Travel industry outlook and economics.

U.S. Leisure Travel Outlook

In 2003, leisure travel in the United States grew at a steady pace of 3 percent from the previous year. However, the travel industry employment numbers show a different scenario. In 2002 travel employment declined 4.2 percent and Worsened in 2003, with 130,000 more jobs lost in the first six months. Between August 2001 and June 2003, the travel industry lost 508,000 jobs: nationwide, compared to total U.S. job losses of 2.1 million. The travel industry generates 6 percent of total U.S. employment suffered 24 percent of all jobs losses in that time frame (Travel Industry Association, 2003).

It can be confusing to see person-trips increasing, but employment decreasing. Some of the indicators help explain the differences. First, more people are traveling by road rather than air. The airline industry is still far from recovery. and capacity cuts continue (down 3.4 percent so far this year and 10 percent since 2001. With cuts in capacity, jobs are lost.

Secondly, while travel is up, spending is down. For example, the average daily rate for hotels in July 200l was $86.64: by September 2003. the rate had fallen to $82.96. A loss in overall revenue requires businesses to cur expenses. Labor is the greatest expense in the travel industry, and thus is subject to cuts in times of need. In addition, business travel has slowed, causing a decrease in overall hotel purchases. Finally, international arrivals to the United States were down 10.5 percent for the first half of 2003, continuing a downward trend that began Sept. 11.

The encouraging aspect of this outlook is the continual increase in domestic leisure person-trips. The American public has shown that travel is a priority in their lives. The places they travel will vary depending on the economic and political situations, but these trips will continue to occur. Also interesting is the surge in RV sales. With airline travel not the top choice among man,, Americans, travel by RV has received a jump start. According to TIA RV rentals rose 30 percent in 2002-2003 over 200i. RV shipments were up 20 percent in 2001. as well as in 2002. Part of this increase was expected with the aging of baby boomers, but Sept. 11 seemed to put RV travel at the top of the list earlier than expected.

In 2004, national domestic leisure travel is expected to increase by 3 percent (Figure 1). As in the past year, travelers are expected to stay closer to home, book their trips late in the planning stage, and continue traveling on American vs. foreign soil.

Montana Travel Trends and Outlook

Preliminary estimates of nonresident travel to Montana in 2003 show a 3 percent increase over 2002--to 9.9 million visitors, or 4.1 million visitor groups (Figure 2). Once again, nonresident travel mirrored the national travel patterns. Interestingly, however, two main indicators of Montana travel--Glacier and Yellowstone national parks--did not follow the same trend line. Both parks started out the year with large increases in visitation. Then the wildfires hit. Not surprisingly, Glacier visitation numbers for August of 2003 were 43 percent lower than for August of 2002. For the year; Glacier numbers decreased nearly 13 percent over 2002. Final recreation visitation numbers for Yellowstone National Park show a 1 percent increase (Figure 3).

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Preliminary Montana airport deboardings for 2003 were up 1 percent over 2002, continuing the trend of yearly increases (Figure 4). The outlook for 2004 in airline deboardings for Montana, however, is bleak. In line with national trends, Delta Airlines is reducing airplane capacity to nearly all their Montana cities. The result will most assuredly be a redaction in state airport deboardings for the first time in over a decade.

Another indicator of the Montana travel industry is the performance of the hotel/motel industry. Occupancy in Montana was 56.3 percent in 2003 compared to 57.3 percent in 2002. Rooms sold in Montana decreased by 0.3 percent from the previous year. Therefore, while occupancy was down 1 percent, rooms sold were barely down, indicating a year basically on par with 2002. Compared to the mountain region states that experienced a 1.9 percent increase in rooms sold, Montana had a different year than the rest of the West (Figure 5).

[FIGURES 4-5 OMITTED]

The 2004 outlook for Montana's travel industry is mixed. Nationally the trend is to stay closer to home which does not bode well for Montana. Airline capacity to Montana has decreased, suggesting a lower volume of visitors even though only 10 percent of Montana's visitors come by air into Montana. The U.S. economy is still suspect and people are spending less when traveling which is also a negative indicator for Montana's travel industry. With those indicators alone, ITRR would predict a down year for nonresident travel.

On a brighter note, the overall outlook is positive based on an ITRR survey conducted in late November with statewide travel industry businesses including moteliers, attractions, B&Bs, ranch vacations, and campgrounds. Only 12 percent of business owners expect a decrease in business in 2004. Seventy-nine percent said they expect to have an increase because of their marketing efforts, their continued trend of increases, and increased bookings for 2004. In addition, Montana's Lewis and Clark bicentennial commemoration continues to be on the radar screen and could be an influence in visitation numbers. However, predictions of increases are virtually impossible. While we believe the commemoration will have a positive influence on visitation to Montana and could be a factor in 2004, it will more likely be noticed in 2005.

In summary, based on all the above indicators, ITRR believes the outlook for Montana's nonresident travel industry will remain on par for 2004, or slightly higher at approximately 10 million visitors. Table 1 Nonresident Dollar Expenditures [in thousands] by Category and County and Visitor Characteristics, State of Montana, 2003 Expenditure Category Cascade Flathead Gallatin

Camping $ 427 $ 3,323 $ 3,957

Hotel 11,985 23,670 46,397

Gas 11,302 22,724 42,255

Restaurant 12,338 27,576 50,580

Grocery 5,804 14,505 16,499

Retail 14,770 38,743 56,759

Outfitter ND * 6,622 3,406

Auto 5,672 3,569 1,310

Transportation 158 289 330

Ent. Fees 1,047 3,509 3,761

Other 458 1,795 4,025

Total $ 63,961 $ 146,325 $ 239,279 Expenditure Category Lewis & Clark Missoula

Camping $ 492 $ 2,729

Hotel 9,794 23,954

Gas 8,153 42,507

Restaurant 15,873 1,878

Grocery 4,152 7,113

Retail 14,857 30,791

Outfitter 9,076 1,053

Auto 3,644 5,437

Transportation 163 235

Ent. Fees 2,113 500

Other 313 2,826

Total $ 68,630 $ 149,023 Expenditure Category Silver Bow Yellowstone

Camping $ 967 $ 3,540

Hotel 9,395 29,081

Gas 26,708 62,78

Restaurant 11,139 50,257

Grocery 7,744 14,495

Retail 6,483 90,656

Outfitter 39 ND *

Auto 2,813 22,803

Transportation 22 830

Ent. Fees 278 869

Other 918 4,159

Total $ 66,506 $ 279,479 Travel Regions Entire State (in thousands) Russell Glacier Yellowstone

$ 1,800,000 $140,716 496,512 455,115

% of state 7.80% 27.60% 25.30% Entire State (in thousands) Gold West Glacier

$1,800,000 219,186 496,512

% of state 12.20% Entire State (in thousands) Gold West Custer

$1,800,000 219,186 455,540

% of state 25.30% Characteristics of Visitors Who Spent At Least One Night in the County

Cascade Flathead Gallatin Length of Stay in MT (nights): 6.2 6.8 55 Main Purpose of Visit:

Vacation 43% 75% 56%

Passing Through 14% 5% 6% Visiting Friends & Relatives 4% 11% 14%

Business 24% 6% 11% Group Type:

Couple 41% 52% 44%

Family 25% 26% 30%