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HomeMy WebLinkAboutVail_Economic_Outlook_5.5.2025ECONOMIC OUTLOOK Discover Vail Destination Marketing Organization May 5, 2025 Macro Economic Trends Markets are under pressure from trade policy shifts and inflation concerns. Consumer confidence is at a near-record low, pointing to reduced discretionary spending—including travel. Western & Luxury Travel Trends Western travelers remain financially optimistic with higher budgets and strong travel intent. Luxury travel is holding steady despite economic headwinds, though shorter stays and last-minute bookings are becoming more common. Vail Trends Vail is slightly ahead of industry benchmarks but faces sustainability concerns as inflation may outpace revenue growth. Strengths include brand loyalty and affluent clientele; key risks include price sensitivity and economic uncertainty. Economic Outlook Funnel Macro Economic Trends Western & Luxury Travel Trends Vail Trends Executive Summary MACRO ECONOMICS 6 Month Market Conditions Mostly Consumer Negative Economic Considerations ●Financial Markets are reacting poorly to the reshaping of global trade policy. Fears around inflation and a lack of confidence in the stability of US Treasuries are forcing markets down. Declining markets impact consumer savings and discretionary spending, including on travel. ●Inflation declined in March to 2.4%, the lowest since March ‘21. Meanwhile, prices continued to rise, up 0.4% from February. While lower inflation can help consumers’ economic perception, the monthly increase is where the reality of costs live. Inflations is expected to increase in the months ahead as tariffs trickle down to consumers. Economic Considerations ●Consumer Confidence & Sentiment: Consumer Sentiment fell to a near-historic low in April and Consumer Confidence, already well below 100, is expected to follow suit in April. Declines in both are coming from all demographic profiles and political affiliations. Declining Confidence and Sentiment are leading indicators of slower travel spend, rate sensitivity, and revenue challenges, all of which destinations should anticipate for the foreseeable future. ●Overall: Economic uncertainty will likely persist for months, if not years, and already-nervous consumers will likely pull back as they adjust to what may now be unavoidable new economic realities. American Traveler Sentiment Strong Signals of Intent & Interest in Travel ●Travel intent remains incredibly strong with 94% of Americans planning to take a trip in the next six months - a +6% increase from February 2025 1 ●The average number of expected leisure trips (12 months) is at a 5-year high or 4.0 2 ●Expected travel budget is near an all-time high - $1,500 higher than the 3-year average 2 1 American Travel Sentiment Study: Wave 96 2 Destination Decisions Webinar American Traveler Sentiment However, economic headwinds remain top of mind ●Inflation (55%) and personal financial situation (55%) are rising concerns for U.S. travelers but have not risen meaningfully since early March 2025 1 ●Only 46% of U.S. travelers believe they will be better off financially in six months 2 1 American Travel Sentiment Study: Wave 96 2 Destination Decisions Webinar TRAVEL TRENDS State of the Western U.S. Traveler (Our Customer) Who is the Western Traveler? This segment is defined as travelers who have visited or traveled within the state(s) of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Texas, Utah, Washington, or Wyoming in the past 12 months. 3 A Profile of Western US Travelers State of the Western U.S. Traveler Western Travelers Economic Outlook ●These travelers are more financially optimistic, with 38.7% reporting better financial situations compared to a year ago 3 ●They have bigger budgets ($6,454 annually vs. $5,030 national average) 3 ●Compressed booking windows - 41.6% said they will begin planning within 8 weeks of a domestic leisure trip 3 ●67% of Western U.S. travelers have leisure travel as a budget priority over the next 3-months compared to the U.S. average of 58% 3 3 A Profile of Western US Travelers State of the Western U.S. Traveler Travel Behavior & Barriers ●Travel being too expensive and personal financial reasons rank highly as barrier but less so for this segment versus the U.S average ●In the past 12 months, for those seeking mountain destinations, 40% have stayed in luxury or 5-star resorts compared to 21% of the U.S. population 3 A Profile of Western US Travelers Projected Length of Stay to Shorten ●We expect length of stay (LOS) to decline across the industry as guests look to continue to travel while being more rate sensitive due to rising inflation & financial market instability. ●Luxury markets may have some immunity from this as they enjoy a clientele that is somewhat insulated from market turmoil. The Luxury Advantage Luxury properties have driven the modest increases in both rate and revenue across mountain resorts for most of the past six months as wealthier consumers remain more insulated from the day-to-day impacts of economic uncertainty. This is an extension of patterns that repeat themselves during periods of economic stress (the Great Recession, the slow-down in 2016, and the immediate post-pandemic). While moderate and economy properties leveled the playing field in 2023/24, they have pulled back in the past 12 months. VAIL TRENDS Summer vs Industry: A Few Power Months Drive Gain Occupancy ADR Vail +1%+5% Industry -0.3%+4% While Vail is pacing well, the inconsistency indicates overall demand uncertainty Room Revenue Sustainability Challenge Ahead Assuming a best-case scenario of: ●Consumers do not pull back further, RevPAR sustains the avg 2.8% growth rate of the past twelve months, and Inflation and Wage growth follow economists’ projections ●Vail properties may find it challenging to keep ahead of inflation. Though this situation is true of the overall industry as well as the CO subset, Vail properties will have a slightly harder time, largely the result of rate sensitivity in a destination with fewer low-price alternatives, forcing rate down, suppressing bookings, or both. Executive Summary: Vail Strengths ●Brand recognition, loyalty ●Excellent town plan and proactive approach ●High quality destination product ●Urban proximity ●Near-direct air ●Clientele has financial resilience Weaknesses ●Moderate/Economy Lodging “shared” with other destinations, limiting consumer variety ●Reputationally expensive ●Further from urban market than less $ options Opportunities ●Pre-emptively tapping the Mexican market ●Rate Wins: adjusting ADR to sensitivities ●Lead time: Lock in longer-lead clientele early Threats ●Sustained economic headwinds force rate down, even with affluent clientele ●Long-term underperformance vs inflation ●Changes to forest use regulation ●Weather (always) DISCOVER VAIL SUMMER CONTINGENCY PLAN A targeted initiative to drive May - June occupancy through Colorado-based travel. This is a test to see if we can increase close in bookings for a specific need period. Campaign Timing: May 9 - June 28 Objective: ●Increase in-state bookings by offering exclusive locals-only packages and incentives ●Complementary of our existing summer marketing efforts. Target Audience: ●Front Range (Denver, Boulder, Fort Collins, Colorado Springs) ●Weekend travelers, families, couples, outdoor enthusiasts Budget: $50,605 In-State Early Summer Boost Campaign THANK YOU APPENDIX Sources A Profile of Western US Travelers, Future Partners, April 2025 ●Data included in this study was collected each month throughout the calendar year of 2024. In total, 49,233 completed surveys were collected, indicating that the results presented here have a confidence interval of +/- 1.6%. The subsample of Western U.S. travelers was n= 21,470. ●Western Travelers are defined as Western U.S. Travelers as travelers who have visited or traveled within the state(s) of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Texas, Utah, Washington, or Wyoming in the past 12 months. American Travel Sentiment Study: Wave 96, Longwoods International, April 2025 ●Key Details: ○Survey Date: April 1, 2025 ○Sample Size: 1,000 U.S. adults (18+) ○Margin of Error: ±3% ○Representative of U.S. population demographics (age, gender, region) ●Travelers are only respondents that have taken a trip in the last 3 years and intend to take a trip in the next 2 year Destination Decisions Webinar, Future Partners, March 2025 ●Representative sample of adult American travelers in each of four U.S. regions ●Tracks traveler sentiment to generate insights into domestic travel trends ●Survey collected: February 15-22 ●4,000+ fully completed surveys collected each wave ●Confidence interval of +/- 1.55% ●Data is weighted to reflect the actual population of each region Group: Meetings, Incentives, Conferences, Exhibitions According to the latest Northstar/Cvent Meetings Industry PULSE Report, Group planners are less optimistic. The main driver of this shift is the economic outlook, with almost two-thirds citing it as the number one negative factor affecting their meetings and events. Expectations for in-person attendance have also dipped. In spite of that, nearly 70% of planners still say their primary focus is booking new events and actively sourcing. Here are three key findings in the March 2025 report: ●Key Finding #1: Planner confidence dips amid policy shifts and economic concerns ●Key Finding #2: Despite challenges, DEI commitment, the value of face-to-face events, and sourcing volume remain strong ●Key Finding #3: Planners predict lower attendance amid global travel hesitations 3 A Profile of Western US Travelers Concerning Consumer Confidence Numbers After its 5th consecutive decline and now at 86.0 points, confidence is at its lowest since May 2020, and prior to that, May 2014. Another Related Article A Cyclical Slowdown or Travel Armageddon?