As the market stabilizes, a crucial moment for DMOs

If 2021 was when Americans started traveling again, then 2022 has been the year they embraced their old travel habits with full fervor. 

This year, after a long pandemic pause, Americans really leaned into the rebound that began in 2021. Travel spending in September reached its highest mark since the beginning of the pandemic, according to the U.S. Travel Association, and tracked six percent higher than pre-pandemic levels from 2019. 

The question moving forward is whether the recovery will last. There's some optimism that it will. "I think the pent-up demand will continue. One busy summer isn't going to quench all the demand for travel that we've seen," Delta Airlines CEO Ed Bastian told CNBC in mid-October. 

Delta's rival, United Airlines, seems to agree. The airline announced plans to add trans-Atlantic flights in 2023, citing a busy 2022 summer in which demand was 20 percent higher than in 2019. And there's similar optimism globally, as the World Travel and Tourism Council expects the travel and tourism sectors to return to pre-pandemic levels in 2023. 

Driving strong performance is increasingly complicated

Despite the upbeat outlook, however, two factors are threatening the travel industry's rebound—big ones, potentially. 

1. Last year's 'travelers flush with cash' dynamic looks very different today

While the overall volume of travel spend continues to rise, many industry players aren't turning the same profits as in 2021. Last year, people resumed traveling amidst unique, unsteady circumstances. Not all destinations were open, international travelers contended with ongoing restrictions, and social-distancing policies remained in effect.

The competition was relatively light. This meant that even if travel volume was still well short of pre-pandemic levels, DMOs and other travel marketers could see a nice ROI on their spend—especially considering consumers were flush with government-stimulus cash. 

DMOs who were moving full-speed ahead in 2021 were well positioned to do it all: to win overall market share and make inroads with new audience segments, all while making efficient use of their budgets. 

This year? It's a different story. For one thing, the industry has roared back in response to those eager consumers, and the marketplace is again cluttered and competitive. Not only is it challenging to build on last year's growth, but many DMOs are finding it difficult to hold onto the market share and audience gains they made in 2021. And some of this pent-up demand Bastian referenced appears to be facing headwinds.

Then there's the even scarier bit: the threat of a looming recession. American travelers expect that the U.S. will enter a recession soon, with two-thirds believing, as of Nov. 7, this economic outcome to be imminent. Because of this, 68% of American travelers report they are exercising caution with their spending. Of this group being stricter with their budgets, 79% shared that includes reducing travel expenditures. The percent of Americans saying travel is a priority in their budget right now has dropped to a 10-month low (at 54%), and the percent saying that now is a good time to spend on travel is the lowest it has ever been since the question was asked back in July 2021 (at 25%).

To be sure, last year's "travelers flush with cash" dynamic already looks markedly different. According to a new report from the Federal Reserve Bank of New York, Americans' credit-card debt is rising faster than at any point in the last two decades. At $887 billion, the debt load hasn't quite returned to its pre-pandemic record high in late 2019, but the tab is 13 percent higher than a year ago, and interest rates are also at their highest point in decades—and poised to continue climbing.

It all adds up to a marketplace where DMOs can still win—but only if they're smart. One such strategy is to focus on consolidating recent market-share and audience gains by marketing aggressively to the specific travelers and segments who powered their strong performances in 2021 and 2022. 

2. Strong media presence—and reporting—are more crucial now than ever

This is not the season to shrink back and save money on marketing spend. DMOs stand out amid rising competition with a heavy media presence that underscores their area's relevance and keeps them top-of-mind for consumers. This dimension takes on added importance given that many DMOs are sitting on big marketing budgets now, and competition is likely to be fierce. 

The same high-visibility logic applies to partner businesses and organizations. This is a moment to push for high engagement and to demonstrate loudly and clearly the bottom-line value that a DMO can bring to a local tourism ecosystem. 

Epsilon can provide various support to DMOs in this unique environment, from helping them consolidate gains by building loyalty among recent visitors to demonstrating the full economic impact of their work.