Travel Into 2022
Story by Noah Wright | Photos by Kassandra Eller | Design by Emma Stark
As Miley Cyrus sings in Party in the USA, “You hop off the plane at LAX with a dream and your cardigan.” Or at least that’s how the song goes, right?
At the beginning of the year, the travel industry saw some major developments and nine months later, there continues to be changes.
So before you go off to book those vacation flights to the land of fame excess, there are some important things you need to know about traveling in our current climate.
The travel and hospitality industry has many different outlets that feed into it. So far, the two main industries that are seeing the most change and trouble are airlines and hotels.
Airlines
“In March and April of 2020, there was a 95% percent drop in booking; most of the travel currently has been leisure travel: family flights and tourism,” says Louis Smilanich, managing director of ramp services for United Airlines at Newark International Airport.
2020 was a rough year for everyone, but airlines especially felt the strain of COVID-19 because nobody was flying. Even today, airlines are still struggling to bring in their main sources of revenue.
“Business travel has only had a marginal return, late to mid-2022 and early 2023 is when business travel is expected to return to the levels it was in 2019,” Smilanich says. “Domestic travel has rebounded really well because, for the most part, there aren’t very many restrictions.”
According to Smilanich, some states, like California and New York, implemented contact tracing, but for the most part, there wasn’t much. As a result, leisure travel around the United States is doing very well and many of the places that were tourism hotspots are seeing increased visitation again.
The same cannot be said about leisure travel out of the country.
“Internationally there are a lot of requirements placed on airlines and every country is extremely different,” Smilanich says.
If a person were to try and travel internationally, there are many different hoops that they would have to jump through in order to safely travel to their destination according to Smilanich.
Many, if not all, international countries have some sort of testing protocol and Smilanich explains that this could be difficult for travelers that plan to go through many different countries.
“When traveling through different countries you not only have to know what the specific requirements are for each country you are visiting. But in some circumstances, time can be an issue, because you might need a negative test at the time of boarding and it can’t be more than 72 hours old by the time you land at your destination,” Smilanich says.
The hoops and restrictions aside, leisure travel is growing right now. However, Smilanich explains that leisure travel alone is not enough to support the airline industry.
“It really changes the revenue models for companies and puts a strain on the profit margin,” Smilanich says.
Airlines are broken into segments, Smilanich explains. There are full-service airlines, like Delta, American and United. There are also low-cost airlines, like Southwest. And then there are ultra-low-cost airlines, such as Spirit, Allegiance and Frontier. Currently, everyone is going after those low-cost flights that make up leisure travel.
“Instead of having your corporate travel that brings in a good amount of revenue, airlines are attracting and going after the flights that they wouldn’t normally go after,” Smilanich says. “Everyone is targeting those customers that only really care about price and not necessarily service level.”
According to Smilanich, airlines, United specifically, have really pushed to put out a flight schedule that is similar to 2019. Since business travel is not making a return as fast as hoped, the only way for them to fly their desired schedule is by going after the low-cost customers.
“With everyone going after the same flights, you see some of those ultra-low-cost companies really getting squeezed by the network size of the bigger companies,” Smilanich says. “For example you look at Allegiance, who is going to stop flying out of Cleveland because they can’t compete with the bigger companies for customers.”
Smilanich says that we may see some consolidation like we did in 2010 to 2012 when airlines were struggling to make money. But this is just speculation.
“Face masks are required,” Smilanich says, “anyone on federal property, which airports are, is required to have a mask no matter if you are vaccinated or not.”
With the mask mandate being extended, Smilanich explains that many people are fighting compliance, leading to tension between flyers and airlines.
However, since the rules and procedures are federally mandated, there is no way to change the safety guidelines.
“For our airline, we have a standard and protocol that our customer service agents and flight crew follow,” Smilanich says. “After a couple reminders, the crew and agents will ask the passenger to leave the flight. While in flight, we will call ahead to have law enforcement on the ground so that when the passenger arrives they can be apprehended.”
Smilanich explains that any flyer who is asked to leave or is apprehended for mask violations, is placed on a no-fly list for lack of compliance. Airlines are currently working to make the list universal so that a person removed from one airline will be removed from all airlines until COVID-19 regulations end.
The regulations are not only reserved for passengers though.
“If you look at the airlines, half of them came out with a mandate that all employees have to be vaccinated,” Smilanich says. “Airlines want to not only protect their own employees, but also want to project that their airline and their operation are healthy and safe to travel through.”
Smilanich explains that United specifically has increased the efficiency of their air filtration systems. He says that masks may go away, but the higher level of disinfecting will continue to stick around.
Hotels
The other hospitality outlet that has seen some major changes since COVID-19 began is the hotel industry.
“As of Oct. 13, in terms of occupancy, we are looking at 59.2% but this time last year we were 37.9%,” Professor and Department Head of Hospitality and Tourism at Highline College Justin Taillon says, citing a statistic by Smith Travel Research.
Taillon goes on to explain that the daily rate, which is the rate per room, has gone up to $143.65. It was $94.12 this time last year.
According to Taillon, REVPAR (Revenue Per Available Room) is important because if you have 100 rooms but you only sell one and you sold that room at $100 then your REVPAR is $1.
“Our REVPAR, which is the most important number, is how much you made per room, is $85.05. Last year it was $35.69, we are seeing a 138% increase,” Taillon says.
Although Taillon says that may sound pretty good, he explains that there are two kinds of hotels: the luxury and the convention market.
Taillon explains that convention hotels, which usually have 1,000 - 2,000 rooms in the Seattle area, differ from luxury hotels, which usually cost 2 - 3 times more to build. For a luxury hotel, it may cost $350,000 per room to build, whereas conventional hotels may be $100,000 per room.
“Looking at convention hotels, they are hurting pretty badly. Their REVPAR is $85.81, up from $22.42, but their occupancy is only 46%,” Taillon says. “TThe hotel is losing money at 46%.”
According to Taillon, luxury hotels are seeing similar if not worse results.
“In the luxury market, we are sitting at a 49% occupancy rate and a price of $144 per room. A luxury hotel at a REVPAR of $144 is losing money,” Taillon explains. “The Four Seasons Experience, and many other luxury hotel services, won’t be what they used to be.”
If leisure travel is going up, how then is the hotel industry showing such negative results? Well, the simplest way to answer that is the same as why airlines are still struggling. With the lack of business travel comes the lack of revenue for all aspects of hospitality.
“Businesses are budgeting right now for the finalization of the 2022 budget and what we are seeing is that businesses are not adding in travel,” Taillon says. “Statistically, business travel needs to happen. There will still be business travelers, but it will be slow and much less.”
With such a limited number of corporations sending salespeople and other workers out on trips, the revenue both airlines and hotels receive from partnerships and more expensive purchases has decreased.
“Vacationers don’t stay at luxury hotels, they stay at economy hotels by the airport,” Taillon says. “[Hotels] can fight for conferences to come to the area; you can try to get business travel back. But other than that, there isn’t much to do.”
Taillon explains that many of the luxury hotels can’t drop their prices like airlines do because if they were to drop their prices then the whole experience would change. The hotels would also have to limit staff and other resources if they were to decrease cost.
“The other option that many hotels are focusing on is government assistance,” Taillon says. “The federal government has done a good job keeping the market afloat. [Economic Injury Disaster Loan] EIDL is a $2 million disaster relief loan that you don’t have to pay anything on for two years. Besides the money, this is helpful to hotels because the interest is only slightly over 2%.”
Hotels do not have the same luxuries that airlines do, an airline can drop their prices and book a higher flight schedule to offset the decreased prices. Hotels can’t risk dropping prices to compete with other companies because there is not enough occupancy to justify the dropping.
Their only option is to wait and hope that things work out.
What does this mean for the future?
The future of traveling is a bit uncertain, but both Taillon and Smilanich are hopeful that the industry will be okay.
“We saw over summer that when airlines grew their schedule for 2021 travel, people were ready to get out and were buying tickets at rates similar and even higher than 2019,” Smilanich says.
The hospitality industry is very flexible, according to Taillon, and when something changes, every other component adapts as a result.
“We need people to travel. Vacations are back and it’s getting much safer,” Taillon says . “Just because business travel is down, doesn’t mean that there aren’t people who want to take care of you.”
With hotel and airline prices down right now, why not go party somewhere in the USA?
