Thursday, 27 November 2008
KCBS: Holiday travel bargains?
KCBS called today to ask about whether the decline in the economy has made bargain airfares available for holiday travel -- and if so, how to find them. For my answers, you can download the mp3 podcast (5 minutes).
A lot of travel is discretionary, and both individuals and businesses are cutting back on travel spending. That means demand for travel services such as airline seats and hotel rooms is down; it also means that those who are travelling are searching harder for bargains. last week at the PhoCusWright conference, for example, I heard representatives of Google report that they've seen a noticable spike just recently in searches for phrases like "cheap airfare" and "discount airfare".
But if demand for air travel is down, so is supply. Airlines are determined not to repeat the mistakes they made after 11 September 2001, when they kept too many planes empty planes in the air. This time around, airlines are cutting flights from their schedules, reducing frequencies, using smaller planes, or shifting equipment to routes they think will be more profitable. For airlines based in the USA, that means international routes in particular: Even while cutting systemwide capacity, for example, Delta is adding flights to more places all over Africa than have had service from the USA or on a USA-based airline in decades.
Airlines are also trying harder to make sure each passenger pays as much as they are willing, and no less. Airfares didn't rise as much as fuel prices did this spring and summer, but neither have they fallen as much fuel prices have this fall. There are always some people willing to pay almost any price for business meetings or family emergencies, and the unrestricted, last-minute, last-seat "walk-up" fares for these people are higher than they have been in years. Airfares, like oil, have probably already passed through their all-time historic low, I suspect, and as oil gets more scarce the long-term trend in airfares is bound to be upward.
So bargains do exist, but only where and when airlines have misjudged demand. And those bargains are fleeting, since airlines are quicker than ever to adjust their schedules and capacity, especially around the holidays, to match changes in demand.
Hotels are using increasingly complex pricing and revenue-maximizations systems modeled on those used by airlines. But they can't readily change how many rooms they have available, or where, the way an airline can manage its supply of seats by shifting or grounding planes. As a result, the downtorn in the economy and travel has had more effect on hotels than airlines.
I had to go to Los Angeles last week and Chicago this week, and I'll be Washington next week for a workshop on civil liberties and homeland security (now wouldn't that be a novel idea?) organized by the staff of the House Committee on Homeland Security. For each of these trips, I've found reasonable airfares -- not great but not terrible, as long I was flexible about my schedule. (Pick your preferred airline or exact flights, or insist on nonstops, and you could pay three or four times as much.)
As for places to stay, the rates published by hotels in all of these places have been high. But I've found 4-star hotels that are normally US$200 or more a night -- and are still charging prices like that if you book directly or through full-price channels -- dumping rooms on Hotwire.com or Priceline.com for $100 a night or less, as long as you are willing to prepay in full before you know the name of the hotel. [Addendum: Similar anecdotal evidence from Peter Rukavina, on business in Boston this week.]
Few hotel executives at the PhoCusWright conference would admit how many rooms they were having to offer at steep discounts, but it's clear from the prices available on Hotwire and Priceline that many are. Priceline's CEO told me he preferred to thiink of his company as "helping" hoteliers fill otherwise-empty rooms, rather than profiting from their pain, but didn't deny that he's getting a lot more discounted ("distressed") hotel inventory than last year. At the same time, hotels are trying to limit their discounting to "white-label" channels that obscure the hotel name (such as Priceline or Hotwire) or obscure the room rate (such as when a hotel room is booked as part of a package with airfare or other services, without the prices of the package components being broken out -- "We love it when you sell our hotel rooms as packages", said one hotel executive at PhoCusWright). That way the hotel can still charge a premium price to brand-conscious travellers who insist on a specific hotel, and can offer a bogus but misleading (and effective in getting people not to shop around) "lowest rate guarantee" while actually offering rooms for half or a third of that "guarantted lowest rate" through white-label channels or tour operators or as part of packages.Link | Posted by Edward on Thursday, 27 November 2008, 20:50 ( 8:50 PM) | TrackBack (0)