Marketing and pricing: August 2008 Archives

John McCain has taken enormous amounts of flak (the figurative kind, not the kind that brought him down over Hanoi) since he admitted he doesn't really know how to use a computer. The thing is, he probably deserves it. After all, so many travellers can use a computer or PC to check out airfares, hotels, resorts and so on, and so many of them are not spring chickens.

We have a survey to prove it. It seems that 'next generation' travellers, those people who embrace technology, with 71% using the Internet to search for travel information, aren't always kids. They are baby-boomers as well as from the 'echo boom' generation, and so are as old as 61. McCain, we know, is about 10 years older, but he has a young wife, so we figure he qualifies.

Is it working? The airlines' survival tactic has been simple: raise fares as much as you can and then cut capacity, assuming that the lowered supply will push up fares. The fare increases as you know are not easy to push through, and even when they're called fuel surcharges, people fight them. So the carriers are relying more on capacity cuts to lead to the natural auction-like effect that takes the supply and demand relationship into reality: fewer seats, people will pay more for what there is. We know capacity is down already, though it's only in the 3%-5% range. The big cuts come next month.

Well, the evidence would seem to be that something is pushing up fares, even as business travellers are trying to get around the trend. The American Express travel unit says that fares are indeed up, with international fares at their highest point in about a decade and domestic fares rising as well. Herve Sedkey, the AmEx global advisory services vice president, says that average domestic business fares are up $24 from a year ago and up $27 from the first quarter of this year, to $260, up almost 12%. International fares paid by business travellers are up to their highest levels since AmEx began tracking fares in 1999, to $1,980, up 11%, he says.

 Source: American Express Business Travel Monitor

The dinosaurs are watching. Or at least their keeper is. And so is Elvis. They'll be watching the Democrats in Denver this week as the party debates its national platform and nominates Senator Barack Obama as its presidential candidate. They're watching on behalf of a trade group for the tourism industry, from motels and hotels to gas stops to amusement parks like the dinosaurs' home, Gatorland, near Orlando, Fla., or entire cities where tourism in the mainstay, cities like Las Vegas. The ads will run in Denver and then in Saint Paul, Minnesota, where the Republicans are having their convention later in August, urging the parties and their nominees to do something about everything from "unnecessary waiting lines at airports" to "marketing the US as a premier destination," Travel Industry Association President Roger Dow said. "Today's deteriorating air-travel system, skyrocketing fuel prices and poorly communicated security policies are deterring domestic and international inbound travel and costing the US billions of dollars," he says. "These issues have never before risen to the attention of presidential candidates. And that needs to change."

It just spent about a billion dollars to be a bigger better airport, but San Jose's Norman Y. Mineta International Airport is going to have to turn to city funds to keep its airlines. The airport, sometimes called 'Mineta,' sometimes 'San Jose' but never just plain 'Norm,' will lower rents in an effort to keep airline service after the city council voted to let it use a fund of about $2.2 million to reduce the Cost Per Enplaned passenger to $8.61 in this fiscal year (ending in June.) The cost, a key airport metric, had been $9.02, a figure that was inflated by the airport's ambitious $1.3-billion modernization and expansion program, said airport spokesman David Vossbrink. Rents will go from just over $206 a square foot to just over $193 a square foot. The cost seems high, but Southwest, the largest carrier, with a 45% markets share, is okay with it because it likes the airport's expansion, say Vossbrink. Southwest usually pays about $5 to get a flyer on board at its other airports.

You already knew this, but it bears repeating: frequent flyers and small children don't mix. Or at least the frequent flyers wish they wouldn't. One flyer site, airfarewatchdog, just did a survey, an admittedly unscientific one, but they got back some strong response that kids, particularly very small ones, should be in a separate section in the airliner cabin. The survey asked 10,000 people, (a fare, or fair, sample) 'would you like to see a section of the plane reserved for parents with babies?' Over half, some 58%, responded 'Yes, they should have done this a long time ago' and another 27% said it was a good idea 'but they never will and it'll never work.' Just 15% said it was bad idea. At lefta and above is our favorite kid.

Okay, we warned you the other week: American Airlines and kayak.com were feuding and Kayak could be booted off of American. Or more literally, American fares could be taken off of kayak.com, a meta-crawler that searches and compares website fares. It was using Orbitz.com as a tool to get to the American data, and American objected. American was angry that kayak.com, along with its sister site, sidestep.com, showed results from various sites such as cheaptickets.com as well as from AA.com, the airline's own site. AA.com has a lowest-fare guarantee and in fact was one of the first airline websites to offer one.

This has not deterred Steve Hafner, the Kayak founder, who says he has big plans. He gave an interview to an on-line travel forum in which he outlines them. Here is Steve, again, just because kayak.com has a much better image of its boss than a camera does. Hafner ('CEO Steve," as the kayak.com site calls him) was a founder of Orbitz, by the way.

Some of the oldest and longest serving models in the US fleet will be around for a little while longer. Two majors, Delta and Continental, have announced plans that will involve retrofitting and spiffing up a couple of classics. Continental for instance finally got into the lie-flat seat game and said it would be putting nice new bed seats on its international fleet - including its Boeing 757-200 fleet. It's already putting winglets on all 41 of its 757-200s. And Delta said that it was going to equip pretty much its entire fleet with Aircell's Gogo broadband service by sometime next year. That means that Delta's 757s and its 133 MD88/90s will have to be flying for sometime longer.

Speaking of ancillary fees, some interesting news comes from that interesting Canadian firm, GuestLogix: they've announced that you can buy Broadway tickets while flying to the Big Apple "on board a major North American carrier to be announced this fall." So far, the deal is only with the Shubert Organization, owner of 18 venues around Times Square, including the Shubert, Belasco, and Winter Garden theaters. It also owns TeleCharge, a ticketing service. But at an average transaction price of more than $200, that's no small commission. New York live theaters take in about $600 million a year in ticket sales, says Shubert. The organization also owns venues in Las Vegas, Los Angeles, and Chicago, so there's room for growth. Now, just make sure that the flight attendant rembers to print out and give you your show voucher. 

The natives, at least those who fly, are getting restless. They're grumbling more and they're grumbling about the fees that air carriers are charging for to carry your bag, be it it your second cheeked bag or even your first bag. We were watching Richard Anderson and Monte Brewer, the chiefs of Delta Air Lines and of Air Canada, at the NBTA the other day, and the anger among the business travel managers in the room was palpable. Richard was a good witness for the defense, though: "compare how much it would cost you to ship your bags with an overnight sereve like FedEx or one of the commercial serves. To ship those golf clubs would be a couple of hundred dollars." As Gary Kelly, the Southwest Airlines chief, said on the earnings call the other day, "the first thing a lot of people ask our when they call our call centers is, 'do you charge to check a bag?'."