If you travel a lot, I’m sure you’ve had many of the same experiences I’ve had lately. Smaller planes as airlines try to save on fuel. Fewer routes and less capacity. More last minute schedule changes and delays. A greater risk of getting bumped from your flight.
We’re now seeing the full effects of nearly two years of rising fuel prices (although the trajectory has changed lately) and an economic downturn that is affecting travelers and travel suppliers in almost every corner of the globe.
According to OAG (Official Airline Guide), the number of domestic flights in the U.S. is expected to fall by almost 11% and capacity by 9% in the 4th quarter of 2008 compared to the same quarter last year. The result will be 21.4 million fewer seats during the last three months of 2008 – the busiest travel season of the year. Globally, the estimates are only slightly better – a 5.2% drop in capacity, 6.1% decline in the number of flights and 46.3 million fewer seats. And 219 of the world’s airports are losing scheduled air service altogether. [You can find more on the OAG’s analysis by clicking here.
The International Air Transport Association reports that international passenger traffic declined 2.9% in September, the first time since the SARS crisis in 2003 that global passenger traffic has shrunk. And international load factors fell to 74.8% in September.
When you combine falling demand with higher operating costs, it’s hardly surprising that airline bankruptcies have risen sharply – and could double over the winter, according to some analysts. Thousands of travelers have been stranded in the past couple of months because of airline failures in Europe. And airline consolidation seems certain to accelerate around the world.
It’s not just the airlines, though. According to STR Global, hotel occupancy is down, although higher rates are keeping revenues stable for the time being. [You can find the September report here.] Hotels lose about 4 customers for every 10 fewer airline passengers.
And more than half of the large businesses surveyed recently by KDS, the Paris-based travel IT company, plan to reduce travel between now and the end of March 2009.
Put it all together and there’s no question that 2009 is going to be a tough year for travel and tourism. But I have a lot of confidence in the resilience of this industry.
While the US and Europe bear the brunt of the downturn in travel, the WTTC sees continued growth in travel GDP in such key markets as China, India and the Middle East, although growth rates have slowed. Travel and tourism in Latin America is growing faster this year than it did in 2007, according to the WTTC. Growth in these countries and regions is helping to offset declines in other parts of the world as well as creating future travel demand.
Even though businesses and consumers may cut back on travel in the short term, travel plays an increasingly important role in how we do business and how we experience the world around us. More people from more regions of the world are traveling to more destinations than ever before. The economic downturn may slow that trend for a while, but it won’t stop it.
Our challenge as an industry is not only to manage through a difficult economic environment. It is also to build an industry that is economically and environmentally sustainable – that can succeed in good times and bad. If we do that, the long-term outlook for the travel industry will be brighter than ever.
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