The price of travel is going up. Not surprising, you say. Seems like pretty much everything goes up, at least a little, every year. A fact of life, you say.
Having been a small businessman for three-and-a-half decades, I pretty much concur. Most prices rise a little at a time. It’s a fact of life in our capitalistic economy. Most economists will even tell you that gradual price appreciation is a positive thing.
What we are facing in pockets of the travel industry next year is not gradual and will not be positive for travelers. It will be sudden. It will be a lot in some places and the increases, categorically, are for different reasons. I’m seeing it as we build our travel programs for next year, negotiating prices and contract terms. Let me offer my take.
Hotels – The price of hotels is going up mostly for one reason, demand vs. supply. For the last several years, new hotel construction has been tempered by poor economic conditions, pretty much around the world. Fewer new hotels means less competition for existing rooms, so prices automatically tend to rise. Existing hotels, accustomed to annual price increases, found the economy and competition wouldn’t allow much in the way of increases, even though rising costs pressured profits. Hotels and motels, like many businesses, sucked it up and held the line on prices.
Now, many are trying to pass on five years’ worth of increases in one shot. The Embassy Suites Logan Airport went from $159 to $215, for the same month, same day of the week, from 2014 to 2015. Other hotels sported similar price increases. New York is up $70-80 a night over last year. Key West is up 20-25%. If you are planning family vacation travel next year, my advice is to start shopping room rates early, there won’t be many in-season sales for 2015 (until new hotels start springing up in 12-18 months). So far, the hotels are not playing the new game the airlines have created. But they certainly could. Read below.
Airlines – This is entirely another story, worthy perhaps of congressional investigation (on second thought, never mind, Congress has way too many issues already). The airlines, as a group, are price fixing by withholding inventory from public sale.
If you don’t believe me, check Southwest’s schedule for April. Lots of flights are labeled as “not available” even though they are 7-8 months away. How could that be? Prices are also extremely high on the limited “available” flights. Ditto for United, except all flights are available, just at totally ridiculous prices. By withholding seats until closer to departure, they can increase the average price paid and increase profits. On the surface this is not illegal, unless they have all gotten together and decided to do this as a group. I will suggest that is the case. Far too much coincidence in timing and process to believe otherwise.
Restaurants – If you go to the grocery store, you know that food prices have risen considerably in the past couple of years. Of course, restaurants have to pass on those costs. Because I’m not a restaurateur, I can’t comment on the specific finances of the situation, but prices are on the rise. This could be one area where the price increases are most justified. And most unavoidable. Expect meat, seafood and fresh vegetable prices to be up the most.
Bottom line, expect to pay more for travel next year, whether you travel as part of a group, or independently. But let’s hope supply and demand drive prices, not huge corporations, who through mergers, have eliminated competition and put themselves in a position to goose the American public.
And that, is just one man’s opinion.
Mark HoffmannP.S. If you would like to attend the Tour Preview Day at the Doubletree Hotel this Saturday, there are a few spots still available! Give us a call at (916) 361-2051. If you’ve already made a reservation thank you and see you there!