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Summer travel forecast: Better, but no blowout

Published: Friday, May 24, 2013 2:08 p.m. CDT

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NEW YORK –This summer, high rollers are flying to lavish vacation hot spots for their vacations. The rest of us are headed to places like nearby campgrounds.

The good news: At some U.S. campgrounds these days you get live bands, air guitar contests and chocolate pudding slip 'n slides.

Americans' plans for summer travel mirror the current state of the economy. Rising home prices and a soaring stock market are encouraging those at the top of the income ladder to take more extravagant trips. But large segments of the population are staying close to home because wages are stagnant, rents are high and the end of the payroll tax holiday has shrunk their take-home pay.

For a travel industry still stinging from the Great Recession, that likely means another summer of steady, but slow, recovery.

AAA, one of the nation's largest leisure travel agencies, isn't expecting a resounding start to vacation season this Memorial Day. Citing the "up and down economy," AAA expects 31.2 million Americans to hit the road this weekend, virtually the same number as last year. Throw in planes, trains and buses, and the number of travelers will drop about 1 percent, AAA says.

As vacationers set out this summer, here's what they can expect:

• Gas prices about the same as last year. The national average price of gasoline was $3.65 a gallon Friday, 1 cent higher than during last year's Memorial Day weekend. Tom Kloza, chief oil analyst at GasBuddy.com, expects prices to drift lower after the holiday and fall close to last summer's low of $3.33 per gallon before hurricane season starts to drag them up again.

• More expensive hotel rooms. The average hotel will cost $112.21, before taxes and any other add-on such as resort fees. That's up 4.4 percent from last year's $107.52, according to hotel research firm STR. Hotels are also expected to be slightly fuller, with occupancy rates climbing from 69.3 percent last summer to 70 percent this year.

• Packed planes, steady airfare. Airlines for America, the industry's lobby group, expects 208.7 million people to fly, up 1 percent from last year. About 87 percent of airplane seats will be filled with paying passengers. Domestic fliers will pay $421 on average for a round trip ticket, down $6 from last summer. International fliers will pay $1,087, up $8, according to the Airlines Reporting Corp.

• Amtrak expects to meet or exceed the 8.3 million passengers it carried last summer. But the taxpayer-backed railroad wouldn't disclose how fares compare with last summer's average one-way ticket of $66.39.

Mike Klopp, a commercial insurance salesman in Irvine, Calif., is starting to feel better about the economy. He and his wife plan to take their three kids on a vacation up the coast to Monterey in August – a trip they skipped last year.

But Klopp says local trips are the limit because they're cheaper. Like many others, he's not yet willing to splurge on a dream vacation.

"The kids would love to go to Hawaii, but there's no way I'm going to do that. We've been hunkering down, money is tight right now," he says.

"I'm not sold that things are better," he says.

Other Americans likely agree. Although the unemployment rate has dropped to 7.5 percent, compared with a post-recession high of 10 percent, the Federal Reserve doesn't see it falling below 7.3 percent this year. And economic growth still isn't as strong as it has been after previous recessions. The economy grew at an annual pace of 2.5 percent from January to March. Economists expect the rate to slow to 2 percent from April through June, partly because of the federal budget cuts that started taking effect March 1.

Those with higher incomes never stopped traveling, but thanks to new highs in the stock market they now feel secure enough to take longer vacations.

Patrick Veling, the owner of a California real estate data analysis and consulting business, says he's taking his "most expensive vacation ever" this year. Instead of the normal one-week vacation, he and his wife Susan are taking their two adult kids on a three-week vacation through northern Europe that will include a 12-day cruise. They'll see Denmark, Norway, the Shetland Islands, Ireland and the Netherlands.

"My confidence in the economy and my business is now strong enough that my wife and I have pretty much insisted we make this trip," says Veling.

Others are benefiting from rising home prices and low interest rates. Their homes are finally worth more than they owe on their mortgage, and they are finding it easier to refinance. That leaves them more money to spend.

"The improvement in confidence is all in the upper income brackets," says Diane Swonk, chief economist at Mesirow Financial.

During the worst days of the recession, travelers mostly stayed home. Hotels desperate to fill rooms started marketing "staycations" to families who couldn't afford to drive or fly somewhere. Summer air travel fell by nearly 8 percent in two years, from 217.6 million passengers in 2007 to 200.3 million in 2009. Luxury hotels saw their occupancy levels plummet during that period from 72.5 percent to 59.3 percent. More than half the rooms at economy and midscale hotels sat vacant.

There has been a slow and steady climb back, but not all parts of the recovery have been equal.

Luxury hotels such as Four Seasons, Park Hyatt, Ritz-Carlton and Mandarin Oriental are filling 73 percent of their rooms on average, surpassing their pre-recession peak, according to an Associated Press analysis of data from hotel research firm STR.

But budget hotels like Days Inn, Econo Lodge and Motel 6 are still below their 10-year occupancy average and more than 3 percentage points below their peak.

The same pattern holds for fliers.

Domestic traffic is projected to grow 0.7 percent this summer, while the number of people buying more expensive international tickets will climb 2.6 percent, according to Airlines for America.

"Expect luxury travel to continue to rebound — consistent with luxury across all industries — while the rest of summer travel will be flat" as the economy still weighs heavily on middle-income families, says Adam Weissenberg, who heads the travel and hospitality consulting group at Deloitte.

But some less-expensive destinations are seeing a recovery.

Campgrounds fared well during the downturn because they are relatively affordable. Some are now doing better business than ever because the operators have retooled their facilities to entice visitors beyond the typical outdoor types.

Steve Stafford, general manager of North Texas Jellystone Park Camp-Resort in Burleson, Texas, has attracted a broader swath of people with "homesteads." These are recreational vehicles that look like cottages. Now the camp can accommodate campers with tents who only have to pay $32 a night for an empty patch of ground and those who want to stay in the comfort of the largest homesteads for $209 a night.

The 37 existing homesteads were booked solid last year. So Stafford is adding a dozen new ones. Those are already booked, even though they are still being installed.

In recent years, the campground has added activities such as arts and crafts, live bands, laser tag, outdoor big-screen movies and theme weekends to try to lure people back. On the schedule for Memorial Day weekend: A chocolate pudding slip 'n slide.

The moves appear to be working.

"The way it's looking so far, we are going to be way up," Stafford says. "No matter how bad things get, people are going to take a vacation."

The hunt for inexpensive vacations is helping companies that recreational vehicles, too. Traveling by RV means families don't need to pay for hotels and can cook most of their meals. Families may not be ready to buy one – sales are only up slightly – but more are choosing to rent one this summer for as little as $100 a day, or $300 during peak weeks.

At El Monte RV, one of the country's largest RV rental companies, summer bookings from domestic customers are up 20 to 25 percent compared with last year.

"It has stunned us," says marketing director Joe Laing. "We're looking forward to this year. We think it's going to be a good one."

Businessmen and state officials on the Gulf Coast of Florida, Alabama and Mississippi are also hoping for a good summer. The tourism industry there was devastated by the BP oil spill of 2010. As part of a settlement, BP has been financing large advertising campaigns to get tourists back to the region.

"This is going to be the best summer season we've ever had," predicts Tish Williams, executive director of the Hancock County Chamber of Commerce in Mississippi.

Williams has spent $962,000 in BP grants to market her county and a new science center there to tourists in northern Mississippi and neighboring Louisiana.

In Florida, the Pensacola Bay Area Convention and Visitors Bureau says lodging tax revenue is up 7.5 percent this year. The tourism industry has spent BP money as far north as Chicago – a 14-hour drive away – to lure new visitors.

But the most pampered vacationers this summer might not even be human.

The Barkley Pet Hotel & Spa in Westlake Village, Calif., is booked solid this Memorial Day. After a recent 18,000-square-foot expansion — another doggie day camp area for small dogs, another grooming salon and spa and another wing of luxury suites — there is now room for 250 pets.

This summer, they can attend ice cream socials, surf in a beach-like pool or play in the day camps, which are shaded by cabanas and cooled by misters.

Some might say the pets have it better off than their traveling owners.

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