Summit County: Market conditions drag down reservations

Date: Dec. 22nd, 2008

Latest research shows continued decline in lodging for resorts - Overall market conditions remained negative in November, which reduced consumer confidence, discretionary spending, and mountain-travel booking patterns, according to the latest Mountain Travel Monitor released by the Mountain Travel Research Program.

As consumer spending slowed, retail prices began dropping, leisure travel discounts appeared, and the price of ski-resort lodging decreased 4.6 percent for November.
Data is derived from a survey of 216 property-management companies in 15 mountain resorts in the western United States and Canada.

Reduced prices appear to be attracting hesitant consumers and travelers who saw some decreases in transportation, living expenses, and travel-related costs, the report indicates.

Among the indicators:

• Consumer Confidence is up slightly but remains low. The Consumer Confidence Index increased in November to 44.9, a six point (18 percent) increase from October’s record low of 38. According to the CCI board, “consumers remain extremely pessimistic, and the possibility that economic growth will improve in the first half of 2009 remains highly unlikely.”

• Financial markets remained unstable with little evidence of relief from the federal bailout plans. Stock-market fluctuations reflected that uncertainty. Economic news was grim, as evidenced by the highly publicized bailout plan for the three major American automakers followed by reports of a $50 billion pyramid scheme perpetuated by a former NASDAQ chairman.

• Retail spending declined, despite brief signs of Thanksgiving retail strength. Even with deep discounts, consumer spending declined, creating a bleak outlook for holiday sales. The subsequent bargains were good news for consumers, but businesses unable to meet profit margins had to cut operational expenses — including layoffs.

• Unemployment grew with 550,000 layoffs in November, and the national figure nears four million — the highest number in 26 years.

• Fuel and transportation costs dropped dramatically, with oil averaging $45.72 per barrel — 48 percent below December 2007. Gas prices are averaging well below $2 per gallon. This trend benefits consumers with lower travel costs and has contributed to recent cuts in some air fares.

• The U.S. dollar has strengthened compared with the 12 major currencies index, increasing slightly (0.5 percent) in early December to 93.7, its highest level since February of 2006. This trend has a negative impact on inbound international travel, as the price of a U.S. vacation increases for international visitors.

• The Travel and Consumer Price Indices declined over the past 30 days and created a “less-bad” situation than in past months for overall consumer spending and travel.
As a result, mountain travelers are reacting to market conditions and changing their historical booking behavior, as indicated by booked reservations as of Nov. 30.

Advanced bookings for the winter season are down 19.5 percent from last year’s pace and 6.2 points lower from October, which was down 13.3 percent. Reservations taken during November for all future dates are down 25.1 percent from last November but aren’t as far down as October, which was off 33.7 percent from the previous year.

Lead time for reservations are getting dramatically shorter based on observations from various resorts.

Reservations for January and early February show moderate strength but are being offset by cancellations that have occurred when final reservation pre-payment was due — particularly among international visitors.

Short-term reservations are strong, however, and were particularly solid in late November, when snow and last-minute deals sparked an increase in visitors.

Second homeowners in resort communities may be increasing personal usage, as their rental units remain vacant in peak periods. This could boost business at ski areas, restaurants and shops but does not appear in advance reservation data.

“At this point, this season is unlike any other in memory,” said Ralf Garrison, MTRiP founder and author of the report. “The final results for this season will depend on several key factors, including the economy, amount of snowfall and the aggressiveness of promotional efforts and programs.”