The global recession has taken its toll on airlines, hotels and the rest of the travel industry. Travelport market research data show air traffic bookings in June were down 12% from a year ago. But for consumers – particularly leisure travelers – the result is a very attractive summer travel season as airlines and hotels entice travelers with lower fares and promotional packages.
It’s all about supply and demand, and there’s a lot more travel supply than there is demand today. Hotel occupancy rates in May fell to 56% in the U.S, 59% in Europe and 61% in Asia Pacific*. June aircraft load factors at several major airlines in the US were stable or even slightly higher than last year, but that is on the back of substantial capacity cuts (a feat which is not easily replicated on the lodging side). Some major European airlines saw load factor drops in June.**
To generate more demand, airlines and hotels are cutting prices on key routes and in key markets.
On the London/New York City route, for example, the lowest air fares in June were down 46% from London and 35% from New York compared to June 2008. Overall, the lowest economy cabin fares in June fell by 11% globally and by 23% in the U.S. year over year. The number of published fares in June increased by 16% globally and 34% in the U.S. from last year, so consumers have a lot more choice. ***
Hotel deals also abound. Average daily rates (ADR) for hotels in the top global cities dropped by a much as a third from April 2008 to April 2009. This includes ADR declines of 33% in Madrid, 32% in London, 31% in Sydney, 26% in New York and Rome, 22% in Paris and 21% in Hong Kong.* The number of hotels offering promotions such as four nights for the price of three, free WiFi and additional loyalty points continues to grow.
Adding to the savings for travelers is the decision by online travel agencies (OTA) like Orbitz and CheapTickets.com to eliminate flight booking fees. OTAs are also playing a big role in driving travel packages and promotions.
At the same time, travelers with flexibility in terms of when they travel are finding a lot of last-minute deals as airlines and hotels compete to fill seats and rooms.
Special promotions, lower air fares and reduced hotel rates are helping ease the impact of the global economic crisis on the travel industry. The 12% decline in air traffic bookings in June was an improvement over the 14% decline in May. The June number was also better than forward booking trends suggested. Bookings for June/July/August have been relatively strong during the last month, driven by price promotions and last minute demand for summer travel. **
It appears to us that we may have reached bottom in terms of demand declines. Real recovery in demand, of course, will take longer – the end of 2009 at the earliest and more likely 2010. Even then, forecasters see gradual improvement over the next few years, not a big surge in demand.
For now, though, there are a lot of good opportunities for deal-hunting travelers.
Sources:
* STR Global
** Travelport market research data
*** Travelport GDS proprietary data base
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