Entries in the Category "Travel Industry Analysis"

Travel Costs To Rise in 2013

The cost of travel is projected to strongly increase in 2013. This is despite weaknesses in the U.S. economic recovery, downturns in Latin America, slow growth in Asia, and continued flat to negative growth in Europe. In a white paper just released by the Global Business Travel Association, a survey of major U.S. corporate travel buyers indicated price rises that included:

• 4.6 percent in domestic economy airfare, to $429 per trip;
• 8.3 percent in international economy airfare, to $1,318 per trip;
• 3.7 percent for domestic hotel rates, to $161 per night; and
• 8 percent in international hotel rates, to $297 per night.

Pricing pressures are also being felt locally. Cleveland hotel room rates are edging up due to a stronger local economy and a shrinking CBD inventory. Two major properties, The Crown Plaza (converting to Westin in 2014) and Embassy Suites (converting to rental apartments) shut down in 2012. The Horseshoe Casino has also blocked significant room nights in the Renaissance Hotel, Marriott Key Center, and Ritz Carleton properties increasing demand in remaining hotels. In addition, strong forward booking for the new Cleveland convention center threatens to absorb new room inventory coming online in the next 36 months.

With years of depressed room pricing, Cleveland hoteliers are relieved to see broad sunlit uplands ahead. But remember, CWRU employees, students, and their families can still get relief with university-negotiated hotel rates. Visit the CWRU Travel Services website for preferred-vendor discount pricing.

Airlines Respond to Soaring Fuel Costs, Japan

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Major airlines have moved aggressively to rationalize fleet use in the wake of higher jet fuel prices. With a jump of more than 60% since last summer, Delta, Continental Holdings, and Air Canada have all trimmed growth plans for the remainder of 2011.

Delta has announced a 25% reduction in flights from their Memphis hub with a corresponding 8% drop in passenger capacity there. Delta's overall U.S. domestic capacity will drop from a 2% planned increase to a 3% reduction. Transatlantic service will be cut by 4%, while a planned 13% increase to Asia will be trimmed to 4%. Revenue is expected to drop by some $150 million due to events in Japan.

Continental Holdings has announced flat capacity growth, down from an overall expected year-on-year increase of 3%. Expansion of international capacity at Continental-United will continue at 3%, but will be offset by a 3% reduction in U.S. domestic seat availability.

Air Canada has also come under increasing fuel-related pressures announcing layoffs of 600 staff across its network. Cancelled routes include Ottawa-Washington Dulles, Montreal-Washington Dulles, Calgary-Chicago, and Calgary-San Francisco.

2011 Travel Costs Up, Japan Impact Uncertain

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The negative effects of the recent global economic downturn have begun to fade for the U.S. travel industry. However this good news for battered hotel and airline companies is bad news for business and leisure travelers.

Airfares are expected to jump 20% by this summer driven by higher fuel costs, industry consolidation, smaller fleets, and a 3% jump in U.S. business travel. In January and February, CWRU airfares reached an average of $508 per trip, already a 16.5% increase from 2010.

After significant deflationary pressures in 2008-10, national hotel rates are averaging $147.30 per night in 2011. This is up 4.2% from last year and is expected to trend higher in 2012. Local Cleveland-area hotels report considerable occupancy and margin improvement for Q4 2010 with a strong 2011 expected.

One bright spot for consumers has been rental car pricing. After two years of increases spurred by shrinking fleets and industry consolidation, rates are expected to fall in 2011-12. Corporate CWRU contract rates for Enterprise Rent-a-Car and sister company National Car Rental range from $35-44/day versus a 2011 $52.60/day U.S. composite.

The great unknown is what Japan's troubles mean for the U.S. and global economies. Airlines already are seeing significant declines in passenger volume and revenue to Japan. Continental-United has reported shrinking traffic to its Tokyo-Narita hub, while Delta has suspended service to Tokyo-Haneda from Los Angeles and Detroit. American Airlines has seen a 25% drop of inbound Japan passenger volume.

Early estimates indicate a ripple effect from the Japanese disasters could shave .5 to 1% from 2011 U.S. GDP growth, dampening demand for business travel. Any decline combined with surging jet fuel costs (up 60% from summer 2010) could spark renewed airline capacity freezes and schedule reductions. The hotel industry will shadow any airline decline, especially business and conference segments that have only recently returned to profitability. For now, it's just a waiting game for travel consumers and providers before the true impact of Japan's difficulties becomes clear.