Travel Weekly - December 15, 2008

M ark Pestronk:
s
_sDOT’s new passenger
plan is not perfect, bu t
a good first step. 23

www.travelweekly.com

Canada, E.U. ink open-skies deal.
ASTA expects a profit in 2009.
Poll finds less traveler loyalty.
Jeri Clausing:
‘One o f the first things I noticed
when ch ecking into the Ritz-Carlton
was the flashlight in the closet.’ 41

Part 1 of 2

THE NATIONAL NEWSPAPER OF THE TRAVEL INDUSTRY
DECEMBER 15, 2008
[ SHARPEST DROP SINCE POST-9/11 ]
By Lester Craft
Why luxury feels
recession’s sting

An economy that favors Wal-Mart and BJ’s Wholesale Club is revealing itself as decidedly hostile to the likes of Tiffany and Neiman Marcus. Several reliable indicators suggest that luxury travel is not immune to the down-marketing of America. Indeed, some projections for 2009 suggest that luxury will suffer the recession’s sting more than any other lodging segment.

But doesn’t such a notion fly in the face of certain realities? After all, is it reasonable to think that the rich will cut back on travel even more than Joe the Plumber?

The answer, in part, is that truly wealthy travelers will continue traveling, both at their accustomed frequency and in their accustomed style. But that comforting thought will not prevent the market for luxury travel from enduring a very real and uncomfortably sharp contraction. Several

culprits are responsible.

ANALYSIS For one thing, many
consumers who former-

ILLUS TRA TION BY THOMAS R LECHLEI TER

ly thought of themselves as affluent no longer feel that way. They likely will travel less and will trade down when they do.

Another consumer group, big-spending aspirational travelers whose lifestyles derived from easy credit rather than income, is just plain kaput.

But the biggest fly in luxury travel’s ointment may be the business traveler. Many corporations are simultaneously trading down and trading out: foregoing luxury lodging on one hand and curtailing travel and events on the other. The only beneficiaries are hotels just below luxury, perfectly situated to snag newly minted penny-pinchers who continue to travel.

Luxury has had a string of good years, lasting right through the summer. Companies who built a cushion can rescale to a smaller market and await recovery. But as with every segment during this credit-chal-lenged era, those who took on too much debt face a world of pain.

Keeping the
faith
ARC reports sales
for November fell
by more than 20%
By Bill Poling

The economic crisis may have halted a trend toward upscale religious travel, but sellers are confident that demand for sacred destinations will endure.

By Michelle Baran PAGE 16

[ NEW POLICY MANDATES MORE PASSENGER DATA ]

TSA to take on watch-list duties

By Bill Poling

The government is doing the airlines a favor next year by taking over the chore of matching passenger names with the terrorist watch list on domestic flights, but the favor is going to come with a price tag.

Beginning as early as January, airlines, agents and online travel sellers are going to have to record a passenger’s full name, gender and birth date. Failure to comply could result in the passenger being denied boarding.

For consumers, the change might mean little more than a one-time adjustment to their preboarding mental checklist.

The impact on the industry, however, is not yet clear but is likely to be onerous.

Customer relations procedures, reserva-

tions systems and back-office tools all will need to be tweaked in a relatively short time, and the government still hasn’t nailed down all the details.

The general plan is for the Transportation Security Administration to check the names and to do so with greater accuracy by using the passenger’s full name, date of birth and gender.

The TSA spelled out the new requirements for its Secure Flight program in a regulation published at the end of October, but it has not provided an effective date. The Air Transport Association said last week that its members were still awaiting the TSA’s “ implementation guide.”

It is expected that the plan will be phased

See DATA on Page 42

Travel agency sales reported through ARC took a nosedive in November, falling more than 20%, to just under $4.8 billion. In dollar terms, that amounts to a decline of $1.3 billion.

It was the steepest monthly sales decline since the months following 9/11 and, with taxes excluded, the weakest November in dollar volume since 2001.

November is typically one of the weaker sales months of the year, but it produced more than $6 billion in sales in both 2006 and 2007.

The decline in sales appears to be steeper than November’s decline in air traffic, possibly suggesting an accelerating or prolonged decline in advance bookings, industry experts say.

November’s overall booking activity, as reflected in the total number of ARC transactions, fell 19.7% compared with the same month a year ago, to just under 9. 2 million transactions. In recent years, ARC’s monthly transaction volume has slipped below 10 million only twice before: in December 2006 and in December 2007.

International transaction volume was off 17.7%. While the number of domestic transactions fell 20%, the drop in dollar volume was steeper on the international side. International fares, minus taxes, fell 25.9%. Domestic fares, minus taxes, were down 19.8%.

Year to date, total sales, including taxes, are dead-even with the same period in 2007. But as recently as the midpoint of the year, sales were 3.6% ahead of last year.

One airline analyst who recently warned of a “major softening in air traffic demand going forward” said that the ARC data could be seen as confirming his prediction.

Michael Boyd of BoydGroup International said in a recent report that November’s traffic decline for the top six U.S. carriers came to 11.2%. For the first time this year, that monthly decline was steeper than the carriers’ 8.6% cutback in total capacity.