One year ago, rising oil prices were taking travel costs to new heights and business travelers were feeling the pinch. Now travel prices are falling again, fueled by the global recession, and airlines, hoteliers and car rental companies are taking evasive actions to survive. Here are ten trends caused by the global economic meltdown, and what they will mean for business travelers in 2009:
1. Air travel on sale. With fewer travelers in this sputtering economy, airlines are desperately trying to fill seats. From January 2007 through July 2008, U.S. airlines raised fares 32 times, according to FareCompare.com. Less than two months into the new year, U.S. airlines have initiated 25 fare sales and prices are back to pre-2007 levels in many markets. If you still have funds in your travel budget, this is a good time to fly.
2. Capacity cuts continue. To counteract declining travel demand, U.S. airlines continue to trim their schedules. Most have already eliminated 10% to 20% of domestic flights and the Air Transport Association projects the seven largest U.S. airlines will cut another 3% to 10% this year. This means fewer seats available for last-minute purchase and more involuntarily denied boardings on oversold flights.
3. Ancillary fees proliferate. Although base airfares are declining, airlines are unlikely to relinquish the added revenues from those annoying ancillary fees for checked luggage, meals and snacks, in-flight entertainment, seat selection and more. United Airlines expects to earn $1.2 billion in ancillary fees in 2009. It's difficult to avoid most fees unless you are an elite member of that airline's frequent-flier program. Continental is the only major U.S. airline not charging for meals in coach and Southwest has shunned a la carte pricing, at least for now.
Unfortunately, hotels are learning from airlines to replicate these most successful, but hugely unpopular, fees. Some hotels are quietly removing amenities like cookies or fruit from lobby areas, or newspapers or toiletries from guest rooms. In other cases some hotels have begun charging guests for formerly free services like Internet access.
4. Trimming and downgrading travel spending. A recent survey by the Association of Corporate Travel Executives found over 70% of corporations trimming their travel budgets by 10% to 20% this year. Many corporations are downgrading travelers from business to economy class on long-haul flights and lowering the hotel class used for business travel. If you're lucky enough to fly business class and rent at upscale hotels, you'll have an easier time finding flights and rooms.
5. Pursuing the business traveler. When times are tough, travel suppliers focus on their best customers, those who generate most of their revenue and profit. Even in this dismal economy many airlines are upgrading first- and business-class cabins and service, particularly on long-haul routes. But the pursuit of business travelers isn't limited to long-haul, global airlines. Southwest recently implemented priority boarding and free cocktails for full fare "Business Select" travelers, and pushed families with small children back in the boarding process. Southwest has also installed special seating with power outlets and USB hookups in their boarding areas, and is touting its no-change-fee policy to attract business travelers. Southwest and jetBlue are also among a growing number of airlines testing Wi-Fi in-flight.
6. International bargains abound. In recent years, airlines expanded international service to capitalize on the booming global economy. Long-haul markets were a safe haven for airlines eager to avoid low-cost competition at home. Now airlines everywhere have trimmed international capacity by as much as 15% and that may not be enough. The International Air Transport Association reported premium (first- and business-class) travel declined by 13.3% in December over the previous year. A resurgent U.S. dollar is discouraging foreign visits to this country, resulting in more unsold seats. Airlines have responded with deeply discounted fares for international travel. I've seen international business-class fares to Europe around $1,000 each way and just a few hundred dollars more for Trans-Pacific flights. Now is the time to seize these bargains before airlines reduce their capacity enough to match slumping international travel demand.
7. Empty hotel rooms and rental cars. Forty percent of hotel stays are tied to flights, according to a recent report produced by Promedia Travel. With fewer flights and fewer air travelers, hotels and car rental businesses are hurting too. While airlines can reduce capacity relatively quickly by grounding airplanes, it is more difficult for hoteliers and car rental companies to dispose of excess capacity, paving the way for bargains in this buyer's market.
8. Decline in meetings and attendance. Meetings are another casualty of the economic downturn. A recent survey conducted by Meeting Planners International and American Express indicated 7% of 2009 meetings had already been canceled, and meeting attendance is expected to be down by 5%. Meeting cancellations and fewer attendees also adversely affect hotels. If you are planning a meeting, this is the time to get a sweet deal.
9. Right-sizing the regional jet (RJ). Originally built to carry under 40 passengers, RJs have been stretched through the years to hold 50, 70, 90, or as many as 100 passengers. Though most RJs with fewer than 50 seats have disappeared and are no longer manufactured by Bombardier and Embraer, airlines continue to downsize and deploy RJs on routes formerly served by larger Airbus and Boeing aircraft. RJs have even entered service on the shuttle between Washington and New York, a route once exclusively flown by larger Airbus 320 series and Boeing 737 aircraft. While the newer RJ models offer more personal space, many passengers still don't like flying smaller airplanes, which will also be more crowded with fewer seats to fill.
10. Resurgence of Internet fares. When travel demand collapsed after the 9/11 attacks, airlines, hoteliers and rental car companies discovered a new way to dispose of un-saleable, distressed inventory through the rapidly growing Internet. Travel suppliers found they could advertise and sell distressed, last-minute inventory at little cost. Third-party websites like Expedia, Orbitz, and Travelocity, and "opaque" bidding sites like Hotwire and Priceline, flourished as travelers discovered bargains in cyberspace unavailable elsewhere. As travel demand recovered, suppliers offered fewer deals through these channels. With the industry in turmoil again, distressed inventory is prevalent once more on third-party websites, and travelers are likely to find better deals online than rates negotiated by their corporate travel departments. For those independent or unmanaged business travelers not bound by a corporate travel policy, great savings could be just a few mouse clicks away.
Send David your feedback: David Grossman is a veteran business traveler and former airline industry executive. He writes a column every other week on topics of interest and concern to business travelers. E-mail him at firstname.lastname@example.org.