As 2010 progressed, the global travel industry as a whole enjoyed some improvement over the very difficult 2008-09 period. However, 2011 brought mixed results. Airlines suffered from much higher fuel costs, resulting in lower profits. On the other hand, 2011 saw hotels and resorts enjoying good occupancy rates, which enabled them to raise prices. Business travel rebounded considerably, while leisure travel was generally strong worldwide. Nonetheless, when members of the European or American middle class do 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 a much more efficient operating condition. U.S. airlines are operating with much smaller staff counts. The number of employees in the U.S. scheduled airline industry plummeted from 485,000 in 2003 to 421,800 in 2010.
The U.S. Travel Association (USTA) estimated total U.S. travel expenditures at $758.7 billion for 2010. This was up significantly from $704.4 billion in 2009.
International passenger travel and travel within Asia and Brazil 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 59.7 million visitors in 2010 to 88.7 million in 2016. 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 worldwide 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 96.1 million jobs on a direct basis in 2010, which they forecast to grow to 118.4 million employees in 2020. The industry generated $1.75 trillion in direct global revenues during 2010, and is forecast to grow to $3.4 trillion in 2020.
In the WTTC’s figures, the U.S. accounted for $376.6 billion in direct travel expenditures in 2010, and is expected to grow to $681.8 billion in 2020. Asian nations produced strong results from travel in 2010, including China at $139.4 billion (expected to grow to $634.1 billion in 2020) and Japan at $119.0 billion (expected to grow to $135.3 billion in 2020). China is definitely the market to watch for exceptional growth.
IATA, the international association that represents most of the world’s major airlines, estimated a global airline industry net profit of $18.0 billion for 2010, after losses of $9.9 billion in 2009 and $16.8 billion in 2008. However, they forecast that profit will decline dramatically in 2011, due to higher fuel costs, with an expected profit of only $4.0 billion.
The 2008-09 recession was an ugly time for airlines. Many 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 also, including MAXjet, Eos and Skybus. Government-controlled Alitalia, in Italy, took bankruptcy in August 2008.
For the near future, advanced new aircraft will bring significant changes in the global airline industry. Boeing’s 787, with the first delivery planned to Japan’s ANA airline for September 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 Boeing 747 and Airbus’ 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.
A small number of the giant Airbus A380 had been delivered by mid-2011, typically set up to carry about 550 passengers in great comfort from one global capital to another. Airbus enjoys a good backlog of orders for this aircraft.
Perhaps more important is the spectacular demand from global airlines for smaller, single aisle planes to replace older models that are not particularly fuel-efficient. Boeing has announced that it will build a new high-efficiency version of its exceptionally popular 737, to be called the 737 MAX, which will compete with a similar offering from Airbus, an A320 NEO model with a new engine option.
Discount airlines remain very important players in the U.S. as well as in Europe and the rest of the world. Southwest Airlines is one of America’s top carriers 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 2008-10. Many of the properties had been financed with heavy amounts of debt, and large numbers of hotels were later foreclosed on by lenders, including many ultra luxury hotel properties.
Today, hotels are enjoying rising occupancy and both higher prices and profits. Meanwhile, some hotel and motel construction has resumed in the U.S., often 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.
Marriott reported that its revpar (revenue per available room) was up 6.8% for the second quarter of 2011, compared to the same period in 2010 (on a worldwide basis for hotels open at least one year). International growth was dramatically higher, hitting 12.4% at international locations outside of the Middle East and Japan.
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 very well despite the recent financial crisis, particularly at the largest cruse lines. Consumers see cruises as high-value package deals, and cruise ships are nearly full. Cruise companies are hopeful that their “all-inclusive” fare model will continue to attract cost-conscious travelers in addition to luxury cruisers. Twelve new ships entered the U.S. market during 2010, representing a total investment of $5.9 billion. Some of the newest ships, such as Royal Caribbean’s “Allure of the Seas” are among the largest passenger ships ever built. The Cruise Lines International Association estimates that North American passenger numbers hit 15 million in 2010, growing at a 7.5% average yearly rate since 1980 when fewer than 2 million embarked.