Marketing Review - Spring 2008 - (Page 36)

FIGURE 2. Time Frame Expectations for Consumer Spending 2008 Tax Rebate Checks travel dollars. By knowing the distribution patterns of the tax rebate checks, hospitality sales, marketing, and revenue managers can develop strategies for enhancing sales and revenues from this one-time infusion of cash in the hands of potential travel consumers. 1. Learn early how strong the propensity to travel will be from watching how consumers receiving the first wave of rebate checks choose to spend on travel. the study suggests consumers compensated for higher gas prices by making tradeoffs in their travel budgets by choosing less overnight trips and more day trips, decreasing lengths of stays on overnight trips, and spending less in restaurants. With rising prices, economists refer this trade-off as the “substitution effect,” where consumers substitute lower quantities of other travel products (hotel nights, restaurant sales) freeing up money to be available to purchase gas at higher prices, and still attain a similar level of satisfaction of the trip within a given travel budget. However, unlike 2006 and 2007, the travel consumer in 2008 will receive the tax rebate (representing a temporary increase in income) to consider in their new travel budget. With this new rebate cash, consumers still concerned about high gas prices may view the rebate cash as an opportunity to off-set the higher gas prices with the increase in rebate income. Economists refer to this type of consumer purchasing behavior with higher prices and new income as the “income effect” where consumers use the new tax rebate cash as income to off-set higher gas prices, still purchase gas, and attain a similar level of trip satisfaction. Thus, if 2008 travel consumers choose to exhibit the “income effect” and off-set higher gas prices with the new tax rebate cash, this would eliminate the “substitution effect” of consumers purchasing less hotel room nights and meals in restau36 rants, and could boost 2008 hospitality and travel sales. 5. In a slow 2008 economy, some consumers will still seek to reward themselves and escape with travel and vacations. For many families and individuals, travel, leisure, and vacations are essential elements in their measures of a balanced quality of life. Tourists have consistently cited the need to “escape” everyday issues and concerns at home by traveling for vacations. Even in a slowing economy with consumers finding ways to lower everyday spending, some travelers will seek travel as a means to “escape” and reward their families for hard work— Americans feel they “deserve” to travel for vacations to get away. Once consumers understand the 2008 tax rebates are special one-time cash injections over and above their regular incomes, even in a slow economy, they may choose to spend more of the rebate cash than they had planned on travel and vacations in order to reward their families with leisure, temporarily escape, and some fun experiences away from home. The tax rebate checks will be distributed by the IRS is two waves. The first wave of checks will be received by electronic tax filers over a three week period from May 2-May 16 (see Table 2). The second wave of checks will be received by paper tax filers over an eight-week period from May 16-July 11 (see Table 4). With the IRS predicting 46 percent of all tax returns expected to be filed electronically, sales, marketing and revenue managers should monitor hotel room pace bookings, and other travel sales, beginning in late April and through May 31 for early indications for consumers’ propensity to spend the tax rebates on travel. By observing how consumers choose to spend the tax rebates in the first wave of distribution May 2 – May 16,, sales, marketing and revenue managers can adjust booking windows for discount rates to meet changing demand and make better decisions for the second wave (May 16 – June 11) of consumers receiving the rebate checks. Some consumers will spend tax rebates before they receive them (pre-rebate spending). According the to Consumer Electronics Association, five percent off consumers receiving tax rebates will be pre-rebate spenders (see Figure 2) with plans to reimburse themselves when the tax rebate checks arrive. By monitoring sales and booking pace data one month before the checks are distributed, revenue managers can get an early idea of the propensity of consumers to spend rebate checks on travel. Revenue Opportunities Strategies for Hospitality Sales, Marketing, and Revenue Managers Information about the tax rebate program can be beneficial in turning the consumer tax rebates into hospitality and If electronic filers and pre-rebate sales exceed forecasts based on the same period from the previous year with no tax rebates, indicating strong demand and sales from rebate recipients, revenue managers may want to consider the following strategies to enhance revenues: HSMAI MARKETING REVIEW • SPRING 2008

Table of Contents Feed for the Digital Edition of Marketing Review - Spring 2008

HSMAI Marketing Review - Spring 2008 Contents COLUMN: The Online Marketer COLUMN: Success Stories COLUMN: Guest Column Ten Trends Now Shaping the Future of Hospitality Turning the 2008 Consumer Tax Rebates into Hospitality and Travel Sales 25 Extraordinary Minds in Hospitality and Travel Sales and Marketing The Lure of Lore: Connecting with Customers Through a Unique Brand Story A Careful Balancing Act A Meaningful Relationship: How Technology Affects the Connection Between Hospitality Marketers and Meeting Planners SPECIAL SECTION: The 2007 HSMAI Adrian Awards Building Five Star Imagery

Marketing Review - Spring 2008

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