Gas Prices and Summer Travel

Gravity defying gas prices are not likely to dampen summer travel. That at least should be the logical inference upon reading Expedia Travel’s Trendwatch as reported in the Travel Daily News. Expedia notes that “the vast majority (85 percent) of U.S. adults who are planning to travel this summer have already booked or will book their travel plans at least one month in advance”. The report also cites TIA’s (Travel Industry Association of America) claim that “one in every three U.S. travelers is planning travel earlier this year than they did in 2005, with many already committed to plans for their longest summer trip”. On an even brighter note, an survey reports that “55 percent of U.S. adults plan to fly as much this summer as last summer and six percent say that they plan on flying more despite rising airline ticket prices in 2006”.

All of that should be a welcome relief to hoteliers who may have read banshee headlines like in today’s New York Sun that talks of a $5 per gallon price for gasoline. The Sun’s report quotes energy savant Alan Gaines, who seven months ago correctly predicted $4 a gallon gas, as saying that ” a confluence of factors could easily produce $5 a gallon gas this summer. ” He is joined in his dismal prognosis by an interest-rate pundit, Mr Leonard Mohr, who foretells significantly higher interest rates. Whether Mr. Gaines and his chorus of party poopers are right or not is a matter of deep concern to all hoteliers as rising gas prices and interest rates do portend dark clouds for our industry.

In the end, despite TIA and Expedia’s sunny report, it is entirely possible that a not insignifcant portion of that 85 percent may curtail if not reverse their travel plans. The industry’s stellar recovery from the troughs of 9/11 and the Iraq invasion could still take more than a dent. So where is the silver lining for hoteliers? Obviously, the US economy continues to be robust but the main strength lies in supply lagging demand in many hotel markets. Unlike in the late 80’s and even the late 90’s, many markets did not see a huge onrush of hotel rooms. A lagging pipeline of room inventory signals that a future downturn (whether it occurs in the near term or in 2008) is unlikely to cause the steep falls in revenue and profitability witnessed in the past.

Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.