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Book now if you're traveling by air during the Thanksgiving and Christmas holidays. Deep capacity cuts by airlines this fall will leave travelers with far fewer choices during the upcoming holidays and much more expensive tickets. Planes will be more crowded than ever. "This holiday season has the potential to be the worst ever," says Kevin Mitchell, chairman of the Business Travel Coalition.
The airlines will slice capacity by as much as 20%, with most of the reductions coming after the summer travel season, as part of their efforts to survive in a world with record high oil prices. They'll also continue to hike fares, increase fees and lay off workers.
If you do book early, check periodically to make sure the flight is still on. Some early bookers are finding the flights they thought they were booked on no longer exist. While the airlines try to notify customers and rebook the trip, the changes aren't always convenient, sometimes leaving earlier or later than the customer wants.
The travel industry as a whole is getting slammed by high oil prices and a weakening economy. Airlines are seeing a falloff in passengers, shops and restaurants are reporting lower sales and hotel occupancy is declining in some well-known tourist destinations. "It will get much softer before it gets better," says Henry Harteveldt of Forrester Research.
Overall, travel this year will be down about 1.2% over 2007, but most of the decrease will occur in the second half of the year, according to the Travel Industry Association, a leading trade group. "Prices are going up on food, gas, everything, and that's putting the pinch on people," says Suzanne Cook of the association.
Hardest hit are faraway "fly to" destinations such as Las Vegas, Hawaii and Florida. Many flights to these places have already been cut, and airfares are up significantly. Some locales are seeing double-digit declines in visitors. Longer "drive to" destinations, such as the Grand Canyon, are also hurting because of high gas prices.
"Staycations" are taking hold as an alternative -- staying home and making day trips to local attractions, which are trying to capitalize on the trend by boosting advertising and offering discount days and family package discounts. The bottom line is that consumers will still take a vacation -- they just won't go as far or spend as much.
Foreign tourists are helping to fill the gap, especially in large gateway cities such as New York, San Francisco and Washington. While tourists from other countries make up only 5% of the travel market in the U.S., they account for 20% of expenditures. With the current favorable exchange rate, foreign visitors are snapping up deals at high-end stores and staying in more upscale hotels. Also, there's still relatively cheap air service to these cities from low-cost carriers, and that's helping to stoke business as well.
Expect a slowdown in business travel, too. Employers will take a sharp pencil to travel budgets with an eye toward cutting the number of out-of-town meetings as well as the number of employees who attend them. This will be especially true in certain hard-hit sectors such as housing and financial services. Proposed trips will have to meet a higher standard of necessity before being approved by managers. "There won't be any push back from employees, either. They don't want to deal with the hassle," says Harteveldt.
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