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Meltdown 101: Travel industry vs. the 'staycation'
2009-01-24
When the economy goes into the tank, people stay at home. But for those still willing to see what's out there, there are stupendous deals to be had. Hotels, resorts and cruise lines are offering rock-bottom rates and doing everything they can to fill rooms, including teaming up with airlines to offer jaw-dropping package deals. And savvy consumers can reap the benefits. A case in point: This reporter recently booked a Waldorf Astoria suite in the Palm Springs, Calif., area through Priceline.com for about $130 after taxes -- in the middle of a holiday weekend, no less. Although we didn't know where we'd end up, the 900-square-foot "Spa Villa" where we ended up staying is listed next weekend for $679 a night. The Walt Disney Co. is also offering a seven-night stay at its Walt Disney World resorts, including seven days of park tickets, for the price of four nights and four days of tickets. And it's throwing in a $200 gift card that can be spent on food and merchandise. According to one travel agency Web site's spokeswoman, travel deals haven't been better since the aftermath of 9/11. Here are some questions and answers about what kind of deals are out there and how to snag them. Q: Why are companies offering such cut rates now? A: Around the world, occupancy and room rates are down as business travel has fallen and vacationers are staying at home because of the recession. According to Smith Travel Research, occupancy in North American hotels was down 10.3 percent in November from a year ago, to 52.3 percent. The average daily rate was down 3.3 percent, to $101.84, while the revenue per available room was down 13.3 percent, to $53.28. In other words, hotels are about half-full these days. And if you are a paying customer, management is willing to cut you a deal. Q: Why are a hotel's official, posted rates often so much higher than what you can find through a travel agent or travel Web site? A: Hotels are averse to cutting their posted rates, because some people are willing to pay that price -- and those people help the bottom line. After the Sept. 11 terrorist attacks, hotels slashed rates and suffered for years afterward, according to Smith Travel Research spokesman Jeff Higley. Now they are more likely to throw in freebies to keep customers happy. "Rather than lowering their rates, they try to put packages together to add value to the rate," Higley said. So, if you can't score a rate cut, Higley says, look for free valet parking, free Internet access or a free breakfast -- hotels may be willing to throw these freebies in. Q: Back to the bottom line: How do I snag a cheap rate? A: Some Web sites are offering extreme discounts on hotel rooms. Priceline.com is now offering hotel rooms in New York at 3-star establishments for $99 and in Washington, D.C., for $59. (This reporter can't remember staying anywhere in New York for less than $100, ever.) The catch is that users have to submit their price and credit card information before knowing which exact hotel they will be staying at. "Occupancies are under pressure and prices are generally coming down," Priceline.com Inc. Chief Executive Jeffrey Boyd told The Associated Press. Because hotels and airlines remain anonymous until after the purchase, they can maintain their posted rates, while selling empty inventory at the last minute for big discounts -- up to 50 percent off for hotel rooms up to 60 percent off airfare. Spokeswoman Jeanenne Tornatore of Orbitz Worldwide Inc., which owns Cheaptickets.com and Orbitz.com, said even openly posted hotel rates are falling. In Las Vegas, rates are down in some cases more than 50 percent -- and in Hawaii, around 40 percent -- since late last year. "Some of those 4-star Las Vegas hotels that used to go for $200 to $250 are in the $80 to $120 range," she said. Vegas.com, owned by the Greenspun Family of Companies, said room rates in January have declined 33 percent from a year ago, to $92 from $138 a night on average. "There are some unbelievable values right now," said Bryan Allison, Vegas.com's vice president of marketing. "There are food and beverage credits, gambling credits. It is definitely stimulating demand." Cruise lines are also slashing prices. A five-night Caribbean cruise from Carnival Corp., leaving from Mobile, Ala., is on offer at Orbitz for $249 with a $200 onboard coupon booklet -- 75 percent off the brochure price. Q: How can companies offer such deals and survive? A: In many cases, hotels benefit just by your presence, in case you spend money on something else, like room service, a meal at a restaurant or spa treatments. Disney Chief Financial Officer Tom Staggs said last month that the seven-for-four deal was "a good trade-off." Presumably, once at the resorts, guests spend all day in the park buying hot dogs, ice cream, bottled water and souvenirs. The discount amounts to about 25 percent off, Staggs said, and really was no better than a deal the company offered back in 2003. What's more, he said, advance bookings in the six months to this coming March, which at one point had been down 10 percent from a year earlier, were down just 6 percent by early December, thanks in large part to the deal. Q: Will prices bounce back -- and the deals evaporate -- much like after 9/11? A: That's not likely. Oppenheimer & Co. hotel and casino analyst David Katz points out that the circumstances behind the travel deals are very different this time around. After Sept. 11, 2001, Katz said, "it was a situation almost solely driven by a fear of flying." This time, consumers have lost trillions of dollars in home equity and stock holdings -- not to mention, in many cases, their jobs. "This is entirely different," he said. "It's an economic matter rather than a fear matter. Post-9/11, people and companies had the money. Now they just don't."
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