ONSITE: Association of Travel Marketing Executives 2008 Forecast

NEW YORK--Executives participating in a travel-marketing panel on Monday were reluctant to condemn the industry's prospects for the year, but long pauses after certain questions about projected travel and advertising spending indicated some trepidation.

At the Association of Travel Marketing Executives' annual forecast luncheon in New York, no panelist answered quickly when moderator Susan Black asked if advertisers will be spending more or less in 2008 and if travel spending will rise or fall this year.

Brad King, managing director of category development for Yahoo! Search Marketing, noted that through the first three quarters of 2007, online travel spending rose 13 percent compared to the previous year. "That's actually the lowest growth percentage that we had seen in this sector for at least the last six years," he said, though pointing out that hotel bookings have been strong. King attributed the slow growth to market saturation and predicted some pressure on airlines, related to high fuel costs and other factors. "Every major carrier in the U.S. will be reducing their capacity by 3 to 8 percent this year," King stated. He added that there would be "downward pressure on the big distribution structure that's out there, because you literally have less product to sell, and when you sell it, it's more expensive."

Rob Torres, managing director, travel, for Google, would only admit to being "cautiously optimistic for 2008." Joel Chusid, general manager, North America, for Hainan Airlines--the Chinese carrier that plans to commence service to the U.S.--said airline consolidation (which would be responsible for the capacity reduction) will be a trend to watch, as it has been for the last few years. He also noted that the inbound Chinese market will have a huge impact. "The Chinese are coming, let me tell you right now," said Chusid. "They're going to be coming in droves and they have lots of money. It's a trend that's going to begin this year, with the agreement [between the U.S. and China governments to facilitate Chinese travel to the U.S.]. A few years from now, you'll see Fifth Avenue filled with Chinese."

During the forum, panelists referred to previous difficult periods for the travel industry. Leisure travel did rebound after the 1991 recession, they said hopefully. Chusid said that while the push to get people traveling after 9/11 tended to focus on domestic travel, now it may behoove the U.S. industry to focus in more on inbound international travelers, due in part to the euro's strength versus the dollar. "The Europeans are coming and shopping and shopping and shopping," he said.

The execs suggested that non-traditional marketing may be the way to go for travel suppliers. This would include web-based social networking and user-generated online content, including video, as well as such "alternative" media for advertising as rental car GPS, TV screens in taxi cabs and seat-back trays on airplanes. Elliot Friedman, Hertz's division vice president, travel industry and partnership marketing, recommended non-traditional partnerships, such as the one Hertz formed last year with the National Park Foundation to promote the rental car company's fuel-efficient fleet (it donates $1 to the foundation for every rental). Any "green" positioning can help in marketing, the panel noted. Torres said corporate-customer feedback last year indicated that a supplier's environmental reputation "was an important feature when choosing an airline. That's the first time I'd ever heard that."

Conrad van Tiggelen, director, North America, for the Netherlands Board of Tourism & Conventions, discussed his organization's success with online social media. On another key issue to the industry--the luxury segment--he said that the market will be relatively unaffected by any economic woes and it would be the middle class that will take the hit. Other panelists agreed that the luxury market was probably safe. Yahoo!'s King said of high-end travelers: "People will keep with those trips, but they'll reduce the number that they take. That's what we've seen: People are unwilling to trade down, so they'll maybe sacrifice one trip in order to take another."

King and his counterpart from Google mentioned that online travel agencies are recognizing the value of "customer engagement" and starting to make the booking experience more personalized for consumers. "We're seeing this now with the online travel agencies--trying to get out of the one-upmanship game and try to get towards this 'lifetime value' of a customer," said King.

Black, the panel moderator (of Susan Black & Associates), advised all the travel industry and advertising personnel who attended the luncheon to read websites like Springwise.com and Trendspotting.com to keep up on trends in consumer behavior and preferences. (AO)

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