How travel brands are marketing amid inflation and recession fears

As it promotes Puerto Rico as a travel destination in a new campaign, Discover Puerto Rico, the island’s marketing organization, is considering several factors when it comes to media placement. One big one? A potential recession. When looking at where to advertise, the agency is targeting U.S. markets where airfare to Puerto Rico is lowest and avoiding regions with costlier flight increases. “The economic uncertainties we’re building into the formula today are those increases in airfare,” said Leah Chandler, chief marketing officer at Discover Puerto Rico, which has run the island's marketing since 2018. The organization is making its media buying decisions on a regular basis, taking a market-by-market approach for the new campaign, which is called “Live Boricua” and comes from creative agency of record R&R Partners. “If airfare is increasing 50% or 60% in some markets, versus others, we have a better chance of capturing those visitors who are going to pay less for airfare," she said. It’s one of a host of strategies travel brands are taking as inflation and economic uncertainty continue to weigh on consumers and a recession becomes more of a reality. After COVID-19 caused travel to grind to a halt in 2020, the industry has spent the last year enjoying a robust return to growth. For many brands, business is now exceeding pre-pandemic levels as consumers engage in so-called revenge travel—taking trips that were postponed during coronavirus lockdowns. Travelers are also combining business and leisure trips in the new “bleisure” trend. Hilton recently told Ad Age that its business this summer has surpassed the same period in 2019. “At the moment, we’re seeing a robust amount of travel,” said Mark Weinstein, chief marketing officer at McLean, Virginia-based Hilton. Yet there are signs of a slowdown. As prices rise on essential items including groceries and household necessities, consumers may begin to pull back on spending on travel. MMGY Global, a travel and tourism marketing agency that tracks demand, found that following an all-time high in April of 2021, demand and intent to travel for leisure have leveled off and begun to dip. Consumers appear to be noticing that trips are not as affordable as they once were amid rising costs elsewhere and perception of affordability has dropped, according to data MMGY tracks. “We have now seen a drop in travelers that say they have finances available to travel,” said Craig Compagnone, chief operating officer at MMGY. “That tells me that you’re starting to have a segment of travelers who say, ‘We are circling the wagons, we have to start protecting our income with a potential downturn on the horizon.’" Tracking layoffs and budget cuts How brands and agencies are bracing for a recession Click here Boosting marketing spend Brands might already be reading the writing on the wall. In recent weeks, several hotel brands such as Hilton and IHG Hotels & Resorts have debuted their biggest campaigns in years. At the same time, online travel agencies including Booking.com and Vrbo have also invested in late-summer campaigns. They’re all spending lavishly on marketing in an effort to maintain momentum, differentiate themselves and give consumers a reason to spend. In their messaging, brands are pushing perks from loyalty programs and promoting the personalized care customers receive. In a few ads, price is playing a role as well. Outdoorsy, the RV rental company, has a commercial that positions RV travel as more affordable than hotels and airfare during this time of inflation. In addition, like Discover Puerto Rico, more brands are paying attention to their media buying in order to better target travelers who will actually take the plunge. “The fact that we’re now looking at the potential of a downturn in the next 12 months creates an even bigger onus for these travel brands to focus on better understanding their direct audience and focus on where they can maximize their media targeting,” said Compagnone. Ad spending from travel brands in the first half of this year topped the same period in 2021. From Jan. 1 through June 30, travel marketers, including airlines, rental car companies and hotels, spent more than $1 billion on advertising, a 46% increase from the year-earlier period, according to data intelligence platform MediaRadar. By comparison, that figure was $741 million in the first half of 2021 and $694 million in the first half of 2020, MediaRadar found. Brands are investing in national TV and print as well as on websites, podcasts, Snapchat and YouTube. “We’re not blind to the fact that there is a possible recession—we have a lot of consumers [who] maybe spent their savings or pandemic money already on a summer trip and what does that mean for winter travel, what does that mean for 2023,” said Lorraine Sileo, senior analyst at Phocuswright, a travel and hospitality research firm. “What we don’t want is the kind of recession we saw in 2009 where people really pulled back from traveling.” New messaging In order to avoid such a pullback, travel companies are adjusting their messaging. Rather than mention lower prices, brands are focusing on the experience customers will receive if they book with them. Last month, Hilton debuted a campaign called “It Matters Where You Stay.” Starring Paris Hilton, a great-granddaughter of founder Conrad Hilton in some spots, the push aims to convince travelers that Hilton will take care of them more than other hotels or home-sharing companies. The approach seems to be a subtle dig at competitors such as Airbnb. “Because rentals have done so well during the pandemic, hotels need to go back to push why do you want to stay at a hotel versus a rental,” said Sileo. “Hotels are trying to turn it around to a ‘You know what you’re going to get,’ kind of message.” IHG is also pushing a message of customer service. In its new campaign, “Guest How You Guest,” visitors are encouraged to stay with IHG resorts like Holiday Inn or Kimpton and be treated like royalty. The marketing push follows the debut of a revamped loyalty program from IHG, which combines its 17 brands into one perk-filled program called “IHG One Rewards.” “It’s taking care of customers day in and day out,” said Claire Bennett, global chief customer officer. “We take care of you in any environment but everyone is welcome.” Loyalty is still playing a big role in travel brands’ marketing. A few years ago, faced with strong competition from online travel agencies like Expedia, many hoteliers began encouraging travelers to book directly with their sites and join their rewards programs, where they were able to collect better customer data. The strategy was especially relevant given the eventual demise of the cookie. Now, online travel agencies have loyalty programs. Expedia Group recently announced a rewards program, “One Key,” that encompasses all of its brands, including Hotels.com, Travelocity and Vrbo. The perks of a program play into the same “We’ll take care of you” message, said Sileo. “It’s chaotic out there and you’re worried about pricing, safety and whatnot—become a member,” she said, noting that Expedia, in particular, is “pushing this family of brands, this safe place to get a great deal.” In the 2008 recession, online travel agencies flourished—they were able to discount prices on hotels and airfare and therefore attract more customers looking to save, said Compagnone. But it’s unclear if, with a new recession, the same dynamic will take place since suppliers like hotels are now more easily able to reach customers directly with the first-party data they’ve captured. “The whole dynamic of how you reach audiences and data available to us to seek out programmatically has changed,” he said. Another trend to watch could be the type of traveler brands begin targeting amid a downturn. Experts say baby boomers could begin appearing in ads and messaging as that group might have more savings and be willing to spend more on trips than their younger millennial and Gen Z counterparts, for example. Such retired consumers might adopt a “seize the day” mentality as well. “It’ll be interesting to see how many travel brands gravitate toward that older more mature audience that still has disposable income and now has disposable time as well,” said Compagnone. As for Discover Puerto Rico, the agency and R&R Partners are hoping that visitors will be swayed by the island’s proximity and ease of entry as a U.S. territory. People who may be hesitant to travel internationally but still want a diverse experience could consider the island, said Scott Murray, group creative director at R&R. Puerto Rico has several different ecological systems on one island and does not require a passport or different currency. “It gives the island a big advantage,” he said. “We’ll start to think about other dials we can turn as we get further down the funnel and think about where consumers are at in getting more bang for your buck.” Sign up for Ad Age newsletters From influencer marketing to agencies, get the latest news and analysis delivered to your inbox Click here

How travel brands are marketing amid inflation and recession fears

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