Fares up, rates down as summer approaches

Good news for the travel industry is not always good news for bargain hunting frequent travelers.

Growing demand on the part of both leisure and business travelers means . . . you guessed it . . . higher prices. Those dirt-cheap deals the travel industry has used to keep us on the road and in the skies over the last couple years will get tougher to find in coming months.

Here’s why:

>FARES: In February, the average price to fly one mile in the U.S. increased 5 percent says the Air Transport Association. Fares are rising because airlines have been able to reduce their supply of seats by parking planes in the desert. Now that competition among travelers for the remaining seats is heating up, fares will rise accordingly.

>FEES: In addition to higher fares, airlines will continue to tack on extra fees to help firm up their mushy bottom lines. In January alone, airlines pulled in half a billion dollars in “ancillary revenue,” a term used to describe just about any airline charge other than fare [such as fees for baggage, ticket changes, upgrades, food, etc.],” said Kevin Chrissey, an airline analyst with UBS who was speaking at the Strategic Travel Symposium, a recent conference to which your TICKET editor was invited by the National Business Travel Association.

>AIRLINE GROWTH: Delta Air Lines, now the largest airline in the world, had to adjust its profit forecast for this quarter based on a 30+ percent jump in corporate travel volume and revenue in February. Also, Delta just announced that it’s jumping back into the hyper-competitive California Corridor with four daily round trips between SFO and LAX using both B737 and regional jets. It’s also adding a new shuttle service between New York and Chicago.

>SUMMER: It’s going to be a busy summer. Remember last summer nearly every flight was full and/or oversold? UBS’s Chrissey warned it could happen again this summer now that demand is rising along with the economic outlook. If you’ve got plans to fly on peak days (Memorial Day, July 4, most of August and Labor Day) you should start looking at fares now and go ahead and book.

>HOTEL GLUT: For hotels, it’s a bit of a different story. There’s been a huge boom in hotel construction over the last five years. For example, United’s Hemispheres magazine this month includes a colorful article about a handful of the 59 new hotels (yes, 59!) that have opened in NYC in the last 18 months. So, with a lot of extra supply out there, and only a slow return in demand, hotel rates should remain relatively flat over the next year.

>BOOKINGS UP: With all the great hotel deals out there, demand is starting to pop. For example, advance bookings at the Best Western chain were up 16.4 percent during the second week in March compared to the same time last year. (They were up over 6 percent for the month of February.) That’s significant considering Best Western’s the largest hotel chain in the world. Disclosure: I write a blog for Best Western.

>BUYER’S MARKET: The buyer’s market for hotel rooms should continue over the next year, said hotel analyst Bjorn Hanson at the symposium in New York. “For many years, I’ve advised consumers to call the hotel directly and ask for a lower rate, and they’d get one about 20 percent of the time. These days, they are getting a lower rate 50 percent of the time,” he said.

>RATES: To further illustrate his point, Hanson said that rates at luxury hotels in New York City were down a whopping 40 percent in 2009 compared to a high in 2006. And he referred to three different forecasts showing nationwide rate declines of 2-3 percent for 2010.

So folks, I’m eager to hear about your observations and plans for travel this year. Have you noticed that prices are increasing? Are you planning to travel more this year than last year? When do you plan to firm up your summer travel plans?

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