Too bad gas prices are falling.
While the rest of the world whined about the seemingly unstoppable rise in energy costs this summer, and the greedy oil companies that were probably to blame for them, we missed the other side of the story.
Soaring fuel costs can potentially save us real money on our next vacation — if not in the short term, then down the road. The effects were already being seen across the board: hotel rooms, car rentals and counterintuitively, even airline tickets. If nothing else, paying more at the pump would have encouraged travelers to do things that will make travel more sustainable in the future.
Don’t believe me? Just talk to your seatmate or fellow hotel guest.
If you do, you’ll hear that contrary to travel surveys that basically shrugged off the energy crisis, travelers either plan some dramatic and permanent changes to the way they get around, or they’ve already made them.
Chat with Kathleen Hargan, a child custody mediator from Oakland, Calif., and she’ll tell you the sad story of downsizing her car to a Prius. “I loved my Lexus almost as much as my firstborn,” she says. “Well, a far second, anyway. It was a dream car. But I had an epiphany when gas hit $3 a gallon.”
Some travelers have gone even further. “I’ve cut my gas consumption in half — or even better — by parking my old reliable GMC Suburban in favor of a BMW motorcycle,” says Jack Riepe, who works for a trade organization in Alexandria, Va. “In most cases, a pair of khakis and a dress shirt can be teamed up with a blazer in the saddle-bags for a business look. Business associates have gotten used to the boots.”
Others are trying to kick the fossil fuel habit altogether. “Gas prices pushed me to buy a bike,” says Lynette Phillips, a university research associate who lives in Shaker Heights, Ohio. “We live close enough to some stores that we can walk, so I do that more often.”
So how is this affecting travel? J Michael Murray, a retired professor from Sarasota, Fla., canceled his Mediterranean cruise this fall. “Flying to Istanbul and back from Rome was too big a hassle,” he says. “The cruise and related expense was just too much for what we would have gotten.” Remember, cruise lines have imposed fuel surcharges on their tickets, which jacked prices up without raising fares. Very clever. Or maybe not.
I’m hearing from a lot more people like Doreen Friel, a communications consultant from Tampa, Fla., who is frustrated by both higher energy prices and the hassle of travel. She just canceled her Delta Air Lines affinity credit card because, “Sky Miles are now worthless,” adding, “it’s just not worth leaving home anymore.”
If fuel prices head higher, travelers like Friel will benefit. Have I fallen off my rocker? No. Here are three ways high gas prices can you money.
1. Hotels: more incentives and falling rates?
During the last few weeks, just before fuel prices started edging downward, lodging analysts and hotel insiders told me rate growth had slowed. If conditions don’t change soon, they added, rates could start to fall. It seems every other hotel is issuing gas cards to encourage people to visit. No company is beneath this kind of incentive. I just saw Preferred Hotel Group — to which upscale boutique properties like the Mosaic Hotel Beverly Hills and San Francisco’s Huntington Hotel belong — offering gas cards.
Hotels were holding the line on further discounts, but if bookings continue to slow, they would have no choice but to cut room rates. Average daily rates slowed from an uptick of 7.1 percent in 2006 to about 5.9 percent last year, according to PricewaterhouseCoopers. A recessionary economy might have pushed that growth into reverse, which would have been a boon to bargain-hunters.
What that means for you: Wait as long as you can before making a hotel reservation. Prices are probably headed south.
2. Rental cars: bigger is … cheaper?
Soaring gas bills meant that rental companies were, in the words of one insider, getting “slammed” — and the beneficiaries are you, the traveling public. Don’t believe me? Try this: Go to the Web site belonging to a major car rental company, like Avis, Enterprise or Hertz, and pull up a random rate quote. Then head over to Hotwire.com and find out how much less the same car would cost. Then go to Priceline.com and bid a few dollars a day below that. Oh wait, you’ve done this before? No, you haven’t.
Here’s the thing about rental cars that few people know. The larger cars can actually be cheaper than the matchbox cars. Why? Because travelers want to save gas, which drives up the demand and prices of vehicles with better fuel economies. Oddly, smaller cars and hybrids could cost more than SUVs and minivans.
What this means to you: Bigger is better. If you have a large family or if you’re driving a short distance, bid aggressively for a larger car on Priceline. (I just snagged a full-size car at Los Angeles airport on Priceline for what Hotwire wanted to charge for its smallest vehicle. Go figure.)
3. Airline tickets: still pretty darned cheap.
Yes, this summer’s airfares are up about 20 percent from last year. But they’re still a bargain. The average domestic airfare for the first quarter of 2008 was $332 — the same price as it was a decade ago, according to the Bureau of Transportation Statistics. And there are signs that consumers are resisting further increases, according to my friends over at Farecast. That’s bad news for airlines like US Airways, who envision a future where they charge outrageous sums of money to fly between big cities, presumably leaving the rest of us to ride the bus. If passengers refuse to pay higher prices, something’s gotta give.
It doesn’t take an aviation analyst to figure out what might happen if fuel prices again start heading north. Customers eventually will refuse to pay exorbitant ticket prices, and the weakest airlines will fail. But I don’t envision a future in which two or three remaining carriers are able to set their own monopolistic prices. Instead, I see a future where the poorly-managed air carriers liquidate and new airlines emerge to meet demand from air travelers. These upstart carriers will be more efficient, customer-friendly and unencumbered by the poisonous corporate cultures that have defined many of today’s dysfunctional airlines.
What it means to you: In the short term, you may pay more for an airline ticket. But don’t let the airlines name their own price. Know when to say when. Force the incompetent airlines out of business by refusing to do business with them. The sooner you do that, the sooner you’ll pay a more reasonable fare.
Higher fuel prices have already forced travelers to make some long-overdue changes — whether it’s cutting back on trips or being more mindful of our limited energy resources. Cheaper prices at the pump threaten to put a dent in the progress.
I’m not the only one who feels that way.
“I am enjoying the high price of oil,” says James Edward Wright, a retiree from Duluth, Minn. “For too long, citizens told our political leaders to make sure we have low gas prices, even if we have to drill holes in some third-world country that hates us. We need $4 to $5 a gallon gas to make it painful enough for us to demand a fix.”
Couldn’t have said it better myself.
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{ 5 comments… read them below or add one }
I’ll have to agree with you, Chris. I’m staying away from the legacys as much as I can. On my upcoming trip to Orlando, I found a great fare on Southwest from LAX to Orlando, so I booked that instead of Delta or US Airways.
It is interesting that you mention the check Hotwire, bid Priceline combination. I have been doing this for several years. This coming weekend, my wife and I are going to Chicago and want to stay in the downtown area to be able to use public transportation avoid renting a car. The best rate for a three or four star hotel on Orbitz or Travelocity was $199 per night. I checked Hotwire and found a four star property for $102. I then went to Priceline and bid four stars for $82 (20% less than Hotwire). We’ll be staying at the Chicago Hyatt Regency for three nights at $82 per night. It is a simple strategy, but very effective.
Since I’m always a little leery of what I’ll get, I rarely do Priceline for a hotel room. However, I’ve used the Hotwire/Priceline combo on several occasions for rental cars. It seems to work. I can usually get a good deal.
I have to keep protesting your comparing of “average domestic airfares” through time. The average ticket price is simply not a decent way of looking at airline cost anymore. You have to include all the surcharges and fees that airlines “unbundled” out of the ticket price. Does this make comparison harder? Yes. But focusing only on ticket pricing is exactly what airlines want. As long as people/press/the gov’t only focuses on those numbers, airlines are getting away with massive hidden price increases. In the supermarket it’s called the ’shrink ray’, in the airline industry it’s ‘unbundling’, but overall, it’s just a hidden price increase.
Chris-
This is a good concept. I even agree with a lot of what you say. However, there are a few things that I have to respectfully disagree with.
1. Jasper pointed out that ‘average domestic airfares’ are worthless. I have to agree. I live in the Midwest, where I have access to 3 local airports within an hour of me, none of which are very small, as major airlines fly regional flights into them. However, if I want to drive to a ‘major airport’ I have a 5 hour drive in any direction. A flight from my local airport to San Diego cost me $360 last October. If I wanted to fly this October for the same weekend, it would be $590. Where does that figure in the average domestic airfare? The average domestic airfare only applies if you live in Chicago, New York City, or close enough to a major airport to make the drive worth it.
2. A lot of the things you listed are POTENTIAL good things. As of right now, a lot of people have been completely priced out of a vacation that takes them out of their hometown. I have not seen any hotel rates decrease yet (yes, I check my fav sites regularly). When I rented a car a week ago, there was $4 difference between the smallest car and the largest car, so I would argue the “cheapest” label. You just pick the amount of room and gas you want to pay. It cost the same to rent any car right now. If you are upper middle class or higher, you are probably ok waiting for these changes to happen. Anyone in middle class or below is wishing they could go somewhere for a vacation but can’t afford it. How is that good?
BTW, a lot of people can’t afford to buy new hybrids or new BMW motorcycles. I’m glad the people that can afford it are buying responsible vehicles. However, once again the people that don’t have excessive money laying around are stuck in their big, old car, trying desperately to find someone to car pool.
Just thought I should point out that your argument is not helping half of the country. But it sure is a nice thought.