Throughout my travel career, the majority of my clients have been what I call “typical travelers.” One or two family vacations per year—maybe a splurge on Disney or Europe every five years. And then I have a few what I consider “one-percenters” who travel without any need for a budget. They were always nice to have—demanding, but pleasant to work with. But will all that change as the travel industry tries to recover from the most significant obstacle ever faced?
My fear, as we come from this is that being a citizen of the world will no longer be attainable for the average person. It will become the privilege of the top one percent.
Back in the 1960s and 1970s traveling was a true luxury for most people. I was fortunate enough to be able to take some foreign trips with my parents and I distinctly remember understanding the costs involved in flying.
Time and innovation has allowed the costs of such travel to drop to the point where a flight from the Northeast to Florida is not a struggle for the average college aged spring-breaker! Planes became larger and seats became smaller. Fuel became cheaper and in-flight service became near extinct as airlines realized that air travel had become mass transit.
And here we are, in a matter of five months a virus has infected more than 4 million people and brought the travel industry to its knees. And to recover, all types of travel will need to change. I have opined about what the cruise and airline experience may look like moving forward. And all of that comes with a cost. A steep cost.
When the airlines eliminated commissions, agencies had a decision to make—pass the cost (or lost revenue) onto the client or lose money on selling airline tickets. Most agencies implemented fees and passed the cost onto the consumer. It will be no different moving forward in 2020 and 2021 and beyond.
If airlines are looking to reduce capacity by 30% or more, they need to make it up somewhere. The cost to staff and fly the plane is consistent no matter the number of passengers. Let’s look at this in the most simplistic way. It costs $350 to fly from BWI-PBI. With 143 seats available on a Southwest flight that’s $50,050 in revenue. Just to fly the plane with fuel, crew, insurance, etc. it costs $3858 per hour. Two and a half hours later and the cost is $9,645. That leaves $40K over for airport costs, labor on the ground, technology, gate fees, non-air equipment, etc. So it is easy to see how that $50K can be whittled away.
One of the scenarios Southwest floated was only selling 60% of their seats. That is 86 seats on a plane fitted to carry 143. That difference has to be made up somewhere. Airlines are not known for huge margins—the old adage holds true: if you want to make a million in the airline industry, start with 2 million. But realistically, my $350 flight will now be $581. For a family of four, that is an additional $924. Not insignificant.
On top of that, you need to assume there will be significant additional costs foisted onto the airlines. Disinfecting, PPE for crew and employees, health screening for passengers, and additional insurance premiums will not be inexpensive. Honestly, that $581 ticket will probably be closer to $750 or over $1000 on routes that are in demand.
With a recession of unknown duration, will the average Joe be able to afford that? That remains to be seen.
Where does that leave us? We need to be keeping a very close eye on the economy and the reaction of travel suppliers along with maintaining communication with our clients. I think we may see a period of drive vacations and I suspect National Parks will be jam packed. Make sure you are up to speed on domestic destinations that are within about 8 hours of your client base.
I also might keep the usual suspects in my sights for air travel provided that they are open and operating—Orlando, Ft. Lauderdale/Miami, Vegas, New Orleans, New York, and maybe Cancun.
As I have said a number of times before, this recovery will be difficult. I don’t want to be an alarmist, but I also don’t think sugar-coating it makes any sense either. It will be a delicate balance as we weather this latest storm together; but if I learned anything in my nearly 25 years in the business, I do know that we will come out of it and likely much stronger!
