The conventional wisdom is that there’s nothing worse for an airline than an empty seat, for a hotel, an empty room, and for a cruise line, an empty cabin. Better to sell it at a deep discount than to get no revenue from it at all.
That principle has brought us $240 round-trip flights from coast to coast, $65 rooms in luxury hotels on the Las Vegas Strip and cruises at under $50 a day. But it only applies up to a certain point.
And at that certain point, airlines cut their schedules, hotels close off whole floors and cruise lines dock their ships. That point is, I believe, pretty much upon us.
Airlines have already cut their flights back sharply — USA Today estimates an 8.6 percent decline in capacity over the past year — and are talking about cutting them more as demand continues to drop. When airlines get capacity in line with demand, airfares will rise again.
Hotels are trickier than planes. You can’t retire them and park them in the Mojave. But hotels won’t discount down to nothing, either.
Hotels must charge enough to heat, cool, clean and maintain the rooms. And beyond that break-even point, higher rates may be more profitable, even if they mean some rooms go empty. (For some wonky accounting on that, see Hotel News Now.)
It’s hard to know how many hotels have closed down whole floors or wings, as some did after the 9/11 terror attacks. They don’t tend to announce it. But the CEO of the InterContinental Hotels Group mentioned that strategy in a recent interview.
Cruise lines are in a quandary, with capacity exanding rapidly as ships ordered years ago are launched in the teeth of a full-force recession. Prices are down, and profits are sinking, as Gene Sloan reported in USA Today’s Cruise Log.
Last month on The Travel Show on WOR Radio, Carolyn Spencer Brown of Cruise Critic told Pauline Frommer that she doubts cruise prices will go a whole lot lower. The cruise lines have made it clear they will take ships out of service or let them sail empty, she said.
So suck up those bargains while you can, and enjoy them. But don’t expect prices to go a whole lot lower.