The travel industry has been hit hard by the economic slowdown, particularly in the last few weeks.
Airlines reported sharp declines in passenger traffic for September. Hotel occupancy rates are down, and corporate travel managers are demanding new concessions on previously negotiated deals. Cancellations are starting to rise even at four- and five-star hotels, which previously seemed immune to the economy’s travails.
Months ago, the nation’s airlines, which are grounding some of their older jets, announced plans to cut 8 to 10 percent of their domestic flights after Labor Day, so traffic was expected to be down. At the same time, the airlines planned to raise fares on their remaining flights.
But passenger traffic is down beyond the cuts already planned. To be sure, fall is usually a slower season for air travel than spring and summer. Until the holiday season begins at Thanksgiving, flights are dominated by business travelers. So the slower traffic reflects the impact the business crisis is having on the airlines. In September, the top seven airlines averaged a 9.47 drop in domestic passenger miles traveled compared with September 2007. Domestically and internationally, the major airlines carried 9.2 percent fewer passengers than in September 2007.
Fares are 15 to 25 percent higher on many routes than they were a year ago. But that portion of the strategy seems to have stalled.
“After 21 increases, almost one a week for the last year, we didn’t see any after July 4,” said Rick Seaney, whose booking site, Farecompare.com, closely tracks airfares. “There is a consensus in the industry that they pretty much have hit the end of the rope on fare increases.”
Hotels are also feeling the slowdown. In September, domestic hotel occupancy was down 5 percent from the previous September, according to Smith Travel Research. And the higher-price segment of the hotel industry, which had been holding its own, now also seems to be feeling the pain.
“For the last two weeks, cancellations of existing reservations are running about 50 percent above normal” at full-service hotels, said Bjorn Hanson, an associate professor at the Tisch Center for Hospitality, Tourism and Sports Management at New York University.
That niche — including five-star hotels and four-star hotels that do major business in conventions and meetings — has been propped up by corporate deals negotiated last spring, when “the balance of power was still on the side of the sellers,” Mr. Hanson said. While rates remain high, Mr. Hanson said, corporations locked into hotel contracts are intensely “negotiating for concessions — free breakfasts, free use of fitness rooms, no charge for business center services, free late checkout.”
Third-quarter profit fell 28 percent at Marriott International, which is considered an industry bellwether because of its big global presence and its wide range of hotel brands, from midlevel lodgings like Courtyard by Marriott to five-star luxury hotels like Ritz-Carlton.
“At the Ritz-Carlton Central Park, normally filled with investment bankers and their clients, the entertainment industry and diplomats are filling rooms and restaurants now,” Arne Sorensen, Marriott’s chief financial officer, said.
Other full-service Marriott hotels are marketing more heavily to travel discount programs like those of the AARP and AAA and to government travelers on per-diem allowances.
Fare sales are even proliferating in the most lucrative segment of the airline market, international premium travel, where the walkup round-trip fare for a business-class seat between New York and London has been in the $9,000 range.
Mr. Seaney recently read off some recent business-class sales and promotions, all with various advance purchase and other restrictions, from his site’s premium-class section. (Some are no longer available, but the airlines keep adding new ones.) “Delta, business-class to Europe, 50-day advance purchase, $1,700,” he said. “Lufthansa on Sept. 16 had a business-class deal to England from New York and Chicago, a little over $1,000 each way.”
Last Friday, British Airways, one of the major players on the intensely competitive trans-Atlantic market, said that its full-year financial projections were at risk because long-haul premium traffic declined 8.6 percent in September from September 2007.
So far, the niche at the top end of the premium market, boutique business-class service by a handful of airlines, has apparently not been seriously affected by the turndown. But even there, discounts are showing up.
The new British Airways subsidiary OpenSkies, which flies 757s configured with two classes between New York and Paris, is starting a new route between New York and Amsterdam next week. Round-trip promotional fares for the top-niche business class are $1,776 and about $1,000 for the other cabin, called Prem+, which OpenSkies says is similar in quality to business class on other airlines, but priced and coded to accommodate increasing corporate travel prohibitions against flying on business-class tickets.
Singapore Airlines, which started all-business-class daily service between Newark and Singapore last May in luxurious long-range Airbus A345s, recently began a daily route between Los Angeles and Singapore. The usual round-trip fare is around $8,500, but last week Singapore introduced a discount fare — $5,999 — available on Mondays, Tuesdays and Wednesdays.
The standard fare remains in effect for the peak travel days, Thursday through Sunday, when flights are often sold out, said Eugene Lee, the vice president for Singapore’s East Coast operations. The flight is more resistant to downturns than some other premium routes because of the length of the trip — 18 hours or more each way — and the fact that the flight depends as heavily on passengers in the energy, mining and pharmaceuticals industries as those in financial services, Mr. Lee said.
Airlines reported sharp declines in passenger traffic for September. Hotel occupancy rates are down, and corporate travel managers are demanding new concessions on previously negotiated deals. Cancellations are starting to rise even at four- and five-star hotels, which previously seemed immune to the economy’s travails.
Months ago, the nation’s airlines, which are grounding some of their older jets, announced plans to cut 8 to 10 percent of their domestic flights after Labor Day, so traffic was expected to be down. At the same time, the airlines planned to raise fares on their remaining flights.
But passenger traffic is down beyond the cuts already planned. To be sure, fall is usually a slower season for air travel than spring and summer. Until the holiday season begins at Thanksgiving, flights are dominated by business travelers. So the slower traffic reflects the impact the business crisis is having on the airlines. In September, the top seven airlines averaged a 9.47 drop in domestic passenger miles traveled compared with September 2007. Domestically and internationally, the major airlines carried 9.2 percent fewer passengers than in September 2007.
Fares are 15 to 25 percent higher on many routes than they were a year ago. But that portion of the strategy seems to have stalled.
“After 21 increases, almost one a week for the last year, we didn’t see any after July 4,” said Rick Seaney, whose booking site, Farecompare.com, closely tracks airfares. “There is a consensus in the industry that they pretty much have hit the end of the rope on fare increases.”
Hotels are also feeling the slowdown. In September, domestic hotel occupancy was down 5 percent from the previous September, according to Smith Travel Research. And the higher-price segment of the hotel industry, which had been holding its own, now also seems to be feeling the pain.
“For the last two weeks, cancellations of existing reservations are running about 50 percent above normal” at full-service hotels, said Bjorn Hanson, an associate professor at the Tisch Center for Hospitality, Tourism and Sports Management at New York University.
That niche — including five-star hotels and four-star hotels that do major business in conventions and meetings — has been propped up by corporate deals negotiated last spring, when “the balance of power was still on the side of the sellers,” Mr. Hanson said. While rates remain high, Mr. Hanson said, corporations locked into hotel contracts are intensely “negotiating for concessions — free breakfasts, free use of fitness rooms, no charge for business center services, free late checkout.”
Third-quarter profit fell 28 percent at Marriott International, which is considered an industry bellwether because of its big global presence and its wide range of hotel brands, from midlevel lodgings like Courtyard by Marriott to five-star luxury hotels like Ritz-Carlton.
“At the Ritz-Carlton Central Park, normally filled with investment bankers and their clients, the entertainment industry and diplomats are filling rooms and restaurants now,” Arne Sorensen, Marriott’s chief financial officer, said.
Other full-service Marriott hotels are marketing more heavily to travel discount programs like those of the AARP and AAA and to government travelers on per-diem allowances.
Fare sales are even proliferating in the most lucrative segment of the airline market, international premium travel, where the walkup round-trip fare for a business-class seat between New York and London has been in the $9,000 range.
Mr. Seaney recently read off some recent business-class sales and promotions, all with various advance purchase and other restrictions, from his site’s premium-class section. (Some are no longer available, but the airlines keep adding new ones.) “Delta, business-class to Europe, 50-day advance purchase, $1,700,” he said. “Lufthansa on Sept. 16 had a business-class deal to England from New York and Chicago, a little over $1,000 each way.”
Last Friday, British Airways, one of the major players on the intensely competitive trans-Atlantic market, said that its full-year financial projections were at risk because long-haul premium traffic declined 8.6 percent in September from September 2007.
So far, the niche at the top end of the premium market, boutique business-class service by a handful of airlines, has apparently not been seriously affected by the turndown. But even there, discounts are showing up.
The new British Airways subsidiary OpenSkies, which flies 757s configured with two classes between New York and Paris, is starting a new route between New York and Amsterdam next week. Round-trip promotional fares for the top-niche business class are $1,776 and about $1,000 for the other cabin, called Prem+, which OpenSkies says is similar in quality to business class on other airlines, but priced and coded to accommodate increasing corporate travel prohibitions against flying on business-class tickets.
Singapore Airlines, which started all-business-class daily service between Newark and Singapore last May in luxurious long-range Airbus A345s, recently began a daily route between Los Angeles and Singapore. The usual round-trip fare is around $8,500, but last week Singapore introduced a discount fare — $5,999 — available on Mondays, Tuesdays and Wednesdays.
The standard fare remains in effect for the peak travel days, Thursday through Sunday, when flights are often sold out, said Eugene Lee, the vice president for Singapore’s East Coast operations. The flight is more resistant to downturns than some other premium routes because of the length of the trip — 18 hours or more each way — and the fact that the flight depends as heavily on passengers in the energy, mining and pharmaceuticals industries as those in financial services, Mr. Lee said.
The New York Times
1 comment:
I guess the travel industry will recover again in the spring, 'cos people cannot do without going on vacation. The only thing is that, probably the cheaper destinations will be mostly visited this year.
I am hopeful as a travel industry employee.
Christophe, London
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