This week’s musings, reflections and observations about travel affiliate marketing…

1. I was thinking recently about the short- to medium-term fate of the US dollar and its subsequent impact on the travel and travel affiliate industries, particularly in light of the recent run-up in the price of oil, the seemingly bottomless pit that is referred to in the halls of the Federal Reserve and US Treasury as our national debt, and China’s on-again / off-again calls for moving out the US dollar as its (and the world’s) principal reserve currency.  As luck would have it, Expedia just released its summer 2009 issue of Expedia Travel Trendwatch, and some of their findings point to some potential answers to several of my ‘travel dollar’ ruminations (at least from a near-term outlook / perspective).

So, what insight about the dollar and travel did I glean from this quarter’s Trendwatch?  Citing year-on-year reductions in the cost of jet fuel and the strengthening of the US dollar against the Euro and the British Pound, Expedia claims that Europe is now a bargain, and many US travelers are flocking to European destinations.  The following represent several examples of the value Europe represents for American travelers this summer:

  • Airfares to major European destinations have dropped to unprecedented levels for the summer/peak-season travel period, with the average airfare from the US to Europe this summer more than 20% lower than the summer of ‘08. For instance, Trendwatch notes London fares have declined by 23%, Rome by 26%, and Paris by 27%, while Athens and Dublin airfares have plummeted by a staggering 34% and 35%, respectively.
  • Likewise, summer 2009 hotel prices have also dropped across Europe compared to last year; Expedia data suggests average daily rates (ADRs) in major tourist destinations have dropped as precipitously as trans-Atlantic airfares (and in some cases, even more). For instance, hotels in Rome are now fetching rates about 23% lower than last year, while ADRs in London are down 25%, and Barcelona’s has plummeted by some 35%.
  • The news is good for travelers in the air, on land as well as on the seas; Trendwatch reports that the average cruise rate to European has plunged 28%! That’s 4% more savings off Alaska cruises (down 24% since the comparable period last year), and almost double the going discount for cruises plying Caribbean itineraries (down 15% year-over-year).

There is a wealth of other insights and important consumer trends that travel affiliates will find very useful in this latest Trendwatch release, including lots of domestic US travel trends.  One item we think is quite revealing is that Expedia customers are also increasingly purchasing trip insurance to ensure flexibility in their travel plans; travel trip insurance sales in conjunction solely with airfare purchases was up 12% for summer travel this year…we’ve always been big believers that travel insurance presents a great and relatively easy to exploit ancillary revenue opportunity for travel affiliates.

It’s important to note that Expedia Travel Trendwatch’s findings are based on the search and buying activities of OTA’s customers for the most recent quarter against the same quarter of the preceding year.  Because Expedia.com has more visitors, shoppers and bookers than any other travel company, TravelDividends believes the quality of their data and follow-on analysis is solid.

2. I also think that other, less well known sources of travel information and trends can be just as informative and strategic as the statistics and facts that come from big players like Expedia.  For example, a somewhat less well-known online company, trivago.com, has released its own survey results on the summer pricing outlook for the European hotel industry.

According to this leading European hotel meta search engine and online travel community, European hotel prices have fallen 7% in aggregate during the comparable period to July 2008, with Spanish cities recording the steepest declines.

Trivago reports that on average, a standard double room in top European cities today will set-back travelers $146.20 this July, compared to $157.58 last year.  In 38 of the 50 European cities that the Company monitors, hotel prices have decreased or remained the same. The trivago Hotel Price Index (tHPI), which is published monthly, is distilled by calculating the 40,000 daily price inquiries for overnight hotel stays generated through the trivago hotel comparison pricing engine.

Here’s a sampling of tHPI’s survey results, which in many ways, reaffirms Expedia Travel Trendwatch’s finding that many European (but not all) destinations represent a bargain for the American tourist:

  • Madrid’s average room rate is $120.17, down 31% from July 2008
  • Barcelona $152.68, down 28%
  • Brussels $139.69, down 19%
  • Rome $165.66, down 7%

So, it seems safe to surmise that based on the findings from Expedia Travel Trendwatch and Trivago, it appears that the ‘travel dollar’ is doing relatively well this summer, and I suspect, barring any unforeseen events, its short-term prospects should remain pretty solid through the rest of this year.  However, the same is not true for many of the travel suppliers who are offering these rock-bottom prices to travel consumers.  Which leads me to my next point…

3. I’ve always thought Michael O’Leary, the iconoclastic CEO of Ryanair, to be both a great ‘trash talker’ as well as someone that, despite how brash or obnoxious his comments may be, if I were competing against him, I’d put my company at grave risk if I ignored his ranting.

His standing in my eyes hasn’t diminished on either count, as a spate of recently delivered ‘O’Learyisms’ clearly reaffirm my convictions.  Here’s a sampling of public statements he’s made just within the past couple of weeks:

Although Ryanair reported an annual net loss of $239 million on June 02nd compared with net profit of $544.5 million in the group’s previous financial year (with this year’s loss blamed on high fuel costs and a large write-down on its stake in Irish national carrier, Aer Lingus), O’Leary reported last week that Ryanair would cut 650 more jobs in Ireland, and blamed the staff downsizing on “…government hikes in taxes amid a deep recession in the eurozone member nation.”  In the same breath, O’Leary claimed Ryanair would “…bounce back into the black in the current financial year with net profits of 200-300 million Euros” thanks to lower fuel costs.

In a separate interview with leading German weekly Der Spiegel on June 29, O’Leary said his low-cost airline intends on placing an”… order or take firm options on up to 300 new aircraft from Boeing or Airbus” by the end of the year.  In that interview, he also reaffirmed that recent his remarks expressing interest in acquiring German flag-carrier Lufthansa “…were not a joke,” but gave no details.  (It should be noted that Lufthansa is the world’s fifth largest airline overall passengers carried, and within the last 18 months has acquired Austrian Airlines, Brussels SN, and bmi).

Today, as reported in the British newspaper, The Sun, O’Leary is considering plans for passengers to stand during flights so more people can be squeezed onboard.

Saying that he is in talks with Boeing about designing an aircraft with standing room, O’Leary envisions ticket holders would be situated on the aircraft by sitting on bar-style stools with seatbelts around their waists.  Acknowledging that the idea came from China’s Spring Airlines (which suggested the standing ticket idea earlier this year), Ryanair estimates that in such a scenario, it would be able to squeeze in about 50% more passengers while concurrently cutting costs by 20%.  If given the go-ahead by the Irish Aviation Authority, the airline plans to order a new fleet of jets with this style seating configuration.

This is another in a long line of ‘ultimate’ ancillary revenue schemes touted by the world’s ‘lowest’ of the low-cost airlines. What other Western airline would be brash enough to put forward an idea requiring the consumer to pay for the privilege of sitting on a seat while flying on an airline (as a footnote, the ‘standing room’ concept was first floated back in 2006… if you’re interested, you can read about it in this New York Times article).

To what extent Mr. O’Leary’s pronouncements are supported by truth versus simply another act of bluster, only he knows.  Nonetheless, his utterances shouldn’t be taken lightly; after being excoriated by the press earlier this spring for his remarks about potentially charging his customers £1 to use the toilet in-flight, he has since unveiled plans for planes with just one toilet instead of three, which O’Leary said would allow six extra seats to be crammed into what already is the most tightly configured aircraft flying the European skies.

It will be interesting – and certainly quite entertaining – to see how O’Leary’s latest pronouncements play-out in the months to come…

4. I think that the latest annual survey form The International SPA Association (ISPA) can in some ways act as a proxy outlook for the overall US travel industry.  ISPA reveals in its 2009 U.S. Spa Industry Update that the industry experienced a steady increase across the board in overall spa locations, revenues and visits, noting that overall industry revenues jumped to $12.8 billion, an astounding 17.8% increase over 2007 results.  While we don’t pretend that the US travel industry has experienced the same level of success (indeed, the reverse has been largely true for many travel suppliers), we do see a silver lining in these figures.

In the accompanying press release ISPA President Lynne McNees acknowledged that these figures represent 2008, and that 2009 is less rosy. “We are pleased to report that 2008 was another year of growth for the spa industry, but we know that we have a tough road ahead as our industry is not immune to the current economy,” said McNees, “Even though the number of spa locations are up, at a per-spa level revenues and visits are slightly down and showing the early effects of the economic downfall.”

TravelDividends thinks that the American consumer’s continued investment in spa treatments and other related wellness programs are also indicative of how most Americans feel about their vacation time.  ISPA’s 2009 U.S. Spa Industry Update reaffirms the notion that Americans value their wellness.

Much like their views on wellness and spas, while many may trade down in destinations to save on expenses, the vacation remains as a ‘must’ for most Americans.  We also surmise that although the economy may be uncertain, Americans value their vacation time; many see it as their principal means to ‘recharge or re-energize’ themselves, and in that respect, their vacation is almost sacred.  And for that, all of us in the travel affiliate industry should be grateful.

As always, we’re interested in our reader’s thoughts on today’s ‘I Think I Think’ post, or on any other travel affiliate industry subject.  You can contact us by email, or leave a comment.  Thanks!

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