As the travel industry slowly and erratically reopens, some airlines and hotels, as expected, have begun slashing rates to lure travelers back to their struggling businesses.
But while some of those discounts have indeed been steep, industry executives and analysts say the unpredictable nature of a Covid-19 recovery could protect at least some sectors from the widespread discounting seen after other crises, such as 9/11 and the Great Recession, that ended up dragging pricing down for years.
“There’s a lot of people saying, ‘Oh, you’re going to have to offer the lowest prices in the market to get people traveling again,’” said Jack Richards, president and CEO of Pleasant Holidays. “We don’t necessarily agree with that because, I think, top of mind is going to be safety and sanitization protocols and convincing travelers that it’s safe to travel. We think price — although it’s important — it’s not going to be the leading variable to get people traveling again,” he said.
There are exceptions, Richards said, adding that Las Vegas, for instance, “appears to be focused on the lowest room rate to drive occupancy.”
On the flip side, he said, some other suppliers have increased prices to cover additional costs related to Covid-19 cleaning requirements.
Still, most agree that it’s difficult to predict how pricing will play out in the long run, given uncertainty about airlift; reduced air, hotel, cruise and tour capacity to accommodate for social distancing; and general unknowns about when widespread travel will be able to resume.
“There’s a huge amount of uncertainty,” said Aran Ryan, director of lodging analytics at Tourism Economics. “I can see a mix of things playing out, maybe multiple things at the same time.”
Hotel rates, for instance, are down about 22% this year, according to STR. And Jan Freitag, STR’s senior vice president of lodging insights, said they are expected to rise only about 1.7% next year.
Hayley Berg, economist for the booking platform Hopper, said domestic fares are down 20% to 30% compared with last year, and international fares are down 20% to 23%.
“Prices were really low to start with,” she said. “Now with demand falling off and the need to incentivize travel, prices are just incredibly low this summer.”
