Monday, Jun. 29, 1992
And They're Off . . .
For the moment, anyway, the summer fire sale by U.S. air carriers is over. But now other travel-related businesses, especially hotels, are scrambling for a piece of the action by offering rock-bottom prices and vacation specials. That's good news for American travelers clutching cheap, freshly purchased air tickets. But after two years of waiting for consumers to get the wanderlust again, many travel firms see the boom as a mixed blessing.
On the one hand, business is definitely up. Says Ken Hine, president of the American Hotel and Motel Association: "The airfare war has been the greatest stimulus I have seen in many years. Our reservations traffic is up more than 30% in many places, all because of the airfares." But on the other hand, the airfare sale has created a huge demand for unprofitable, cheapskate travel. And chances are good that more fare wars are coming. Travel companies fear the auto industry pattern, in which consumers refuse to buy at anything but desperation prices. The U.S. hotel industry is severely overbuilt. Nearly 2 out of every 3 full-service hostelries have been losing money for the past two years. And while all the major chains are competing to offer the best summer bargains, few expect the sudden uptick to do much for their profits.
Car-rental firms may come out the best, in part because they are less vulnerable to bargain shoppers. Many Americans who would otherwise have taken a trip in their own cars this summer have ventured far afield, thanks to the low-priced air tickets, and plan to rent cars. Hertz reservations are already up 25% from last summer, and have doubled in Denver and some other popular cities. Hardest hit are travel agents, who earn their commissions based on costs, and nearly all components of their business are operating at lower price levels. Some predict wave after wave of fare and rate wars as the cash- strapped airlines and hotel chains struggle to survive. Says Richard Nigosian of VTS Travel, in New York City: "Nobody can make money like this. And who knows whether travelers will come back when we start charging reasonable prices again?"