US travel industry one of few bright spots in continuing dismal economic performace

The US economy has had a dismal summer with a national debt crisis and the US congress’ failure to fund the Federal Aviation Authority  —  not to mention stubborn continuing high unemployment  —  but there’s a bright spot: travel.

Job creation in the travel market has remained if not strong, at least steady. Hotel occupancy is up. So is business travel. Meetings, ditto. And prospects for leisure travel look promising.

One small example: While the US’s job outlook continues to conjure up words such as “sluggish” and “lackluster,” the Labor Department’s latest figures show travel jobs in the US increased for the eighth consecutive month.

The US Labor Department reported the unemployment rate remained unchanged at 9.1 percent but that the travel industry posted 9,200 new jobs in July. That was down from the 30,000 number posted in June. But the travel industry has accounted for more than one in 10 jobs this year.

“However, through the first seven months of 2011, travel industry employment has expanded by 106,000 to a level of 7.5 million workers, accounting for 11.4 percent of the total jobs created so far this year,” said the Labor Department.

But the overall travel market itself has seen serious gains.

In the hotel market, improved occupancy levels and higher room rates have led to a string of better-than-anticipated earnings from hotel chains.

Business travel has improved and the forecast is for continued growth.

But on the downside, leisure travelers should heed a warning that the enticing deals of the past may past tense, warns Fox Business.

 “We as an industry have trained our customer to not come to us to look for a room, but to go to a third party," Jan Freitag, senior vice president of global development for STR, told Fox. "It’s been tough to tell people to raise rates because there’s always someone who has a better rate and a better deal.”

Hotel occupancy levels are starting to recover from the recession but room rates have been slow to bounce back.

With business travel on the rise, however, it’s leading the industry’s rebound after a bad two years of corporate travel-budget cutbacks.

Cyclical changes in business travel are not new but because the recession started with a financial crisis, perhaps, its impact has been broader than ever, experts say.

TravelClick says hotels in North America have seen a seven increase in occupancy levels for advance bookings from the transient business travel segment. These are business travelers who haven’t locked in group rates. That compares to a leisure travel occupancy increase, which was lower but still healthy at 3.6 percent.

“While group travel rates will continue to be sluggish since they’re negotiated well in advance, the amount of group travel is set to increase,” predicts Fox

The increased demand coupled with much slower anticipated growth in hotel room supply conjures up a steady increase in room rates—meaning pricing is about to go up.

Room rate growth has been sluggish, less than one percent, according to STR Research. That means supply should remain constant. That bodes well for even higher room rate increases.

Leisure travel has hardly been robust but it has remained fairly steady throughout the recession, experts say.

 “The leisure traveler, we’ve found they might’ve put off buying a car, but they didn’t put off going on vacation, so the leisure travelers actually through the recession have been pretty stable,” Expedia CEO Dara Khosrowshahi told Fox.

The outlook ahead: The US Travel association predicts this year will set a new record for leisure travel trips.

And back to the jobs picture?

 “As we have already seen this year, the travel industry is one of the most efficient job engines in the US economy, creating twice as many jobs as the rest of the private sector for any given increase in output,” said David Huether, senior vp of economics and research at the US Travel Association.

He and others in the travel industry are recommending that the US improve its visa system to create even more jobs. Huether said:
 

“Travelers from China, India and Brazil collectively spent close to US$15 billion in the US in 2010, which supported 105,800 U.S. jobs. Barriers, like visa delays, that discourage travel to the U.S. must be removed so we can enjoy the economic impact of these travelers.”

By David Wilkening