‘We Are Headed for a Travel Recession,’ Says MMGY Global — But Advisors Beg to Differ

by Cheryl Rosen
‘We Are Headed for a Travel Recession,’ Says MMGY Global — But Advisors Beg to Differ

According to MMGY, 'evidence suggests the U.S. is poised for a slowdown across every travel category.' Photo: Shutterstock.com.

‘It's Time to Call It – We Are Headed for a Travel Recession,’ CEO Clayton Reid wrote in a two-part article on the MMGY website this month. We’re not sure whom he’s been talking to — most travel advisors report this is their best year ever. And yet, some are taking first steps to prepare for the inevitable day when sales will slow.

“Evidence suggests the U.S. is poised for a slowdown across every travel category,” Reid said. The MMGY Global Travel Sentiment Index has gone down for eight straight quarters, and 34% of travelers cite travel costs as their number-one concern, versus only 18% in 2016 — suggesting that “American intent for leisure travel has softened considerably.”

In the short term, MMGY “sees strength in both the U.S. group and corporate transient markets” but it “suspects that those sectors will also begin to decline over the next three quarters.” While there is “reason to believe that pockets of the market will remain strong, such as affluent travelers or the Mature age group … leisure demand will contract below 2002 levels by early 2020, and corporate demand will follow by Q3.”

As a result, Reid said, “we will likely see … a drop in fares and rates combined with shorter booking windows, a shift to more frequent trips with lower spend levels, shorter-haul itineraries, as well as a trade-down on product and amenity sets.”

The good news for travel agents? Commissions will rise as demand falls and suppliers need intermediaries to help them move market share.

So far, business is booming
Experienced travel professionals, though, say they are not seeing any decline in demand — and indeed, most say they are exhausted by the busiest busy season they ever have seen.

Business is up 71% at Charles Russell’s Cruise Planners franchise, for example, and “already strong into 2020,” Russell said. Sales rose 70% at Dream Vacations by Trapper Martin, too, and are “strong into 2022 across all age groups,” Martin reports.

Margie Lenau has been invited to her local library to host an event called Travel Tales “because they saw so much interest in travel”; and sales at Wonderland Travel Vacations are up 17%. “We are getting more calls from people who find us on the internet,” she said. “I don’t see things slowing down.”

Bruce Oliver says clients he hasn’t heard from in years are contacting him at Virtual Luxury Network; Betsy Bouche at Largay Travel Inc. says her clients are moving upscale, almost all requesting high-end FITs and river cruises in Europe, especially Central Europe and Greece.

And Heather Howard DiPietro of Travel Sales Group LLC “has been at two industry events in the last two weeks and every single agent was talking about 10- to 12-hour days.”

On a fam trip on Norwegian Joy, Brad Janes, president of Metro West Travel, said that customers in his Vancouver market “are cashing out big houses and using part of the proceeds to travel. We’re up double digits for 2019, and educating our clients on the luxury brands. We’re moving our clientele up from Norwegian to Oceania and Seabourn.”

But a little preparation can never hurt
Last week, the Dow was up, unemployment was down, and the Consumer Confidence Index rose. Still, some say that what goes up must inevitably go down — and they are taking steps to prepare.

While sales are up in 2019 even above a “great 2018,” Travelink American Express Travel is “preparing for a softer 2020, as we have seen a dip overall during Presidential election years,” said Sandy Schadler. Her “preparation” activities include database clean-up; re-contact strategies for clients who haven't booked in a while; and updating travel preferences via a quick survey to fully update customer profiles “so we can offer relevant one-to-one email marketing specific to the most current travel preferences of our customer database on behalf of our advisors,” she said.

“It is a challenge to complete database health projects when you are at your busiest,” Schadler noted, “but it's important to prioritize them so a softening economy will not have quite the negative impact it could.”

At Krayton Travel, Mitch Krayton also is considering the inevitable. “Sales are strong but should political and economic issues change down, so would travel. Measles on a cruise ship may give people pause. Brexit may impact European and UK travel. We don’t control the factors that influence travel choices. We must be flexible and expect these cycles,” he said.

The high end looks firm
Still, travel advisors said, the high-end customers who form the base of most agencies’ business seem to be traveling more — and better and farther — than ever.

At Videre Travel, Sarah Fazendin is indeed seeing more “super last-minute bookings — so many people wanting to book June in Europe right now, impossible!” But 2020 is looking pretty good, and while a softening of traveler sentiment is possible, historically “the high-end market may spend a little less than they normally would have, but they don't stop traveling.”

Caitlan Etchevers, business development manager at Visit Lauderdale, in Florida, did acknowledge a little concern, noting that, “Unfortunately, I think he may be on to something. I do not have hard facts, but something has me a bit nervous and thinking this way.”

And Stef Katz, The Travel Superhero, is seeing more nervous travelers staying closer to home. “There is a lot of uncertainty in the world right now. ‘Am I going to be allowed to take that cruise to Cuba? What the heck is going on with that emergency declaration in Jamaica?!? I heard there’s a good chance of my getting killed in Mexico, but now it’s in Jamaica, too?!? Can I travel to the UK and Ireland in 2020, or will I get caught up in the apocalypse that they’re saying Brexit will cause?’ Americans are very easy to scare.”

Still, while “business with the price shoppers is down, experience-driven travel is way up,” said Branda Ajay of Magic Family Travel and Allegro Luxury Vacations. “Those clients understand the value of partnering with a travel agent and are willing to invest more in their travel, resulting in a better experience.”

“Nothing is softening” at Wanna Get Away Travel, said Estelle Legeai Wilkinson. “It’s crazy busy and much larger budgets, and yes, many last-minute bookings. My increase is at almost 40% from this time last year; it could be more, but I’m being selective on whom I work with this year. I just recently booked a $70,000 Tahiti trip and am getting well into 2020 bookings. I prefer to be able to pay great attention to my clients than take on more business than I can handle. Plus, we need a life, too!”

Tip of the Day

As travel advisors, we have to be curious. Curiosity leads to impactful connections that pave our road to success. - Jenn Lee, VP of Sales and Marketing, Travel Planners International

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