Christopher Elliott wrote a recent article, The Disappearing Vacation, where he coins 2009 the year of the ‘naycation’, as in No Vacation for 2009. 

The numbers are looking bleak, particularly on the luxury front of air travel.

Premium air travel fell 11.5% worldwide in November 2008 compared to November 2007, according to a New York Times article yesterday, January 20, 2009.  The greatest decline is in long-haul travel.  Those $15,000 to $20,000 ticket prices finally seem to be an inhibitor to flying up front for the moneyed corporate masses.  (I refer to corporate masses from my experience of having traveled on dozens of premium flights and never having talked to someone seated next to me in the premium cabin who paid for their own flight.  Corporate travel or frequent flyer award travel is common.)

Trans-Pacific premium travel suffered nearly an 18% drop in November 2008.  This might be a good time to try and score a First Class award ticket on a trans-Pacific route.

Trans-Atlantic premium flight travel to Europe dropped 9% in November over the year before. 

And the airline industry forecast is for the travel market to decline further before an improvement is seen.

On the hotel front, luxury hotel travel has dropped 24% from a year ago in recent industry tracking data.

Chris Elliott commented in his ‘Disappearing Vacation’ piece “No two ways about it, staying close to home and exploring the local attractions can be dull. (Unless you live in a place where people like to vacation.)”

Lone Cypress, Pebble Beach 1-18-09

Pebble Beach, Western Edge of California, Eastern Edge of the Pacific

I do have the good fortune to live in a place where a staycation is still a great time.  When traveling and asked where I am from, I regularly describe where I live, Monterey/Pacific Grove/Pebble Beach/Carmel, collectively known as the Monterey Peninsula, as the place in California where Californians vacation.   

We spent the day basking in the sun and whale watching at Pebble Beach this past weekend.  The best whale watching from the shoreline I have seen in my life has occurred the past two weeks.  The Monterey Peninsula has had the longest winter heatwave in almost 50 years.  The temperature in Monterey has exceeded 70 degrees for the past 9 days and on Monday, January 19 the temperature peaked out at 80. The last time the Peninsula saw this kind of winter extended warm temperatures was January 1962.

Cypress Point, westernmost point of Pebble Beach, looking south to Point Sur

I rag on the exclusivity of Pebble Beach, but I have to admit the scenery is damn beautiful and the whalewatching from Cypress Point was the best location on the Peninsula I have been in the past two weeks for close views of whales from the shore. Some whales were within 1/2 mile of land. 

The $9.25 entrance fee to the 5,300 acre privately owned and gated community on the western edge of the Monterey Peninsula keeps me from visiting the area as frequently as I would like.  Bicycles may enter Pebble Beach without charge for the cycling alternative.  I need to get a bike.

Pebble Beach will have the ATT Pro-Am golf tournament in two weeks.  The hotels need the revenue.  Pebble Beach, feeling the pinch of luxury travel cuts, has shed employees, shut down restaurants on Sundays, and offered discounts on room and golf/spa packages for their three hotel properties: Pebble Beach Lodge, Spanish Bay, and Casa Palmeiro.

The Lodge at Pebble Beach, view from near 18th green of Pebble Beach Golf Links

Still, Pebble Beach Corporation has posted rate increases for April 2009.  An ocean view room at the Pebble Beach Lodge will increase more than 4% from $925 to $965 per night.

The Lodge at Pebble Beach, Oceanview rooms

The rooms above look over the 18th green of Pebble Beach Golf Links and Carmel Beach is in the distance.

Pebble Beach Golf Links, 18th green, a view from oceanview rooms at The Lodge

Is $965 for a night at a California coastal resort feasible in this economy? 

Time will tell if this luxury retreat on the Monterey Peninsula will continue to see a retreat in luxury for 2009.

Loyalty Traveler tip: The $9.25 car admission fee to Pebble Beach will be deducted from your restaurant or bar bill if you visit one of the Pebble Beach restaurants, bars, and cafes.  A bottle of Stella Artois will run $7.25 at Traps in Spanish Bay Inn and appetizers are $10-$20; Peppoli restaurant entrees are $30 to $50.  The Lodge has similar prices.

Spanish Bay Inn, bagpiper at sunset

I am on a lonely road and I am traveling,

traveling, traveling, traveling,

Looking for something, what can it be?

    All I Want –  Joni Mitchell

Mt. Shasta, California view from I-5 near Dunsmuir

I heard a blogger panelist at BlogWorld08 in Las Vegas tell bloggers never to apologize for not blogging.  I’m not apologizing – just writing.

I was on the Family and Friends plan this past week over the Thanksgiving holidays.  I have hotel reviews, stories, and photos from Las Vegas for Loyalty Traveler December blog posts.  There are still several pieces of the Vancouver, Washington, Oregon, and California trip I want to finish writing and posting to this blog. 

I drove around the western states for most of November.  It has been 12 years since I did serious road travel.  My realization this past month is writing as a road warrior is much more difficult than writing when flying the friendly skies.  Piloting and navigating a car takes a lot more physical and mental energy than being a high flyer drifting between airports penning thoughts.

Most of my November days were used seeing hotels (about 25 hotels or so), staying in hotels (11 stays), and driving between hotels (3,500 miles).  Gas dropped from $2.94 to $1.81 over a three week period of driving around California and the west.  Hotel prices also dropped by 35% in many locations from the time I started looking in mid-October/early-November to when I was booking rooms during November.  Airfares for domestic December holiday travel are some of the lowest fares I recall seeing in the past 7 years.

The new Starwood Luxury Collection hotel, the Nines Portland, Oregon has dropped rates as low as $149 for Christmas week.  This is 40% less than lowest rates were 30 days ago.  Recently opened hotels like the InterContinental Monterey are currently offering abnormally low rates like $117 per night (AAA rate) for an upscale hotel in a resort destination.

I was checking Denver hotel rates for stays around Christmas week and the Hyatt Regency and Grand Hyatt in downtown Denver are only $70 a night.  I am astonished and thankful.  Hyatt Gold Passport Faster Free Nights makes hotel rates this low essentially freebies.  A Hyatt Gold Passport member can stay upscale in downtown Denver at economy hotel room rates and redeem luxury hotel nights in a place like Scottsdale’s Hyatt Gainey Ranch Resort or a Park Hyatt for free during winter 2009.

I think we have about two to three weeks before the 2009 hotel promotions appear on the web to try and stimulate the hotel economy.  Hotels are mirroring the national economy in needing a jump-start to keep rooms occupied in 2009. 

Hotel industry news throughout November has repeatedly shown occupancy declines, luxury and upscale hotel market room rate cuts, and average room rate declines across the USA, although Texas hotel rates are rising at the moment. Forecasts offer an even bleaker 2009 hotel industry scenario.  Projects like the St. Regis Las Vegas and new Starwood hotels in Macau are postponed indefinitely.   

Much of the hotel industry occupancy projections in 2008 and into 2009 were based on increased international visitors to the USA.  The dollar was weak and the British pound and Euro were strong and made the USA a bargain destination.  Many international currencies have lost 20% to 30% of their value against the dollar since September and the likelihood of large increases in the numbers of international visitors to the USA has diminished.  The Mexican peso and Canadian dollar have plummeted against the US Dollar taking away the financial incentive and the financial resources for USA travel from our top two sources of international visitors. 

Time-Rich, Job Poor?  Go Travel!

Work interferes with seeing the world.  This is a great time to travel and see the world.

There are travel deals all around.  Last week, Holland America offered an inside cabin for $1,025 per person on a 16-day San Diego to Fort Lauderdale cruise via the Panama Canal.  A 16-day cruise for $2,050 all-in, including the fuel surcharges for sailing next week December 7.  $125 per day for a room, entertainment and recreational activities, and all the food you can eat is a great deal. 

Luxury Hotels – “Show me the Discount”

The hotel industry strategists urged full steam ahead in early 2008 when faced with any discussion of a world recession and that “d” word.  I am talking about “discount” room rates. 

Shhhh. 

The “d” word can’t be spoken too loudly inside the hotel industry.

Wall Street and the hotel industry have been taking a bath with our cash for five years.  Except for the slight downturn in 2001-2003, hotels have been raising the cost of rooms every year for the past decade and now they are through the roof…or at least to the 7^th floor.

I am not Jerry McGuire.  You can yell “Show me the money!” all you want. 

I’m yelling back, “Show me the discount!”

We need a win-win negotiation here.

I rant on and on about the high cost of hotels.  In a world where many leisure travelers and business travelers have watched their retirement tossed out with the bathwater in 2008, the discussion in the hotel industry that rate increases will have to be moderated this year just pisses me off.

You have to wonder how bad things really are when you watch your savings portfolio crash 20% in a week.  

What the hell.  Go traveling.

All year long the industry talk in the media has been how luxury travel is immune from the economic downturn. 

Several articles I’ve read in the past twenty-four hours suggest the media is peddling a different tune in Black October 2008.

·          

Some people don’t just travel , they travel well…

well, expensively.

The Miami Herald ran a story October 8, “South Florida Luxury Hotels Tested in Hard Times”. The Setai Hotel, South Beach, Miami has standard room rates of $1,100 per night.  The sales director says room rate discounts to $620 per night, normally only offered for weekdays, may have to be offered on weekends this  winter season to attract guests.

I am thinking European repeat visitors to the USA may now feel what Americans have experienced in trips to Europe and many other countries where the US dollar declined in value over the past few years.  1000 Euros is only worth $1,368 today, about $200 less, or 13% less than it was three months ago ($1,574 July 9, 2008). 

Miami has had several new luxury hotels open in the past few years with all the major chains buying a piece of the real estate.  Fort Lauderdale has Starwood’s new W Hotel, and the St. Regis Fort Lauderdale rebranded as a Ritz-Carlton, a Marriott hotel .  Hilton has the Fort Lauderdale Beach Resort and Miami has two InterContinental hotels. 

Luxury hotels are abundant in south Florida.  This location may be the bellwether location to watch for luxury hotel trends in 2009.

·          

The Wall Street Journal has a good read on Caribbean hotel discounts, “Silver Lining for Vacationers in the Caribbean,” by Sarah Nassauer.  The article states Puerto Rico hotel rates are down 11%, and Punta Cana on the Dominican Republic is down 16% from this time last year.  The Caribbean may be like 2005 was for housing.  Signs of a turbulent hotel elevator ride ahead. 

Last month I blogged about the global hotel report by Smith Travel Research showing the Caribbean had the only decline of average room rates over the past year.  Airline service cuts, higher airfares with all the fuel surcharges, and already over-priced hotel accommodations have led to tough times. 

·          

And winter 2009 should be worse I predict.

The Europeans and foreigners with stronger currencies than the dollar helped boost tourism in Caribbean locations with European ties.  European visitors to Aruba in the Netherland Antilles have seen the Euro drop 13% against the US Dollar in the past three months.  And the US Dollar is the major transaction currency for hotels in the Caribbean. 

A 5% hotel room rate cut to $400 per night for a Caribbean beach resort in November 2008 will still cost $50 more per night for a Euro-spending European than it was in July 2008.

·          

Joe Sharkey’s New York Times article, “ Travel Industry Shaken by Economic Downturn” cites patterns of luxury travel decline.  British Airways, the grande dame of European luxury air travel, has seen almost a 9% decline in the past year for its long-haul premium travel.  Even Singapore Airlines is offering premium flight discounts as the tiny financial powerhouse island-country of Singapore joins New Zealand as the second major Asia Pacific country to officially go into economic recession. 

Upscale hotels are impacted too.  Sharkey’s article cites Bjorn Hanson, New York University professor at Tisch Center for Hospitality, saying hotel cancellations for full-service hotels have been running about 50% above normal for the past two weeks.

·          

Pebble Beach Lodge and Golf Resort sent me a special offer for two nights with two rounds of golf and a complimentary room upgrade starting at $2,000.  I guess they didn’t read my blog post, “$8 Cups of Beer!  Pinch me, I’m Luxuriating,” written after the ATT Pro-Am last February.  (I changed the title last month to “Monterey County Luxury Hotels” to enable better search engine optimization.)

If you want to learn more about the Pebble Beach offer you can call 1-800-877-0279 and ask for code “PGECP8”.  Book by October 21 to get the added bennies.

·          

Ritz-Carlton Spa and Golf Resort, Half Moon Bay, California

And then there is the AIG fiasco last month at the St. Regis Monarch Beach in Dana Point, California.  I was interested to read in the LA Times yesterday, David Lazarus’ Consumer Confidential, that AIG had another company event planned for the Ritz-Carlton Resort in Half Moon Bay, California next week. 

I was thinking we could organize a beach blanket protest using the California Coastal Commission’s public access to the beach (explained here) for some consumer advocacy and fun in the sun.

The cancellation of the AIG event at the Ritz-Carlton Half Moon Bay was just announced this morning.  Power of the media.  Power to the people.  Our tax dollars shouldn’t be funding golf excursions.

Attention AIG executives!

Loyalty Traveler has a great tip for a Pebble Beach golf getaway – but, please pay on your own dime.

And this takes us back to the downturn in luxury travel.

$500,000 luxury meeting getaways will likely be scaled back dramatically over the next year as this financial crisis winds its way through the travel industry in 2009.

·          

The good news? 

Loyalty Travelers will find hotel bargains in 2009.

Hotels are looking more to consumer groups for targeted hotel rate discounts. 

My wife just turned 50.  She was surprised I hadn’t gift-wrapped an AARP card for her birthday present.

Honey, I think I have already picked out your Christmas gift .

Travel Going Down, Down, Down. It’s the Economy, Stupid!

Global hotel rates are up overall, year-over-year for July 2008, in all regions except the Caribbean, reports STR Global.  The STR Global survey set of over 36,000 hotels and nearly 5 million rooms probably comprises all of the 25,000 or so hotels in the top 10 major hotel loyalty programs.

The Middle East/Africa was the only global region to experience increased hotel occupancy.  Oil and war must be a good hotel filler combo.  The more than 3% higher occupancy levels were in the face of a 30% increase in average room rates in July.   With per night average room rates still only at $150 for the North Africa/Middle East region, the low cost North Africa hotels mitigate the luxury priced rates of Dubai.  The most expensive hotels regionally on average are to be found in Europe, but the recent drop in Euro value relative to the dollar throughout August could mean an actual decline for prices in US Dollars in the coming months.  Europe is seeing tougher economic times developing and the hotel rate increases for the coming year are unlikely to match the exuberant room rate hikes of 2007. 

European hotels had occupancy declines of over 2% from summer 2007 to 2008 and the Asia Pacific region had a larger decline of 7% occupancy, yet average room rate increases of more than 14% in both regions kept hotels profitable.  Currency exchange rates more favorable for Americans coinciding with a general overall drop in hotel travel throughout much of Europe may make 2009 a good year for finding more reasonable room rates for an American traveling internationally.

South America is seeing occupancy gains year-over-year for the hotel industry.  My last international trip to South America in 2007 provided great value for the dollar on transportation ($5USD extra to travel First Class on a one hour, 3-cabin, high speed deluxe ferry from Buenos Aires to Colonia, Uruguay), hotels (six different Starwood properties), and food ($1.00USD for 1.0L bottles of Stella Artois in the local Buenos Aires market). 

North America is experiencing declining hotel occupancy, led by the Caribbean hotels.   The Caribbean is the one global region that has not been able to sustain positive revenue growth for the year.  Rates have dropped for Caribbean hotels (but, still way overpriced!) while the Americas as a whole saw an increase for room rates by almost 3% for the past year.

As an industry, hotels have been raising room rates at a pace much higher than inflation for the past four years.  This is at the same time the American working person is on average not earning pay rises to match the inflationary pressures.  California is at a 12 year high for unemployment at 7.3%.  The average hourly wage in California has increased 2 cents over the past three years from $22.52 to $22.54.  Everything in the household budget is increasing in cost while Americans on average had the biggest decline in three years for personal income. 

At 2,000 working hours per year, the average worker has earned about 4,000 hotel points worth of wage gains or 2,000 frequent flyer miles in additional wage value per year.  At least the loyalty points and miles are not taxed like wages.  A traveler better start collecting MyPoints to supplement the travel budget.

Economic necessity is compelling the consumer to make choices of where to spend money.  And all travelers are consumers.  Hotels seem to be one of the cuts for many travelers as evidenced by hotel occupancy declines in most regions of the world.

The interesting factor I am waiting to see is how hotel loyalty programs restructure their free night redemption charts over the next year.  Hotel loyalty programs in the past have based their redemption rates for a free night using points on the hotel’s average daily rate for a room.  On one hand the lowest average daily rates are in North America ($108) when compared to Europe ($167), the Middle East ($150), and Asia Pacific ($137) regions.  On the other hand, the large majority of hotels in most of the major hotel corporations are located in the USA and although these hotels have some of the lowest rates worldwide, most of the free room redemptions for the major hotel loyalty programs are made at USA hotels. 

Hopefully, the loyalty traveler will see “category creep” be a minor issue in 2009.  There has been an alarming category reclassification shift over the past three years.  The hotel loyalty programs have moved most of their hotels up at least one category in redemption level and many hotels to much higher category levels for free nights using points.  The hotels used to be distributed more heavily towards the lower redemption levels in the Starwood, Marriott, and Hilton programs.  Hotels in the Category 1 and 2 segments have been dwindling as the Category 4, 5, and higher hotels swell in numbers.   Perhaps 2009 will be the year when a significant number of hotel properties in the USA actually drop in redemption category.  Now that would be a boost for the frequent guest and actually justify a full-scale press release for a program enhancement.

Loyalty Traveler note:  Much of the commentary here is based on the research work and data of Smith Travel Research and STR Global who produce a variety of reports on USA and global hotel rates and occupancy levels. 

The Happiest Place on Earth – Orlando, Florida actually saw a decline in room rates for July 2008 by almost 2% from last year.  A sign for 2009?

New York Times published a news article last week on the state of the hotel industry, “Terrible Timing for a Hotel Boom”.

Some interesting data:

-         Across the USA occupancy levels are down 5% from 2007.

-         New York City is the nation’s bright spot with high hotel rates and high occupancy.  Foreign tourism is benefiting New York City.

-         2007 was the year of record profits for the hotel industry.  No wonder.  2007 was the year of record room rates for the hotel traveler.

-         6,000 new hotels with 800,000 rooms are in some development phase. 

-         2,000 hotels are currently under construction, but many of the other 4,000 planned hotels may be slow to develop.  A few months ago I carefully went through the Starwood web site and there were 100 or so hotels with web sites although some of these hotels were not scheduled to open until 2010 or 2011.

-         327 hotel projects have been canceled in the last three months.

The New York Times article quotes an academic, Professor Bjorn Hanson from the Tisch Center for Hospitality at New York University.   He warns the good times for New York hotels at the present time can see a severe downturn with continued poor economic times.  The effect of fewer city hotel occupants means neighboring businesses feel the economic ripple.  Many cities are already experiencing this impact.

Dr. Hanson says hotels tend to break even at 54% occupancy and that reminds me of the many articles I have been seeing about Hawaii hotel occupancy declines the past two months. 

The decline in flights to the Hawaiian Islands has helped bring the average hotel occupancy on the Big Island of Hawaii down to 57% for June 2008.  Despite the low occupancy on Hawaii, the average room rate is still $202.  Oahu is the bargain island at $173 compared to Maui’s $278 average hotel rate, and Kauai at $219.   

Tim Winship posted an article on SmarterTravel.com “How to Evaluate Frequent Flyer Promotions”.  This is a great read and the information applies equally to hotel frequent guest programs.  My interest with Loyalty Traveler is to evaluate hotel loyalty program special offers and provide that information in summary form to hotel travelers. 

“But whether you’re a member of the Pudding Club or just an average consumer looking to do the smart thing, mileage-wise, it pays to do the math.”

-         Tim Winship

I could not agree more whole-heartedly.

Concierge Traveler – Hotel and Travel News  

I have noticed trends in the hotel industry stories over the past couple of weeks since not posting much while traveling around in San Francisco and Denver.  Here is a selection of interesting travel industry articles I have seen lately.

********

I have been writing much of this year on the “perfect storm” of currency exchange economics, perception of declining wealth among Americans and its impact on international travel, and the hotel revenue management teams insisting on maintaining historically record high room rates. 

My conclusion is the trifecta will decrease the room rate inflation for hotels in the U.S. but I anticipate wildly swinging hotel rates for the rest of 2008.  Expect exorbitantly high room rates in major city business center hotels during busy work weeks and peak travel conferences when the hotels will strive for enhanced revenue. Anticipate more frequent hotel room bargain rates during extreme lulls in business travel to induce leisure travel stays. 

The leisure traveler will see great hotel rate opportunities and an increased probability of getting a high value-added incentive like a complimentary room upgrade, free parking, restaurant meals and/or bar drinks, and quite possibly a high added-value rebate through hotel loyalty program bonus points towards a future free night redemption.  Unlike airline frequent flyer miles, hotel programs make room redemption using frequent guest points a fairly simple process.

Rising fuel costs balanced by staff reductions seems to be the business practice for keeping profits rising in the face of declining occupancy and pressure on room rate rises.  Europe is seeing a widespread decline in the American tourist market on the order of 10-15% fewer visitors for places like Ireland this season than last year so far.  The British pound has lost nearly as much value against the Euro in the past year as the dollar – around 15%.  A survey of UK  travelers shows 13% cutting back on travel plans due to weaker value of the British pound in past year.  British tourists are finding less value in travel to Ireland.  British tourists are increasingly favoring Turkey to escape the Euro zone for a beach getaway as even the rising cost of a holiday in Spain pushes bargains aside.

The indicators are that major cities are faring better than outlying regions for tourism such as Budapest.  London, Amsterdam, Paris, and Berlin are still strong attractions for the tourist and business conference market.  Ireland and Scotland are seeing summer tourist fortunes decline.  Still there are analysts saying “there are no decline in business hotels for 2008” and the scenario is not so bad as hotels continue to profit, just to a lesser amount than in previous years and the cut rate bargain hotel rooms may not be coming to your town anytime soon.

Now I am waiting to see the loyalty program response to initiate more interest in hotel travel for the second half of the summer season.  The incentives are nowhere near the high value hotel frequent guest promotions of last fall, winter, and spring.

Expedia has dropped 48% in stock value since October 2007 and the recent announcement of the purchase of Venere.com did not seem favorable to the market.  For the consumer the deal just might be upbeat.  Venere.com has accommodation relationships with nearly 30,000 European and US properties and the acquisition will add more than 10,000 new hotels in Europe, Africa, and the Middle East to Expedia’s reservation system.

More interesting to me is the acquisition of VirtualTourist.com by TripAdvisor.com.  Expedia is moving along as the major player in the hotel travel review and travel media market and now adds a vibrant social media component to the Expedia portfolio.

Hotel stocks and travel stocks in general are taking a hit on Wall Street with many at 52-week lows.  Marriott reports profits are declining in the past few months by a substantial margin of 24%.  Analysts predict that reduced airline capacity may exacerbate the problem of lower hotel occupancy for geographically isolated U.S. cities like Denver, Colorado to an extent larger than the post-September 11 travel slump.

Don’t think twice, it’s alright

            – TripAdvisor’s top ten places to show your skin.

Don’t think twice, it’s not alright to slip out of that tan line clothing in Dubai. 

-         And a tourist asks can you still kiss in public on a Dubai beach? 

Hotel Website Redesign and Brand Recognition

HotelChatter.com reaction to the Starwood Hotels’  Luxury Collection website redesign and recent articles on InterContinental Hotels media library, Hilton’s Conrad and Waldorf-Astoria brands are all pieces pushing brand recognition with website enhancements to distinguish these upscale and luxury brands within the corporate hotel family. The St. Regis Fort Lauderdale is being stripped of its brand name affiliation with Starwood Hotels.

Boston and Las Vegas  Coast-to-Cost Blues

Boston hotels predict harder times ahead as fuel costs and operating expense increases cut into diminishing profits.  The hotel rates in Las Vegas are reported to be at their lowest room rates since 2003 in this LA Times blog.

A staycation in Carmel isn’t necessarily an adverse idea

Back in January I blogged about the impact of the economy on travel “Money for Nothing (but my MTV)” from a personal point of view as a consumer. The stock markets were shuddering from the finance markets liquidity crisis. And this was all before the huge spike in gasoline prices for the American consumer. Times are generally looking harder for the leisure traveler.

I have to wonder if the Cornell Center for Hospitality Research advice for hotels to maintain an operating model of higher prices, lower occupancy will hold as the American consumer is squeezed by household inflation. The strategy of high prices, lower occupancy as a hotel business model is based on the findings that hotels which maintained their rates in the year following the September 11 attacks came out with more profits than hotels that lowered rates to boost occupancy during the travel slump after 9-11 (hotel rates were at record highs at the time of the 9-11attacks).

I believe the travel impact of the post-9-11travel recession was due in large part on fear of travel. There were incredible airline travel deals at the time. Priceline was my good friend for hotels and $60/night central city 4-star hotels in the capitals of Europe. The dollar was strong as a currency and offered high value in foreign exchange for travelers.

Will the game of chicken play out the same for our current travel crisis in 2008 as it did in 2001?

Reality check of the travel environment of 2008:

The Euro caused a general inflation of about 20% overnight in Amsterdam when prices were converted from Dutch Guilders to Euros for this American traveler. The dollar is worth only about half as much as it was shortly after the Euro became the currency.

Hotel average daily rates in the USA have increased annually at about triple the rate of inflation for the past several years in the USA where there are no currency issues compounding the high rates. Internationally, rates have more than doubled in many countries as the US Dollar has lost 20% to 40% of its value against most international currencies over the past five years.

Air travel has become much more expensive with the rise in fuel and the addition of fuel surcharges to ticket prices. Using 100,000 frequent flyer miles for a premium class award ticket to Europe will now cost as much as a regular miles earning ticket did in late 2001. I was earning nearly 40,000 frequent flier miles for every $400 all-in ticket to Europe in late 2001. And now, in 2008, it can cost $400 in award ticket fees to fly to Europe using frequent flyer miles.

Gasoline prices for driving around the USA have more than doubled since the post-9-11 travel recession. When the cost of taking a 900-mile road trip means a $200 gas expense, the frequency of travel decreases (San Francisco to Los Angeles and back is about 900 miles).

“Staycation” is a term being tossed around frequently these days in the media. Too broke to travel? Stay in town for your vacation. Fortunately, I have regularly used staycations for years as a hotel strategy to maintain high elite status with a hotel loyalty program like Starwood, Hyatt, or Hilton. The staycations are rather enjoyable as San Francisco is my “Staycation” vacation home base.

The only article I have seen showing a rise in USA travel is from American Express regarding travel to Europe. Every other piece of data I have seen shows declining travel for Americans in 2008. TravelPort owns the Galileo global distribution system. GDS reservations are what travel agents use to make bookings and about half of all worldwide travel reservations are made through a GDS. TravelPort reports reservations numbers for 2008 show a 7% decline from the same period for 2007 for travel in the Americas and a 3% decline overall globally. And this is at a time when hotel room supply in the USA is about to increase dramatically as new hotels open over the next two years. The hotel projects took off in the boom years of real estate and will open from 2008 to 2010 in the current economic bust.

The InterContinental Hotels in San Francisco and Monterey may reflect the room rates impact in the coming cycle of new hotel openings. The best available rates are about $100 less than I think they would have been had the hotels opened a year ago.

The hotel travel industry is going to try and ride the crest of the wave. For loyalty travelers it is important that the industry just remember the wave of hotel bookings is created by consumers. With the current stormy economic conditions facing the American consumer, the hotel booking wave might just go flat.

The Laguna Resort and Spa, Nusa Dua, Bali, Indonesia

Starwood Preferred Guest has raised the category level of the Luxury Collection hotel, Laguna Resort and Spa, Nusa Dua, Bali, Indonesia by two category levels in four years.

Dec 2003, SPG Category 2, free weekend night = 3,000 Starpoints

March 2008, SPG Category 4, free weekend night =10,000 Starpoints

Gary Leff’s post, February 25, 2008 on View from the Wing, about the SPG annual category shift got me to thinking about my reaction to the coming changes. I understand the rationale for SPG increasing the categories for high demand hotels. Yet, I feel the pain of devalued points.

I have decided to look at it initially from my personal travel perspective.

Maybe later, I’ll tackle a real analysis of the shifts if I can locate charts showing the SPG categories from 2004 and 2006 to help me track the changes. Blondebomber of FlyerTalk has active links to his SPG Hotel Category spreadsheet on the internet. The spreadsheet tracks the SPG hotel category changes from 2005 to the current March 4, 2008 changes.

Hotel Shifts I notice from past stay award rates for a single free night:

Sheraton Noosa, Noosa Heads, Queensland, Australia,
July 2003     Category 3    7,000 points

March 2008     Category 5    12,000-16,000 points

Noosa Beach by Sheraton Noosa, Australia

Four Points Darling Harbour, Sydney, Australia
July 2003     Category 2     3,000 points weekend; 4,000 points weekday

March 2008    Category 4   10,000 points

Westin Nusa Dua, Bali, Indonesia
December 2003    Category 1      2,000 points weekend; 3,000 points weekday

March 2008   Category 3     7,000 points

Westin Nusa Dua, Bali, Indonesia

The Laguna Resort, Luxury Collection, Nusa Dua, Bali, Indonesia

December 2003    Category 2    3,000 points weekend; 4,000 points weekday

March 2008    Category 4    10,000 points

Starwood Hotels Luxury Collection, Laguna Resort Nusa Dua, Bali

Royal Orchid Sheraton, Bangkok, Thailand
March 2004   Category 1     2,000 points weekend; 3,000 points weekday

March 2008    Category 3     7,000 points

Bangkok, Thailand, Royal Orchid Sheraton Hotel

Westin Atlanta Airport
June 2007     Category 2     3,000 points weekend; 4,000 points weekday

March 2008   Category 3    7,000 points

Westin Hotel Atlanta Airport

Sheraton Newark Airport
June 2007    Category 2      3,000 points weekend; 4,000 points weekday

March 2008    Category 3    7,000 points

Sheraton Newark Airport, New Jersey

I have made a very rough estimate of the category changes at hotels I’ve visited.

I’ve probably redeemed 150,000 to 200,000 Starpoints for free nights at some of the hotels listed here and other places and locations I’ve stayed over the past five years.

I estimate it would now take about 260,000 points for the same number of nights at hotels where I redeemed points for stays for about 100,000 points.

Next month, 100,000 Starpoints might buy 10 nights at a selection of hotels where I redeemed 100,000 points for 25+ nights.Hotel room rates in most places have not risen anywhere near 150% in the past five years. Starwood point inflation has been devastatingly high on the free night redemption side for many travelers.

In Starwood’s favor, the widespread expansion of available Cash & Points rates in 2007 for hotels in all SPG categories from 1-6 has proved to be a high value use of Starpoints at many hotel properties.

$60 and 4,000 Starpoints for a Category 4 hotel award night can be a great alternative to 10,000 Starpoints or a $250+/night paid room rate. Paying $60 cash is a much higher value than spending 6,000 Starpoints.

$150 and 8,000 Starpoints for a Category 6 hotel night is often a better choice than 20,000 Starpoints or a paid room rate of $500/night.

I am glad I traveled when I did.

How much has your Starpoints earning power increased over the past five years?

My earning power hasn’t increased significantly and nowhere near 150%.

Two options for this traveler:

1. Stay fewer hotel nights or

2. Pay more money to increase the ratio of paid/award nights.

My economy will be the decider.

Is there a Priceline Master in the House?

I am not a real doctor (PhD). I only have a Master of Science. That is why I work for consumers instead of pocketing the lucrative research paycheck from the hotel industry.

The doctor, Chris K. Anderson, Ph.D., at the Cornell Center for Hospitality Research has come out with a report advising hoteliers how to squeeze more pennies out of our consumer pockets. This time the research is aimed to maximize hotel profits from Priceline.

http://www.hotelschool.cornell.edu/research/chr/pubs/reports/abstract-14705.html

The report is available for free download upon registration with the center.

Loyalty Traveler has a few comments on the report.

Cornell Report Statistic:
60% of online hotel rooms are booked through hotel-branded websites (I assume this is what is meant by “supplier-managed” websites).

Loyalty Traveler view: Hotels have provided incentive for customer reservations through hotel-managed channels by offering exclusive loyalty program benefits. In other words, Hotel points and frequent guest member perks are only guaranteed when booking through hotel-managed websites. The hotel websites generally offer a better rate , although special offer rates are often hidden from view to the casual online reservationist of a hotel room.

Report Statistic: 40% of online hotel bookings are made through online travel agencies like Expedia, Travelocity, Orbitz, and Priceline.

Loyalty Traveler View: Expedia and Travelocity and Orbitz are convenient. Priceline and other opaque sites like Hotwire.com generally offer the best discounts on room rates. A traveler has to weigh the factor of cost with the uncertainty of hotel location and brand. A frequent guest member does not earn hotel points and the reservation is likely to be booked in lowest category hotel room on property.

Priceline Bidding data:
A graph shows the number of bids in the two weeks prior to the date of arrival for the sample hotel. Data shows about 50% of all Priceline bids occurred in the 2 days before arrival.

The minimum acceptable Priceline bid for the hotel, within a one week period, ranged from mostly $55/night to $65 per night with one outlier night at $235/night.

An interesting chart is Exhibit 8, which if I have interpreted correctly, indicates that about 1 in 25 Priceline winning bids represented a 90% discount on commonly published rates for the hotel. And about 5% only got a 20% discount on the going room rate.

The vast majority of bid winners receive less than a 50% discount on the regular room rates. About 60% of winning Priceline bids received a 28%-36% discount on the room rate. Technically, the Priceline slogan “Save Up to Half Off” appropriately represents the Priceline reality. The Cornell graph shows about 10% of bidders received between 67% and 90% off the regular room rate.

The last time I used Priceline was for a night in Washington D.C., June 2007. I ended up with the Marriott Key Bridge, Arlington, VA for about $100 and the lowest available room rate through the Marriott site was $329 for that night.

My initial analysis of the Priceline tool provided for hotel managers seems to indicate some trends for consumers.

Consumers may find the most favorable room rates booking Priceline the day before or day of arrival. Booking at 10 to 14 days in advance of arrival may also provide the best opportunity for higher discounts. The Cornell Priceline tool appears to encourage hotels to not discount Priceline inventory rooms as deeply between 2 and 10days before arrival as a means to maximize profits.

An interesting analysis would be to compare the Cornell Priceline data with consumer bidding data from www.biddingfortravel.com to see if there is useful consumer information to be gleamed from the comparison.

Anyone planning to make a hotel bid through Priceline.com or Hotwire.com should check out www.biddingfortravel.com to see what successful bids are pricing out and then try and use that data with the knowledge that 10-14 days before arrival may provide the best opportunity for deep discounts on Priceline. And if you are desperate and lucky, the day before and day of arrival Priceline bids may save you enough cash to buy gas and pay for hotel parking.

The PointsWizard blog on BoardingArea.com had a link to this article detailing strategies for successful Priceline bidding.

Laurence Geller listed some interesting data points in a blog from Jan 18, 2008. His piece discusses the widening divide between Generations X and Y mass consumers and the truly “super-affluent”. In 2006, the affluent spent on average $2,400 on hotels and resorts, while the super-affluent spent $61,200. He argues new brands will proliferate as today’s luxury brands become commonplace.

St. Regis Hotels are luxury brand of Starwood Hotels and Resorts

Friday morning on CNBC, a news crew reported from the St. Regis Fort Lauderdale, Florida from a CEO conference. The studio reporters were asking about the age of the hotel and the reporter stated it had been open 9 months. I haven’t looked into those facts.

The report got me to thinking about the super-affluent and the merely affluent. For the Loyalty Traveler the travel is reduced to the numbers. I wondered what the rates are at the Fort Lauderdale St. Regis.

Here are the search results for St. Regis, FLL room rates for Monday, 2-18-08

OceanView
$476.10 (AAA rate)
$479 (Best Available on StarwoodHotels.com)
$509 Special Offer Page “SRSPG”
$529 (Best Available on SPG.com)
$549 Special Offer AAA rate “XRF”

Ocean Front
$566.10 (AAA)
$579 (Best Available on StarwoodHotels.com and SPG.com)
$609 Special Offer “SRSPG”
$649 Special Offer AAA rate “XRF”

Pool Terrace
$607 Florida Resident rate
$669 Best Benefits Package special offer “SRSPG”
$689 (Best Available on StarwoodHotels.com and SPG.com)
$709 Pool Terrace Special Offer AAA rate

[special offers accessed from St. Regis Fort Lauderdale ]  [Loyalty Traveler note:  St. Regis converted to a Ritz-Carlton in summer 2008 a few months after this post]

XRF rate includes complimentary valet parking, two Bloody Mary’s, and complimentary room upgrade to next available room type. In this case, contact hotel and find out a good night for booking with a good upgrade potential.

SRSPG rate includes two Bloody Mary’s, triple Starpoints and complimentary internet access.

The super-affluent spender could be looking at about 2 to 3 months of Pool Terrace living over the course of a year at this hotel and comparable properties. The affluent spender on $2,400 is looking at a long President’s weekend holiday and sitting home the rest of the year.

Starwood Cash & Points Award Savings

While checking St. Regis Fort Lauderdale, I came across an example of where loyalty program membership leads you to a much better booking option than a regular search on the hotel chain primary web site.

Westin Colonnade, Coral Gables, FL
Saturday, Feb 16, 2007
Rate = $429/night

www.starwoodhotels.com web site hotel rate for the Westin Colonnade through a regular search as a hotel guest not participating in Starwood Preferred Guest and not looking for the Starwood Preferred Guest hotel loyalty program site.

Checking http://www.spg.com/ – I have the option of getting a Cash & Points award at the Westin Colonnade, a Category 4 SPG Hotel for $60 and 4,000 Starpoints.

The ability to buy up to 20,000 Starpoints online from SPG at the rate of $35/1,000 points is a strategy to keep in mind if you do not have 4,000 Starpoints. Adding the cost to buy 4,000 Starpoints for $140 and the $60 Cash portion of a Cash & Points award makes a $200 room rate booking possible. The website states purchased Starpoints will be posted to your account within 24 hours.

The corporate-branded hotel websites generally have the lowest rates for their own hotel rooms compared to third-party online travel agencies like Expedia and Travelocity.

The difficulty for the DIY online hotel reservationist, is the time needed to sift through thousands of pages on the corporate-branded websites to find the lowest rate page. Finding the lowest rate is a matter of knowledge and luck at the time you search.

$485 through Starwood Hotels corporate web site compared to $200 for the SPG member using Cash & Points booking option for a one-night rate at the Westin Colonnade is the differential cost for the guest with a lack of knowledge and time. The Starwood Preferred Guest loyalty program gives the member a hotel rate option that is nearly $300 less.

An additional benefit of a Cash & Points stay is the award stay usually does not incur tax. The minor detraction of a Cash & Points award is the hotel stay does not count for elite qualification or promotional offer credit. A Cash & Points award stay also does not earn points for the Cash portion of the award.

Priceline Hotel Bookings

CNBC reported Friday morning Priceline has experienced a surge in bookings. The TV commentator asked, “Does the growth in Priceline indicate a weak economy?”

Priceline is a great resource when hotel room rates are threatening to make your credit card bleed. Last June, I booked the Marriott Key Bridge in Arlington, Virginia for a Sunday night before a Monday afternoon flight to Buenos Aires. I wanted to be in DC, but the major loyalty program hotel rates ranged from $250 to $350/night. I considered renting a car and driving to the Virginia outer suburbs for a $100/night Sheraton rate.

Marriott Key Bridge Hotel, Arlington, Virginia (Priceline.com booking $115)

Instead I paid $115 total for the Marriott and I was a ten minute walk across the bridge into Georgetown. I had an interior pool view room on the third floor while the preferred rooms look out over DC from 6 to 10 stories up.