Economic uncertainty has holiday travelers down — but not out
Brother, can you spare $44.61?
Brother, can you spare $44.61?
That, according to the American Farm Bureau, is what the typical Thanksgiving dinner — turkey, stuffing, cranberries, pumpkin pie and all the fixings for 10 people — will cost this year. Ticking gradually upward, that’s an increase of 5.5 percent from the $42.26 the same meal cost last year.
The cost of getting there? Well, that’s another story, given the roller coaster ride travelers have endured this year. Caught between soaring prices and shrinking demand, travel costs are all over the map and changing daily, and the forecast for the future is likely to be every bit as apparent and unchanging as Hank Paulson’s plans for the economy.
The next two weeks will be the busiest travel period of the year, and planes are expected to be as crowded as ever, even though fewer people will be traveling. That is because of huge cuts in capacity the airlines have made in a desperate bid to cut losses and return to profitability.
Meanwhile drivers will be pleasantly surprised by pump prices that have fallen to the $2-a-gallon range, about half what they were in the summer.
Maybe the situation doesn’t warrant dusting off the Depression-era song cited above, but this holiday promises to be as challenging as any in recent memory.
Travelers feeling down, but not out
The traditional barometer for Thanksgiving travel — AAA’s annual forecast — will come out November 18, but the prognosis for travelers is already looking gloomy. Last month, travel-trend forecasters IHS Global Insight issued their own projections, which listed a litany of challenges, including “rising inflation, increasing unemployment, tightening credit conditions, high levels of consumer debt, declining housing wealth and stagnant wages.”
No wonder the company is predicting a drop in domestic travel during the final quarter of 2008. Business travel is expected to take the biggest hit, tumbling by 4.6 percent, while leisure travel will slip 0.3 percent. The data suggest that while companies are slashing travel budgets to the bone, vacationers are simply scaling back.
“By no means is the sky falling,” says Suzanne Cook, senior vice president of research for the Travel Industry Association (TIA). “After years of growth, we’re now looking at modest declines.” As the major trade group for the U.S. travel industry, TIA’s latest research projects that total leisure travel for this year will slip 0.2 percent and 1.3 percent for 2009. “American travelers are trading down, but not out,” adds Peter Yesawich, chairman of Ypartnership, which helped conduct the research.
In other words, they’re doing what they always do, hoping to spend Thanksgiving with friends and family, calculating the costs of flying and/or driving and making the best of things in troubled times. If that’s your plan, too, here’s what to expect.
Fewer passengers, fuller planes
For many fliers, particularly those who fly infrequently, this Thanksgiving will likely provide an introduction to the nation’s rapidly contracting air-transportation system. During the 12-day holiday period (November 21–December 2), the Air Transport Association of America (ATA) expects U.S. airlines to carry 24 million passengers, down 10 percent from last year. Rest assured, planes will still be plenty crowded — the decline has more to do with capacity cuts than falling demand — as the industry tries to shrink itself into profitability.
Whether that will work or not is open to debate, but travelers are already facing fewer choices when flying, with some of the most dramatic cuts taking place during Thanksgiving. From Monday to Monday, U.S. airlines will operate approximately 187,000 flights, a drop of almost 18 percent over the year before, according to figures compiled by OAG (Official Airline Guide). Available seats on Thanksgiving Day and the following day have been slashed a whopping 67 and 39 percent, respectively.
Fewer flights and fewer seats means higher fares, right? Generally speaking, yes, and after 21 fare hikes during the first half of the year, it looked like there was no limit to how high airfares could go. (The most recent DOT statistics show the average domestic fare jumped eight percent during the second quarter of this year, hitting a record of $352.) By early fall, typical airfares over the Thanksgiving period were running 15 to 30 percent above the same time last year.
But a funny thing happened on the way to Turkey Day. (Funny weird, that is, not funny ha ha.) Last summer’s oil crisis segued into a global economic crisis that has forced businesses to cut back on their spending and prompted consumers to adopt a wait-and-see approach to their holiday travel plans.
So, when Northwest Airlines announced a fare sale late last month, it was quickly matched by the competition. “It wasn’t just a little bitty sale,” says Rick Seaney, CEO of FareCompare.com, the airfare research site. “People who were getting quoted holiday fares of $400–$600 were suddenly seeing fares well under $300.”
The best deals, suggests Seaney, come to those who can be flexible. As an example, he quotes a four-night Thanksgiving trip between Chicago and Fort Myers, Fla., and comes up with the following fares: a painful $493 if you fly Wednesday to Sunday, but just $219 if you travel Tuesday to Saturday and a bargain-basement $169 if you can go Monday to Friday. “You may have to trade off time at work or keep the kids out of school an extra day,” he says, “but it may be worthwhile if you want to see your friends and family.”
Tom Parsons, CEO of the travel-deal site BestFares.com, cites similar bargains for flexible fliers. Atlanta-Boston: $369 Tuesday-Sunday, but $169 Tuesday-Monday. Dallas-Miami: $559 Wednesday-Sunday, but $269 Tuesday-Saturday. New York-Los Angeles: $459 Tuesday-Sunday, but $309 Tuesday-Saturday. “If you live in Dallas and want to go see Mom in St. Louis, you can still find some reasonable fares,” he says, “as long as you stay away from November 30.”
Reasonable, of course, is relative (and subject to change and limited availability), and despite the price drops, many fares remain higher than they were a year ago, especially when you factor in surcharges and à la carte fees. (Earlier this month, Delta become the last legacy carrier to start charging $15 to check a first bag, although the fee doesn’t take effect until December 5.) Such “skyway robbery,” as Parsons puts it, will only make it harder to calculate total travel costs over the holiday.
Nevertheless, and skyway robbery aside, the bigger picture — fewer flights, falling demand and good deals for those who can be flexible — bodes well for holiday travel. Barring bad weather or other surprises, there may very well be shorter lines at the airport, fewer delays in the sky and a less stressful experience along the way.
Less pain at the pump
Presumably, some would-be fliers will take to the road instead, especially given the recent and stunning drop in gas prices. With regular averaging $2.20 per gallon nationwide last week — approximately half of what it was during the summer — the prospect of filling the tank has suddenly become a lot less daunting.
Part of it is a sort of gas-pump amnesia. “People aren’t thinking back to five years ago when gas was a buck and a half,” says travel-trend analyst Doug Shifflet of D.K. Shifflet & Associates. “But if it comes down to $2 a gallon, they’re going to start feeling pretty good about it.”
That, in turn, is prompting many travelers to compare the costs of flying vs. driving with renewed interest. Says Seaney, “People are pulling out their calculators and figuring out how airfare with all the add-on fees compares to driving four or five hours with gas at $2.20 a gallon. For a family of five, there’s certainly a compelling argument for driving — especially on short-haul flights.”
In fact, there are already indications that people are, indeed, driving more. According to Carl Richardson, director of auto travel for AAA Southern New England (AAASNE), bookings for the company’s Drive Vacations product — hotel deals within a 500-mile car trip from Boston or Providence — were 11 percent higher in October compared to the year before. “Gross sales are up, reservations are up and room nights are up,” he says. “We’re thrilled with that.”
From troubled times to family time
Ultimately, this Thanksgiving is shaping up to be a glass-half-full/glass-half-empty sort of holiday for travelers. As suggested above, many people are trading down, but not out, and adjusting their plans in light of job losses, declining home values and a stumbling economy. “People are saying life is uncertain; therefore, it’s a good time to get together with friends and relatives,” says Shifflet. “Instead of flying from Washington, D.C., to visit Mom in California, they may choose to go to their kid’s place in the next county.”
Likewise, says Maguire, falling gas prices will likely make it more palatable for more people to hit the road: “Across the nation, we’re looking at around $125 billion that’s now available to the economy that was being put in people’s gas tanks over the last few months.”
The big question, she says, is how and where that money will find its way into the economy. “I think there’s no doubt that some of that freed-up cash will be used for travel,” she says. “There are certain things that are a birthright or time-honored tradition, and this is one of those times that people tend to honor them.”