Recession kills Chapel Hill Museum, threatens others

by Sean McLachlan on

The municipal museum in Chapel Hill, North Carolina, is the latest victim of the recession. It closed its doors on Sunday after 14 years in operation. The town council had only earmarked $20,000 for the museum in the 2011 budget, far short of the $49,000 it needed to stay open.

The Chapel Hill Museum explored the history and culture of this prosperous university town with displays on early settlers, desegregation, works from local artists, and a popular fire engine from 1914. More than 15,000 people visited the museum every year and it was a regular destination for school groups.

With budgets getting cut across the country, the Chapel Hill Museum may be the canary in the coal mine for cultural organizations. The Battleship New Jersey was recently saved from a budget cut, but a nearby children’s garden had to reduce its hours after getting less funding than it needed. Numerous parks and historic sites in New York also face closure.


Photo courtesy Siera Heavner via Wikimedia Commons.

Airline recovery: U.S. and Asia key to growth

by Tom Johansmeyer on

Take advantage of cheap fares while you still can! It looks like the airline industry could find its way back to normal in as little as two years, thanks largely to increase in the United States and Asia, which will offset flagging demand in Europe.

The global recession has been brutal for the airline industry, which sustained 15 percent decline in revenue last year, according to the International Air Transport Association. Nonetheless, the initial belief that it would take three years to recover has been scaled back to two.

Says Giovanni Bisignani, top dog at IATA,

“Instead, probably we are seeing this could happen in two years,” he said at a news conference ahead of IATA’s annual general meeting next week. “The economy is pushing again strongly, especially in areas outside Europe, and the good news is that this industry is recovering faster than expectations.”

Even with an estimate economic impact of $1.8 billion from the “ash cloud” in Iceland, the airline industry is headed in the right direction. So, book your flights now … prices may be heading up soon!

Two billion reasons why you pay to check bags

by Tom Johansmeyer on

Or, you could call it “2 billion reasons why flight attendants shouldn’t get raises.” It works both ways.

The labor debacle at British Airways reminds us of the perpetual stupidity turmoil that has come to characterize the airline industry. Not to pick on BA, but the strike shows how disconnected the flight attendants are from the nuts and bolts of the business, and it translates across the pond. Yet, passengers are in a similar state of denial, feeling wronged by the airlines as they are nickled and dimed for “amenities” such as checking luggage. With the latest data from the Bureau of Transportation Statistics, it’s pretty obvious that airlines need to bring in some more money, and it has to come from somewhere.

In the United States last year, 769.9 million travelers set foot on planes (departing from, arriving to or completely domestic), a decline of 5.3 percent from recession-stained 2008 and off 8.2 percent from 2007, when 832.2 million passengers flew the friendly skies. This was the first time the number of fliers fell below the 800 million mark since 2004, in which 763.7 million passengers boarded planes. Think about it: 2009 is basically 2004. The airline industry has lost five years of growth.Meanwhile, fewer people were paying less for tickets, with the average fare falling $30 from 2007 to 2009 – settling at around $315. The increase in demand led to the shedding of around 700,000 flights from 2008 to 2009.

In all, this dynamic cost the U.S. airline industry approximately $2 billion … and that doesn’t include financial losses elsewhere. Fewer customers spending less led to a profound decline in revenue, and the airlines need to find a way to get it back. They’ve been able to close the gap, in part, through the ancillary fees we’ve all grown to hate. Every time you pay to check a bag, eat an unsatisfying sandwich or grab a little more leg room, you’re helping to keep these guys in business.

Of course, this would be a lot easier if the airlines would do their part. Price increases are frustrating when you see striking employees looking for more in a market where their salaries are effectively unsustainable. And with some flight attendants willing to subject themselves to interviews with 18 airlines in order to land a job, it’s pretty clear that demand is sufficiently high to make pay raises not only unnecessary but irresponsible.

So, it’s time for both sides of this equation to accept reality.

Passengers: you’ll be paying for extras. The airlines need it right now, and the beauty of momentum is that they’ll keep charging us for everything imaginable even when the economy recovers, because they aren’t going to slash a revenue stream that’s paying off.

Flight attendants: raises? Look at the economics of the situation. If passengers are paying more for the same service and demand is high for a shrinking number of positions, there’s no reason to pay them. With revenue in the tank and an aggregate net loss of $4.6 billion for 11 U.S. airlines last year, there’s no money for raises … unless there’s a new way to extract blood from a stone, of course.

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Guests to stay in control of hotel industry until at least 2012

by Tom Johansmeyer on

The light at the end of the tunnel is always cause for hope. When market conditions are at their worst, the promise of a recovery keeps morale from plummeting and gives a reason to keep pushing forward. For the hotel industry, however, there’s nothing but darkness for the next year. The latest research from PhoCusWright paints a pretty dismal picture, evident immediately from the title of its most recent announcement: “Why Hotels Are Not Recovering Any Time Soon.” But, it could just as easily have been called, “Why Travelers Can Get Dirt-Cheap Rooms in 2010 and Probably 2011.”

Ouch.

If you’re looking for a culprit, start with those two traditional factors — supply and demand.

Demand is off substantially. Conditions right now are worse than they were in the dismal 1990/1991 season and during the post-9/11 recession. Last year, demand fell between 5.5 percent and 6 percent. This is far worse than the 2 percent decline posted in 2002 and the 1 percent drop in 1991. This year, PhoCusWright expects demand to inch higher by 1 percent to 1.5 percent, but this is relative to the severely depressed baseline of 2009. So, we’ll likely reflect at this time in 2011 on a slow recovery that still has some road in front of it.
Fortunately, a 5 percent increase in demand is expected in 2011, followed by a few years of growth in the range of 3 percent to 4 percent. This means that we’ll get back to 2007 levels by the end of 2011 and start to see net hotel market growth in 2012.

Part of the problem that the hotels face is an increase in supply. So, while demand is down, the industry has more beds that need heads in them. The ill-timed increase in demand is the result of projects that began before the financial crisis and subsequent recession. Nobody saw the credit market collapse coming, let alone the downstream effects, as evidenced by the 3 percent increase in supply last year. From 2011 to 2013, supply growth will slow down, though, as bone-dry credit markets and general financial malaise have led many development projects to stall. In fact, PhoCusWright expects hotel supply falls next year and the two years after.

The increase in supply and decrease in demand has put incredible pressure on occupancy. In 2006, hotels were able to put 63 percent of their room-nights to work, but last year, that fell to 55 percent. PhoCusWright expects the increase in demand and decrease in supply over the next few years to support an industry-wide recovery to 60 percent occupancy by 2012. At this level, hotels can usually pick up some pricing power, which translates to an improvement in rates.

In 2009, hotel room rates were of course impacted by the disparity between supply and demand, not to mention the general squeeze on consumer spending. But, these factors weren’t exclusively responsible for the 9 percent drop in rates last year. The hotels themselves bear part of the blame, according to PhoCusWright’s study. In an effort to fill rooms, they engaged each other in a “race to the bottom,” in which they tried to undercut each other for market share at any price.

Given the anemic growth in demand expected in 2010, expect room rates to continue to fall until 2011. The return to pre-recession levels will take a while, particularly given the economic conditions that will be with us this year. The result is another year of depressed revenues for the hotel industry. Last year, revenue per available room-night (RevPAR), the primary metric by which the hotel industry is judged, plunged 17 percent last year and will continue to slide in 2010. PhoCusWright expects the bleeding to stop in 2011, with 2012 RevPAR reaching only 90 percent to 95 percent of the peak levels sustained in 2007.

So, what does all this mean? A full recovery is likely four years away for occupancy and room rates. In 2011, the situation will stop worsening, and it will pick up in 2012, but it’s two years past then than you’ll see the hotels regain their strength. Until then, it’s the consumers’ show. Travel often. Slap a few more nights onto each of your stays. You’re in the driver’s seat.

[Photo via MigrantBlogger]

Mexico relies on Facebook to kick travel slump

by Tom Johansmeyer on

Travel to Mexico got a big ol’ kick in the cojones last year. The global recession spanked airlines and hotels around the world, and since the United States was ground zero for the financial crisis that accelerated the recession, Mexico likely lost some action from its biggest trading partner. And then swine flu came along, bringing much of the Mexican tourism and travel industry to a crawl. When I was in Los Cabos last May, I didn’t lack elbow room. Well, an 82 percent drop in Mexican tourism, according to the Woodrow Wilson International Center for Scholars, can have that effect.

To kickstart the industry and attract more people to the warm sun south of the border, the Mexican Council for the Promotion of Tourism just completed a combination game and giveaway through Facebook. The Gracias A Ti Vive Mexcio website used Facebook Connect to make 10 people incredibly happy with free trips awarded from December 21, 2009 through the end of the year. The only catch was that you had to live in Mexico and have a Facebook page. Winners were selected by game rankings (more details over at Inside Facebook), and the top scorer got to choose from Cancun, Puerto Vallarta and Huatulco – and bring a guest.

With more than 1,300 fans on the Facebook page, it looks like the promotion was a success. And, why wouldn’t it be? Mexico is one of the fastest growing countries in Latin America for Facebook, with 6.67 million users.