Major Airline Could Go Out of Business, Hotel Costs Could Double, Will Las Vegas Survive?

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Welcome to The Morning Shave. We read a ton of travel articles each day for our personal research and to share the best travel tips and tricks with you. Here are the articles for Tuesday, May 12, 2020, that we think you should read.

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The Morning Shave

Hotel costs could double, Airbnb hosts may have to sell homes post coronavirus. – With capacity constraints and fewer people traveling, hotels may have to actually raise rates to stay in business. Their business model requires a certain amount of revenue to cover the cost of the building, utilities, insurance, and maintenance that are due whether any guests show up or not. If there are fewer guests, you need to charge them more in order to pay the bill.

Coronavirus pandemic could force a major U.S. airline out of business, says Boeing CEO. – When previous tragedies like 9/11 happened, flights resumed fairly quickly afterward. With coronavirus, it doesn’t seem like travelers will be traveling like they were before any time soon. And with airlines promising to keep middle seats open on flights, that makes it even harder for airlines to make enough money to meet their obligations.

Want to travel to the U.K.? Be ready for a 14-day quarantine. – More and more countries will implement a web of overlapping rules that will make international travel harder, both for the average traveler and business traveler. Some countries, like Austria, are offering a coronavirus test for sale to bypass the 2-week quarantine period. Situations like this make travel more expensive, thus out of reach for many families.

United to notify passengers of crowded flights, offer free changes. – It is good to see United making some consumer-friendly changes like this. Some travelers are ok with a crowded plane, while others are not ok with taking that risk. Frequent communication and flexible policies will help them attract more passengers.

Could the ‘City of Lost Wages’ persevere with half-full casinos? Las Vegas ponders its coronavirus future. – Las Vegas was built on packed clubs, incredible buffets, and gambling at crowded tables. Not to mention thousands upon thousands of slot machines and video poker games. With coronavirus, all of that has to change. What changes will Vegas be able to make to encourage travelers to visit again?

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4 COMMENTS

  1. An interesting group of articles. While I’m not going to sign up for The Telegraph to see the entire article, I have some major doubts about hotel prices doubling. Among the reasons that I saw cited were empty room requirements for spacing, occupancy percentage limits and heavier cleaning protocols. While in individual markets some or even all of these may be true, that is skewing things to see them in the absolute worst possible way. As an example, if hotels are restricted to 50% or 75% occupancy that restriction will not be long term. Further, since there are staff to pay anyway, isn’t it better that they’re putting the temporary health and cleaning protocols into effect using that staff? Also, do hotels truly expect demand to be so high that they can sell more than what they’re restricted to for a few weeks or so? Further, I may be naive here but I have never heard the idea raised of keeping empty rooms in between occupied rooms out of some perceived health benefit. In sum it just comes across as way over the top. As a business owner who’s business will be reopen soon after two months, I will be faced with very substantial restrictions that in sum will keep my revenue at around a quarter of normal until the situation normalizes, so I understand the problems involved. We just have to bite the bullet and get through this. We’re Americans, it’s what we do.

    • I think the doubling may be a worst-case scenario, but I think many of the screaming deals we’ve enjoyed may be ending in the mid-term. Businesses can’t stay in business without a certain amount of revenue, and they are loathe to stay in business for too long while operating in the red. Initially, I think that there will be some really good deals initially to try to create demand, but those will wear off given the capacity limits in place. It’s going to be an interesting science/economic experiment that we’re all participating in.

      On a personal note, I hope that your business does well while dealing with these restrictions. I hope that we’ll get to see you at one of our virtual meetups soon. Not sure when we’ll start doing them in-person.

  2. Increasing prices because you NEED to doesn’t work very well. Supply, demand, and price elasticity will have something to say about that. If your competitors aren’t mostly doing the same then you will have a lot of empty rooms that could of at least contributed towards covering costs (albeit not a profit overall). An empty room reduces your costs very little

    It’s time to start evaluating whether you CAN ride things out, whether you WILL ride things out, or if you’ll just call it quits. If enough call it quits, and the room supply substantially decreases, then you can charge more. D

    This could very well be survival of the fittest (whoever can survive the losses the longest and are ready to do so).

    • I hear you. Business travel used to be pretty inelastic, however, the average traveler’s appetite for flying is very elastic. Airlines and hotels can easily outprice themselves out of business. The whole concept will dramatically change with business travel curtailed and Zoom calls and teleworking have been serviceable alternatives. Consumer flights have been subsidized by some degree by 1) cramming tons of people into a plane and 2) business travelers willing/able to pay higher prices for premium class flights and last-minute bookings. Hotels are on that same spectrum.

      Some airlines and hotels will hold out initially by offering lower prices to earn market share, but the reality of paying the bills will make them increase typical prices to make up for the loss of higher-end clients and lower volumes. Whatever happens, those hotels and airlines that have a lot of capital and can outlast their competitors will be in prime position once we get past this.

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