Home Publisher's Point of View Rising Fuel Costs Hit Airlines Hard–Consumers Already Traveling Less

Rising Fuel Costs Hit Airlines Hard–Consumers Already Traveling Less

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The past few weeks were ones the travel industry could do without. One by one, the major airlines announced cutbacks in flight volume and increases in fares—and for good reason. The average price for a gallon of jet fuel climbed to $3.21, up from 33 cents a gallon 10 years ago. The cost of refining a gallon of jet fuel is up sixfold since 2000. Jet fuel costs now make up 30 percent to 50 percent of an airline’s operating costs. Many of the smaller airlines have been forced to shut down (24 in the last six months) and United has discontinued Ted, its low-fare airline. Continental just announced it will eliminate 3,000 jobs and reduce flight volume by 16 percent.

Americans certainly don’t need more reasons not to travel. The increasing hassles of air travel were already having a negative impact on consumer habits. According to Travel Industry Association of America research, 28 percent of all U.S. air travelers avoided one trip in the past year because of the hassles of air travel. The impact: 41 million air trips that did not happen and a $26.5 billion hit to the U.S. economy in the form of lost spending.

It is clear that the United States has reached the point where fuel costs are dramatically altering travel. More evidence: According to the Federal Highway Administration (FHA), Americans drove 11 billion fewer miles (4.3 percent) this past March when compared with March 2007. FHA says it is the sharpest drop for any month since it began keeping statistics in 1942. Wow.

Higher Costs Actually a Good Thing?

One need not be a Nobel Prize winning economist to figure out that fewer air and automobile travelers equals fewer opportunities to sell rooms. Even though it seems like we are in for a rough patch, I believe the energy squeeze could ultimately be a good thing. Here’s why:

• Rising fuel costs will force the airlines to operate more efficiently and fly and purchase planes that are more energy efficient. For example, both United and Continental are grounding inefficient 737s. The transition period will be difficult, especially for employees who will lose their jobs, but rising fuel costs will encourage innovation.

• Just as higher costs are forcing the airline industry to change course, so too is it forcing the automobile industry to do the same. Trucks and SUVs, once a cash cow for the auto makers, are being replaced by fuel-efficient, smaller automobiles. In the next few years, hybrid vehicles will become much more common. This trend will have a significant positive impact on the willingness of Americans to travel. It will also benefit the environment.

• Increasing energy costs and a downturn in travel will pressure hotel owners to seek out technologies and products that will help them reduce the cost of doing business. Most buildings in our industry are still energy hogs and operated in a highly inefficient manner. All new hotels will have to be “green.”

• Tougher times will stimulate marketing genius. Those companies that capture the attention of Americans wanting to stay closer to home will be the winners. Isolated, more difficult-to-get-to destinations such as Las Vegas will be forced to reign in their unsustainable growth.

The coming months and years will be unlike anything the travel industry has ever seen. Hold on tight. It is going to be quite a ride, but hopefully a green one at that.

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As always, I can be reached at editor@greenlodgingnews.com.

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