Flying south: Spring breakers will stimulate travel revenue in March

Spring break thumbnailBargain-hunting students are expected to spend over $1.7 billion on spring break this year.

For many Americans, the month of March marks the start of daylight savings, seasonal allergies and spring cleaning. However, for nearly 20.0 million US college students, March means spring break. After months of hitting the books, many students will hit the road to enjoy a week away from school with their peers. From all-inclusive beach getaways to road trip adventures, IBISWorld expects spring break spending to top $1.7 billion this year.

Travel

With almost 25.0% of colleges located in the Northeast and Mid-Atlantic, many students will choose to spend their vacations away from the cold and flock toward warmer climates. With so many southbound spring breakers, it is no surprise that air travel to Florida increases sharply during the month of March. According to the Department of Transportation, overall domestic revenue passenger miles (the number of passengers and the distance flown measured in thousands) are typically 3.0% to 5.0% higher than average in March. However, for airports situated near popular spring break destinations such as Panama City and South Padre Island, revenue passenger-miles in March are anywhere from 20.0% to 50.0% above average. For domestic airlines operating in these locations, the flood of beach-bound students will have profit margins looking particularly sunny this spring. Largely due to declining fuel prices, average profit for airlines has increased from 4.0% in 2010 to 10.7% in 2015. With the world price of crude oil expected to decline an additional 33.4% this year, fuller flights and lower fuel expenses will continue to pad the pockets of airline operators.

With gas prices at their lowest in nearly a decade, travel expenses are expected to be less burdensome for penny-pinching students who choose to drive to their destination. The influx of road-tripping students this year is good news for the Gas Stations with Convenience Stores industry, which has declined at an annualized rate of 6.1% over the past five years. Although low oil prices will keep the spring in vacation gas sales modest, gas station operators will benefit from consumers purchasing other road trip essentials such as snacks, sunscreen and other personal-care products.

Accommodation

Accommodation is another major expense for spring breakers. While the invasion of young vacationers brings an inflow of revenue to the $171.7-billion Hotels and Motels industry, students are often more thrifty and fickle than typical hotel patrons. According to a study from Priceline.com, 43.0% of students booked their room for less than $100 a night, and over 90.0% of students opted to share room reservations to save money in 2015. Bargain-seeking students have also shifted toward alternative accommodation services such as Airbnb to book their lodging. According to Hipmunk, 9.5% of total spring break bookings were made through Airbnb this year, compared with 4.4% in 2015. As a result, IBISWorld expects hotel operators to compete using competitive pricing and promotional offerings to bring back spring break business this year.

As more students turn to the rental market for their spring break accommodation, hotels will rely on travel agencies more than ever to fill their room vacancies. Over the past decade, travel agencies have increasingly used mobile channels to simplify the booking process and boost overall exposure, especially as tech-savvy millennials become dominant in the consumer market. Although online price comparison tools have made spring break accommodation bookings increasingly competitive, many travel agencies have tailored their offerings to specifically target the student demographic. Many agencies attract students by offering “all inclusive” or “bundled” spring break packages, which include travel, lodging, food, planned tours and activities. These packages, which generate about 32.0% of industry revenue, have become progressively more common among spring break participants, along with travelers in general. Over the past five years, the rising popularity of tour and packaged travel bookings has helped elevate travel agency revenue at an annualized rate of 2.5%, as these bookings typically earn higher commissions than other industry services.

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