the pegasus

VIEW

SEPTEMBER 2011

Business and Leisure Travel Growth Continues

Are Your Online Revenues Growing at Their Full Potential?
Even facing the growing headwinds of economic uncertainty, travel growth continues its strong march forward overall. Corporate travel still flexes the most muscle worldwide, with leisure travel progressing despite mixed regional results. Global business-based global distribution system (GDS) channel bookings increased by +6.1% over prior year in September, accompanied by ADR growth of +3.5%. Global leisure-based alternative distribution system (ADS) channel bookings increased by +5.6% over prior year, with rates in turn rising by +3.0% over prior year. With the internet playing such a key role in capturing bookings from new and repeat guests, optimizing your web capabilities is a must to succeed during any economic climate and especially in the current challenging economic times. READ MORE >>>
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While it may be safe to say nearly everyone has an online presence; how much value is actually gained by these efforts is another story. Your online strategies website, social media and most importantly a mobile-friendly presence must all be working together at peak efficiency in order to generate highmargin room bookings. A contemporary, well-built and easy-to-navigate website is essential. However, the best looking website in the world wont drive results unless your hotel can be found. Thats where the effectiveness of SEO and pay-per-click strategies comes in. Creating awareness through effective keyword analysis and a range of technical efforts (like meta tagging) are key to generating more website activity. Converting hotel shoppers into bookers is the next step. A consumer-friendly, easy-to-understand and intuitive booking process makes a big difference, whether it is being run on a desktop computer, a tablet or a mobile smart phone. Hotels, whether operating independently or as part of a group or chain, will not always have the internal knowledge, technology or resources to excel at all of these aspects or achieve the optimal integration required of them. Know your limits and seek out external expertise when necessary. You can bet the topperforming hotels are. Mark Peacock, CIO at Pegasus Solutions, adds, The rapid rate of innovation in todays online booking environment is ratcheting up hoteliers technology needs. To compete successfully, they need access to the state-of-the art tools and techniques that will maximize online revenue. David Millili, CEO of Open Hospitality, agrees, Most definitely. A full suite of integrated online marketing tools tailored specifically to hotel needs is essential. The high-tech, high-touch aspects of internet marketing must be combined to focus on revenue for your hotel. Both are not only of one mind on the topic, but with Pegasus recent acquisition of Open Hospitality, they are now one company, working to better assist hoteliers in this regard. Take charge of your web strategy. Is it fully addressing and maximizing all of the areas it needs to in order to realize the levels of online revenue you should be achieving? These are key aspects of your online strategy to reflect on as you read The Pegasus View September editions analysis of each distribution channels performance below.

GDS Channel (Corporate Travel Focus)

Global GDS channel results show corporate travel recovery keeping a firm footing and forging onward. Overall, bookings, ADR and revenue are still gaining additional ground over and above the progress made last year. This is no small feat considering the uncertainty stemming from Europes debt worries and unstable financial markets. Global reservations increased +6.1% in September over prior year which is less than the +10.2% increase reached in August, but ahead of Julys +5.8% increase. Reservations still maintained positive booking growth since Aprils dip following Japans earthquake disaster. Additionally, keep in mind that it was in April 2010 that bookings went from single-digit growth to consistently averaging more than +25%. Further growth on top of such strong previous progress is challenging, especially during these uncertain economic times.

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Globally, corporate rates also continue to rise from last years levels. Septembers ADR increased by +3.5% over prior year, which is slightly less than the +5.8% year-to-date growth pace, but still a positive trend. The need for corporate travel is driving the demand that supports rising ADR. Corporations are leveraging video conferencing technology, especially for inter-office communication, to curtail their travel budgets. Yet, steady growth in this market is evidence that decision makers still recognize the benefit of face-to-face interaction for developing and strengthening relationships with potential and existing customers. Most companies, particularly large ones, are still in a better earnings and cash flow position than last year. However, even those businesses are exercising prudence in how their travel budgets are spent.

As weve reported previously, travelers are shortening length of stay (LOS) as a means of controlling their costs per trip. The global average LOS in September 2011 was 2.17 nights versus 2.16 nights in September 2010, for a fractional increase of +0.6%. The global average booking lead time has shown marginal increases over last year at 16.14 days versus 16.16 days in September 2010. Longer booking lead times are an indicator of group meetings and conference travel, since business travel usually needs to be booked further in advance than personal trips. The levelling of booking lead times with last year suggests that while meetings and conference travel has not regressed, the growth pace of business group travel over leisure travel is slowing.

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North American GDS

September GDS channel results for North America also reflect on-going growth for the business sector. Reservations grew by +3.8% over prior year. This growth pace is less than the +6.7% increase achieved in August, yet it remained greater than Julys +2.7% increase over prior year. North American ADR continued its consistent growth trend. Septembers ADR increased by +4.6% over prior year, only slightly less than Augusts +5.7% increase and almost equal to the year-to-date growth pace of +4.8%. This steady rise in rates, even during troubled economic times, is a tribute to the sustainability of corporate travel.

Similar to global patterns, LOS and booking lead times in North America almost equalled last years levels. The average LOS for trips in September 2011 was 2.13 nights versus 2.12 in September of last year, for an increase of only +0.6%. Likewise, trips were booked an average of 15.03 days in advance of travel during September 2011 as opposed to 15.08 days during September 2010.

GDS Around The World

September GDS channel results outside of North America reiterate the resilience of corporate travel. Uncertainty breeds anxiety, and September held considerable uncertainty as to what plans were being made
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toward resolving Europes debt crisis. Nonetheless, bookings outside of North America increased by +7.7% over prior year. Rates around the world managed to rise by +2.5% over prior year. This is an easing in growth pace from the larger gains seen earlier in the year. Yet again, ADR still manages to grow above the +10% increases achieved this time last year in 2010 over 2009 which makes these gains very encouraging.

Business bookings and rate increases held steady around the world, yet so did stagnating business LOS and booking lead times. Outside of North America, the average business LOS in September 2011 was 2.20 nights versus 2.19 nights in September 2010, increasing by +0.5%. The average booking lead time in September also almost matched that of last year at 16.89 days in September 2011 and 16.92 days in September 2010.

ADS Channel (Leisure Travel Focus)

Global ADS channel results reveal that leisure travel growth is progressing steadily. Although regional economic worries are more apt to surface in leisure markets than in their corporate counterparts, leisure travel continues to improve over last year.
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Bookings during the summer months grew by an average of +5% over prior year, with Septembers bookings increasing by +5.6% over prior year. While Septembers global ADR increase of +3.0% did not surpass this summers average growth surge of +4.5%, it did stay on par with the year-to-date growth pace of +3.1%. Although the global economy is unsteady, businesses are still hiring at a greater rate than last year overall, which positively impacts travel by increasing consumer confidence and giving consumers the disposable income to plan trips, even if LOS is shorter.

While the number of getaways is greater than last year, consumers are keeping the number of nights per getaway about the same. The average global leisure LOS in September 2011 was 1.97 nights versus 1.98 nights in September 2010. Unlike the corporate sector, booking lead times remain just ahead of last year. September 2011 trips were booked an average of 16.43 days in advance as opposed to 15.92 days in September 2010. Look-to-book ratios in September averaged +20% higher than last year, approximating the same level of growth over prior year. Booking lead times standing at only a slight margin over last year combined with stunted LOS and steadily elevated look-to-book ratios point to a committed but cost-conscious consumer.

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North American ADS

September ADS channel results for North America represent remarkable fortitude and flexibility. Leisure reservations rose by +7.0% over prior year, adding momentum to the growth uptick in August, bringing bookings growth practically equal to the year-to-date pace of +7.3%. This rise in reservations led to solid revenue gains of +11.8% because hoteliers did not allow increased demand to be undermined by deep discounts. September ADR rose by +5.0% over prior year, just higher than Augusts increase of +4.8% and markedly higher than the year-to-date pace of +3.8%. Septembers boost in bookings can be attributed to cost conscious consumers willing to travel after the peak summer season in order to get more for their money.

Average LOS was slightly less than last year with trips lasting an average of 1.97 nights in September 2011 compared to 1.98 nights in September 2010 for a decrease of -0.6%. Booking lead times stayed just ahead of last year, with trips in September 2011 booked 14.85 days in advance compared to 14.33 days in advance in September 2010.

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ADS Around The World

September ADS channel results outside North America reflect a combination of factors playing out at the regional level such as consumer caution and attempts to improve upon exceedingly exceptional gains achieved last year. These regional factors (see the Performance by Region section) caused booking volume as a whole to slip below prior years level by -3.0%. In September, ADR managed to grow by +1.5% over prior year, keeping revenue within -1.4% of last year. Naturally, any dip below prior year is not good news. Considering that in 2010 most months bookings grew by more than +20% over 2009, coming within -3.0% in 2011 during the recent financial market issues is actually commendable for the more reactive leisure sector. Although this years growth did not exceed last years, leisure travel volumes are still quite substantial and many markets around the world are still growing year over year.

In general, the same scenario for LOS and booking lead times for leisure markets exist around the world. The average LOS outside of North America in September matched last years average of 1.98 nights. Average booking lead times remained slightly longer than last year at 25.64 days in September 2011 versus 24.49 days in September 2010.

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GDS & ADS Channel Performance by Region

Corporate travel remains the backbone of the industrys recovery. Although it is kept in check by the multitude of financial issues taking place around the world, it is still trending positively. Across all regions, September GDS channel bookings have increased over prior year by approximately +4% or greater, with all but Africa/ Asia/Oceania achieving rates that continue to increase over prior year. The mixed leisure-based ADS channel results stem from independent regional actvity as opposed to the market as a whole. North America had stronger than anticipated travel activity in September. Europes bookings hovered around last years levels. The decrease in South Americas leisure bookings stem largely from greater growth achieved in prior years with relatively less inbound travel from long-term vistors. Asia/ Africa/Oceanias leisure booking decrease can be attributed to a combination of factors such as greater than average prior year growth gains, Japans inbound and outbound travel still being affected by the disaster in March and on-going unrest in the Middle East/North Africa. In general, for both the corporate and leisure sector, rates are making progress despite the varied pace in booking growth.

Forward-Looking Industry Trends

GDS forward-looking global data shows corporate travel growing through the end of the year. Bookings look to continue to grow over prior year each month, with potential slowing in January. Corporate travel budgets may come under closer scrutiny, but business trips will surely still take place as part of companies competitive strategies. As we enter the last quarter of the year, sales forces will be determined to meet and exceed their 2011 revenue targets and build a foundation for their 2012 goals. Travel intermediaries that can creatively and effectively manage costs per trip will create a win-win scenario for all involved.

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ADS channel forward-looking global data suggests that while booking growth could potentially wane in October, it should return in November through January for an improved holiday season over last year. Rates look to continue making progress globally, albeit possibly slowing in January. With more people employed than last year, they will be willing to travel over the holidays even its a cost -conscious trip. Now is the time for hotels to promote themselves and offer travelers the best value for their money. Play up your hotels distinctive appeal, as well as the activities or events your location has to offer. In fact, consider teaming up with local tourism associations and even other hotels to drive demand to your area and benefit from combined advertising instead of simply slashing your rates.

Key Takeaways
Corporate travel holds up under pressure. September global GDS channel bookings grew by +6.1% over prior year, less than Augusts uptick of +10.2% but greater than Julys +5.8% increase. Rates continued to grow, increasing by +3.5% over prior year. Leisure travel progresses overall. September global ADS channel bookings grew by +5.6% over prior year. Global ADR increased by +3.0%, on par with its year-to-date growth pace. Leisure travel gained momentum in North America but growth eased in other regions around the world. GDS forward-looking data shows corporate travel moving ahead. Bookings and rates look to grow over prior year through the fourth quarter, with potential for slower booking growth but a possible rate uptick in January. ADS forward-looking data shows leisure travel persevering. Booking growth looks to potentially slow in October, but return during the holiday season. ADR looks to continue to stay ahead of last year.
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In summary, September results show a travel recovery that might have slowed, yet overall it is still moving forward. Travel is continuing, just not as fast as the industry would like. On the economic front, while different groups may have contrasting approaches to resolving financial and economic issues, it behoves everyone to work toward solutions solutions that will bring the global economy and global travel back to solid ground. Meanwhile, corporations and consumers will continue to value travel highly and are intent on finding ways to make room in their budgets for it. As trends analyzed in The Pegasus View and reported by other industry sources indicate, business and leisure travel are expected to continue to progress, even if the pace varies. With the internet being an overwhelming source of bookings in any economic climate, it benefits hoteliers greatly to utilize state-of-the-art web solutions that will drive online traffic and profits. We look forward to continuing to sharing more about industry trends, developments and projections in the next edition of The Pegasus View.

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ABOUT THE PEGASUS VIEW

Mike Kistner President and CEO, Pegasus Solutions

Julie Parodi Sr. Director of Strategic Planning and Editor, The Pegasus View

The Pegasus View is a monthly analysis of global booking trends available online and by free subscription at www.pegs.com. Data reported in The Pegasus View comes from billions of transactions processed monthly by Pegasus Solutions, the worlds single largest global processor of hotel transactions. It is the only industry report to reflect data drawn from both global distribution system (GDS) and alternative distribution system (ADS) transactions, representing the business and leisure markets respectively for approximately 90,000 hotels worldwide. All data is on a date of booking basis unless otherwise stated. Average daily rate (ADR) and revenue percentage changes are calculated from values using a single constant exchange rate to eliminate the effects of currency exchange rate movements.

ABOUT PEGASUS SOLUTIONS

Pegasus Solutions is the worlds leading provider of technology and services to hotels and travel distributors, supplying the awardwinning RezView NG central reservation system, electronic distribution services, advanced agency commission processing and payment services, and hotel marketing representation services. Founded in 1989, Pegasus created and launched the hotel switch, and today its customers include approximately 90,000 properties around the globe as well as a majority of the worlds travel agencies. Additionally, Pegasus powerful representation arm incorporates Utell Hotels & Resorts and Utell Connect, services that have been chosen by more than 6,000 member hotels in more than 130 countries. Pegasus is the hotel industrys most experienced thirdparty marketing, sales and reservations specialist. It also powers the niche consumer website www.hotelbook.com, dedicated to promoting independent and boutique hotels throughout the world. The companys widely followed monthly data report The Pegasus View has been awarded a 2011 Stevie Award, and is recognized as the only hospitality report to monitor both actual business and leisure bookings. Pegasus has 21 offices in 12 countries, including Dallas, London, Singapore and Scottsdale, Arizona. For more information, please visit www.pegs.com or www.utell.com.
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