|
The Conference Board Consumer Confidence Index® declined in March, after increasing in February. The Index now stands at 124.1 (1985=100), down from 131.4 in February. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – declined, from 172.8 to 160.6. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – decreased from 103.8 last month to 99.8 this month.
“Consumer Confidence decreased in March after rebounding in February, with the Present Situation the main driver of this month’s decline,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Confidence has been somewhat volatile over the past few months, as consumers have had to weather volatility in the financial markets, a partial government shutdown and a very weak February jobs report. Despite these dynamics, consumers remain confident that the economy will continue expanding in the near term. However, the overall trend in confidence has been softening since last summer, pointing to a moderation in economic growth.” The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was March 14. Consumers’ assessment of current conditions declined in March. The percentage of consumers stating business conditions are “good” decreased from 40.6 percent to 33.4 percent, while those saying business conditions are “bad” increased from 11.1 percent to 13.6 percent. Consumers’ assessment of the labor market was less upbeat. Those stating jobs are “plentiful” decreased from 45.7 percent to 42.0 percent, while those claiming jobs are “hard to get” increased from 11.7 percent to 13.7 percent. Consumers’ optimism about the short-term future moderated in March. The percentage of consumers expecting business conditions will improve over the next six months declined from 19.6 percent to 17.7 percent, while those expecting business conditions will worsen remained relatively flat, 9.3 percent versus 9.2 percent last month. Consumers’ outlook for the labor market was less favorable. The proportion expecting more jobs in the months ahead decreased from 19.0 percent to 16.4 percent, while those anticipating fewer jobs increased from 12.3 percent to 13.4 percent. Regarding their short-term income prospects, the percentage of consumers expecting an improvement rose slightly, from 20.6 percent to 21.0 percent, while the proportion expecting a decrease declined, from 8.3 percent to 7.6 percent. Source: March 2019 Consumer Confidence Survey®
0 Comments
In February 2019, Hawai‘i hotels statewide reported decreases in both average daily rate (ADR) and occupancy, which resulted in lower revenue per available room (RevPAR) compared to February 2018.
According to the Hawai‘i Hotel Performance Report published by the Hawai‘i Tourism Authority (HTA), statewide RevPAR declined to $242 (-4.2%), with ADR of $290 (-1.2%) and occupancy of 83.4 percent (-2.6 percentage points) (Figure 1) in February. HTA’s Tourism Research Division issued the report’s findings utilizing data compiled by STR, Inc., which conducts the largest and most comprehensive survey of hotel properties in the Hawaiian Islands. In February, Hawai‘i hotel room revenues fell by 5.6 percent to $360.0 million. There were more than 22,000 fewer available room nights (-1.5%) in February and approximately 58,000 fewer occupied room nights (-4.5%) compared to a year ago (Figure 2). Several hotel properties across the state were closed for renovation or had rooms out of service for renovation during February. All classes of Hawai‘i hotel properties statewide reported RevPAR declines in February, except Upper Mid-scale Class properties ($149, +2.5%). Luxury Class properties reported RevPAR of $447 (-6.2%) with ADR of $574 (-2.2%) and occupancy of 77.9 percent (-3.4 percentage points). At the other end of the price scale, Mid-scale & Economy Class hotels reported RevPAR of $154 (-10.3%) with ADR of $181 (-6.8%) and occupancy of 85.3 percent (-3.4 percentage points). Among Hawai‘i’s four island counties, only O‘ahu hotels reported ADR growth for February ($237, +1.2%). This increase was counter-balanced by a 1.0 percentage point decrease in occupancy to 86.4 percent, resulting in no RevPAR growth in February ($205) compared to a year ago. Maui County hotels reported a decline in RevPAR to $337 (-4.5%) in February but led the state overall. Both ADR ($420, -2.9%) and occupancy (80.3, -1.3 percentage points) decreased year-over-year. Hotels on the island of Hawai‘i reported a drop in RevPAR to $233 (-13.5%) in February, with lower ADR ($285, -5.8%) and occupancy (81.8%, -7.3 percentage points) compared to February 2018. Kaua‘i hotels’ RevPAR fell to $230 (-12.3%) in February, with declines in both ADR to $306 (-1.3%) and occupancy to 75.1 percent (-9.4 percentage points). All of Hawai‘i’s resort regions reported RevPAR and occupancy losses in February. Only Waikīkī properties were able to raise ADR for the month ($232, +1.0%) compared to a year ago. Tables of hotel performance statistics, including data presented in the report are available for viewing online at: www.hawaiitourismauthority.org/research/infrastructure-research/ About the Hawai‘i Hotel Performance Report. The Hawai‘i Hotel Performance Report is produced using hotel survey data compiled by STR, Inc., the largest survey of its kind in Hawai‘i. The survey generally excludes properties with under 20 lodging units, such as small bed and breakfasts, youth hostels, single-family vacation rentals, cottages, individually rented vacation condominiums and sold timeshare units no longer available for hotel use. The data has been weighted both geographically and by class of property to compensate for any over and/or under representation of hotel survey participants by location and type. For February 2019, the survey included 162 properties representing 47,794 rooms, or 89.9 percent of all lodging properties with 20 rooms or more in the Hawaiian Islands, including full service, limited service, and condominium hotels. The diversification of tourism product and the progressive growth of investment are supporting the sustained development of a secure destination
Granma: Author: Vivian Bustamante Molina | internet@granma.cu March 21, 2019 11:03:23 Cuba’s hotel infrastructure continues to grow, already offering more than 69,500 rooms. Almost 40 hotels, providing 18,000 new rooms which are to be inaugurated in the medium term, are currently under construction in Cuba, where authorities remain committed to the sustained growth of the tourism industry, as the driving force of the economy. Forecasts for the present year were based on sector potential, and include the expected arrival of 5,100,000 international visitors (stopover and cruise), representing a 7.4% increase in comparison to 2018, as reiterated by Tourism Minister, Manuel Marrero. There are already early signs that this figure will be reached, as Cuba welcomed one million international visitors five days before it did so in 2018, while January closed with an increase of 9.0% as compared to the same month of the previous year. It is worth noting that the anticipated growth of this sector is not based solely on new investments, but also on plans for modernization and updating of the country’s existing hotel infrastructure. Meanwhile, diversification goes hand in hand with the development of event and incentive tourism, and the promotion of high-standard facilities in Havana. The upcoming annual International Tourism Fair, FitCuba, to be held in Havana in May, will offer an opportunity to corroborate results in this regard, including the announced opening of a dozen new accommodations and the reincorporation of 1,121 refurbished rooms that were out of service. Currently in different phases of construction are the Havana hotels: Prado y Malecón, Corona, Metropolitano, Gran Hotel, and those located on Malecón and D Street, 3rd and 70th Streets, and 25th and K Streets; while undergoing refurbishment are the hotels: Habana Riviera, Habana Libre, Deauville, Lincoln, Sevilla, Cohíba, Colina, Vedado, St. Johns, Neptuno Tritón and Copacabana. Reconstruction works are planned on another five, among them, the emblematic New York hotel. Such a broad investment program includes extra-hotel services such as the Tarará and Hemingway marinas, and the Capdevila golf course; in addition to recreation and gastronomic centers, including the La Ferminia restaurant, and the Complejo 1830. SAFE, QUALITY TOURISM Sector authorities estimate that, for the first time, revenues in the current year will surpass 3 billion dollars, representing growth of 17%. Greater service quality and diversity constitutes the cornerstone of efforts, supported by the intangible value provided by the security of the country, which leads to increased tourist arrivals, as visitors recognize and appreciate the safe conditions to undertake activities. A series of international awards vouch for such conditions: Varadero features second place in the TripAdvisor 2019 Travelers’ Choice Awards for the world’s best beaches, after having placed third in 2018; while the hotels Paradisus Princesa del Mar, located at the same beach destination, and Havana’s Gran Hotel Manzana Kempinski and Hotel Nacional, were all recognized in different categories of the 2018 World Travel Awards, which identify excellence in all activities linked to the global travel and tourism industry. Such honors, together with last year’s record number of international visitors, only serve to refute the U.S. State Department’s Cuba Travel Advisory, warning its citizens to reconsider travel to the island. The advisory, in effect since November 2017, represents yet another orchestrated lie aimed at sabotaging Cuba’s economic and social development. Just like the ever-present blockade, it has had a negative impact, demonstrated by the 40% drop in U.S. visitors to the island following the issue of the warning, having seen previous growth of 175%. However, people from other latitudes continue to come to Cuba, attracted by its climate, environment, culture, and safety. Meanwhile, several sectors in the U.S. itself have expressed their opposition to moves by the Donald Trump administration, including for example the U.S. Tour Operators Association (USTOA), which has insisted that Cuba is a “safe” destination. Likewise, Cuba Educational Travel, a U.S. organization, reported that in an anonymous survey of citizens of that nation, 99.13% felt “safe” or “very safe” during their stay in the Caribbean country. The same opinion is shared by U.S. Senators who have traveled to the island, and refute the story of sonic attacks on diplomatic staff at their embassy in Havana, instead advocating the restoration of all operations of that mission. Further arguments to support Cuba as a tourist destination include the Excelencias Award for Safest Travel Destination, received by Minister Manuel Marrero during the 38th International Tourism Trade Fair, FITUR 2018, held in Madrid; or the high level events and visits of dignitaries and personalities from around the world, who travel to Cuba to strengthen ties of friendship and collaboration. In addition, the country’s potential is demonstrated by growing foreign investment in the sector. Two examples are the Meliá company, which continues to consolidate its presence in Cuba, operating 34 hotels with 14,661 rooms; while the prestigious Asian chain MGM Muthu Hotels will open its fourth hotel in Cuba during the first half of this year. All this begs the question as to who loses out more from the U.S. obstacles to Cuban tourism. 2019 will see an upswing of cruise capacity deployed in the Caribbean, the Mediterranean, Alaska, the West Coast, South America, the Indian Ocean/Red Sea and the Persian Gulf, Bermuda, Hawaii, Africa and the Panama Canal, according to the 2019 Cruise Industry News Annual Report.
The Caribbean is likely to see more than 10.7 million cruise passengers compared to 10.2 million last year, commanding a global market share of 38.7 percent. Thus, this will be a record year for the Caribbean in terms of passenger numbers, although its percentage share of the worldwide cruise capacity will be below the 42.2 percent estimated for 2014. The Mediterranean will also see it strongest year ever in terms of passenger numbers at 4.1 million and 14.8 percent of the global capacity, but its market share is also down from 17.9 percent in 2015 when 9.6 million sailed. Alaska is also expected to have a record year with more than 1.2 million passengers and a 4.4 percent market share. The previous records year was 2008 with just over one million passengers. The West Coast is also seeing a bump up to nearly one million passengers from 870,000 last year. Bermuda will see a 30 percent increase and Antarctica 40 percent. While the Indian Ocean will see a significant increase that is mainly driven by the Indian start-up Jalesh Cruises. Northern and western Europe stays relatively flat with 2.6 million passengers this year and 2.5 million last year, and a 9.4 percent market share year-over-year. Asia/Pacific will see a significant drop, mainly due to the readjustment of capacity in China; Australia stays flat, as do the Canary Islands and South America. U.S. citizens’ outbound travel from the USA to International Regions grew by 6.3% in 2018.3/17/2019
The United States Government’s Department of Commerce, International Trade Administration’s National Travel and Tourism Office (NTTO) recently released the full year 2018 figures for U.S. citizens outbound travel from the USA to International Regions.
The numbers for air traffic both to and from all international regions (on US and foreign flagged carriers) are reported to the NTTO by means of the “U.S. International Air Travel Statistics Report”. For more details of this survey go to: - http://tinet.ita.doc.gov/research/programs/i92/index.html As can be seen: -
The NTTO defines the Caribbean as including the following countries: - Included in Caribbean for APIS:
US Citizens Outbound Travel Total 2018
Caribbean share of total outbound trips made by US citizens 2018
Hospitality-travel firm says tourists with money are not coming to Mexico and are going elsewhere3/15/2019 Head of Apple Leisure Group says insecurity, sargassum and insufficient marketing are the causes.
Mexico’s high-end tourism market has taken a hit so far in 2019, according to the CEO of a hospitality-travel firm who predicts that visitor numbers will decline further in coming months. Alejandro Zozaya, CEO of Apple Leisure Group, estimates that the economic spillover from tourism is down 20% to date this year compared to the same period of 2018. The problem: not as many wealthy Americans are coming to Mexico to vacation, get married at lavish ceremonies and honeymoon. “The most important market we have lost is that which leaves the largest economic spillover, the high-end North American,” Zozaya told the news outlet Aristegui Noticias. “We still have a lot of Americans but the highest segment [of the market] has stopped coming and we’ve replaced them with tourists from other countries and regions who leave a smaller spillover – they spend less at the destination, hotel rates go down,” he said. The businessman claimed that the main reason well-off tourists are not coming to Mexico is insecurity but added that sargassum on Caribbean coast beaches and a lack of marketing following the government’s decision to disband the Tourism Promotion Council (CPTM) are also factors. More United States citizens are traveling outside their country than ever before and there is not a decline in the international tourism market, but tourists are deciding to “go to other destinations that are not Mexico,” Zozaya said. “[Americans] are going to the Dominican Republic, Costa Rica, Jamaica, and Mexico loses market share.” He said that tourism is declining in Mexico’s most popular destinations at the same as the number of hotel rooms is going up. “We have 30,000 additional rooms projected for Quintana Roo on top of those in Puerto Vallarta, in Los Cabos and other destinations in Mexico,” Zozaya said. He stressed that advertising is the best way to attract greater visitor numbers to Mexico and that demand for accommodation and other tourism services must grow at a rate at least equal to supply growth in order to maintain profitability and employment in the sector. Zozaya’s estimate of a 20% reduction in tourism spending this year is well above the 0.3% decline in air arrivals recorded in January but the businessman warned that “the most complicated” period for the tourism industry “is still to come.” Contributing to the decline in international air arrivals in January was a reduction in the number of passengers flying into Cancún International Airport, the first year-over-year decrease for any month in almost seven years. Earlier this year, the Secretariat of Tourism predicted that international visitor numbers could hit 43.6 million in 2019, which would represent a 5.2% increase on last year’s record figures. Total tourism expenditure is forecast to reach just under US $23.7 billion, which would also be 5.2% higher than in 2018. Last month, Tourism Secretary Miguel Torruco Marqués said the government is aiming to increase expenditure by tourists in Mexico by focusing more on attracting big spenders. Among the nationalities that spend the most while visiting Mexico, the Japanese are in first place, spending an average of $2,008, not including airfare. Cuba used to depend on aid from its oil-rich ally Venezuela. But with Venezuela in turmoil, opening luxury hotels is "a new stage," but also "a necessity," Cuba's Tourism Minister says as his country scrambles for other revenue sources. In Havana, there's a shop selling a camera for more than $25,000 -- roughly 850 times the average monthly wage in Cuba. The eye-popping sum earned predictable scorn on social media, but it begins to make sense when seen through the lens of the island's fledgling bid to tap into the luxury tourism market. The exclusive camera store and other boutiques featuring A-list brands like Versace and Armani are located in a shopping gallery on the ground floor of the swanky Gran Hotel Manzana.  Tourists sit by the swimming pool on the rooftop of the Gran Manzana Hotel in Havana, on February 11, 2019. (AFP) The mere existence of the shops certainly seems incongruous in a country that has been governed as a one-party communist state since 1959, and where the average wage is $30 a month.
But the hotel isn't exactly looking for locals to buy in - it attracts "a clientele of private airplanes... princes and celebrities," according to general manager Xavier Destribats. The Gran Hotel Manzana, the first ever five-star establishment in Havana, opened in 2017 in a sumptuous historic building that was, at the beginning of the 20th century, the island's first shopping mall. The property run by Swiss group Kempinski is "the first genuine luxury hotel in Havana," said Destribats. "It's the first hotel with a 1,000-square-metre spa," he said. All the rooms are at least 40 square metres (430 square feet), with prices ranging from $370 for a basic room in low season to $5,000 for the presidential suite. "There was a certain type of clientele that didn't travel to Havana, or Cuba, because there wasn't the standard of luxury five-star hotel like in cities such as Paris or London," Destribats added. 'Feels like Miami' The hotel terrace offers stunning views over Havana's colorful historic neighbourhood, where many Cubans live in dilapidated buildings that have fallen into disrepair or have vegetation sprouting from them. "It really doesn't feel like Cuba, clearly not - it feels like being in the United States, Miami or Puerto Rico," said Celia Liegeois, a 26-year-old tourist from Paris. Having traveled around the island nation for three weeks, she and a friend had decided to spend their last few days relaxing by the hotel's rooftop pool. Nearby, Suki Lu, a recently arrived 28-year-old Chinese television presenter, is impressed at what she sees. "It's beautiful. Look at the sunset! It's truly addictive," she said. "I live in Dubai so when you talk about luxury hotels, the level there is really high, but I think I'll like this hotel," she said, while her friend used a drone to get an aerial view of the building. The largest single group of visitors to the Gran Hotel Manzana - one-fifth of the total - are tourists from the United States, although there are plenty of visitors from Europe, Asia and the Middle East. The Kempinski group, which hopes to open two or three more hotels in Cuba, is of course not the only chain to show an interest in the ultra-luxury market. In September 2018, Spain's Iberostar opened its second five-star hotel, the Grand Packard. French hotel giant Accor is planning on opening its own luxury establishment on the Malecon, Havana's famous seaside boulevard, in September. It will include a chocolate shop on its ground floor and a restaurant and concert space on its roof. The employees' outfits will be designed by Spanish fashion designer Agatha Ruiz de la Prada. US blacklist However, there is a slight catch: in every case, the hotels are owned by Gaviota, the Cuban army's branch dedicated to tourism. The foreign hotel groups are only allowed to run the establishments, all built by French group Bouygues, which has a long-standing local presence. Authorities don't publish the army's revenues, but this alliance between hoteliers and the military landed the luxury hotels on Washington's blacklist. US tourists are technically banned from staying in the hotels - but the restriction can be easily circumvented by either paying in cash or booking through travel agents. Beyond hotels, developers have more ideas to entice those with deep pockets. "There's a plan to build golf courses in partnership with real estate groups," said industry expert Jose Luis Perello. The opening of a luxury hotel means Cuba has turned a corner, he said. "Since it opened up to international tourism more than 20 years ago, Cuba has focused all its plans and strategies" on "sun and beach tourism" for the masses, Perello said. That category currently accounts for 73 percent of the 70,000 hotel rooms on offer in Cuba. And those who rent them usually don't spend much money. The same goes for cruise ship tourists - while the number of cruises docking in Cuba has exploded, passengers only spend an average of $15 a day on land. That isn't great news for Cuba, which welcomed 4.7 million tourists in 2018 - it needs the cash. The government, which has been subjected to US sanctions since 1962, used to depend on aid from its oil-rich ally Venezuela. But with Venezuela in turmoil, Cuba is scrambling for other sources of hard currency and its economic growth has stagnated at around one percent - not enough to cover the population's basic needs. Opening luxury hotels is "a new stage," but also "a necessity," Tourism Minister Manuel Marrero Cruz says.
Geneva - The International Air Transport Association (IATA) announced global passenger traffic results for January 2019 showing traffic (revenue passenger kilometers or RPKs) rose 6.5% compared to January 2018. This was the fastest growth in six months. January capacity (available seat kilometers or ASKs) rose 6.4%, and load factor inched up 0.1 percentage point to 79.6%.
"2019 has started on a positive note, with healthy passenger demand in line with the 10-year trend line. However, market signals are mixed, with indications of weakening business confidence in developed economies and a more nuanced picture across the developing world," said Alexandre de Juniac, IATA's Director General and CEO. Total Market: January 2019
International Passenger Markets International passenger demand rose 6.0% in January compared to the same month last year, which was up from a 5.3% rise in December year-over-year. All regions recorded growth, led by Europe for a fourth consecutive month. Capacity increased 5.8% and load factor climbed 0.2 percentage point to 79.8%. European carriers' international traffic climbed 7.7% in January compared to the year-ago period, down from an 8.6% annual increase in December. This moderation likely reflects uncertainty over the region's economic situation, including lack of clarity over Brexit. Capacity rose 8.8% and load factor fell 0.9 percentage point to 80.3%. Asia-Pacific carriers recorded a demand increase of 7.1% compared to January 2018, solidly above the 5.0% growth in December. Capacity rose 5.1%, and load factor surged 1.5 percentage points to 81.7%, second highest among the regions. Healthy regional growth is being underpinned by rising incomes and an increase in the number of airport pairs. Middle East carriers had the weakest growth, with demand up just 1.5% compared to January 2018. Nevertheless, this still was improved over a 0.1% drop in traffic in December. It is premature to say whether this improvement represents a trend. Capacity climbed 3.2% and load factor fell 1.3 percentage points to 75.6%. North American airlines experienced a 4.7% traffic rise over a year ago, improved from a 3.7% annual rise the month before, while capacity climbed 3.5% and load factor increased 1.0 percentage point to 80.6%. Demand is being supported by comparatively strong economic conditions which have delivered a low unemployment rate and bolstered consumer spending. Latin American airlines' traffic climbed 5.8% in January compared to January 2018. Although this represented a slight softening compared to the growth in December of 6.1%, signs are that passenger volumes have accelerated a little in recent months in seasonally-adjusted terms. Capacity rose 6.7%, however, and load factor slipped 0.7 percentage point to 82.8%, which still was the highest among the regions. African airlines saw January traffic rise 5.1%, up from 3.8% in December. Concerns continue about the region's largest economies, South Africa and Nigeria, however. The region's capacity rose 2.9%, and load factor jumped 1.5 percentage points to 70.9%. Domestic Passenger Markets Domestic traffic climbed 7.3% in January, year-on-year, the fastest pace since August and up from 5.6% growth in December. All markets showed growth, with China, India and Russia posting double-digit annual increases. Domestic capacity increased 7.5% and load factor slid 0.1 percentage point to 79.3%. Domestic Market: January 2019
US domestic traffic rose to a four-month high of 5.8% in January; however, in seasonally-adjusted terms the upward trend has moderated since mid-2018, possibly reflecting concerns about the economic outlook and trade tensions with China. Russian domestic traffic rose 10.4% in January, down from 12.4% in December, but continuing the strong upward trend in passenger traffic. The Bottom Line "Aviation is the business of freedom, liberating us from the constraints of geography and distance, but to be effective we require borders that are open to the movement of people and goods. We welcome the latest EU proposals to adopt a common-sense approach to maintaining and enabling the connectivity between the UK and the EU in the event of a no-deal Brexit. But this is just a temporary solution and with Brexit still set for 29 March, we urge both sides to agree a comprehensive Brexit package that will ensure the seamless air connectivity travelers expect," said de Juniac. Read the full January Passenger Traffic Analysis (pdf) Notes for Editors:
The Central Bank of Aruba recently released its revised Third Quarter 2018 numbers and announced that tourism receipts for Aruba grew by 8.4% in the third quarter, from 730.7 million AFL in the third quarter of 2017 to 792.1 million in the third quarter of 2018. During these same three months the number of stopovers to Aruba decreased by 0.7% while the number of cruise visitors grew by 18.5% compared to the same three months of 2017.
During the first nine months of 2018 tourism receipts increased by 9.1% compared to the same nine months of 2017, growing from 2,422.4 million AFL in 2017 to 2,643.9 million AFL in 2018. During the same nine months the volume of stopovers grew by 1.5% while the number of cruise visitors grew by 5.8%.
Tourism Receipts (Revised Series)
In Millions of AFL Source: Central Bank
Tourism Receipts (Revised Series) Percentage Change
Forbes Magazine:—On March 4, 2019, Southwest Airlines began selling tickets to Hawaii from the US mainland. The long-awaited announcement included the four California cities Southwest will fly from, as expected (San Diego, San Jose, Sacramento and Oakland) and the destinations (Oahu, Maui, Lanai and The Big Island.) The announcement of service, which begins March 14, also included something else not everyone had been expecting—tickets as low as $49 each way.
The flight dates and prices came as welcome news to consumers, particularly those who snagged the $49 tickets. No doubt they provided some solace as well to those stranded by an East Coast snowstorm that cancelled 2500 flights, leaving frustrated passengers to dream of Hawaiian beaches. Southwest Airlines on Monday (04MAR19) opened reservation for service to Hawaii, with the first flight scheduled in mid-March 2019 from Oakland. The airline will also operate inter-islands service from late-April 2019. Boeing 737-800 aircraft will operate these new routes. Honolulu – Kahului eff 28APR19 4 daily Honolulu – Kona eff 12MAY19 4 daily Oakland – Honolulu eff 17MAR19 1 daily, 2 daily from 24MAR19 Oakland – Kahului eff 07APR19 1 daily, 2 daily from 10APR19 San Jose CA – Honolulu eff 05MAY19 1 daily San Jose CA – Kahului eff 26MAY19 1 daily In addition to launching service from Oakland and San Jose with fares as low as $49 and $79 each way to Hawaii (San Diego and Sacramento service will be announced later) Southwest said a little about what that service will look like. The airline says it will provide seating with an “industry-leading 32-inch seat pitch” on Hawaii flights, along with “Islands-inspired drinks and snacks,” WiFi enabled planes and “100% free inflight entertainment” including movies and live TV. Southwest has put up a dedicated web page for information at Southwest.com/Hawaii. Although long expected, Southwest’s market entry was not so welcome at competitive airlines that already serve the Hawaiian market, including Alaska, Hawaiian, Delta, United and American. For Southwest itself, the stock market reaction was not particularly positive, as the stock (LUV) declined -0.51 (-0.94%). But the new announcement had a much more pronounced effect on Hawaiian Air (HA:NASDAQ), which dropped $3.24 (-10.94%). Alaska Air (ALK), one of the volume leaders in flights to Hawaii from the West Coast, dropped -1.81 (-3.0%). While it was a bad day for the stock market in general, the three other major US airlines flying to Hawaii also declined. American dropped -0.92 (2.66%), United dropped -2.61 (-3.0%) while Delta declined slightly, by -0.17 (-0.3%). The competition problem for Hawaiian, although the airline has been established in the islands for 90 years, is obvious. (Not widely reported: Southwest is now offering four interisland flights a day between Honolulu and Kona on an introductory basis for $29 each way.) The prospect of overcapacity and/or the dread “fare war” also potentially threatens revenues and profits at the other carriers. The race to the bottom (err, the race to preserve market share in a low fare environment) has already begun. Southwest’s competitors have responded with fares from the US mainland to Hawaii for as low as $197 roundtrip. For less than two hundred dollars, you can fly roundtrip from San Jose (SJC) or Oakland (Oak) to Kahului, Maui (OGG), or from Oakland to Honolulu (HNL). All three $197 round trips are Alaska Airlines Saver Fares, their version of Basic Economy, so luggage will be extra. (Southwest has promised to continue their “two bags fly free” policy to Hawaii.) Similarly, American Airlines is offering non-stop roundtrips from Phoenix (PHX) or LAX to Kona (KOA) on the Big Island for $257, also in Basic Economy. Other low fares are available from Delta and Sun Country. Low fares mean less revenues and lower profits, of course. In extreme cases the loser of such a fare war may end up drastically cutting back its presence in Hawaii or retreating from the islands altogether, as Allegiant did in 2017. Obviously, this is not a possibility for Hawaiian Air. Less obviously, the new low fares may mean something else—damage to the elaborate loyalty and “elite” structure that the legacy airlines have built over the last 35 years. The Points Guy found some Southwest flights to Hawaii for $49 or 1,950 points each way, from San Jose and Oakland to Honolulu and Maui. I compared a Southwest flight from Oakland to Honolulu on March 19 with an American Airlines flight on that date, which demanded 22,500 points (or $173) versus 1950 (or $49) for Southwest. Even discounting the fact that the Southwest fare is a promotional one, and any possible discrepancy in point value, this is a huge difference. In some ways, it calls into question the value of loyalty to a particular frequent flyer program, which a number of analysts have pegged as actually more valuable than the airlines themselves. Why kill yourself sitting on planes, paying to upgrade to “elite” status, making “mileage runs”, charging everything to one loyalty card, and so forth for overvalued points, when you can buy a roundtrip to Paradise for $200? Or, if Hawaii is your leisure destination, why not fly the legacy carriers network to a California city, fly Southwest to the islands, and preserve those presumably precious miles for next time? Even with this announcement, Southwest has other sandals—er, shoes -to drop when in terms of Hawaiian announcements. The big question is when service from the Los Angeles and Orange County metro areas will begin. The 13 million people who live in those areas served by LAX, Burbank, Ontario, Long Beach and John Wayne/Orange County airports are currently left out of Southwest’s schedule, although competitors are now offering low fares from LA to the islands. In addition, a quick check of Southwest Vacations, the vacation package site of Southwest Airlines, shows that Hawaiian flights—and hotels, rental cars and other amenities—have not yet been integrated into the system. When it is, in addition to the current Southwest.com/Hawaii site, expect tens of thousands of Southwest customers to begin building Hawaiian vacation packages. Will Southwest’s entry into the market increase the pie for everyone? Or will the “Southwest effect” cut both prices and profitability for itself and its competitors? For the airlines, the battle for the Hawaiian market, and perhaps a larger war over the value of plum destinations like Hawaii to loyalty programs, has just begun. |
Jim Hepple is an Assistant Professor at the University of Aruba and is Managing Director of Tourism Analytics. Archives
July 2020
Categories |
RSS Feed