2015 travel got off to a bang for some, for others it was more of a fizz – but why?
When I wrote about 2015 last year, I was pretty sure that it was going to be much steadier, more predictable and… what happened?
In a “flat market” we are seeing big growth. Some agents reporting the same.
There are a many conflicting factors that are contributing. Here’s four I think are having an effect.
1. Economic Doom and Gloom – the Kiwi effect
There are not many positive stories about the Australian economy. The world is ending and Tony Abbott is responsible. Or Joe Hockey. Maybe Peta Credlin. We can’t really blame it on the Labour Party as apart from Bill, they can’t get on the news, but they are re-tweeting beautifully.
Last year we were doing road trips around New Zealand and established businesses were reporting that, for no real change in trend or activity, they had grown 40% compared with the corresponding period for the previous year.
25 meetings later we worked that New Zealanders were becoming immune to the never ending barrage of negative economic press. There was a common thread of New Zealanders saying “Bugger it, if we don’t go on a holiday now, we will never go.” So they started booking.
2. Falling dollar
I try not to disagree with Jason Westbury from AFTA as he wields a much bigger stick than I do. But I felt that with the Aussie dollar falling so much and that so many travel contracts run through US currency, that people would be put off travel. It also makes spending in the US a bit less attractive.
But given that the Aussie dollar has not shifted too much against euro currencies, agents are reporting that people are still booking, but maybe favoring Euro destinations where the dollar stretches a little further.
We checked our statistics and found no discernible trend. If anything, Hawaii is booming. We are seeing growth across all sectors. Dubai is now a mega hub. But these statistics can be skewed by airline activity, that we have added new wholesalers (like Dubai) and have also had some “luck” go our way.
The jury is out on this one.
3. Petrol Pricing and falling interest rates
I’ve spoken to four industry heads about this and they are split on whether or not this would be a contributing factor.
Drop in petrol prices suggest people are hundred dollars a month better off. The recent drop in interest rates suggests $50 a month better off on the average mortgage. Suggestion is there may be more to come.
It seems this $150 a month saving is having the family economist think “Hmm, we can afford that $5000 holiday”. But it would still take them 30 months to pay off the holiday with that bit of extra savings. Good for us I guess!
4. But the party may end
Many economists are predicting real economic pain is going to kick in on the last quarter of this financial year – that is April and May, where May is typically still a busy booking month. As companies see the impact of nine months of negative numbers and they make adjustments to their workforce and salary bases, this may have flow on effect on discretionary spending.
So the suggestion is come April, it falls in a hole. But this could be offset by falling interest rates and petrol prices and competition from hotels, OTA’s.
People are more likely to spend while they have the money; if they think they may not have it next month, rather than saving, they are spending now before the pain becomes apparent. Like the Kiwi effect.
Good for the travel industry I guess.
