Travel 2008 - A Tough Year
December 24, 2008 – 7:45 amHigh costs put pressure on travel industry margins
The travel industry is ending a very bad year, where fuel costs pushed prices to the brink, and customer demand fell. Airlines, in particular, suffered greatly in 2008, and there are now less of them than there used to be. Aloha, ATA and Skybus all went under in 2008, along with 80 other airlines worldwide.
Not only did the airline industry contract by number of carriers, the carriers that remained contracted by ending service to less than profitable hubs. Now airline customers have fewer routes to choose from in many areas. Plus, the standard of service was cut back by airlines, when the big airlines all started charging customers for amenities that used to be included free.
Beleaguered consumers skip traveling in 2008
Unfortunately, that means travelers are probably paying more for less than they were in 2007 when it comes to air travel.
Fares had been rising at a healthy clip all year, with gains above 5 percent each month, thanks to healthy demand and fewer flights. Yields were up 12.5 percent in September, the first month of the most severe flight cutbacks.
Then, the recession started to take its toll.
Business travel fared no better. Even the high end business travelers cut back on their plans.
The upper end of the travel industry has insisted that its increased emphasis on $20,000 first-class airline seats and $1,000-a-night hotel rooms was justified because the rich were different. The wealthy would always travel, claimed the developers of new luxury resorts and the executives of every airline that unveiled another pricey, front-cabin offering. But the rich aren’t different — except that they’ve curtailed travel faster than the rest of us. According to I.A.T.A., the worldwide airline trade group, premium-class travel dropped 8 percent in September, 6.9 percent in October, and “early indications for November point to further large declines.” Occupancy rates at luxury hotels have plummeted faster than the lodging industry at large, and even fancy brands such as Ritz-Carlton and Four Seasons are suddenly discounting like crazy and throwing in extras like free nights and gratis breakfasts.
The trends for 2009 would indicate more of the same. Hotels are cutting prices in the anticipation that fewer travelers will be staying, and the airlines continue to face an uncertain future.
Certainly many consumers used credit to finance their travel. Now, with credit all but dried up, few are plunking down the big money on “dream vacations.”
If the middle class isn’t traveling, and the “super-rich” aren’t making up the difference by booking high end accommodations, it’s safe to say that 2009 will look a lot like 2008. Travel is down far enough, in fact, that many major destinations like Las Vegas are announcing layoffs in industries that have remained relatively unscathed by the recession. At least until now. More ominous, a number of construction projects in overbuilt locations have been stalled as investor money dries up.