See the complete list of trends that we analyze.

1) Introduction to the Travel Industry

As 2010 progressed, the travel industry was enjoying some improvement over the very difficult 2008-2009 period. While budgets for consumers and businesses remained tight, occupancy rates were increasing in the hotel industry, and airline seats were relatively full. Southwest Airlines reported “robust” consumer traffic as of mid-2010. Nonetheless, when the middle class does take a vacation, it is generally on a reduced budget. Businesses are sending more employees on trips, but are keeping a tight reign on costs at the same time.

During 2008 and 2009, many airlines cut routes and reduced the total number of seats available, partly by removing older, fuel-guzzling aircraft from service. This put the airline industry in much more efficient operating condition for 2010. U.S. airlines are operating with much smaller staff counts. The number of employees in the air transportation industry plummeted from 563,500 in 2002 to 415,300 in 2009. U.S. airlines were operating at about 81% of potential passenger load during 2010. During the peak summer travel season in July 2010, JetBlue had a load factor of 86.2%.

The U.S. Travel Association (USTA) estimated total U.S. travel expenditures at $704.4 billion for 2009, $772.9 billion for 2008, $739.4 billion in 2007 and $699.8 in 2006. As of 2010, travel providers of nearly all types are competing fiercely on price or are offering their customers special inducements and packages.

International passenger travel and travel within Asia are two bright spots in the industry. For example, the U.S. International Trade Administration expects international arrivals in the U.S. to grow from 54.9 million visitors in 2009 to 71.8 million in 2014. Hotel occupancy and airline traffic are strong in emerging nations including India, China and the surrounding Asian region, as well as in Brazil, which has been enjoying soaring economic growth.

Dozens of new discount airlines have been launched in emerging nations in the past few years, some of them with great success. Meanwhile, Emirates has carved out a place for itself as a major long-haul airline, with routes spanning the entire world and a major hub in the Middle East.

According to the World Travel & Tourism Council (WTTC), the global travel and tourism industry supported 77.2 million jobs on a direct basis in 2009, which was forecast to grow to 81.9 million employees in 2010. The industry generated $1.87 trillion in direct global revenues during 2009, forecast to grow to $1.98 trillion in 2010.

The WTTC also prepares an estimate of the total effect of travel and tourism on GDP (gross domestic product), including both direct and indirect revenues. On that basis, the group estimates the total impact of the industry on global GDP at $5.47 trillion or 9.4% of global GDP for 2009. WTTC forecasts that the direct and indirect economic impact of travel and tourism will grow by 4.4% yearly between 2010 and 2020, on an inflation-adjusted basis.

In the WTTC’s figures, the U.S. accounted for $1.64 trillion in direct plus indirect travel expenditures in 2009, followed by Japan at $551 billion and China at $526 billion. China is the market to watch, with 95 million Chinese expected to travel to foreign lands in 2020.

IATA, the international association that represents most of the world’s major airlines, projected a global airline industry net profit of $2.5 billion for 2010, after a net loss of $9.9 billion in 2009 and $16.8 billion in 2008.

The 2008-2009 period was an ugly time for airlines. Many airlines took bankruptcy protection in 2008, including Frontier, and some, such as Aloha Airlines and ATA, once major airlines in Hawaii and elsewhere, were forced to discontinue operations altogether. Several specialty and business-class-only airlines ceased operations, including MAXjet, Eos and Skybus. Government-controlled Alitalia, in Italy, took bankruptcy in August 2008.

Meanwhile, advanced new aircraft will bring significant changes in the global airline industry. Boeing’s 787, with first deliveries planned for early 2011, will enable international airlines to offer great enhancements to passenger comfort with extremely long intercontinental range, while the airlines will benefit from a fuel efficiency boost of about 20%. Although this mid-size aircraft carries fewer passengers than the 747 and the giant A380, it will enable airlines to open up many new, direct routes. For example, new flights from Europe directly to growing markets in Africa and Southeast Asia will be started. Likewise, new routes from markets in the U.S. such as Denver or Minneapolis, that historically have not been major jumping off points for direct flights to Europe or Asia, will likely be tried. Nearly three dozen of the giant Airbus A380 had been delivered by mid-2010, typically set up to carry about 550 passengers in great comfort from one global capital to another.

Discount airlines remain very important players in the U.S. as well as in Europe and the rest of the world. Southwest Airlines holds the top rank in America by number of passengers, and JetBlue has enjoyed very rapid growth. Outside the U.S., many carriers have carefully studied Southwest’s methods and strategies, and have enjoyed strong growth. Good examples include Kingfisher in India, Dragonair in China and Ryanair in Europe.

Hotels throughout the world enjoyed a major boom through mid-2007, with high occupancy levels, rising room rates and strong levels of both business and leisure travelers. However, the global financial crisis put a damper on hotel occupancy that continued into 2008 and 2009. Many major hotel construction projects were cancelled or put on hold. In addition, during the previous boom many hotel properties had been sold to investors at lofty prices that no longer looked reasonable in 2008-2010. Many of the properties had been financed with heavy amounts of debt, and large numbers of hotels have been foreclosed on by lenders, including many ultra luxury hotel properties.

Today, hotels are enjoying rising occupancy, but room rates are soft, and discounting is used in many cases to attract guests. Some markets, particularly Las Vegas, may have become vastly overbuilt during the last boom. Meanwhile, some hotel and motel construction has resumed in the U.S., mainly to replace aging properties or to secure a spot in growing communities.

Globally, some of the best growth markets in the world for hotels, resorts and airlines are in Asia. Booming business markets from Beijing to Mumbai to Kuala Lumpur have led to the opening of tens of thousands of new rooms in order to accommodate the rapidly growing number of business and leisure travelers.

With some signs of an economic recovery, the hotel industry was enjoying a rebound as of mid-2010, but multiple challenges continued to face this business, particularly in terms of room prices. For example, for the second quarter of 2010, global hotel giant Marriott reported the arrival of increasing numbers of business and leisure travelers. Its occupancy increased by 5.4% worldwide during the second quarter. Good news such as this is very welcome in this industry, particularly in light of the many foreclosures of major hotel and resort properties in recent months.

Marriott reported that its revpar (revenue per available room) was up 8.2% for the second quarter of 2010, compared to the same period in 2009 (on a company-operated, worldwide hotel basis, adjusted for the effects of inflation). The company forecast a global revpar increase of 6% to 8% for the full year 2010 on a worldwide basis, including a 4% to 6% increase in North America.

E-commerce continues to play an extremely important role in the travel sector, making booking convenient for consumers and more cost-effective for travel providers. However, online travel booking sites like Orbitz and Expedia face tough competition. Today, airlines and hotel chains are offering their own powerful online reservation systems, with rich features, multiple levels of photos and descriptions, and the ability to earn and manage frequent flyer awards. Consumers often find the lowest prices on sites operated directly by airlines and hotels.

The cruise line business has held up relatively well since the onset of the financial crisis, particularly at the largest cruse lines. However, these companies sometimes offer deep discounts in order to fill cabins. Consumers see cruises as high-value package deals, and cruise ships are nearly full. New ships continue to be built. In 2009, cruise lines invested $4.7 billion to build 14 new ships. An additional 12 were expected to launch in 2010. Many of these ships were designed and funded before the economic recession, but cruise companies are hopeful that the “all-inclusive” fare model will continue to attract cost-conscious travelers in addition to luxury cruisers. The Cruise Lines International Association reports that North American passenger numbers rose 1.0% to 10.1 million in 2009 from 2008, while the global passenger count grew 3.3% to reach 13.4 million.