TravelMole eWire Q&A: Lorraine Sileo, Phocuswright

Lorraine Sileo is vice president, research, at US travel research firm Phocuswright

Q: How do you think this recession is going to affect the travel industry in 2009?

A: The recession has been a long time coming, but we still don’t know its full effects on the travel industry. There is still a lot of uncertainty out there regarding 2008; when public companies report their third quarter results we’ll have more visibility on the impact.

PhoCusWright projects low single digit growth for the US and European travel markets in 2008 and 2009 – though it could certainly be worse. We don’t anticipate steep declines like we saw in 2001 and 2002. There are emotional and personal reasons to spend money on travel, as there are business requirements. In some cases, lower prices due to declining demand will prompt some travellers to take advantage of deals they can get online. That’s the silver lining.

Q: Are there any sectors that are going to feel the pain more than others? How and why?

A: Tour operators, traditional travel agencies and other travel companies that are not yet exploiting online channels properly (eg search engine marketing, mobile, user reviews, booking) will continue to feel the brunt of the pain and channel shift.

Q: What will agents and suppliers need to do in order to survive the downturn?

A: One thing we learned after the Sept. 11, 2001 terror attacks is that people will travel (regardless of economic or even security concerns) if they feel like they are getting a good deal. Travel agencies and suppliers need to position their offerings as special opportunities in times of distress. After all, if you can afford it, what better time to travel then when prices are low and crowds are thin?

Q: From summer 2008 onwards there has been a plethora of polls showing how consumers refuse to cancel holidays in a downturn as they are seen as vital to wellbeing. Will this alter as the credit crunch deepens?

A: For most of us, travel is a discretionary expense that can be trimmed or even eliminated in times of financial distress. But it really depends on your personal situation. Thankfully not everyone is impacted by foreclosures or job loss. And while people may worry about the stock market or their retirement savings, those fears may not impact short term plans to take an affordable, relaxing vacation.

Q: Do you see the downturn having any unexpected side effect?

A: Most travellers believe the internet offers the lowest prices, and with so much emphasis on cutting costs, online channels should continue to perform better than offline channels.

Q: How can the travel industry capitalise on your NextGen report? What is it telling the industry about its newest consumers

A: We define the next generation traveller as someone who is technologically savvy despite their age. They don’t respond to traditional media. And since they represent a large and growing segment of the population, it’s important to understand their preferences and habits to better target this demographic.

Q: Your US and European online travel overviews are just about to be published. What are the main similarities and differences in the findings for these separate marketplaces?

A: The biggest differences is the fragmentation of the markets in Europe – some like Italy and Spain still have 10 online travel agencies vying for attention, and only a small percent of hotel rooms are sold online. But similarities include the speed at which airlines (both traditional and LCCs) are shifting distribution to their web sites.

Q: What is Phocuswright’s advice to the travel industry for 2009?

A: Don’t just rely on the same customers – they might be cutting back. Excel at internet marketing to reach new prospects.

Q: And just for fun – can you describe the typical buying journey of an online travel purchaser of 2028.

A: Search will improve dramatically so results are personalized to our preferences and pocketbooks. Online recommendations will be uncanny. And virtual tours of places throughout the world will take our breath away.

by Dinah Hatch