What to expect in summer travel 2018
Have you made any travel plans for the summer? If not, it is probably a good time to do so.
As a matter of fact, it is now also a good time for business operators in the hospitality and tourism industry to revisit their existing summer plans and make adjustments if necessary. But first, let's check what we can expect in this year's summer travel.
The Positive
Positive growth can be expected due to the following reasons:
- The unemployment rate continues to fall, with an estimation of going below 4 percent by the summer. Companies located in areas with low unemployment rates have already voluntarily increased the hourly wages and/or add more benefits to their staff members. The improving economy will encourage more people to travel.
- The minimum wage is also on the rise. Many areas across the nation have set a schedule to raise the minimum wage (e.g., to $15 an hour by 2020 in Los Angeles). Meanwhile, a most recent relay organized by the workers at the major airports serving the New York City is pushing to increase their minimum wage to $19 an hour by the fall of 2023, leading another wave of raise. People may hence spend more on trips as they are expecting to get more incomes in the near future.
- Many hotels and restaurants have made innovative changes in service operations with the aids of technology, helping them offset some of rising labor costs while keeping the price at a reasonable level.
- Hotel chains are getting bigger through acquisitions and mergers, which allows the big players to lower some of the overhead costs and offer more diverse products.
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The reinvented and improved loyalty programs begin to take effects, encouraging more loyal customers to travel over the summer. The most recent update is about the Hilton Honors Program, with several significant upgrades to ensure the hotel's frequent travelers stay happy.
The Negative
Meanwhile, there are a few concerns that deserve our close attention, including:
- Gas price is on the rise, reaching the highest point in recent years.
- Prices for hotels, restaurants, and air tickets are going to increase as employers pass some of the rising labor costs to customers and with a higher gas price.
- Worker shortage has become a big challenge facing the restaurant and hotel industry, which is normally the case when the unemployment rate is low.
- For years, foreign investments, especially the ones from mainland China, have shown great interest in the hospitality and tourism sector. Even though China has slowed down its overseas investments, there are still many new hotels and restaurants in the pipeline that are ready to open for business. Tougher competitions are expected as more inventory is added to the market.
- The competitions among Airbnb, OTAs (online travel agents), hotels, and other travel companies are going to heat up as Airbnb strives to become a mega tourism company. Airbnb also debuted two new brands/products recently, which could become an even bigger threat to hotels.
- The uncertainties from the global market, such as the possible trade war between China and the U.S., add additional concerns to travelers as they make plans for summer travels.
Will more Americans travel in the summer then?
It is likely that more people will travel in the summer as the economy continues to improve even though there are still some uncertainties in the market. I, however, am not sure if people are ready to spend a lot more on summer travels. Facing the record high gas price in recent years, I also believe short road trips will remain a very popular form of travels as consumers are trying to lower their travel expenses.
Overall, do you feel more positive or negative about the market? What do you expect from the hospitality and tourism industry this summer?
Linchi Kwok
Professor at The Collins College of Hospitality Management, Cal Poly Pomona
CAL Poly Pomona
