Flying the Costly SkiesAugust 9, 2023

The Impact of Soaring Airfares on Meeting & Incentive Programs By
August 9, 2023

Flying the Costly Skies

The Impact of Soaring Airfares on Meeting & Incentive Programs

The skies may still be friendly, but increases have also made them costly.

According to data released earlier this year, number crunchers at the U. S. Labor Department’s Bureau of Labor Statistics put the increase at 17.7% over last year. Airline tickets in the past year have outpaced the overall rate of inflation significantly.

There are multiple reasons for the cost increases, including higher fuel costs, decreased flights due to airline staff and equipment shortages and increased demand as the pandemic recedes. That leaves business travelers with fewer options and few or no deals.

As significant as the increased pricing seems, costs are inconsistent across the board and aren’t hitting all destinations, travelers and programs the same way. The degree to which costs impact planners and groups is dependent in part on location, destination and the purpose of their program. While some planners may pivot from an international to a domestic event or choose a regional destination so that attendees can access the venue by car, others are finding ways to offset high flight costs with minor changes to programs. While some destinations are feeling the pinch, others aren’t.

We asked travel analysts, travel companies, planners, DMCs and CVBs across the country how or whether the soaring cost of tickets is impacting them. Here’s the input we have collected.

Analyst Perspective

Executive Vice President, Public Affairs and Policy at U.S. Travel Association, Tori Emerson Barnes,  points out that despite challenges, business travel is back.

“About eight in 10 business travelers, both group and individual, are planning travel in the next six months,” Barnes said. “This segment faces headwinds in the form of tight company budgets, travel hassles, inefficiencies, plus a lack of workers in the office.”

“U.S. airlines have added thousands of new jobs in recent months, which has eased the shortages it had faced as it staffs up for strong demand ahead,” Barnes continued. “However, the FAA recently requested air carriers to operate with 10% fewer flights from major New York area airports this summer as a result of the agency’s own shortage in air traffic controllers. Only 54% of these critical staff positions are available. Reducing flights at peak periods affects travelers across the entire air travel system. U.S. Travel is working with Congress now as it shapes the reauthorization of the FAA this year to address the agency’s technology and staffing needs.”

Senior Vice President  of AAA Travel, Paula Twidale, noted in April that airfares are about 30% higher this year.

“Cost increases are more significant in international markets,” Twidale said. “That may change things for incentive planners. It’s possible for prices to increase further, especially on international flights where destinations are in high demand this summer. We’re seeing sold-out flights in many markets already in direct service to places like London. It’s unlikely we’ll see prices fall any time soon.”

AAA representative Andy Gross addressed the issue of rising fuel costs, which affects both flying and driving and varying impacts.

“Gas prices vary depending on the region,” Gross said. “If a meeting is on or near the Gulf Coast, gas prices will be less expensive than on the West Coast or in the Northeast. The further one is from large oil production and gas-refinery operations, the more expensive it is due to distribution costs.”

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Company Views

What is the actual impact to groups and meetings?

Global Director, Travel for Meetings, American Express Global Business Travel (Amex GBT), Jorge Garcia Rojas pinpoints the vertical nature of industry changes.

“It varies across industry verticals and types of groups,” Rojas said. “Just like any other year, there are sectors going through transformational changes and focusing on their expenses, while others are in a process of expansion or trying to catch up on everything they could not do during the pandemic. This year, we are seeing some corporations wanting to make up for lost time, combining two years of incentives into one and resulting in increased travel numbers.”

“We’re not seeing transportation costs having much impact on incentive travel,” Rojas said. “We are continuing to see increased demand, with customers again booking destinations such as Hawaii and Europe for programs out of the continuous U.S. We’re also seeing recovery in demand for the Caribbean. Big internal meetings are taking place once again, with teams flying from around the world into one or two locations. And we’ve seen an increase in small and midsize meetings with teams meeting regionally and more frequently.”

He said that costs at destinations can actually be more of an influencer.

“For lodging and venues, we’re seeing growth in popularity of non-mainstream meeting destinations,” he said.

Although domestic destinations have shown faster recovery than international destinations, he doesn’t believe that’s related to costs.

“We relate that pattern more to post-pandemic health and duty-of-care concerns rather than cost of travel,” Rojas said. “As in the past few months, we’ve seen popular international destinations in strong demand. We’ve seen a shift away from U.S. destinations, specifically for programs with global attendees. U.S. visa appointments have been very difficult to get due to backlog, so sometimes non-U.S. destinations were chosen to avoid visa and transit visa issues.”

While it makes sense that planners and groups wishing to reduce transportation costs at meetings might choose a destination where costs are less, Rojas doesn’t believe that’s the case.

“Amex GBT clients are certainly aware of fare increases,” Rojas said. “However, there’s been wider recognition of the value and importance of meeting in person.”

He added, “Conversations are not about reducing meeting budgets but more about good program management including planning ahead, controlling expenses, reporting and duty of care so that companies can make the most of the experiences they’re creating for their attendees and translate that into growth for their business. Sustainability is increasingly driving the conversation, too, and is a variable that needs to be considered when making decisions going forward.”

One trend Rojas is seeing is a significant reduction in advance notice for launching events.

“This makes it more challenging to forecast and strategize for the right resourcing,” Rojas said. “Also, last-minute changes to programs are a more common occurrence these days.”

It is not surprising that not everyone sees the situation in exactly the same way. Crystal Zawilinski, CMP, CMM, CEM, sales director, meetings and incentive programs with Wisconsin-based Fox World Travel, believes the high cost of travel is having an impact on incentives, and clients are figuring out ways to mitigate those costs.

“Flight price increases are definitely affecting incentive program plans in several ways,” she said. “We’ve seen customers use a variety of cost-saving measures to offset higher airfare costs, including shortening incentive programs, visiting less exotic and/or expensive destinations and utilizing all-inclusive properties. Many clients are currently avoiding destinations that have had historically limited airlift. Some of our clients have used blocked-space airfare to lock in or guarantee flight costs.”

Dahlton Bennington, CMP CMM, managing director at Orlando-based PROfound Planning, also sees incentive planners adjusting their programs.

“The high cost of air travel, combined with ever increasing food and beverage costs, is a top concern among incentive planners,” Bennington said. “Incentive budgets are not increasing as significantly as costs. We, as planners and partners, have the opportunity to prove our value, creativity and ingenuity by consistently doing more with less.”

In terms of program tweaks to offset higher costs, one trend he’s seeing is the use of “at leisure recognition,” which means giving qualifiers unstructured time on an incentive trip to do whatever they want. This is time that, in the past ,would likely have been a structured event with a cost.

“This softens the blow of increased costs but doesn’t eliminate them,” Bennington said.

Theresa Duncan, senior manager, corporate events, with a manufacturer of agriculture and construction equipment, said that higher air prices have not yet influenced destination choices for her groups.

“However, our company does keep employee-only meetings in the central part of the country so that driving is an option for some attendees,” Duncan said. “And for our dealer meeting, we do try to stay with destinations that are close to the larger populations of our audience.”

DMC Opinion

Catherine Chaulet, president & CEO of Global DMC Partners, has also seen indications that planners are making changes to programs, including booking alternative destinations. According to the organization’s Q4 2022 Pulse Survey Report, 68% of planners report that rising airfare costs are affecting destination choice.

Chaulet said, “Some cited in their comments that their organizations or clients are choosing based on where the majority of their attendees are located, and/or choosing locations that have other transportation options for attendees, such as trains.” She is also seeing a trend of U.S. planners favoring international destinations.

In addition, she is seeing that cost challenges aren’t just about airfare, and that destinations have issues, too.

“More often than not, it’s the lack of availability and high cost of the room block that has stopped groups choosing certain destinations,” Chaulet said. “And where high airfare is caused by reduced flight availability, destinations are taking steps. We’re seeing more destinations working with airlines to open their market.”

Some destinations are also promoting low-cost flights at certain limited times, which is a potential opportunity for groups with flexible meeting patterns.

CVBs’ Viewpoint

Most destinations are feeling positive about today’s economic challenges in spite of high fares. Many are seeing airlines increasing flights to and from their destinations while others believe their location and/or amenities are enough to offset whatever increased costs groups face.

Choose Chicago President and CEO Lynn Osmond echoes other industry execs.

“We’re hearing from our corporate customers that the overall expense of doing business is up due to inflation,” she said. “But even with these higher costs, corporations are still prioritizing face-to-face events. This means that event professionals are increasingly being tasked to do more with less.”

After cutting back on routes and service during the pandemic, airlines are now increasing service to many cities, which should help drive costs down.

“Nashville benefits from being a traditionally high-drive destination thanks to its convenient geographic location,” Adrienne Siemers, chief sales officer, Nashville Convention & Visitors Corp., said. “Additionally, flight access continues to increase to our city.  In February, Nashville International Airport saw an increase of 32% in screened TSA passengers compared to January.”

San Francisco, Miami, Las Vegas and Memphis also saw increased air travel.

David Whitaker, CEO & president, Greater Miami Convention & Visitors Bureau, noted that Miami International Airport recently garnered the top spot as the U.S.’s busiest airport in terms of international arrivals.

“This coupled with hundreds of direct flights domestically give us a tremendous competitive edge,” he said. “Supply and demand are clearly on our side and on the side of our attendees.”

San Francisco International Airport (SFO) served over 42.3 million passengers last year, up 74%, according to Nicole Rogers, executive vice president and chief sales officer, San Francisco Travel, and that number is anticipated to go up by another 8 million this year.

Lisa Messina, chief sales officer, Las Vegas Convention & Visitors Authority, said that Las Vegas welcomed just over 3 million visitors in February, up 17.8% from last year and that visitors easily balance increased flight costs with the city’s inherent value.

“Our tradeshows are reporting record-breaking numbers so far this year, coupled with marquee sporting events and global chart-topping entertainers,” she said. “Groups are finding plenty of reasons to make it out to Las Vegas.”

Memphis is another city with plenty of positives for planners, including expanded air service by existing airlines and the arrival of new airlines.

“Memphis also benefits being located within a day’s drive of two-thirds of the country,” Kevin Kane, president & CEO, Memphis Tourism, said. “We’ve always been a destination that serves visitors both regionally and nationally. Destinations like St. Louis, Nashville, Birmingham and Atlanta make for quick drives to Memphis. And visits to Memphis originating in markets like Dallas, Detroit and Philadelphia grew by 83% or more, compared to three years ago.”

Seattle’s great airlift is a selling point for planners and groups. The city benefits as a hub for several airlines, which increases competition and helps keep costs down.

“Flight costs impact attendance and certainly leisure travel, but also group and business travel,” Kelly Saling, SVP & chief sales officer, Visit Seattle, said “We’re fortunate to be the hub for Alaska and Delta airlines with a large American Airlines presence as well. We have competition that shops this market versus a market that doesn’t get to have the variety of air lift. It’s one of our best features.”

Lance Wheeler, vice president of corporate and intermediary sales, Visit San Antonio, pointed out that airline ticket costs are an issue across the U.S. due to high demand and lower staffing levels than pre-pandemic, but like others, he said his city provides offsets.

“Depending on the time of year, flight prices may be higher than other destinations,” Wheeler said. “However, many other costs, once in the city, are significantly lower. For example, given the distance of the airport from downtown, transportation costs are much lower than in many other large cities. Additionally, food costs are much lower. These ancillary costs often offset potentially higher airline ticket prices.”

Some cities benefit from having multiple airports nearby, including Long Beach, California and  Washington, D.C. With three airports within a short drive of the city, flight costs are not impacting meetings in the Long Beach area, according to Steve Goodling, president & CEO of the Long Beach Convention & Visitors Bureau. That’s true of Washington D.C., as well, which has Amtrak service in addition to three airports. Melissa A. Riley, senior vice president convention sales and services, Destination D.C., said the city’s many free attractions provide substantial added value for attendees, and new direct routes to/from multiple cities is increasing air availability in the nation’s capital as well.

For some cities it’s about location.

“Air tickets are still going up but Milwaukee is in a unique position,” Leslie Johnson, Visit Milwaukee vice president of sales, said. “Since many companies are losing attendees due to the high travel cost associated with airfare, they’re now looking at the Midwest to capture an audience that can drive to the event. We’re seeing more and more interest in the drive market.”

Gina Mintzer, executive director, Lake George Regional Chamber of Commerce & CVB, noted that the Lake George Area is mainly a drive-in destination for the Northeast.

“This is good,” she said. “However, the Albany and Plattsburgh international airports have limited direct flights now as compared to pre-pandemic lift offerings, which has prohibited some corporate bookings.”

Located at the crossroads of two major interstate highways, Albuquerque is an easy drive from Arizona, Colorado, western Oklahoma and Texas. Its airport, Albuquerque International Sunport, the largest commercial airport in New Mexico, is currently being modernized and expanded, which will make it a destination for groups from many other states, according to Tania Armenta, president & CEO of Visit Albuquerque, who said, “Southwest Airlines is starting nonstop flights between Kansas City and Albuquerque and is increasing the number of daily flights to Houston, Las Vegas, Phoenix, Los Angeles and San Diego.”

Rising airfares, decreased flights, staffing and other challenges are a reality, but optimism also runs high. Destinations are savvy enough to push for improvements that will ultimately help level out travel prices and planners are smart and creative enough to find ways to decrease other expenditures. Not everyone has the same approach, but everyone seems to agree on the commonality that face-to-face meetings matter and remain a value proposition regardless of transportation volatility. C&IT

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