Ceres

Ok, all political nonsense aside. The facts are we now have a split government, which means gridlock. The stock market looks heavy. We have a rising dollar that is bad for exports and higher interest rates. All of which does not give me a warm fuzzy feeling about the intermediate term of the economy. We have a had numerous consolidations in the travel business with many devaluations and raising the bar for elite status.

Point being the pendulum has swung way in favor of the airlines and hotels. When is the next recession or downturn, coming to where we see them cater to us for our business? Not make status tougher to get, and trim benefits.


Just a random thought

Kagehitokiri

what airlines and hotels are seeing revenue drop?

consolidation = look at smaller companies

rufflesinc

That .....slap from the invisible hand of the free market stings huh

Often1

Why do you say "our" business? Don't you mean "my" business?

Plenty of carriers and chains are chasing HVC accounts, typically large corporate accounts and doing quite well at it.

Next recession, carriers and properties will cut capacity rather than offering up a ton of freebies. That was a bad less from 2007-09.

Ceres

Kageh: I think they will see a big drop when the when the bottom falls out of the stock indexes.

Ruffles: In actuality, prices have not risen with inflation. It's amazing how cheap discount J is these days. I was more looking for the triple points runs for S&G's, stuff like that.

Often: Yes I did mean our business, as a collective group. I am a consultant, so I have more corp rates in my pocket than Carter has pills. But it was fun running to HNL for lunch and back in discount J. But it's the thrill of the chase man. It's the sport, the game. Maybe you don't get it, but its fun for some.
But seriously you can cut capacity for the carriers as their stock plummets with planes on the ground and loss of revenue. Its razor-thin margins, on high capacity. And really Starriott, that just now expanded into 29 brands is going to what?? lease out all those hotels to Bezos for Amazon fulfillment centers?


No, I was more looking for predictions as for the next multi-thousand point drop in the dow? The next real crater in the Nasdaq. Another global hiccup, To where all the corporations' reign in expense accounts. Meetings go Webex, brick and mortar dies and rates rise as they choke off the excess liquidity. When the likes of Munoz and Parker get run out of town by their shareholders.

remember they all got too big. And the old saying, hogs get fat... pigs get slaughtered.

florin

There is no going back. Predictive data analytics allows airlines to change their flying patters and adjust pricing, schedules and equipment with incredible accuracy. In the past 2-3 years I've been on many flights that had every seat occupied in Y. (That includes A380s.) Load factors are through the roof thanks to all the info now available. If travel drops, I don't think airlines will drop the prices too much or otherwise chase travelers; instead they'll find ways to slim down (reduce flights, park some planes, furlough some staff) while maintaining profitability.

Hotels are a different animal; I don't know how far they will go to drop their prices tho.

Ceres

I think you're right about the airlines. Prices are very reasonable now. I just wonder how low their share prices go, when the numbers drop.

As for Starriott, I think they will choke on the acquisition and wonder why they got that big. I don't think investors will flock to them, or the airlines, during the next large correction in the market. Plus occupancy number still matter, I think.


So any guess on when the next downturn happens, or am I dead wrong that one is around the corner?

Eastbay1K

Hotels may actually save money by keeping rooms empty rather than selling them too cheaply, given their ever-increasing fixed costs.

Ceres

We should know soon because I think the rout is underway.

Just my .02

TrojanHorse

Someone has to pay for those planes sitting on the ground if they take them out of service
How they do that IDK
but payments will still be due

TBD

I think you answered your own question in the initial post.

The economy is on fire in most major markets. Demand is up, particularly on trans-Atlantic business (and especially to London). Except for a few outliers, airlines are posting pretty good margins. Airlines don't need to chase your business because your business is replaceable.

Most legacy carriers are being conservative with capacity growth to keep airfares up. LCCs are more aggressive with ASM growth, though, so markets with that exposure (e.g. domestic US economy class) haven't seen airfares rise (even if the planes are full). Even LATAM, with their exposure to currency crises in Brazil and Argentina, posted a positive quarter.

But ... margins have been decreasing for a few years now. Labor costs are up for almost every major airline. Fuel costs are up significantly year/year. At some point, CEOs will get nervous and seek new revenue. It only takes one airline to decide that they will increase revenue through volume (dumping capacity) to start a fare war.

In short, the power will return to consumers either when the economy (and demand) slow, or when an airline's margins drop to a point that makes shareholders anxious.

rufflesinc

How does that work? They have to pay the real estate costs empty or filled. The housekeeping staff is full time and not contracted so they're not going to be able to schedule around how full the place is.

Kagehitokiri

re another sep 2008, who knows

how will marriott choke on acquisition?
2018Q3 >
9056 wyndham
6922 choice (franchise)
6919 marriott
5560 hilton
5518 intercontinental
4681 accor
800 hyatt (+ 2 pending - two roads and SLH)

the cheapest hotels have the highest operating / net incomes
housekeeping? even high end full service is cutting / outsourcing

florin

I don't believe that fuel costs are consistently going up. They go up and also come down. They are not aligned with inflation. Planes are also more efficient now.

Airlines have been pursuing new revenue streams for years and have been very successful at nickel-and-diming. Some examples:
1. Fees, FEES and more fees. FEEEEEEEEEEEEEEEEEES!!! US legacies are taking in billions!
2. Premium Economy is a huge cash cow.
3. Upsells: 10 years ago paid UGs virtually didn't exist and now most airlines have some sort of means to PAY more for a higher class of service.

DCP2016

I'd say when the next recession hits and fuel prices skyrocket, but after all of the previous mergers, the top 4 (DL, AA, UA, and WN) really don't have much to worry about. They can take a hit and survive. The ULCC's might survive as well. The ones that will take a hit and will either have to merge or change their product (for better or for worse) will be JetBlue, Alaska, and Hawaiian.