ECONOMIC UNCERTAINTY AFFECTS MOUNTAIN RESERVATIONS

Press Release

• November 25 2008
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Denver, Colo., Nov. 18, 2008—Data released yesterday by the Mountain Travel Research Program (MTRiP) indicated that the ongoing bad economic news during the month of October had a negative effect on consumer confidence with a drop by 36.5 percent– reaching its lowest level since being established in 1985.  The data revealed that winter reservations are down 13 percent overall and reservations taken in October are down 22.4 percent with both figures down from September levels. New reservation volume held up well but was offset by cancellations that occurred when final payments were due and the sales were not consummated, particularly for reservations in early season, including Thanksgiving and Christmas holiday periods.
The October Mountain Travel Monitor noted that in addition to the drop in consumer confidence, the financial markets have remained volatile and the recent legislation to stimulate the economy has yet to find any measurable influence on consumer spending.  Retail sales dropped 2.8 percent during the month and eclipsed the previous biggest decline in sales of 2.65 percent recorded in November 2001.  Although the Monitor also reported that the credit crunch is easing a bit as evidenced in indexes such as the LIPOR, it doesn’t appear to have had a positive impact on consumers yet.
Other key issues influencing the mountain travel booking trends are the world economy and transportation costs.  In today’s global economy, most nations are co-dependent and the collapse of financial institutions in major international markets is having an impact on the U.S. dollar and other currencies.  These dramatic downturns in other nations have led to an increase in the value of the dollar which makes the previously favorable exchange rate for a U.S vacation by international visitors less affordable and attractive.
The report also observed that transportation costs have been a bright spot in the economic picture as the price of oil has dropped radically in a short period of time with prices stabilizing around $60/barrel and pump prices averaging around $2.38 gallon and even less in many markets.  This has led to a decrease in air travel costs and airlines have apparently, at this time, eased away from their previously aggressive position to increase pricing.  If this trend continues, air transportation could become more affordable and lower prices may provide an incentive for skiers and riders to book a winter vacation.
“Unfortunately, all of the bad news in October may be causing some historically resilient guests to remain on the sidelines by deferring their decision to make reservations or by generating increased cancellations,” said Ralf Garrison, author of the Mountain Travel Monitor Report. “Discretionary spending was the fuel that funded leisure travel in recent years but the phase is practically an oxymoron these days as cautious consumers curb their spending,” he added.

Implications for the Mountain Resort Industry

Garrison’s report observed that the uncertainty facing consumers will likely have several outcomes for mountain destinations this winter:
-A significant number of past guests that typically stayed for 5-7 nights have not made reservations and are unlikely to book until either the current economic conditions stabilize or resorts develop and promote compelling offers to attract visitors to the mountains.
-Resorts and lodging properties may have to shift their focus to potential guests in close-in markets or “one tank guests.”  These potential visitors can react on short notice to last minute opportunities surrounding Thanksgiving and Christmas holidays.  “This ‘Epicenter Effect’ may provide an important ‘fill-in’ opportunity for lodging properties that re-focus on skiers and riders who are relatively close and more likely and able to react to offers and packages that can help fill beds and chairlifts,” claims Garrison.
-Mountain resorts may need to react to competitive pricing already being aggressively promoted by both the cruise and gaming industries that are offering deep discounts.  As this competition increases, consumers expectations for a deal will increase—particularly in lodging since this is the vacation component that has experienced the greatest price increase in recent years.
Although the influence of snowfall can be considerable, its ability to “trump” consumer confidence and recessionary forces is uncertain. Historical data for skier visits supports this theory but its positive impact may not apply equally to all segments of the market.  Local season pass holders can and do react to abundant snow on very short notice without incurring any additional expenses. However, destination guests often book well in advance based on schedules and pricing, and these guests are often much less responsive to snowfall as the winning trump card.
“In a recent informal poll of un-booked destination guests who typically spend considerably more on their vacation than day skiers and season pass holders, they were much more concerned about economic factors than snow conditions,” said Garrison.  “In fact, they  considered good snow conditions a ‘given’ so heavy snowfall may not deliver the influx of visitors that many resorts of come to expect in good snow years,” he cautioned.
In assessing the situation in the Mountain Travel Monitor, Garrison concluded that “it probably isn’t wise for mountain resorts and lodging properties to depend on Mother Nature for fiscal security, viability, and stability.”