take the change
The pent-up demand is so strong that bookings for off-peak travel are higher both on pre-summer weeks and on midweek days. During its first 2022 travel industry earnings call, Delta Air Lines said off-peak travel revenue is improving as travelers move away from more frequent travel times. Expect to hear more of that from travel executives this year.
Ted Reed
The return of travel after the pandemic has been so strong that airlines and hotels are selling more seats and more rooms for times that are classified as “off-peak”.
As a result, off-peak rates have shown gains, which could weigh on travelers while airlines and hotels benefit, even with the most historically profitable business travel not fully returning to 2019 levels.
“We’ve been trying to catch up with that strong demand,” Delta President Glenn Haunstein said last week, as the blue-chip US airline led the airline’s earnings reports. “When you look at where we’ve pre-booked, we have (prices) slightly ahead on peak days and peak travel periods versus off-peak travel times. And we’ve seen consumer demand that you’d expect, with off-peak travelers going, but with higher returns.”
One result of the airline industry has been that revenue management is back in style after its pandemic downturn. Now, airlines can once again try their traditional revenue management strategy: keep some seats for sale at higher prices for late bookings. The model could not be maintained during the pandemic because business trips booked late have fallen dramatically.
Hauenstein not only gave a shout-out to the Revenue Department, but he also advised budget travelers to look for off-peak rates. “Our quest on the Revenue Management team, who I believe did an excellent job of managing this increase, is to not run out of seats as we approach peak travel, the summer travel season,” he said. “We want to have affordable offers in the market until departure day and we don’t want to run out of seats.”
For the price sensitive, Hauenstein advised that flying during the peak summer season would require being prepared to fly on off-peak days. “As we head to the peak, there will be restrictions on peak days,” he said. “So while you’re shopping, if you’re looking for lower prices, you have to be flexible as to what days you want to travel.”
Hauenstein’s discussion of off-peak travel referred to both midweek but also to ‘shoulder seasons’, such as slow spring weeks.” When an analyst noted the historic drop between spring break and summer travel, Hauenstein said, “One of the problems is coming out of Covid.” , we probably won’t peak like we did in the past in order to create more efficiency in the grid throughout the year.” For example, he said, pre-Covid deltas were running about 20% more wide bodies in the summer than they were in the winter. : “What we’ve been really working on during covid is coming out of this with a more off-season grid, so we can make better use of the assets, flatten the tops, build the bottoms.”
Delta’s earnings report sparked excitement in travel stocks. Over the course of the week, Delta and American shares rose 15 percent, United rose 9 percent, Marriott rose 8 percent, and Hilton and Carnival rose 8 percent. This week, American and United will announce its earnings.
Hilton and Marriott will report back in early May. Hotel chains have not commented on recent booking trends, but Marriott said that in the second half of 2021, “shoulder days on Thursdays and Sundays rebounded well to just below 2019 levels (while) Fridays and Saturdays were above pre-pandemic levels,” According to spokesman Benjamin Gero. “Monday through Wednesday it was still well below 2019 levels.”
On Hilton’s fourth-quarter earnings call in February, CEO Chris Nassetta said hotel stays are increasing. “As a positive sign of the temporary recovery in business, at the beginning of January, midweek temporary bookings in the US for all future periods were down 13 percent from 2019 levels and improved to just a 4 percent drop by the end of the month,” Nassetta said. Regarding leisure travel, he said, “We expect strong leisure trends to continue again this year, driven by pent-up demand and nearly $2.5 trillion in consumer savings surplus.”
Aviation consultant Bob Mann said it makes sense for travelers to move to off-peak periods in order to reduce costs. “Business travelers like to travel when they want to travel,” he said. “But with leisure travelers and price seekers, you can focus prices to create shifts in demand by day of the week and time of day.”
