Economist Lakshman Achuthan shared a gloomy economic outlook with attendess of the TIA 2008 Marketing Outlook Forum.
Editor’s note: This article was originally posted on 30 October 2008. The article was chosen as part of Hotel News Now’s look back at 10 years of the hotel industry.
PORTLAND, Oregon—Before beginning his presentation on the economic outlook for the travel industry, Lakshman Achuthan, managing director for the Economic Cycle Research Institute, asked attendees for patience.
“I will thank you in advance for not beating up the messenger,” he said Tuesday morning at the TIA Marketing Outlook Forum.
Though met with good-natured laughter, the request foreshadowed more bad news during an economic recession that has begun to reverberate throughout the globe.
Achuthan was quick to point out, however, that the U.S. is not on the precipice of a depression.
“Since the Great Depression, we haven’t had any depressions. … The era of depressions is something really in the history books,” he said, adding that proactive government measures and a smaller manufacturing sector have added stability to the economy.
On the other hand the U.S is enduring a deep recession, he said.
“A recession is really, at its base, about jobs. … Employment data is almost as bad as we saw in 2001. … For the next couple of quarters, we’re going to see actual employment continue to weaken.”
As employment and consumer confidence decline, so will consumer expenditures in the travel industry, Achuthan said.
Consumer expenditures for airline transportation are down significantly through the second quarter of 2008, and “there is no upturn in airline expenditures for the foreseeable future. … For the next couple of quarters, the growth rate is unlikely to turn up.”
The same could be said for the hotel industry, as consumer expenditures are “going to go down noticeably,” Achuthan said.
Looking overseas, he said the outlook is even bleaker in Europe.
“Europe may turn out to be the epicenter of global weakness. … They may have a stronger recession than we do.”
He added that Japan has already begun to show signs of a recession as well.
“We’re going to have the worst global recession since the early ’80s.”
When asked how to market in that climate, Achuthan suggested a pragmatic, value-added approach.
“The value proposition is clear. There are various ways that you can essentially make it more attractive or lower your price. It may squeeze your profits, but you’ll still have money coming in to cover your expenses.”
While he admitted there might not be a lot of money to make given the global recession, Achuthan told attendees that by maintaining their presence through marketing, they could increase market share and cash in during the inevitable upturn.