Passengers will “bear the cost” of the airline industry’s transition to net zero through higher airfares, the head of the International Air Transport Association (IATA) has warned.
Addressing the Sustainable Aerospace Together Forum, hosted in Seattle by Boeing and FT Live earlier this month, IATA director general Willie Walsh pulled no punches when spelling out the enormous cost of decarbonizing aviation and how it will be funded.
IATA’s member airlines agreed in October 2021 to commit to net zero carbon emissions by 2050. The trade body sees sustainable aviation fuel (SAF) as potentially representing 65% of the abatement needed to reach that target. However, these fuels are three to five times more expensive than kerosene, and a massive amount of investment is needed to vastly scale up production.
“Ultimately, our customers are going to bear the cost of this transition,” says Walsh. “Anybody who says that the cost of transitioning to net zero is going to be low or unnoticeable, I’m afraid, is fooling themselves. This will represent a significant challenge and mean that passengers will have to pay higher fares.”
He adds that “we need to be honest” with customers about the “significant” cost of transitioning to net zero. Airlines “are not in a financial position to absorb that cost”, says Walsh, therefore, “it will have to be passed on to consumers”. It is “absolutely crucial”, in Walsh’s view, that “everybody recognizes they have a role to play” in the transition.
“It’s not just about airlines,” he says. “We need the OEMs to play their part, we need governments to recognize that they have a significant role to play. Regulators need to understand the challenge and be ready to support the transition to net zero. We need investment, and that means we’re going to have to access finance.”
Some airlines are already being open with passengers about the increased cost of SAF, and have begun adding it to their ticket prices.
KLM, for instance, recently doubled the mandatory sustainable aviation fuel surcharge introduced last year on all flight tickets from Amsterdam. The Dutch carrier now adds a surcharge of between €2 and €24 ($2.14-$25.72) to tickets from Amsterdam, to help fund the use of a 1% SAF blend on all Schiphol-departing flights. The surcharge runs alongside a voluntary SAF contribution program, although the airline has admitted that take-up for this is low.
Jonathon Counsell, group head of sustainability at British Airways parent company IAG, also points to low take-up for voluntary schemes.
“We have voluntary mechanisms for our customers to reduce their emissions. The uptake is relatively low but they are a good consumer engagement piece,” Counsell told attendees at the Sustainable Aerospace Together Forum. While corporate customers have shown “a lot of interest” in voluntarily paying extra to reduce their own Scope 3 carbon emissions, he notes that, “ultimately, we’re not going to solve the problem through voluntary mechanisms”.
Anecdotally, Counsell recalls a recent conversation with a customer in which, he claims, the customer said: “Don’t give me the choice, it’s too complicated. Just include it in the ticket price.”
Not all airlines agree, however, that the cost of net zero should automatically translate to higher airfares. Diana Birkett Rakow, senior vice president public affairs and sustainability at Alaska Airlines, says the US carrier is “really wrestling with, ‘how do we make sure this is a transition that’s managed economically so that it doesn’t put air travel and the economic opportunity of air travel out of reach for more people?'”.
This question, says Rakow, is “going to be a conversation that we will all grapple with over the next couple of decades, but one that’s important not to lose sight of”.
She adds: “On all fronts, education of consumers is probably the place to focus on more than what’s the cost right now – both because it’s important to supporting the transition, but it’s also important for the political will to enact the types of policies and understand what it takes to get through this transition.
“So, I would encourage us to think about it that way, rather than who pays.”
This increased number of travellers reached into their purses and generated higher levels of spending ─ upwards of an estimated $20.8 billion ─ marking an 8% increase over 2021.
More hotel guests accounted for the 17.1 million hotel room nights sold in 2022, representing an increase of 7% compared to 2021.
“We strongly believe that these 2022 results can be attributed to our destination’s all-star line-up of attractions, amenities, dining, accommodations and the tireless work of industry partners,” said David Whitaker, president and CEO of the GMCVB. “But the numbers by themselves don’t tell the whole story of what sustained success in this industry means. Tourism fuels job growth and economic vitality resulting in quality-of-life benefits as a result of visitor taxes that support everything from arts and culture to healthcare and transportation.”
The industry recovery that began in 2021 carried over into 2022 with sustained room bookings at record levels. At the forefront of travel, Miami International Airport (MIA) served more than 50.6 million travellers and welcomed new carriers including Southwest Airlines, JetBlue and Spirit Airlines. Despite challenges posed by international travel restrictions and extended visa wait times, Greater Miami and Miami Beach experienced a resurgence of its traditional international markets. The rebound in the international overnight visitor market highlighted a steady growth rate of 2.7% in 2022.
The cruise market made a triumphant return with a surge in guest volume that began in the summer, rebounding to 2019 levels.
Cumulatively, international visitors comprised 25% of the overnight market, with 4.7 million visitors, contributing to 29% of tourist expenditures.
“As we navigate the ever-changing landscape of the travel and tourism industry, 2022 serves as a powerful reminder of the appeal of our destination. The return of the international visitor has been key to our destination’s success,” said Bruce Orosz, GMCVB board chair. “With the reactivated GMCVB international office network spanning 50 cities in 53 countries, we’ve galvanized key resources to promote international travel to Greater Miami and Miami Beach. Innovation and collaboration are critical moving forward as we compete among global destinations to remain the business, leisure, conference and meetings location of choice for visitors from around the world.”
The meetings and conventions sector also experienced significant growth, with bookings filling the destination’s iconic Miami Beach Convention Centre (MBCC) and surrounding hotels. Year to date, the GMCVB has worked to confirm 386 conventions and meetings, locking in 239,218 total room nights. For 2023, meetings and conventions of note include Bitcoin North America, Machine Learning and Systems, LE/Miami: This is Beyond, Florida International Medical Expo (FIME), American Black Film Festival and the American Vein and Lymphatic Society. Representatives from the Professional Convention Management Association (PCMA, Jan. 10 – 13) and Exp Realty (Oct. 28 – Nov. 1, 2024, and Oct. 20 – 23, 2025) both made onsite announcements that their organizations have selected the MBCC for future conventions.
Notably, Greater Miami and Miami Beach’s hotels not only sold more rooms in 2022 but also exceeded 2021 by 13%. Moreover, hotel daily rates increased 14%, indicating a willingness among visitors to invest in unparalleled hospitality and luxury experiences. The increase in room sales and record-high hotel rates contributed to an increase in gross hotel revenue of 29%.
Unparalleled hospitality experiences include exquisite dining and thanks to publications like the Florida Michelin Guide, which debuted in 2022, and most recently bon appétit magazine naming Miami its Food City of the Year, Greater Miami and Miami Beach’s dining scene is generating unprecedented buzz.
Throughout the state of the industry event, the GMCVB showcased several new initiatives, including expanded multicultural tourism and development efforts, the Miami Begins With Me training programme, Rainbow Spring and the popular Miami Temptations programs. These initiatives aim to raise awareness of the destination’s diverse heritage neighbourhoods, create an authentic and welcoming experience for all visitors and provide promotions and savings at top eateries.
The GMCVB’s focus for 2023 includes expanding offerings and improving the visitor experience while at the same time delivering marketing and branding campaigns like “Find Your Miami,” a promotional effort that displays the cultural richness of Miami’s neighbourhoods and countywide experiences. Among other presentation highlights, the GMCVB has zeroed in on the talent pipeline, specifically by supporting career development through its Black Hospitality Initiative and recently raised over $200,000 to support scholarships. The organization is also taking steps to broaden its commitment to sustainability and inclusivity.
For full statistical report for 2022 click below
Bloomberg - May 16th 2023
Low-cost airlines are known for no-frills, cramped cabins and annoying fees for everything from bottled water and printed boarding passes to seat selection. You get what you pay for, basically. But that’s only one component of these airlines’ business model. The other key part is aggressive growth: More flights on the schedule mean more opportunities to spread costs around and make it economical for Spirit Airlines, Frontier Airlines and the like to chase market share with rock-bottom headline fares.
Before Covid, these airlines could grow as much as they wanted and could afford. These days, a stubborn scarcity of planes and workers makes it virtually impossible for carriers of any shape and size to fully satisfy demand that has come roaring back from the pandemic doldrums. These curbs on growth are jamming up the operating model of low-cost airlines and giving large full-service carriers such as United, Delta and American Airlines a competitive advantage that will be hard to reverse.
If you’re grumpy about high prices and canceled flights, you should save some complaining for an aerospace manufacturing sector that still doesn’t seem to have learned its lesson on resiliency planning. The airplane supply chain remains crippled by labor shortages and production challenges, pushing out wait times for new planes and repair work on older ones. Certain engines are also requiring maintenance earlier than expected, further crimping the number of planes airlines can fly at any given time. There aren’t enough air-traffic controllers, particularly at the facility responsible for the New York area’s three main airports, which has only 54% of the staff it needs. The Federal Aviation Administration has asked carriers operating in the region to slash flights during the busy summer travel season to help ease the pressure.
These constraints are hitting the low-cost carriers particularly hard: Spirit has had to trim its 2023 flying plans four times since initially giving guidance, while Frontier has cut its capacity growth target twice, according to Melius Research analyst Conor Cunningham.
The collective pressure on aviation infrastructure means airlines need to operate with higher levels of buffer staff and planes and lighten up their schedules if they want to successfully deliver passengers from point A to point B — all of which erodes the low-cost carriers’ historic cost advantage and eats into their profits. Fuel and labor inflation isn’t helping. Pilots remain particularly scarce, and Spirit is still struggling with attrition even after reaching a two-year contract with its union that will increase pay by an average of 34% over the period.
The large legacy carriers are getting burned by plane and pilot shortages, too, but the silver lining in their case is that when fewer seats are to be had, these airlines can charge higher fares. Ticket price inflation feels different if all a traveler gets is a bare-bones seat on a plane that may or may not make it to its destination on time, if at all.
Frontier and Spirit cater primarily to leisure travelers in North America. This market boomed early once the pandemic started to subside, but its recovery is starting to look close to tapped out. The big airlines, by contrast, have substantial transatlantic and Asian operations that should experience a surge of demand this summer after the dismantling of Covid travel restrictions that were still in place in many countries last year. Delta is operating its largest-ever transatlantic schedule this summer and feels confident enough in the international travel recovery that it’s reportedly in talks with Airbus for a significant order of wide-body jets.
The low-cost carriers say that supply constraints won’t last forever and that they can eventually power up their networks as they used to, but they might be waiting a long time. While engine makers GE and Raytheon have both said they’re seeing modest improvements in supply chain logjams, commentary from Safran, Airbus and Rolls-Royce is less optimistic. Investors aren’t holding their breath: Spirit Airlines’ shares are down about 20% this year and are trading at about half the price at which the company agreed to sell itself to JetBlue (the Justice Department sued to block the merger; the airlines are appealing), while shares of Frontier have dropped even more. United shares, by contrast, are up more than 20%.
John Berean | Hotel Online | May 10, 2023
Hawaii enacted some of the strictest travel measures in the United States in response to the COVID-19 pandemic. A mandatory two-week quarantine was enforced in March 2020 for all travelers arriving to the Hawaiian Islands; this quarantine applied not only to out-of-state visitors, but also to local interisland travel. As a result, a majority of hotels and resorts suspended operations. In October 2020, a Safe Travels program was introduced, easing the quarantine for inbound travelers contingent upon a negative COVID-19 test result within three days prior to arrival. This policy, in addition to the outdoor living and lifestyle of the islands, contributed to Hawaii being perceived as a safe haven from the pandemic.
In the second quarter of 2021, occupancy levels began to notably improve concurrent with a strong rebound in domestic tourism. As most international destinations remained closed, U.S. travelers chose to visit domestic resort markets with a heavy focus on the outdoors and nature, such as Napa/Sonoma, Lake Tahoe, Sedona, Jackson Hole, and Hawaii. This spur in domestic travel supported a strong recovery in hotel occupancies, with demand rebounding to roughly 90% of pre-pandemic levels statewide.
Visitor Arrivals by Island
Source: Hawaii Tourism Authority
Average Rate and RevPAR Changes
The surge in “revenge travel,” or those making up for time lost during the pandemic, spurred phenomenal rate growth on the outer islands, particularly at luxury, resort-style properties. Conversely, many lodging facilities on Oʻahu were unable to capitalize on the rate gains achieved by the outer islands. This island’s slower rate growth can be attributed to several factors:
RevPAR Metrics by Island
*Includes the islands of Moloka’i and Lana’i
Source: Hawaii Tourism Authority, Smith Travel Research (STR)
Going forward, demand levels are expected to continue to improve on Oʻahu, particularly as international tourism picks up. The Japanese market, having only produced roughly 300,000 arrivals in 2022, is expected to more than triple to about one million arrivals in 2023 based on the most recent Q1 2023 forecast provided by Hawaii’s Department of Business, Economic Development & Tourism (DBEDT). However, the return of this key market is likely to be more gradual in comparison to the surge in domestic tourism, particularly when considering the travel patterns of Japanese tourists and the cyclicality of the wholesale market. In addition, a weak yen, inflation, and high fuel surcharges on flights have also hampered the recovery of Japanese tourism. Golden Week, a multi-day national holiday in early May in Japan and one of the longest vacations of the year for many Japanese, is typically a major week for hotels and other businesses in Hawaii. Initial reports estimate that 2023 visitation levels during Golden Week were still down by nearly 50% compared to 2019 levels. Recent predictions from local hoteliers and other market participants anticipate a stronger rebound in Japanese travel in Q4 2023.
Meanwhile, domestic travel is likely to soften as most international destinations have reopened and the U.S. dollar remains relatively strong. The lifting of COVID testing requirements prior to returning to the U.S. is also expected to support more outbound domestic travel. Following the significant rebound in 2022, demand levels are expected to gradually improve over the next several years, and DBEDT is projecting statewide visitation levels to surpass pre-pandemic levels by 2025/26.
Hawaii Tourism Forecast Q4 2022
Source: Hawaii DBEDT
Changes in Supply
Given the limited availability of land and high construction costs, Hawaii has one of the highest barriers to entry for development in the United States. However, the lodging landscape has experienced several notable changes since the pandemic, including the conversion of existing supply and the addition of new supply.
The AC Hotel by Marriott Maui Wailea opened in May 2021 as the sister property to the adjacent Residence Inn by Marriott. This hotel marked the entrance of Marriott’s popular AC Hotels brand to the Hawaiian Islands.
Dovetail + Co introduced the Wayfinder Waikiki (formerly known as the Waikiki Sand Villa Hotel) in December 2022 following a year-long renovation. The hotel’s coffee shop and retail store, B-Side, is currently open. The property’s remaining F&B outlets, including a tropical speakeasy and pool bar and the Redfish Waikiki (Foodland‘s poke restaurant concept), are expected to debut later in the year.
Starwood Capital Group debuted the 1 Hotel Hanalei Bay (formerly known as the St. Regis Princeville) as its flagship property for the 1 Hotels brand in February 2023. The property is positioned to become the top luxury resort on the island of Kauaʻi.
Sheraton Kona Resort & Spa at Keauhou Bay was rebranded in November 2021 as the Outrigger Kona Resort & Spa following its acquisition. The property reportedly began to undergo a $40-million renovation ($79,000 per room) in April 2023.
Following the strong reception of the Surfjack Hotel & Swim Club and The Laylow, Autograph Collection affiliate, the emergence of design-forward, surf-themed boutique hotels has gained traction in Waikiki. Recent renovations have focused on a playful, modern design, which can be seen at several other popular hotels in Waikiki, including the Queen Kapiʻolani Hotel, Kaimana Beach Hotel, Wayfinder Waikiki, and White Sands Hotel.
Recent High-Profile Renovations
Kona Village is finally slated to reopen in July 2023 as a Rosewood Resort following a multi-year redevelopment. The property will primarily comprise standalone villas ranging from 1,000 to 6,200 square feet but will also feature several smaller oceanfront villas salvaged from the former resort.
JL Capital is expected to debut the Renaissance Honolulu Hotel & Residences in late 2023. The 39-story, twin-tower property will be managed by Highgate Hotels and will feature 112 branded residences located above 187 hotel units.
Continental Assets Management is in the process of redeveloping the former Remington College Building as a 104-room AC Hotel by Marriott; the property is planned to open in Q4 2024.
Despite strong hotel performance in 2021 and 2022, transaction activity has remained somewhat muted over the last few years. Several notable transactions occurred on Maui in 2021, including record-breaking sales of the Residence Inn by Marriott and AC Hotel by Marriott in Wailea, as well as the Royal Lahaina Resort. In 2022, notable sales included the Maui Seaside Hotel, which is expected to be flagged under a soft brand following an extensive renovation and repositioning, as well as the Queen Kapiʻolani Hotel.
While the current high cost of capital might deter some hotel investors on the mainland, the Hawaii market is poised for stronger transaction activity in 2023 and 2024 in light of the recent strong gains in RevPAR, especially as Asian markets reopen.
The Hawaii lodging market made a significant recovery in 2022, propelling many properties to achieve record-breaking RevPAR levels. While demand levels should continue to gradually improve over the next several years, operators will need to remain vigilant with revenue-management strategies to maintain the ADR gains achieved during the pandemic. With tourism levels projected to exceed pre-pandemic levels by 2025/26, the Hawaii lodging market should reach stabilization around 2025.
Our team constantly monitors the Hawaii lodging market, and our many consulting engagements throughout the islands keep us abreast of the latest trends and shifts in the market. For more information, contact John Berean, who oversees HVS operations in Hawaii and Northern California.
Geneva - The International Air Transport Association (IATA) announced strong demand growth in air travel for March 2023.
Total traffic in March 2023 (measured in revenue passenger kilometers or RPKs) rose 52.4% compared to March 2022. Globally, traffic is now at 88.0% of March 2019 levels.
Domestic traffic for March rose 34.1% compared to the year-ago period. Total March 2023 domestic traffic was at 98.9% of the March 2019 level.
International traffic climbed 68.9% versus March 2022 with all markets recording healthy growth, led once again by carriers in the Asia-Pacific region. International RPKs reached 81.6% of March 2019 levels while the load factor at 81.3% exceeded the March 2019 level by 10.1 percentage points.
“The calendar year first quarter ended on a strong note for air travel demand. Domestic markets have been near their pre-pandemic levels for months. And for international travel two key waypoints were topped. First, demand increased by 3.5 percentage points compared to the previous month’s growth, to reach 81.6% of pre-COVID levels. This was led by a near-tripling of demand for Asia-Pacific carriers as China’s re-opening took hold. And efficiency is improving as international load factors reached 81.3%. Even more importantly, ticket sales for both domestic and international travel give every indication that strong growth will continue into the peak Northern Hemisphere summer travel season,” said Willie Walsh, IATA’s Director General.
Air Passenger Market in Detail
International Passenger Markets
Asia-Pacific airlines had a 283.1% increase in March 2023 traffic compared to March 2022, continuing the robust momentum since the lifting of travel restrictions in the region. Capacity rose 161.5% and the load factor increased 26.8 percentage points to 84.5%, the second highest among the regions.
European carriers posted a 38.5% traffic rise versus March 2022. Capacity climbed 27.0%, and load factor rose 6.6 percentage points to 79.4%, which was the second lowest among the regions.
Middle Eastern airlines saw a 43.1% traffic increase compared to March a year ago. Capacity climbed 30.5% and load factor pushed up 7.0 percentage points to 79.4%.
North American carriers’ traffic climbed 51.6% in March 2023 versus the 2022 period. Capacity increased 34.0%, and load factor rose 9.8 percentage points to 84.8%, the highest among the regions.
Latin American airlines had a 36.5% traffic increase compared to the same month in 2022. March capacity climbed 33.4% and load factor rose 1.9 percentage points to 82.8%.
African airlines’ traffic rose 71.7% in March 2023 versus a year ago, the second highest among the regions. March capacity was up 56.2% and load factor climbed 6.5 percentage points to 72.2%, lowest among the regions.
Domestic Passenger Markets
Brazil’s domestic traffic rose 8.0% in March compared to a year ago and is now just fractionally below pre-pandemic levels.
Indian airlines’ domestic demand climbed 20.3% in March and was 10.0% above the March 2019 levels.
Air Passenger Market Overview
The Bottom Line
“As traveler expectations build towards the peak Northern Hemisphere summer travel season, airlines are doing their best to meet the desire and need to fly. Unfortunately, a lack of capacity means that some of those travelers may be disappointed. Part of this capacity shortfall is attributable to the widely reported labor shortages impacting many parts of the aviation value chain, as well as supply chain issues affecting the aircraft manufacturing sector that is resulting in aircraft delivery delays. However, a significant share of recent flight cancellations, primarily in Europe, are owing to job actions by air traffic controllers and others. These irresponsible actions resulted in thousands of unnecessary cancellations in March. This is unacceptable and should not be tolerated by the authorities,” said Walsh.
Travel Remains a Priority, but at the Right Price
By Dana Miller | Hotel News Now | May 1, 2023
After a period when consumers were prioritizing spending on travel and experiences regardless of the expense, hotels in some markets are now beginning to see that trend slow down as inflation persists.
Harry Carr, senior vice president of revenue management at full-service hospitality management company Davidson Hospitality Group, said at this time in 2022 there was a “champagne effect.”
Carr said the champagne effect for Davidson’s portfolio, which is composed of 84 hotels and resorts, meant that “consumers were prioritizing travel above many other things, and they weren’t really concerned about the cost … regardless of the expense, [they’re] going to do it, [they’re] going to have that extra glass of champagne.”
Even if the nightly rate at a mid-range hotel in Miami was $600, Carr said the consumer didn’t care.
“Really, there was no price ceiling, there was no thought about ‘maybe I’ll put this off,’ and the discretionary income that they had, or the savings that they had, was banked. And it was also a little bit of ‘hey, if I’m going to work remotely, midweek I can go here, go there,’” he said.
Though it varies by market, Carr said that type of demand is now beginning to slow down in the second quarter.
In aggregate, Carr said Davidson’s portfolio is up slightly in terms of occupancy but rate is starting to slip, especially in leisure markets such as Phoenix, Los Angeles and Charleston, South Carolina, he said. Conversely, leisure demand is picking up for its hotels in markets such as Chicago and Minneapolis.
Carr said consumers are no longer buying on impulse when it comes to booking travel and are willing to shop around more. This includes choosing to book a trip outside of popular holiday periods such as July Fourth to still get the experience “without breaking the bank,” he said.
Dan Paola, vice president of operations at management, development and investment company Raines, said in an email interview that his team is still comparing performance to 2019 from a stability standpoint. Both 2021 and 2022 resulted in “incredible revenge travel, but some of that is starting to die off,” he said.
“We still saw a very strong start to the year, but people continue to be rate sensitive. We have been seeing year-over-year gains but not the [average daily rates] we anticipated for the year. A majority of our growth now is in occupancy,” he said. “As a portfolio, we are almost flat in ADR year over year, but up over 5% in occupancy. April may be the first month that some of our hotels don’t see overall year-over-year increases. It’s hard to tell with some properties because there continues to be new supply entering the market. With so many brands, guests are looking to try something new.”
The pickup in business and group travel is helping offset some of the leisure slowdown, he said.
“Sporting and social groups continue to rebound well, and we are seeing more and more moderately sized corporate group bookings,” he said. “In traditional leisure markets, such as New Orleans, travel for special events and festivals is moving in a positive direction, and rates are higher than pre-pandemic levels.”
However, Paola said even corporate travelers are now looking for a deal and how they can show their companies they are saving on cost.
“From what we see, guests still prioritize travel but at the right price points. Five dollars can make all the difference, “ he said.
Isaac Rodriguez, senior vice president of revenue strategy and distribution at management company Twenty Four Seven Hotels, said his company’s portfolio — which is concentrated in markets such as California, Arizona, Las Vegas and the Pacific Northwest — has experienced a weaker booking window.
“I think what we’ve been enjoying the last 12 to 15 months in some of these markets during the time of discretionary spend, is definitely a very short booking window. So this summer, we’re not really going to get a full perspective of that until we actually get into the summer months with a high-demand period,” he said. “We’ve noticed a slowdown in April, we’ve noticed a slowdown in March … we’re trying to determine how much of that is adverse effects of [colder weather in California], how much of that is [from less] discretionary spend.”
Which Purchases Are Consumers Scaling Back On?
Paola said customers are now booking more standard rooms across Raines’ portfolio.
“We are constantly upgrading guests to free up the standard room types so the bookings continue,” he added. “This certainly points to rate sensitivities, and that guests are still looking for a deal that allows them to spend on food and beverage and local attractions.”
Carr said length of stay has decreased slightly, “depending on the market between a tenth of a day to a quarter of a day. It’s not as though they were staying four nights, then [went] down to two.”
There’s much more stability in length of stay at its higher-end hotels, he said. It appears that the people who did well during the pandemic are continuing to do well.
“If you weren’t laid off, didn’t have a disruption, that’s where we’re seeing probably the most consistent demand,” he said. “[At] the midrange — we have four hotels in the Florida Keys — and one is just not [performing well].”
Carr said Davidson’s portfolio is seeing a large gap in the middle of its room type offerings in the first quarter of 2023 compared to 2022.
“We’re seeing good production in your base, so your standard rooms are booking at roughly the same pace. And our high-end [rooms] are actually slightly up. It’s that they’re not buying a partial ocean view, [they] want to be oceanfront, or [they] want the base category because [they’re] being a little more cost-conscious,” he said.
Strategies To Stay Ahead
Paola said commercial strategy teams should use future pricing strategies and group bookings to build base, then optimize rates to blend in transient business.
“Thinking creatively, we all know how well the extended-stay properties have done and will continue to do. Even the brands are launching new extended-stay brands into their portfolios. So that being said, does your property have the ability to use extended-stay-tiered pricing to take advantage of that segment. We’ve recently gone through and audited our websites and online travel agency sites to make sure all of the information and photos are current and accurate. As much as we may not like to admit it, having correct OTA strategies is an important way to keep bookings going if there is a slowdown.”
To stay ahead of a leisure slowdown, Rodriguez said his team is focusing on the “tried and true” value-based bundle packaging and longer-stay patterns.
“What we can do is hopefully get a higher rate capture,” he said. “And we’re going to continue to focus on personalizing the guest experience just to see what we can do in terms of value-add to hopefully increase revenue capture throughout the guests’ stay.”
In comparison to past downturns, Rodriguez said the biggest difference now is that hotel brands have improved their tactics to alleviate pressures when consumers trade down.
After the onset of the pandemic, he said all major hotel brands implemented a freeze on corporate rates, and this is the first year that brands are back to renegotiating those.
“During 2021 [and] 2022, we locked those [rates in, which] protected us. What it allowed was no emotional-based pricing on corporate for the last two years,” he said. “So even though there might be a trade down in leisure, as we do see the corporate preferred [accounts] come back, there is not a feeling of dramatic effects. If anything, we can maintain or slightly increase those rates. As a result of that, we’re not really seeing lower ADRs compared to the last two cycles. ADRs definitely have improved.”
At Davidson, Carr said value-add packages that are focused on food and beverage or a bundle of activities continue to attract guests, and that’s what they’re opting to book.
When leisure travel was booming, Davidson slightly pulled back on offering those packages to instead focus on obtaining the highest rate. Now, Davidson is finding success through offering resort credits.
“Even if it’s not a huge discount, it is attractive because they are going to spend more when they’re on property,” he said.
Bernard Marr | Forbes Magazine | May 1, 2023
You’ve probably noticed how, by comparison to other products and services, buying travel online can be complicated. This is because of the huge number of product variations. Research suggests that while there are around 700 billion different variations of products on sale at Amazon, Expedia customers have to pick out what they’re looking for from 1.26 quadrillion (that’s a one followed by 24 zeroes) options!
In other words, they come crashing up against what is probably the biggest limitation of search engines when it comes to using them for picking out one option from a truly vast range of possibilities.
Luckily, this is just the sort of problem that technology like ChatGPT – generative artificial intelligence (AI) chatbots built on large language models (LLMs) are great for solving. Rather than a search engine, which presents users with a sometimes overwhelming number of results that often have to be filtered to find the best options.
One way to picture the difference is to think of it as having two expert helpers on hand. One of which will give you ten possible answers to any question you ask it and let you work out which one you think is right. The other will just get straight to the point and tell us what we need to know!
So, it’s interesting to see that Expedia Group has become one of the first major e-commerce operators to build ChatGPT into its app. Users of the feature (which is currently in beta for iOS users) can now plan their travel arrangements by having an open-ended “chat” with the application. This means discussing travel plans, the best options for accommodation, the sights they'd like to see, and the activities they'd like to experience – just as if they were planning the trip while sitting with a human travel advisor.
How Does Expedia Use AI to Simplify Travel Planning?
Generative AI hit the headlines late last year with the public launch of ChatGPT – a chatbot built on top of the GPT-3 LLM created by OpenAI. There have, of course, been AI chatbots before; Amazon's Alexa and Apple's Siri both fall into the category. But ChatGPT amazed users by being capable of holding far more sophisticated conversations. It can also generate text, including articles, stories, scripts, speeches, poetry, and even computer code, to a standard that can often pass as human.
Because the technology is accessible via API, the developers of many services and applications are now racing to be the first to build it into their own services. For example, Microsoft (a key investor in OpenAI) added its capabilities to its Bing search engine, and the social messaging app Snapchat recently unveiled its own GPT integration.
Although they are all based around the same language model developed by OpenAI, developers are able to add their own features and functionality to their ChatGPT deployments. Bing enabled it to search the web, augmenting the training data it uses to respond to queries with more up-to-date information. And Snapchat’s integration is able to learn about its user over multiple conversations, developing its personality as it goes.
Expedia’s innovation enables it to compile handy lists of the options that are discussed during its conversations, known as Trips. Users can then refer back to these to get an overview of everything that was discussed. Vanilla ChatGPT, for comparison, tends to forget what you’ve spoken to it about between sessions.
According to Expedia, it will also let users know when there are exclusive rewards and discounts they can take advantage of directly via the ChatGPT interface.
Aside from this latest deployment of generative AI, Expedia uses AI in a number of other ways across its services. This includes providing personalized recommendations and results via its search engine.
It also analyzes historical trends in the pricing of flights in order to track price fluctuations and predict the best time to make bookings.
What Are The Challenges of Using Generative AI in Travel Planning?
One limitation that’s become apparent when it comes to generative AI chatbots is that they are sometimes prone to making mistakes!
Anyone who has used ChatGPT, in particular, for any length of time is likely to have noticed that it can fairly frequently provide incorrect information. This propensity – which affects other LLMs as well as OpenAI’s – has been referred to as “hallucination” because it demonstrates that ChatGPT can sometimes be out-of-touch with reality!
Expedia has not given specific details of what steps have been taken to address this issue. I can’t help but feel it could cause problems if it turns out that it can give incorrect or inaccurate information about travel bookings, for example stating that accommodation or venues are wheelchair-accessible or dog-friendly when in fact they aren’t!
It does, however, state that “measures have been taken to limit inaccurate results and inappropriate responses; at times, the experience may not work exactly as expected."
Time will tell how effective Experia Group has been at mitigating these issues, and reports of their success (or failure) are likely to emerge soon.
How Might Generative AI Chatbots be Used by Expedia and Other E-Commerce Platforms in the Future?
Expedia Group might be the first major e-commerce operator to incorporate generative chatbots into its core platforms, but it’s highly unlikely to be the last.
Numerous ways exist in which the technology could be used to streamline operations and improve customer experience. These include:
Like most people, I increasingly shop for goods and services online simply because I appreciate the convenience. On the other hand, there have been times when I have found myself frustrated because choices and results are presented in an overwhelming way (this is particularly true with travel), and it’s hard to find answers to specific questions. If generative AI can help solve these problems, then it has the potential to be a game-changer for the future of digital retail and commerce.
Jim Hepple is an Assistant Professor at the University of Aruba and is Managing Director of Tourism Analytics.