Official Reports Say Travel Spending Hits Lowest Level in Years

Locations in this article:  Las Vegas, NV

euro-dollar.jpgStatistics released by the Commerce Department yesterday officially confirm what the travel industry has known for months now—people just aren’t spending as much on travel as they did a few years ago.

Between October and December of 2008, business and leisure travelers spent 22 percent less than they did during the last quarter of 2007. This drop is even larger than the 19 percent decline that happened immediately after the terrorist attacks of September 11, 2001.

The spending decline has cut across all segments of the travel business. As Americans cancel vacations, fewer international visitors come to the U.S. and companies cut back on business trips, spending on food and drink has fallen 6 percent, lodging 10 percent and shopping 11 percent.

Spending on domestic air travel declined for the fifth quarter in a row. International air travel spending actually rose one percent in the fourth quarter of 2008, after dropping by a whopping 35 percent in the previous quarter.

The closed wallets have had a devastating ripple effect on the hotel and airline industries: The hospitality sector lost more than a quarter of a million jobs lost in the last year alone, and airlines have laid off or furloughed thousands of employees in successive waves since early 2008.

Cities that depend on tourism have been particularly hard-hit. Las Vegas and Atlantic City, for example, are seeing spikes in unemployment and many of the famous casinos are facing bankruptcy.
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The gloom and doom of late 2008 sharply contrasts with the boom times of late 2007, when travel was still going strong. In fact, a Commerce Department report from September 2007 showed a 13 percent increase in the number of international visitors to the U.S. compared to the prior September, and a 19 percent increase in spending.

The good news is that the travel industry’s response has been to offer huge discounts and unusual flexibility in an effort to get people to hit the road. Prices fell 16 percent industry-wide as hotels slashed room rates, airlines launched fare sales, and package tour companies offered free nights, resort credits and other freebies.

Some cruise lines and airlines are even offering money back guarantees where they’ll refund your ticket if you get laid off and need to cancel your trip.

But despite the recession, people are still traveling, albeit smarter and more cheaply than before. More and more travelers are heading to second-tier destinations closer to home rather than splashing out on expensive trips to big cities or foreign countries.

Others are economizing by staying fewer nights, renting vacation condos instead of hotel rooms, and jumping at all-inclusive cruise and resort offers that bundle lodging, food and entertainment together for a single price.

Related links: Wall Street Journal, U.S. Bureau of Economic Analysis, U.S. Customs and Border Protection

By Karen Elowitt for PeterGreenberg.com.

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