will decline 11 percent in 2009, returning the industry to pre-2006 levels, PhoCusWright, the travel industry research authority, projects. The decline reflects a dramatic shift in consumer demand levels and the changing behavior of today's traveler in a recession.

Among the top trends identified in PhoCusWright’s new Consumer Travel Report— to be released in full at PhoCusWright’s Analyst Forum, June 9 in New York City— is the ascendancy of Generation Y travelers, the growth potential in online travel and the impact of travel search engines.

Move over boomers—Generation Y has come of age: “Twenty-five to 34-year-olds are spending the most per household on travel and 18- to 34-year-olds are significantly more likely than older age groups to indicate that they plan to travel more this year," PhoCusWright says. "While boomers are commonly described as the wealthiest generation, the 45-64 age group is spending the least per household on travel and is also the most likely to reduce travel spend this year.”

It is going to get worse before it gets better. “Consumers who spend more than average on travel are more likely to reduce travel expenditure this year, and those that spend less than average are more likely to actually increase travel expenditure this year," PhoCusWright said. "The result of this mixed bag of intentions is that overall expenditure will decline considerably across the board, but budget brands will experience a smaller decline than upscale brands.”

Online travel agencies will fare better than other channels. It may seem surprising given the recent flurry of fee cuts and revenue-eroding promotions from online travel agencies (OTAs) like Expedia and Orbitz, but OTAs will outperform other channels in year-over-year bookings because of their consumer base.

Online travel is mature but not saturated. Though the majority of travelers typically book online, there is still plenty of opportunity to grow online transactions. Consumers that spend the most on travel still use a mix of online and offline methods.

Travel search engines are (finally) making a mainstream impact, PhoCusWright says. “Travel search engines like Kayak are not new to the travel industry, but are now becoming a mainstream element in the travel planning process. Over a quarter (28 percent) of travelers typically turn to them when shopping for travel and new entrants like TripAdvisor will continue to broaden the audience.”

Visit www.phocuswright.com.
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