Travel Execs Point to Sectors That May Suffer or Boom

WHEN THE ASSOCIATION OF TRAVEL MARKETING EXECUTIVES GATHERED some execs for a January panel forecasting the state of the industry in 2008, such familiar terms as fuel surcharges, airline consolidation and social media were heard, but the panelists scrupulously avoided condemning the industry's prospects for the year in the face of a general economic malaise.

Nonetheless, the first panelist to speak, Brad King, managing director of category development for Yahoo! Search Marketing, began by noting that for the first three quarters of 2007, consumer spending on travel booked online had the lowest year-over-year growth since 2002. He attributed the slow growth to market saturation and projected 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," stated King, who did point out that hotel bookings have fared much better than airline ticketing. 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."

Joel Chusid, general manager, North America, for Hainan Airlines—the Chinese carrier that will start service to the U.S. in June—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 said 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.]."

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 taxicabs and seat-back trays on airplanes. Elliot Friedman, Hertz's division vice president, travel industry and partnership marketing, recommended non-traditional alliances, 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. Rob Torres, managing director, travel, for Google, 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."

Torres and his counterpart from Yahoo! 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.

On another key issue to the industry—the luxury segment—Conrad van Tiggelen, director, North America, for the Netherlands Board of Tourism & Conventions, 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. 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." —ADRIENNE ONOFRI


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