First Quarter Reflects Solid Travel Despite Soft Spots

the pegasus
VIEW
FIRST QUARTER 2013
First Quarter Reflects Solid Travel Despite Soft Spots
Concentrate on What Will Solidify Your Future Success
Slower business travel in the later portion of 2012 is giving way to more
decisive corporate travel spending in 2013, bringing back glimpses of booking
growth on top of modest but steady rate increases. Similar encouragement
is seen in leisure travel as spring begins and travelers start booking summer
stays. Reservations exhibited strong growth overall for the first quarter, rising
by almost +6.0% globally and +7.9% in North America for the month of March.
More challenged regions still delivered bookings that came within -8.3% of
prior year volume as a whole, and most all regions experienced average daily
rates (ADRs) that stayed on par or just ahead of prior year. Future arrivals
booked thus far indicate an overall improved summer vacation season. What is
in your future? Make sure you are implementing the technology and expertise
that will enable you to rise to the top, and stay there.
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Too often, hoteliers are spending the bulk of their time dealing with day-to-day tasks, which prevent real focus
on sales strategies. Leveraging state-of-the-art systems and expertise will help achieve what you don’t have the
time, resources or capability of accomplishing.
As the heart of your hotel operation, your central reservations system (CRS) needs to be robust and
contemporary enough to meet the market’s growing demands and complexities. Selling hotel rooms in the
Internet age is all about being available and being bookable. That means being consistently accessible across
all platforms: global distribution systems (GDS), alternative distribution systems (ADSs) or online channels,
desktop and mobile devices, as well as call centers.
Optimizing technology to drive reservations starts with connectivity, but includes being able to effectively
and efficiently manage all the moving parts involved. Hotel content, rates, room availability and property
information are constantly in flux, and must be kept current and consistent across all reservation channels.
Your CRS needs to be capable of making real-time updates to rates that are automatically bookable anywhere
consumers are shopping. It also needs to combine greater functionality with greater agility.
Today’s hotelier should be able to bypass multiple system interfaces, while still having the ability to manage
multiple properties at both the chain and property level. The CRS should enhance your ability to not only
centrally manage content and distribution, but to also quickly view pricing, selling restrictions, room and
non-room inventory. Other must haves should include leveraging multi-lingual content and support, pricing
in multiple currencies, conveying sales messaging to the call center, and tracking shopper behavior. How well
your CRS performs directly influences how well you will.
Keep this in mind as you read how the industry performed in The Pegasus View First Quarter 2013 edition’s
analysis of each distribution channel below.
GDS CHANNEL (CORPORATE TRAVEL FOCUS)
Global GDS channel results for the first quarter of 2013 reflect improved year-over-year business travel
performance over that seen in the latter half of 2012. With the exception of October, bookings hovered below
prior year volumes from May until December 2012. January bookings then burgeoned past those in January
2012 by +7.9%. February and March did not maintain the growth surge, but did hold on to the prior year’s
volume strength. Both months’ bookings came within a mere -0.3% of those respective months in 2012.
Globally, rates remain healthy, and most recently reflect renewed growth. Following a straight six months of
registering just below prior year from June through November 2012, Q1 2013 global rates have now remained
above prior year. This slow but consistent rate growth reflects companies’ increased willingness to raise their
travel spend, which is key for hotel revenue growth. The overall ease of economic and political uncertainty is
enabling companies to be more decisive with spending; particularly with travel spending since it can yield both
short and long-term revenue returns.
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Business travel will also be sustained by increasing levels of international travel. Although areas of the
Eurozone remain troubled, more industrial production and retail sales in China are helping to improve exports,
fueling a rise in international outbound business travel In fact, the GBTA (Global Business Travel Association),
predicts a +5.9% rise in international outbound spending this year.
Expanding average length of stay and reservation lead times is also a reflection of more international travel.
The average global stay in March was 2.15 nights, versus 2.14 in March 2012, rising by +0.5%; a marginal
increase but one that has held steady year-to-date.
Average booking lead times have also lengthened globally. Trips in March were booked an average of 19.19
days ahead of arrival, versus 19.08 days last March, for a similar increase of +0.5%. These jumps point to
more group travel, driven by corporations capitalizing on international opportunities through meeting and
conference attendance.
NORTH AMERICAN GDS
First quarter GDS channel results for North America show similar signs of improving overall business trends.
Reservation volumes spiked over prior year in January, slightly dipping in February primarily due to one less
day than February 2012, and crept back up to a +0.6% increase in March. Rates for the region stayed ahead of
prior year as well.
North America’s length of stay and booking windows are holding steady against prior year overall, although
averages vary and are greater for many of the major, international gateway cities. This region’s average length
of stay for March reservations was 2.13 nights versus 2.14 nights last year, a marginal decrease of -0.4%, similar
to the year-to-date percentage change of -0.1%.
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GDS AROUND THE WORLD
First quarter GDS channel results outside of North America reflect bumpy but improving overall business
trends. Reservations for the diverse regions surged to a growth rate of +11.2% in January, increased by +1.2%
in February despite the Leap Year effect, and stayed within -1.4% of prior year in March. Rates have remained
greater than prior year for four straight months since November, ending the quarter up by +0.9% in March.
Outside North America, length of stays and reservation lead times are showing more significant gains.
The average length of stay for bookings made in March was 2.19 nights compared to 2.15 nights last year,
increasing by +1.8%. Reservation lead times in March also widened by a larger margin. Business trips were
booked an average of 20.40 days in advance as opposed to 19.75 days last year, increasing by +3.3%.
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ADS CHANNEL (LEISURE TRAVEL FOCUS)
First quarter 2013 global ADS channel results reaffirm leisure travel’s resiliency. Despite swirling headlines
surrounding U.S. sequestration, European debt, the closure of banks in Cyprus, etc., tourism persevered.
Bookings for the quarter increased over prior year by +5.1%, with March rising by +5.9%. March received an
extra boost with Easter occurring earlier this year leaving the majority of Easter holiday travel to fall in March
as opposed to April last year. Many hoteliers are recognizing ongoing demand, and are strategically upholding
rates. ADR has risen by +1.4% through the quarter, staying above prior year by +0.5% in March.
International outbound traffic is not only playing a greater role in the business sector, but in the leisure
segment as well. The World Tourism Organization (UNWTO) forecasts international tourist arrivals to increase
by 3% to 4% in 2013, and, in-line with its long-term forecast, +3.8% a year on average between 2010 and 2020.
Longer-haul travel to more distant destinations is shown by average lengths of stay and reservation lead times
that have stabilized and/or edged up globally. Getaways booked in March were for an average of 2.01 nights
versus 2.00 nights last year, increasing by +0.5%, which is significant in the reversal of a previously shrinking
trend. Average reservation lead time has steadied globally, and actually lengthened in many markets. The average
global booking window was 21.47 days in March 2013 versus 21.62 days in March 2012, differing by -0.7%.
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NORTH AMERICAN ADS
ADS channel results for North America exhibit a similarly active first quarter for the leisure market. January
reservations spiked to +9.8% over January 2012; higher than any growth over prior year since August.
February was disadvantaged competing against 2012 Leap Year’s extra day, but then March rebounded with a
substantial +7.9% increase over 2012. Rates have steadily surpassed prior year, with ADR increasing by +3.5%
for the quarter and +2.5% in March.
More stable average length of stays and reservation lead times for this region hint at gradually improving
consumer confidence in light of lingering economic concerns. The average length of stay edged up by +0.5%,
increasing from 1.99 nights in March 2012 to 2.00 nights in March 2013. Considering varied travel budgets and
preferences, booking choices and lead times vary among consumers. For the region as a whole, trips are being
booked just under last year by -0.9%; 19.53 days ahead of arrival versus 19.72 days.
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ADS AROUND THE WORLD
First quarter ADS channel results outside North America showed sound performance among a mix of external
influences. Amid local economic and political pressure felt in many regions, reservations came within -5.9% of
prior year’s volume for the quarter, and -8.3% for March. Rates are keeping pace with prior year, remaining a
constant revenue generator and testament to underlying demand. ADR came within only -1.1% of prior year
for the quarter and -1.0% for the month of March.
Outside North America is where increases in longer distance leisure travel are more evident. Rising middle
class populations in emerging economies bring a rising demand for travel, especially to farther destinations.
The average length of stay for this group of regions as a whole increased by +2.4%, from 2.09 in March of 2012
to 2.14 nights in March 2013. Average booking lead time expanded by a notable +6.7% from last year as trips
were booked 36.04 days in advance in March 2013 versus an already lengthy 33.78 day window in March 2012.
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GDS & ADS CHANNEL PERFORMANCE BY REGION
Results range greatly by region, country and city, however, the tie that binds corporations, consumers and
economies is travel. And, increased international travel will serve to strengthen performance worldwide.
Europe and South America are registering lower booking volumes compared to prior year than other regions.
But, on top of renewed local issues, 2012 also registered relatively strong volume for those areas. Additionally,
mature markets like many in Europe and North America will typically maintain demand but not deliver yearover-year growth margins as large as emerging economies like those of China and India.
Rates are performing consistently better across the regions than bookings. The strongest rate growth can
be seen in Asia/Africa/Oceania, with ADR increasing by +1.3% and +5.6% in March for business and leisure,
respectively. South America had the softest regional rate performance against prior year in March, yet its ADR
still fell within -2.6% and -4.4% of 2012 for business and leisure.
The data supports the existence of foundational travel demand that will support rates, as well as a sound
rate and distribution channel strategy. Lower rates will not automatically bring more bookings, and could
actually bring bookings in at a price point that errodes profits. Increased efforts to tap into international travel
can signficantly bolster business-on-the-books, particularly for areas where domestic travel may be waning.
Inbound travel demand for destinations can pick up the slack – and further enable profitable pricing.
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FORWARD-LOOKING INDUSTRY TRENDS
Global GDS forward-looking data points to solid business travel ahead, with revenue being driven by growth in
rates and longer stays. Booking volumes may rise compared to prior year in April, but will remain within range
of prior year in general. Rates will continue to deliver modest but more consistent growth for arrivals through July.
Business trips remain a priority, but are being taken strategically. Companies are often financing fewer
but longer trips to central locations that are farther away; coupled with the same or more frequent quick
turnaround trips for short distance needs. In both cases, travel plans are being coordinated to accomplish
multiple objectives during the same trip whenever possible to reap the highest travel ROI.
ADS channel forward-looking global data suggests promising spring and summer seasons for leisure travel.
Bookings thus far suggest continued growth over prior year. April’s growth will be tempered without the boost
of 2012’s Easter holiday. Booking growth should regain momentum in May and July, with perhaps a slight pause in
pace for June. Rates will stay within close range of prior year, with potential for slight growth in April and June.
Consumers are anxious to enjoy time away with family and friends at whatever budget level they can afford,
and for many, any extra money earned or received has been set aside for travel. The best value is sought across
the spectrum, from economy to luxury travel.
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KEY TAKEAWAYS
• Corporate travel delivers dependable results. Global GDS channel bookings increased by +2.4% over the first
quarter, and stayed within -0.3% of prior year for the month of March. Globally, rates stayed ahead of prior
year by +1.7% for the quarter and +0.6% in March.
• Leisure travel ensues as ADS channel bookings grew globally by +5.1% for the quarter and +5.9% in March
over last year. Global rates forged ahead of prior year by +1.4% for the quarter and +0.5% in March.
• Global GDS forward-looking data through July shows solid demand will continue. Bookings will be near prior
year levels, while rates will be essentially at or just above prior year.
• Global ADS forward-looking data through July shows that, in total, more spring and summer vacations will be
taken once again than prior year at rates that match or exceed prior year.
In general, first quarter 2013 results and future stays indicate a sound and overall improved travel year lies
ahead. Both businesses and consumers are gaining confidence, whether stemming from actual improved
financial circumstances, or lessened anxiety, and both are acting on that growing confidence. Trends analyzed
in The Pegasus View and reported by other industry sources indicate travel demand will remain resolute, with
improvement and growth happening at an uneven and often sluggish pace. Nonetheless, hoteliers that can get
out from under daily challenges to focus on the future will outpace and outperform their competitors.
We look forward to sharing more about industry trends, developments and projections in the next edition of
The Pegasus View.
David Millili
CEO, Pegasus Solutions
Julie Parodi
Vice President of Sales Operations
and Editor, The Pegasus View
ABOUT THE PEGASUS VIEW
The Pegasus View is a quarterly 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 world’s 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 100,000 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 single largest processor of electronic hotel transactions, delivering advanced and affordable connectivity and distribution
solutions to nearly 100,000 hotels worldwide. Pegasus connects hotels to crucial sources of business, facilitating almost $16 billion for its clients
annually. In addition to foundational global distribution system (GDS) access and online connectivity, Pegasus delivers online, social marketing and
booking solutions through its Open Hospitality division, and powerful reservation tools to convert and capture bookings. As a trusted partner in
generating guest room demand and sales, Pegasus also offers hotels actionable business intelligence through its PegasusView Market Performance
reports to help hotels understand and respond to changing market conditions.
Pegasus has 18 offices in 10 countries, including regional hubs in New York, Dallas, Scottsdale, Frankfurt, London, Madrid, Sao Paulo, Tokyo and
Singapore. For more information, visit www.pegs.com or www.openhospitality.com.
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