U.S. airlines have always been an easy target for criticism. Their lack of service, lack of attention to detail and general mismanagement have made them the butt of many jokes over the years. It's all been well deserved. My flight today from Cleveland to Nashville had no issues! It was quite a pleasant surprise that a flight went off without a hitch.
The hotel industry is a close relative to airlines (many hotel chains were started by airlines), and it is holding its collective breath as the airlines try to sort out the latest mess. High fuel costs have airlines resorting to some things that once were sacred. More airlines are charging to check bags, for drinks and meals and even to ensure a specific seat assignment (window or aisle). All of this is being done to increase revenue to offset the rising price of fuel.
Travelers have had to endure higher airfares many times throughout the years, and even in the day of the discount airlines, it is a reality most business travelers—the Holy Grail to hotel operators—have learned to deal with. Combine that with airlines cutting routes and reducing the number of flights, and there’s a potential for disaster in the hotel industry.
While things are not completely rosy for hotels, the economic landscape isn’t complete doom and gloom yet. But it could get there quickly.
Reports indicate that many of the nation’s top 25 markets are starting to see a decline in the number of air travelers, which of course, means fewer roomnights sold for hotels.
Hotel owners in Phoenix, Las Vegas and San Diego, among many others, are starting to see kinks in their armor when it comes to visitors. Companies are decreasing air travel. Leisure travelers are tightening the belt. Digital teleconference, which has been ballyhooed for years, is becoming a reality that many businesses are turning to to reduce travel costs.
It is estimated that airlines will lose $10 billion this year—and many of them will go bankrupt because of the high cost of oil ($135 per barrel, up from around $65 a barrel a year ago). I’m a frequent flier between Cleveland and Nashville, and Continental will cut that route from its itinerary in September. Hello, Southwest.
The hotel industry has been able to maintain average daily rates, which is a sign that it has mastered the art of yield management. But, the industry’s dynamics are not getting better and some industry executives believe the business is in for a two-year decline. I’ve been reluctant to buy into that, but the more I read and hear about the way the airlines are handling the current environment, the more I believe that the hotel industry is in for rocky couple of years.