Money-saving guide 2002: Hard times for the travel industry spell lower prices for travelers. Paula Szuchman reports on what you can do to stretch your dollars now.
Late last year, Cathay Pacific announced the deal of the century: a $554 round-trip fare from New York to Hong Kong. More astounding than the low price was the number of strings attached: zero. There were no rescheduling fees, and you'd get a full refund if you changed your mind. Because the ticket had to be booked on the airline's Web site, you automatically scored 10,000 bonus miles on Cathay partner American Airlines, which, combined with the 16,000 you'd earn in-flight, added up to a free ticket anywhere in the continental United States.
Sadly, that special fare is no longer available. But there are plenty of other great deals to go around. For the foreseeable future, airlines, hotels, and other travel companies will continue to do what they have to do to stay afloat, luring back the leery with discounts and incentives. It's expected to be at least somewhat successful: the Travel Industry Association of America predicts that domestic travel expenditures will increase slightly this year over 2001, but will remain 5.6 percent below 2000's figure.
The result: the seller's market of 2000—a record moneymaking year for travel providers and a record spending year for travelers—has given way to the buyer's market of today. By the end of last year, it seemed the whole world was on sale, from airline seats to hotel rooms. The good news for you: it still is.
The air transportation industry's turn for the worse began as far back as last spring. Hurt by a slowing economy and a consequent drop in business travel, most of the major airlines were struggling. Then came September 11 and the government bailout; by November, they'd used up most of the $5 billion in federal cash and were still hemorrhaging millions a day. Foreign carriers also suffered losses, prompting layoffs and service cutbacks. A few, including Ansett, Canada 3000, Sabena, Swissair, and Transbrasil, ceased operations (all, however, are in various stages of resurrection).
The losses are a result, in part, of drastically lower fares, such as that $554 Cathay Pacific ticket to Hong Kong. Such discounting is likely to continue for some time, and will appear across the board, whether it's Hawaii for $300 or the Caribbean for $99. Even flights to Europe should be more affordable this summer, says Tom Parsons, president of Bestfares.com. "Traffic will be steady within the forty-eight states, as demand starts to rise and airlines add flights, but Europe will be down because people are still reluctant to go too far," he says.
Exactly how long the deals will last is anybody's guess: airlines won't discuss future pricing. But the current climate may have long-term effects, particularly for business travelers. Rather than buying unrestricted fares, which can cost 10 times more than less-flexible advance-purchase tickets, many business travelers have been either snatching up cheaper seats or simply staying home (teleconferencing provider Genesys reported that volume in the week after September 11 was up by 45 percent). Because the major carriers depend on business travelers for the bulk of their revenue, industry insiders hope the airlines will create more agreeable ways to get them spending again. "This will be a great time to restructure business fares," says Jon Ash, managing director of Global Aviation Associates, a consulting firm based in Washington, D.C. Already popular are Northwest's BizFlex fares: 50 percent off full coach rates with a two-week advance purchase and a one-night stay. According to the National Business Travel Association, the average round-trip business fare will rise only 3 percent this year—to $1,102—compared to an 8 percent rise in each of the last five years.
WHAT YOU CAN DO:
• Search the right places. Travel consultant Joe Brancatelli calls the array of current airfare deals a "bazaar," but also warns of looking too hard for the best bargain: "Don't spend three hours trying to shave twenty dollars off the price." The trick is finding good resources for one-stop shopping. Check out Brancatelli's weekly picks at www.joesentme.com and Bestfares.com's City Lowfare Search, updated three times a day with the lowest fares from your city to anywhere in the Americas.
• Go for special passes. Cathay Pacific's All Asia Pass, starting at $999, gets you to Hong Kong and up to 16 other cities. Passes from Europebyair.com let you fly among 150 European cities for $99 per leg.
• Get bonus deals. Look for promotions that give you extra miles or discounts for booking on-line or right away. Some airlines are also offering free stopovers; earlier this year, British Airways gave passengers flying from the United States to the Continent a two-night hotel stay in London.
• Keep tabs on the fares. If you know your travel dates in advance, start tracking fares five months ahead, so you'll be aware of the first break in prices. Fares typically go on sale up to two months beforehand, but lately, Parsons says, airlines have been extending the window to six months.
• Buy last minute. If you can wait, 11th-hour Web specials remain plentiful. SmarterLiving.com will e-mail you a weekly compilation of fares from your hometown.
• Keep checking. Make sure you reconfirm the price for your flight at least one week before departure; if the fare has gone down, most airlines will issue a voucher for the difference.
Just as the airlines have been suffering because of the weak economy and the aftereffects of September 11, so has the hotel industry. Too much supply—a result of rapid expansion in the late nineties—coupled with too little demand could lead to nationwide occupancy levels this year of less than 60 percent.
"We've seen a rate that low only seven years in the past seventy-five years," says Bjorn Hanson, an analyst at PricewaterhouseCoopers. With the construction of new rooms slowing, supply and demand should even out some time next year. But until then, the industry will be attempting to win back customers—with lower rates.
The hardest-hit sectors are those that rely primarily on air traffic and business travel, such as urban hotels, convention hotels, and resorts; mid-price and budget chains are less affected. Hanson says the U.S. cities that will have the best deals this year are Boston, New York, Washington, D.C., Orlando, Miami, Dallas, Chicago, and San Francisco. All had building booms over the past few years, and all depend on fly-in traffic to fill rooms.
But you can't always expect to find cheaper rates. While some hotels held fire sales immediately following September 11, many high-end properties have kept prices steady. "Discounting is a long-term losing strategy," says Cathy Enz, a professor at Cornell's School of Hotel Administration. "It's always harder to raise rates than to lower them." Instead, luxury hotels are focusing on regional markets and drive-in business; promoting weekend travel, especially to families; and creating value-added packages that pile up the perks. For example, the Paris Without the Jet Lag package at the Ritz- Carlton, New Orleans, costs $235 a night and includes a spa treatment, breakfast in bed, and parking. If you were to pay for each element individually, you'd be spending $465.
WHAT YOU CAN DO:
• Be flexible. Time your stay for fallow periods: city and convention hotels are quieter and less expensive on the weekends; resorts, midweek. Also, consider independent hotels, which may be having a harder time attracting guests. "Today's traveler is looking for the perceived security of chain hotels," Hanson says.
• Book early—or late. Hotels are adopting the "yield management" systems of the airlines: dropping rates on a slow day and then raising them again when business picks up. "Like the airlines, we're putting the price out electronically, and then adjusting it up or down according to the response," explains John Wallis, senior VP of marketing at Hyatt International. That means the same logic behind booking airline tickets now applies to hotel rooms: Get the best rates by reserving either early or very late.
• Learn to surf. The Internet is a great place to comparison-shop and find last-minute deals. Wanderluxe.com, debuting this month, promises to provide last-minute deals for top-of-the-line products. Luxurylink.com runs auctions that can save you 50 percent or more. But always call the property itself to see if a better deal can be had. "I can't afford to have someone quoting a $99 room and our own reservations agent saying $135," points out Steve Pinetti, senior vice president of sales and marketing for Kimpton Hotels & Restaurant Group.
• Ask about packages. Hotels are offering all sorts of blandishments—extra nights, breakfast, greens fees, spa treatments— to get you to stay. "Whether you're paying less or not, you're bound to be getting a better product overall," Enz says. But make sure the extras are things you really want.
• Join loyalty programs. To woo business from loyal customers, hotels are giving them special deals through their frequent-stay programs. Starwood's Preferred Guest program, for example, recently launched its own Web site (www.spg.com), which posts a litany of offers ranging from lower rates to bonus points for free stays or airline seats.
Because they're so dependent on air traffic and advance reservations, cruise lines have had a particularly rough time of late. Bookings dropped by 40 to 50 percent in September. Since then, rates have been slashed, ships dry-docked, and sailings canceled or brought closer to home. Both Renaissance and American Classic Voyages have filed for bankruptcy.
As in the airline and hotel industries, rapid expansion in recent years has brought an excess of cruising capacity, meaning some ships are selling berths for a song. "I've seen weeklong Royal Caribbean cruises—on the Voyager and the Explorer of the Seas, the ones with rock-climbing walls—starting at $499," says Jacquelyn Wolfer, president of International Tours & Cruises Fifth Avenue in New York. "The same trips would have gone for $1,500 last year." The Caribbean—where 70 percent of ships can be found at any given time—has been a good deal for some time and will remain so, says Janet Olczak, president of Cruise Specialists in Seattle, who believes that fares for European cruises will start falling soon as well.
WHAT YOU CAN DO:
• Use a travel agent. Agents have access to the best deals on the lines they do the most business with. Some fares (often called "fax specials") are so low that the agents aren't allowed to publicize them—you have to ask if any are available. Many agents are parlaying their own commissions into perks for clients—room upgrades, airport transfers, meal tickets, and shipboard gift certificates. A good agent will also recheck prices close to the departure date, and refund part of your money if the rate has gone down. Travel agency consortium Virtuoso.com can hook you up with a luxury cruise specialist.
• Stick with your favorites. Many lines offer special discounts for repeat customers, and the deals are getting better. Through Crystal Dividends, for instance, you can book an Asian or Baltic cruise this year and get half off almost any sailing in 2003. Industry consolidation is benefiting consumers in this regard; already, alumni of any Carnival-owned line (Carnival, Costa, Cunard, Holland America, Seabourn, Windstar) are entitled to offers on the other lines.
• Look for departures near you. Many companies are adding sailings from new ports to drum up more business. If you're within driving distance of cities such as Baltimore, Galveston, Mobile, Montreal, New Orleans, Seattle, and Tampa, you might not need to fly.
• Book early—or late. Cruise lines are eager for future bookings, so look for special incentives if you're willing to commit well in advance. Reserve your Christmas cruise now, Olczak says, and you could save as much as 60 percent. If you can wait till the last minute, www.icruise.com and www.cruisecheap.com have good deals on so-called distressed inventory: for example, a seven-night Alaska cruise on Princess for $599, down from the standard lowest rate of $1,849.
Since they also depend on advance bookings, tour operators are finding it as difficult as the cruise lines to plan their seasons. But, explains Cari Gray, spokeswoman for Butterfield & Robinson, "unlike cruise lines, we don't have a lot of inventory that's sitting vacant and needs to be filled. If we don't sell a trip, we don't run it."
For consumers, that means little discounting, as tour operators simply shift itineraries to the destinations for which there is demand. Because many of Abercrombie & Kent's American customers are choosing to stay closer to home, the company has added two more rafting trips on Utah's Green River and four more departures to Peru and the Galápagos, where, chairman Geoffrey Kent says, business is up 10 percent. "This year people are doing Machu Picchu instead of the Himalayas."
WHAT YOU CAN DO:
• Ask about extras. To encourage advance bookings, many operators are offering special perks, including additional travel insurance. Other incentives include independent departures, more dining options, and free hotel nights before or after your tour.
• Look into package deals. In general, consider buying your tour and airline tickets together. "Tour operators are great [for tickets] because they have incredible bulk buying power," says Wolfer. But always double-check the fare on your own to make sure you're getting a better deal.
• Surf the Web. Tour operators are using the Internet to aggressively market new destinations and to sell discounted distressed inventory to travelers who can make last-minute plans. iExplore.com has special offers from up to 130 operators, updated monthly.
While the major airlines have been bleeding red ink since September 11, most low-fare carriers have suffered far less. True, Midway stopped flying on September 12 (it's just getting back in the air), and Sun Country reverted to a charter-only operation, but others—including AirTran, American Trans Air, Frontier, JetBlue, Southwest, and Spirit—are planning to expand this year. The success of these low-fare airlines is great news for consumers, since their presence usually translates into lower fares for the communities they serve.
The bargain birds are shining for several reasons. Many use secondary airports, which are often less prone to long security delays. They're servicing markets abandoned by the majors' low-cost subsidiaries, such as Shuttle by United and US Airways' MetroJet. Their fares are a boon to cost-conscious fliers, particularly frequent business travelers. And Southwest and JetBlue, at least, are well financed, well managed, and simply better equipped to ride out economic storms, analysts say.
Europe's cheap carriers are finding success as well. U.K.-based Go hopes to carry more than 500,000 passengers to and from East Midlands Airport alone in 2002. Buzz plans to add nine new flights to France from London this month, plus some French domestic routes. EasyJet expects to become the U.K.'s second-largest carrier this year. It will have some competition from British Midland, which is launching its own budget airline this spring.
Some analysts have predicted that the shake-up among the majors will lead to an expansion of the low-fare sector here as well. JetBlue CEO David Neeleman remains skeptical: "I don't think we'll see a lot of new start-ups. We're doing great, but it's still rough out here."
Where The Deals Are
The global slowdown in travel has affected some parts of the world more than others. Here, the destinations with the biggest savings.
CANADA North-of-the-border trips are still a bargain for Americans: tourism here is expected to make a slow recovery this year, but the Canadian dollar continues its 28-year decline against the greenback.
ALASKA Look here for cruise deals, since a number of ships have been rerouted to Alaska from Europe; discounts as high as 50 percent are likely. People aren't planning as far ahead, so markdowns should show up this spring to encourage bookings for late summer.
HAWAII Although arrivals from the mainland have begun to bounce back, the decline in Japanese travel has been devastating. Amazing package deals include such goodies as free nights, a free car rental, confirmed room upgrades, food credits, and luau tickets. Ë la carte airfares may be high because of service cutbacks, so look for air-inclusive deals. Expect the deepest discounts in April and May.
EUROPE With Europeans traveling more within Europe this year, the drastic drop in U.S. visitors hasn't hurt the region terribly. But there should be bargains—even in major cities, even at the height of summer. The U.K., still recuperating from last summer's foot-and-mouth outbreak, was hardest hit and will have the most deals.
AFRICA Travel to southern Africa has held steady—Johannesburg-based Wilderness Safaris says it has 12 percent more bookings for Botswana this year—but the weakness of the South African rand continues to make that country particularly affordable.
AUSTRALIA A post-Olympics glut of hotel rooms and travelers' reluctance to fly long distances has caused prices to drop significantly in Sydney and throughout the country. Airfares, however, haven't decreased much, so the best way to save is with air-land packages.
ASIA Don't expect great deals in Tokyo, since the Japanese are traveling more within Japan, but Muslim countries (Malaysia, Indonesia) and more out-of-the-way spots (Cambodia, Vietnam, the Maldives) will be running specials. As in Australia, you'll save the most with air-land packages.