Flight prices dip amid COVID. Will it impact holiday travel?

The nation’s airlines are sweating over an unexpected drop in business travel in the last few weeks — and that’s welcome news if you’re a traveler looking to save money.

This month, domestic airfares are down 5% from September 2019 and international fares down about 8%, drops that industry experts attribute partly to the traditional price slump that happens at the end of the peak summer travel season plus the rise in coronavirus cases due to the Delta variant, according to the travel website Hopper.

Prices for flights to Europe are at a five-year low, down more than 30% compared with the same month in 2019, according to the travel website.

But the discounted prices are not expected to last long, with increases likely when travelers start booking holiday trips.

“Everything we are seeing says people are definitely going to be traveling,” said Adit Damodaran, an economist for Hopper.

The airfare roller coaster shows how the pandemic continues to affect the nation’s $1.5-trillion travel and hospitality industry. For the first time since COVID-19 took hold in spring 2020, travel demand this summer began to match and briefly surpass pre-pandemic levels, giving airline executives hope that the industry would soon rebound from more than a year of financial losses.

But in the last few weeks, airlines have reported a steep drop in demand and an increase in reservation cancellations. September typically marks the end of the peak summer travel season and the start of business travel for conferences, conventions and meetings. Industry experts say the uptick in business travel never materialized because of the surge in COVID-19 cases.

As a result, airlines are forced to drop prices to fill the seats left empty by business travelers.

“In a normal year, the fares would stay high because people would travel for business, but that is just not happening,” said Madhu Unnikrishnan, editor of the publication Airline Weekly.

The average domestic round-trip flight costs $260, down from $290 at the end of August, according to Hopper. International round-trip fares have dropped to an average of $700, down from $760 at the end of August.

The average round-trip price of a flight to Europe from the U.S. is $565, down from $665 at the end of August and the lowest price in five years, according to the website’s data. That price was an average of $940 at this time in 2019.

But flying to Europe could become more difficult soon. The European Union recommended this week that its 27 nations reinstate restrictions on tourists from the U.S. because of rising coronavirus infections. The guidance isn’t mandatory, and member countries have the option of allowing fully vaccinated U.S. travelers in.

The slump in business travel and rise in overall cancellations have airlines worried. Southwest, United, Delta and American airlines all revised their earnings outlook for the July-to-September quarter.

“The company continues to experience softness in bookings and elevated trip cancellations, especially close-in, as a result of the rise in the COVID-19 cases associated with the Delta variant,” Southwest Airlines said in a Sept. 9 filing with the Securities and Exchange Commission. “Close-in” cancellations are usually defined as being within 21 days of departure.

In its own Sept. 9 investor update, Delta Air Lines said “initial revenue expectations were predicated on an acceleration of business travel through the September quarter. The pace of business travel recovery has paused as companies delay or scale down initial office reopening.”

United Airlines said it expects the drop in demand to push total revenue down 33% in the July-to-September quarter.

Airlines are not the only businesses feeling the pain. The hotel industry is projected to lose more than $59 billion in business travel revenue in 2021 compared with 2019, according to a report by the American Hotel & Lodging Assn. and Kalibri Labs.

If the number of coronavirus cases drops or remains unchanged, travel experts say, Americans are likely to book air travel in high numbers for the Thanksgiving and Christmas holiday season. And higher demand usually means higher prices.

“Most airlines have said Thanksgiving and Christmas and year-end holidays remain solid,” Unnikrishnan said. “So far, people are not canceling their holiday plans.”

Bookings and internet searches for holiday flights have started to rise.

“Right now, flight prices for the holiday travel season are up across the board compared to both 2019 and 2020,” said Giorgos Zacharia, president of the travel website Kayak.

Domestic round-trip airfares around Thanksgiving are priced at an average of $300, up 23% from 2020 ($245) but down 11% from the pre-pandemic 2019 fares ($335), according to Hopper. The average domestic round-trip airfares for travel around Christmas are $430, up 71% from 2020 ($250) and up 10% from 2019 ($390).

Rick Seaney, chief innovations officer at 3 Victors, a travel data company, said making flight reservations for the holidays can be tricky. Booking early — up to six weeks before departure — usually ensures that travelers get the lowest prices. But Seaney said another coronavirus surge could keep prices down, allowing travelers to book flights much closer to the holiday season.

“The question is will the prices get better or worse if you wait,” he said. “It depends on what will happen with the pandemic.”

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STR: September U.S. Hotel Metrics Dip Again Despite Group Bump

The U.S. hotel industry reported lower key performance metrics in September compared with August, despite a strong showing in group demand beginning mid-month, according to STR. This was the second month in a row U.S hotel performance slowed after regular month-over-month increases since at least January.

Compared with September 2019, September 2021 occupancy was 61.2 percent, down 8.2 percent. Average daily rate was up 1 percent to $133.11. Revenue per available room declined 7.3 percent to $82.04.

Group demand for the week ending Sept. 18 eclipsed 1 million booked room nights for the first time since early in the pandemic, according to STR, and rose to 1.3 million the following week. At the same time, group average daily rate moved past $200 for the first time since February 2020.

Still, those bumps in weekly demand weren’t enough to raise the monthly performance averages past August levels. Group demand increased occupancy, but also “created a lowering effect on average daily rates, as group rooms for upper-tier classes are typically priced lower than transient rooms,” according to STR.

In the top 25 markets, none saw occupancy increase above 2019 levels. Denver reported the highest occupancy at 71.4 percent and was the only market above the 70 percent occupancy mark. San Diego was the next-strongest market at 67.1 percent. Orlando reported the lowest occupancy for the month at 49.2 percent, followed by Minneapolis at 50.5 percent. 

RELATED: STR: U.S. Hotel Recovery Slows in August

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Tripbam: Corp. Hotel Volume Recovering After August Dip

Despite a blip in the recovery during August, when market-rate growth flattened and pricing volatility increased, hotel booking volume again is on an upward trajectory and volatility is down once more, according to Tripbam’s third-quarter market report. “The dip we saw was related more to late summer holidays than it was to long-term concerns about the [Covid-19] delta variant,” according to the report.

The hotel reshopping firm on Sept. 12 assessed data from the previous 30 days and compared it with figures from the same 30 days in 2019. Tripbam used the same customer set it had in 2019 for a like-for-like comparison.

The company found it had processed about 31 percent of the volume as in 2019, but the average length of stay has begun to return to what it was two years ago, said Tripbam founder and CEO Steve Reynolds during a late September webinar that reviewed the findings. With mostly essential travel happening during the height of the pandemic, the average length of stay had been four to five days, but has returned to a more normal 2.5 days, he said. The 11-day booking window before travel still was shorter than the 16-day window of 2019. 

Global market rates were down 28 percent for the 30-day period in 2021 compared with 2019, from an average of $234 to $168, while global booked rates were down 22 percent, from an average of $195 to $150, according to the report.

Looking at rates from a discount level, hotel programs in 2019 delivered about 18 percent in value across all clients, Reynolds said during the webinar. Currently, that percentage is at 17 percent, so there is a “bit of a ways to go to get the same percentage value,” he added. 

The report projected that global business travel hotel bookings by year-end would be between 40 percent to 60 percent of 2019 levels. As of the end of 2022, Tripbam expects global business travel hotel bookings to reach 80 percent of 2019 volumes, and the company expects that reduction to remain long-term based on conversations with corporate buyers.

Tripbam also anticipates that market rates will reach 2019 levels by the first quarter of 2022 and likely exceed 2019 levels in the subsequent quarters. “Don’t roll over rates,” Reynolds said. “Get programs in place now so they’re in a good position for 2022. We think [rates] will go up, and we can argue that a static program might be the way to go, and we can argue dynamic might be the way to go. It depends on the market.”

Further, the report cautioned about dual-rate loading. Some companies worked with hotel partners to introduce dynamic rates and to roll over 2020 static rates, which would in theory act as a rate cap in 2021. But Tripbam found during contract audits that dual-rate loading was often having the opposite effect—the static rate was acting as a floor rather than a cap, leading companies to pay more. “The concern is that some hotels don’t have the technology to support it the way it is being sold,” Reynolds said. “You need to [perform] audits to make sure it’s working. For major chains, it is working as promised, but with some smaller brands, there are some problems.”

Tripbam also provided an update on its new air offering, which is in beta with about eight clients, said VP of air solutions Tim Nichols. “It’s up and working,” he said. “We’re looking at reshopping and rebooking, that is the core of what the solution does.” Early findings show that it is producing savings “in the mid-teens [percentages] and increasing.” The company expected to run the beta for about another month.

RELATED: Tripbam: Corp. Hotel Rates Set to Hit 2019 Levels by Year-End

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ASX to rise; Suncorp says flood claims could tip $250m; US stocks dip

Suncorp said that, after the heavy rainfall and flooding across NSW, South East Queensland and Victoria, it had received just over 7600 claims across all three states by 12pm on March 30.

Claim numbers are expected to rise further as customers gain access to affected regions and the extent of damage becomes clear, it said.

Around three-quarters of claims are from NSW, with around 20 per cent from Queensland and the balance from Victoria and the ACT. The severity of claims varies significantly between regions.

Suncorp estimates net claims costs in relation to this event will be $230 million – 250 million.

Suncorp expects the majority of claims to be attributed to a single event across all three states for reinsurance purposes. The costs of this event will be capped at $250 million under the group’s main catastrophe program.

Suncorp said it has a comprehensive reinsurance program in place that provides strong protection for the remainder of the financial year.

The full limits remain available on all the group’s main catastrophe program and dropdown aggregate reinsurance covers.

In addition to eroding the deductibles on the dropdown aggregate covers, this event will further erode the deductible on the Group’s Aggregate Excess of Loss (AXL) protection.

The AXL provides $400 million of cover in excess of a retention of $650 million with an event deductible of $5 million. As at 28 February 2021, $370 million of the AXL deductible had been eroded.

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