Transcript 101: The Travel Industry by the Numbers, with David Huether

Intro: 00:00 Welcome, you’ve arrived at destination on the left with Nicole Mahoney, learn from the experience of travel and tourism experts who use collaboration and creativity to attract more visitors, strengthen their marketing programs, and reimagine how their industry does business. Hello listeners, this is Nicole Mahoney, host of

Nicole Mahoney: 00:19 destination. On the left, I am passionate about travel and tourism and love learning from the experiences of professionals in the industry. That is why I’m so excited to introduce today’s guest, David Hughes. I’m the senior vice president for research at the US Travel Association where he manages the associations, economic marketing and advocacy research programs. Prior to joining us travel in January 2011, David held the position of chief economist at the National Association of manufacturers in this role. He served as the organization’s economic forecaster, as well as principal spokesman on economic matters important to America’s industrial base. Before coming to the NAM in 1997, David worked as an economist with the bureau of Economic Analysis at the US Department of Commerce. He received his bachelor’s degree from Guilford College in 1990 and his graduate degree in economics from the George Washington University. In 1997. Thank you for joining me, David. I’m very much looking forward to our call today. I know our listeners are going to really gain a lot of insight from you, but before we dive into the questions, can you tell us a little bit more about your story in your own words? I find it adds so much more context to our conversation.

David Huether: 01:37 Sure. So I graduated from college in North Carolina, the small liberal arts college called Guilford College, more than 1990 recession and I ended up getting a job at the Commerce Department through an and internship that I did when I was an Undergrad and I worked there for a couple of years and then I transferred because I wanted to be an economist. I have my Undergrad in economics, but that transfer to an agency called the beer of economic analysis and they are the division of the Commerce Department that estimates GDP, other major economic variables, so it’s a great place to work as an economist. So I worked there and then I went to school at night to get a graduate degree in economics and after being there for awhile, no, I decided to leave the government and I landed as an economist with National Association of Manufacturers, which is a trade association just like us travel, but it represents the manufacturing sector where you find out if you live in Washington, sees that they are against trade associations. Every industry has a trade association. And so I worked there for about a decade or so. And then, um, I, a friend of mine actually who was the head of research at the US Travel Association was retiring and I thought, well, that looks like a pretty cool place to work, totally different than the manufacturing. And so I left for manufacturing into tribal and I’ve been here ever since. So it’s, uh, it’s

Nicole Mahoney: 03:00 very interesting. That’s awesome. I love that. And actually when I, when I read your bio, I’m in preparing for today’s interview, I thought it was a very interesting path, you know, from the manufacturing side over to the travel side. But I actually don’t think that it’s that much of a leap because either way it’s all about manufacturing a product versus a product or an experience, but it’s a very similar to me, I’m kind of a, you know, kind of way of looking at things. So I actually found that very interesting that you came from the manufacturing side,

David Huether: 03:36 associations in Washington DC, one of their principle activities is lobbying on different issues that manufacturers do, but we have issues that we lobby on it. So we tried to convince legislators and people in the administration of why they should pay attention to us and every association does this. But one of the things that’s unique about the travel industry is that because the travel industry is not defined as an industry by the US government, I suppose to manufacturing. Um, one of the things we do at us travels, we actually estimate the economic impact of travel at the national level, at the state level and for every congressional district. And we do it every single year. So that makes our job very exciting. Uh, but you’re right, it is a product a. and one of the, one of the right now, if you looked at how much, when people go out and travel, you say, what’s the travel industry? If you leave your house and you go 50 miles or more away from home, or you stay in a hotel and you go shopping, you go to a movie, do anything. You’re spending representative of the travel industry. So you’re spending at retail, you’re spending in hotels, you’re spending at the gas station, you’re spending and amusements, whatever you’re doing, leisure business. If you’re 50 miles and we’re away from home, you’re a traveler. Yeah. And uh, so that’s, we estimate the last year travel spending in the United States actually top $1,000,000,000,000.

Nicole Mahoney: 04:59 I’m not surprised by that at all, but that is a very impressive number. I think. That’s awesome. I have a question about that. Fifty miles. Um, do you, when you’re looking at the data that, that 50 mile kind of criteria, the criteria also that they have to stay overnight somewhere? Or is it does day trippers kind of in our day trippers included in that

David Huether: 05:23 it’s travel 50 miles away and you spend money and you come home in one day. That’s a day trip. That’s included. If you spend the night in the hotel, you can travel 40 miles away or 30 miles away. So the 50 mile away is for just to catch day trips, 10 miles away. You stay in a hotel, you’re included.

Nicole Mahoney: 05:45 Great. That’s good to know. So you’re already giving us a glimpse of what the numbers look like. And I want to start by asking you about the economic outlook that you just released for September. So what are the, what are some of the current economic indicators telling us about the state of the economy?

David Huether: 06:04 Industry is doing very well. Both leisure and business travel are performing better this year than they did this period last year. What’s interesting is that, and this hasn’t happened that often, but business travel is actually outpacing leisure travel, uh, in 2018, which is an unusual phenomenon. Typically leisure travel goes fast for the business, but with the compensation of a GDP GDP growth this year where there’s been a huge acceleration in business investment that has spurned a lot a business, travel and business travel is growing. They’re very, very healthy pace at the same time, we are also keenly looking international inbound travel. So when you think of a person from the UK or from France or from Brazil, from China or from Japan and last year there are about $77 million international people who came to the United States when they spend their money here. Uh, it’s a significant part of the travel industry. In fact, it’s about 16 percent of that $1,000,000,000,000 I mentioned earlier is spending. Hi International travelers. So we look at that too. That’s been positive. Uh, but it has been growing at a slower pace this with this year and last year then has a few years ago. So one of the things we’ve seen is that right domestic travel economy, both business and leisure has been accelerating at the time. At the same time where domestic or international inbound travel, well growing has been growing at a slower rate.

Nicole Mahoney: 07:47 There’s definitely been a lot of conversation about those international travelers and how the US is kind of keeping pace, um, especially, you know, in the, in the global markets. Um, can you speak a little bit to that and kind of what does the things that you’re watching and keeping an eye on in terms of that international market?

David Huether: 08:05 Yeah. It’s a fascinating topic and one of the things that we measure us travel is we take a look at when people come to United States and we save for the sake of this argument, forget about Canada, Mexico, and just look over people coming from the rest of the world. We call that overseas travel and then we compare that to like what is the US share of when people travel like outside of their continent, international travel. And after nine slash 11, it felt rather significantly of 2017 percent of global travel was the United States. And I fell in the matter of about four years down to about 11 percent. Now, due to a number of policy changes and other issues, the United States kind of gradually began to reclaim share and by 2015 we were close to like 14 percent of global travel. It’s coming. The United States that was the highest since 2002 one.

David Huether: 09:03 Um, what we’ve seen in the last couple of years is a while international travel, like say last year and this year is growing, it’s not growing as fast as our competitors and we’re actually losing share. And so right now we estimate that our share’s gone from 13 point eight percent in 2015 to a little more than 12 percent this year. So we’re being outpaced by our competition. And so that’s an issue to deal with. One of the reasons for that is the fact that the value of the US dollar has increased about 25 percent since 2011. That makes traveling to the United States were expensive and that’s had a detrimental impact on international inbound travel.

Nicole Mahoney: 09:49 That’s interesting. Interesting to know. And I’m glad you pointed out, you know, how the US dollar does impact travel and it’s not necessarily because I know the debate out there as you know, is it the politics, is it, what is it? And I’m certainly, it could be politics, it could be a number of things, but that value of the dollar, um, definitely has an impact. And I find that interesting because at the same time we’re having that challenge with the overseas travel and you’re seeing that the domestic market is really strong. And I think that goes to, you know, the fact that of course we have a strong US dollar, we have a strong economy. Businesses growing business. Travel is up. So it’s trying to find that balance, right?

David Huether: 10:31 You mentioned international, inbound travel. If you look at it, it’s the opposite of that outbound travel about United States, people like you and me and going overseas travel. It’s skyrocketing because our person power much higher. But if you look at inbound travel, you mentioned it means there are a number of factors. There’s, there’s increased competition definitely from other, uh, from other, uh, other destinations, other countries that are destinations. Um, there is some issues that we’re dealing with us politics, but it can range from issues have been the United States before and you go someplace else. Two think they may have a perception about safety in the United States. Uh, that’s an issue. Um, so there are a lot of factors that go into the inbound travel in the United States compared to exports of aircraft, for example.

Nicole Mahoney: 11:33 That’s a really good point. So, David, a lot of our listeners are a dmo, is there in there in local markets. They’re interested in the international market. Um, they might be, you know, near a gateway city. Um, you know, I’m in upstate New York, so a lot of the destinations around where I am are always talking about in looking at New York City, what’s happening there and how we’re pulling visitors up into our area. And I’m just wondering out of these different indicators that we’re talking about, whether it be the international or the domestic, what are you seeing? As you know, when you start to kind of trickle down into those more local markets, what kinds of things are you seeing as being important for them to keep their eye on?

David Huether: 12:18 The most important thing to look at pretty highly for high frequency basis is from national data is look at the state of the labor market, especially in, uh, the source markets that different destinations are looking to in terms of they’re trying to get visitors from a so you can look at state employment, growth, income growth, etc. At one month lag from the national numbers that come out every month. And that gives you the sense of the economic health of the areas you’re trying to attract. Uh, and since when people have more discretionary money, they’re gonna, they’re gonna obviously travel and spend more, uh, getting a handle on how different areas of the country are fairing at the state level. Uh, I think would be the, the one thing that take a look at an insect second thing, uh, to take a look at it. Since about 75 percent of leisure travel is done by car. It’s also very important to look at, uh, at the nature of gas prices and if they are increasing or decreasing significantly, a small changes in the price of gasoline we’ve seen have a very, very negligible impact on a traveler’s decisions, but if there is an enormous spike, uh, that is sustained for a period of time either up or down,

David Huether: 13:53 that can have a significant impact. And that’s one of the things that I always look out, uh, related to, uh, travel prices.

Nicole Mahoney: 14:01 Two great resources for our listeners. Thank you very much for sharing those. And so we’ve already talked a little bit about this, but um, as we are finishing up third quarter, are there other travel trends that, that you’re looking at that are really kind of showing how this year is shaping up? I know you’ve already shared that a sounds like everything is performing better this year than last year. Are there other things that you’re looking at?

David Huether: 14:30 Decompose that into three components? One component is domestic leisure travel. Second component is a domestic business travel in the third component is international inbound travel. So we kind of look at those three, those three things differently and they kind of add up to the total. So, okay.

David Huether: 14:51 Domestic leisure travel. Well, we primarily look at a national level, uh, the inflation rates, especially travel inflation is employment growth and growth in disposable income. So if those indicAtes the metrics are, are fairly positive, gets a good barometer for domestic leisure travel, a four business travel, uh, we primarily a look at, um, manufacturing and manufacturing sentiment indices that come out from the supply management, uh, as well as corporate profits that are released by the bureau of economic analysis on a quarterly basis to get an idea of how a business travel going to be and they’ll domestic side, as I said earlier, we kind of look at ’em the dollar over the last year or so, and just most recent updates on economic growth. And I also like to mention that you can, the government does actually track international inbound travel on a monthly basis, about six month lag. But you can go to the commerce department and look and see how it’s performed year to date through april. And it’s positive. But it’s not growing at the speed that it did in the, say 2012 to 2015 period.

Nicole Mahoney: 16:19 Great resource. Thank you very much. And as you were talking about the, um, the business travel, I’m wondering how far out, um, and I don’t know that this is necessarily, um, how far out can you look? So you’re looking at some of these indicators now, does it give you some confidence of what might come in january or what might come first quarter of, or is it really just kind of, we know where we’re at, but things change, you can change quickly.

David Huether: 16:56 Well, we do a forecast a semi annually or twice a year where we forecast the volume of trips. So like how many trips people take, right? The international trips and we forecast travel expenditures and we forecast travel inflation. Um, and we, um, estimated out to right now 20 slash 22. So you, we update every two years, but so somebody annually update that. And so right now our outlook is, is, is fairly positive going out for the next several years, uh, with in the next couple of years with domestic growing a little faster than international, but international starting to kill up, started to pick up steam a beginning next year, beginning of this year. This year will be better than last year actually for domestic or international

Nicole Mahoney: 17:51 for international. And that’s great news. That’s great to hear. So I want to ask you about this report. Um, I was actually at a, I believe either at one of your events, I can’t remember our ipw when you released the us travel made in America report and I want to take a little bit of time and have you explain to our listeners what that report’s all about and then also what they can, how they can use it and what resources they have available to them.

David Huether: 18:27 Well, really showcases how destinations are successful and important contributors to local communities and economic development. And the report highlights, uh, with the role of the dmo and how it’s evolved, uh, into not just attracting people to actually becoming a community manager. In fact, helping to manage the, the view and the destination is seeing a, not by jUst travelers coming in, potential travelers, but also potential investors and companies that are thinking about, uh, locating plants and facilities in that area. And so the report really is aimed to educate elected officials, key stakeholders,

David Huether: 19:19 all the travel industry’s really essential contribution to economic development in communities across the country. So in addition to showing the powerful impact that travel has to both urban areas and rural areas across the country, uh, they’re also, uh, the report is also filled, uh, with a number of case studies that show what the positive impacts on communities has been having from successful dmo marketing efforts at the same time, that disastrous, disastrous, uh, calamities that have happened that when certain cities and destinations have restricted funding from travel promotion. And basically what happens is they can’t mark it and the competition’s marketing and they lose, lose out and they lose share. And it takes them years to rebound. So there are positives and negatives related to effective travel marketing.

Nicole Mahoney: 20:28 A great tool and that’s available on your website. We’ll make sure that we link to that in your show notes so that our listeners can, can find that easily. Um, but I think it’s such a good tool and an important tool, especially for, you know, are dml listeners to a because I know, you know, that’s one of the biggest challenges that destination marketers have in terms of managing stakeholders, right? As well as being able to market and serve the community. So, um, I think that’s a, that’s a really great resource. So david, what’s next? What are you working on now?

David Huether: 21:18 We’re updating our forecast. We are going to be creating estimates for the impact of the states for 2017. That’s where do by the end of the year. And then we’re also going to be starting to work on a report that we did, I think about five years ago called fast forward. We’ll come up with a new Maine this year. This is free. You don’t know what page, uh, but basically what it would it looked at was it looked at over 30 year period in the United States and from 1977, I think it was 2013 or something like that. Two thousand 12. And it looked at. Yeah, what the career progression was for people who started off their careers in the travel industry versus those in other industries such as construction, manufacturing and care or finance.

David Huether: 22:17 I think the rest of the economy. Okay. And what we found out was a couple of things. One is that on average people had about eight jobs cross all sectors from when they started to, when they were 55 years old. So people stay in one sector forever, they can’t change, but we found out that, uh, those who started off in travel ended up 30 years later making more money than those who started off in other industries. So it’s a rear. The travel industry is a real stepping stone to a career ladder and accessible career ladder. And that was true for, uh, for, for those, uh, who eventually went to college. It was true for those who didn’t go to college, it was true for women and it’s true for african americans and it was true for hispanics as well. So it was an amazing study that we did and it’s about five years old. So we’re going to update it this year.

Nicole Mahoney: 23:20 Yeah, I love that study because, um, you know, that there’s this perception that uh, you know, in travel and tourism, this is just a fun industry. It’s all hospitality jobs, maybe low wage jobs and it doesn’t really have the same impact necessarily. These would be perceptions, right, that the other industries might have. And so I love these tools and these reports that us travel putting out because it really does help, uh, help us, uh, here in the travel and tourism industry, you know, talk to our constituents, to stakeholders, our elected officials, and really kind of pushed that message that we are very strong industry and an industry that contributes to the economy. I think that’s just really exciting.

David Huether: 24:04 We look forward to appear yet.

Nicole Mahoney: 24:06 That’s fantastic. So david, I know our time is coming to a close. I know this conversation would go quick, but I’m wondering if there’s anything that you wanted to share, anything else with our listeners that maybe I didn’t ask you about that you think is important for them to know?

David Huether: 24:21 Well, I would say that everything that we talked about, it’s available at www us travel, o r, g, that’s us travel.org. And if you go to our website and click on the research tab, there are a gazillion tools you can, uh, play with and look at. You can look at the state of the travel industry. You can look at historical data, you can look at, there are a number of reports that are available to the public and I would invite everyone in your audience to take a look and, um, and have fun. It’s, it’s a, it’s a fascinating industry. It’s a growing industry. It’s an expanding industry. Um, and it’s an important industry. It’s an important industry industry to understand.

Nicole Mahoney: 25:06 Yeah, absolutely. I appreciate that and thank you so much david, for spending time with us and we’ll look forward to checking in with you again.

David Huether: 25:14 Okay.

Outro: 25:16 It’s time to hit the road again. Visit destination on the left.com. During your travels for more podcasts, show notes and fresh ideas.