What would happen if the affluent travelers stayed home, businesses cut way back on trips, and everyone else had to cover an airline’s expenses? It’s a scary thought.
I think about it often. I have one of those ‘niche’ jobs – I study the very wealthy. Usually this is pretty fun, but lately it’s been pretty dismal with the revelation that the recession is causing even the super rich to re-think their way of life.
The pages of the Wall Street Journal are rife with examples of ‘it’ fashion designers eschewing costly runway events, art auctions experiencing record low sales, and luxury homes suffering multi-million dollar markdowns.
The harsh truth is that industries from fashion to finance to, dare I say it, travel, are subsidized by those folks who are willing to buy those high ticket items. When the economy was flying high, this was good news. Now that those free-spending ways are taking a dive, though, it might mean some changes are in order.
It’s not just the wealthy cutting back, either. Many businesses are slashing costs, too. I know the large international firm I work for has made some draconian policy changes – using Skype and teleconferencing to cut travel costs, as well as making executives fly coach and cutting out meetings deemed non-essential.
As Janice Hough recently pointed out, folks sitting in front of the curtain pay the lion’s share of an airline’s operating costs. Ditto goes for all other types of travel, like hotels and cruises.
What happens when full-fare customers disappear faster than Bernie Madoff’s billions? It won’t be pretty.
Airlines have long realized the vulnerability of their fare constructs, but kept with the status quo as long as it seemed to work and because no one could come up with anything better. Making all fares the same seems like a great idea. Very democratic and American. But in reality, it’s unappealing to both the average travelers (who already feel they’re paying too much) and the first class passenger (that resents the lack of choice and being treated like everyone else).
Some cruise lines are gravitating that way with ‘guaranteed low fare’ deals. Although this provides comfort to the passenger, it also takes away the thrill of bargain hunting and thwarts those gambling that a fare will go down much closer to the trip date. This is getting suspiciously close to a one-price-fits-all pricing strategy. It’s less of a convenience for us than it is a safeguard for them. Add to that all the mergers taking place (and the reduction of competitors), and what do you get?
So, in light of volatile fuel markets, the recession, terrorist concerns, airline and other travel industry company consolidations, and all the other ‘perfect storm’ deterrents to travel, will 2009 or 2010 be the year of new pricing structures? And what do you think they will look like?
