Sunday, October 12, 2008

The “Financial Crisis” and Leisure Travel

You only have to be a consumer – of anything – to know that the U.S. (and the rest of the world) is in a deep financial mess. The details of how we got here are confusing and convoluted, but it’s a significant world event, and will impact our economies for years.

Whether you hole up at home; whether you still spend freely on luxuries; or whether you barely make ends meet as your mortgage is underwater and your credit cards are being squeezed, you either are now or will soon be affected.

Americans love to spend, spend, spend. On food, travel, clothes, automobiles, electronics, and a hundred other categories. And in our opinion, if a real financial squeeze comes for most Americans, travel will be one of the first “luxuries” to be eliminated from the budget. (But then, do any Americans actually have and follow a “budget” any more?)

The short-term effects of a recession, depression, or whatever you call this economic pullback are being felt not just on Wall Street, but at your local bank (where, if the bank’s still in business, hiring and raises are frozen as deposits melt away), at the construction jobsite (where developers can’t get enough credit to cover payrolls), at the grocery store (since shoppers are gravitating toward WalMart and Costco), at the car dealer (where gas guzzlers sit on the lot for months), and in most corners of your community.

It may take awhile for the financial crisis of 2008 (and probably well into 2009) to be fully felt within all segments of the travel industry, but it will happen. Airlines will cut even more flights (at the same time trying to raise fares). Hotels will see lower occupancy rates (and they can’t park underutilized hotels in the desert like the airlines can park planes). Ski resorts and other destination attractions will find fewer visitors this winter and into the coming year.

In recent years, the travel industry took a hit during the first Gulf War and after 9/11. But on a day-to-day economic basis, those world events were minor compared to what we’re facing now. Of course, we may be in a “fear bottom,” and everything various governments are now doing will pull the economies of their countries up in a short time.

But talking to everyday folks both here in the U.S. and abroad, it seems everyone is talking about reigning in their discretionary (travel) spending in a major way. We’re not economists (thank goodness), but we believe that the travel industry has a very tough year or two ahead. Businesses will fail. And as a consumer, you will have fewer choices, higher prices, and your overall travel habits and patterns may change, affecting the industry for many years to come.

Simpler times before the last financial storm – postcard from London, postmarked 1928