Our prediction: Expect big changes from Southwest Airlines and other major players in the year ahead.
The big travel news in 2016 is likely to follow a few main themes. I talk about “themes” rather than “stories,” because instead of blockbuster announcements, you’re more likely to see ongoing developments throughout the year—new approaches to old problems, and new fights over new problems. It may not be a great year for travelers, but it will certainly be an interesting one. Here are some worrying trends to watch for in the year ahead.
Look Before You Book
The primary struggle in the 2016 travel marketplace will be between individual airlines, hotel chains, and rental car companies on one side and the powerful third-party online travel agents (OTAs) and legacy Global Distribution Systems (GDS) on the other. Predictably, the biggest loser is likely to be consumers who aren’t paying attention.
The push is coming from the airlines and hotels: They want you to book through their own websites, not through OTAs. Specifically they want to (1) “own” your loyalty so that they can sell you more than just a basic room or ticket, and (2) to avoid the sizable costs of paying both the OTA and the GDS to transact a sale. To get you, they are increasingly offering special deals and packaged product combinations available only when you book direct, such as Hilton’s and Marriott’s offer of “free” Wi-Fi to direct bookers. Even deals as basic as a senior and AAA hotel discounts may not be posted on a GDS or OTA website.
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The OTAs, of course, want to protect their turf. So far, their best leverage remains their ability to compare prices across many different lines and brands. The OTAs have allies in some big business travel buyers, where travel management systems are closely integrated with the GDS. The OTAs are doing as much as they can to adapt. But for now, consumers should at least look for deals available on a supplier’s website before booking through any third party.
Consort with the Enemy
Although you’re already seeing more “hot destinations in 2016” reports that you can assimilate (here’s ours), you can expect two main developments. A lot of ink and pixels will be devoted to two countries, once fairly popular, then off-limits enemies for many years, and now newly christened possible friends again: Cuba and Iran.
Given the new agreement for scheduled direct flights, you’ll be seeing a lot about Cuba in 2016. Cuba has some of the world’s best beaches, alluringly close to the U.S. East Coast. And Iran has a great mix of scenery and historic sites.
The difficulty with both countries, however, is that neither is really ready for a massive influx of U.S. tourists, either culturally or practically. Although Havana and Cuba’s beaches are already heavily built up for Canadian and European visitors, they don’t have the capacity for a huge increase, nor do they have enough high-end properties.
Iran is even less prepared than Cuba, with limited tourist accommodations and limited English-language staff. Moreover, even with eased relations, neither country is likely to allow free, unfettered roaming by U.S. travelers; guides or groups may be required. If you can find the right trip, go; but don’t expect to travel as freely as you can in most of the rest of the world.
Despite all those isolated supposedly “trendy” areas—one prominent source is touting Greenland—most people will keep heading for the same places that people went to last year: Orlando, Las Vegas, New York, San Francisco, Europe, and the other long-term popular spots.
Subdivide Coach and Economy
Airlines around the world will keep subdividing their “main cabin” coach/economy products into multiple “brands” with differing price and product features. New approaches will extend the envelope at both the high and low ends of the price/quality spectrum.
For a long time, the “better than ordinary economy” air travel segment has been bifurcated: Many long-haul airlines based outside the U.S. (plus Air Canada) adopted “true” premium economy, with wider seats than regular economy, up to eight inches of additional leg- and workroom, and improved cabin service. Fares are typically almost double regular economy. Conversely, the big three U.S. legacy lines, Alaska, Hawaiian, and JetBlue (plus KLM) adopted “semi” premium economy, with a few inches of extra legroom but little else. Each-way fares are typically around $100 more than regular economy for transcontinental flights; less for short flights.
That’s about to change. In 2015, American announced it will add a true premium economy on long-haul international planes, while still retaining its semi-premium product on those planes and almost all its domestic and short-haul planes. According to trade sources, Delta is about to do the same. So, in 2016, you can look for United to copy American and Delta. Also, some current true-premium economy lines will add the lower-cost “semi” option. And for both premium options, expect more airlines to adopt “auction” or “bidding” schemes for regular economy travelers to upgrade.
Two intriguing questions remain, One is pretty obvious: How will Virgin America respond? Currently, it, along with many other airlines, sells extra-legroom bulkhead and exit row seats, but Virgin adds a lot of extras and charges up to three times the base coach fares. It’s hard to see how Virgin can avoid adding a competitively priced semi-premium coach sub-cabin to match all its primary competitors.
Although Southwest has always insisted it’s a one-class airline, it recently announced that its IT system now—for the first time— has the capability to assign seats and add different classes. Despite a strong one-class tradition, it’s clear that Southwest wants to attract more business travelers, and it’s equally clear that the extra-legroom options on competitors Alaska, American, Delta, JetBlue, and United look attractive to a lot of business travelers. Don’t be surprised to see Southwest go premium (or more likely semi-premium) on at least some planes.
American and Delta have established low-end sub-brands that emulate low-end airlines, mainly Frontier and Spirit. Fares are lower than regular coach fares, but totally unbundled: Tickets are totally nonrefundable and everything but a seat is extra. So far, seating is in the same cabin as regular coach, but because travelers can’t reserve seats in advance, they stand a high likelihood of being stuffed into middle seats. And some lines may install separate sub-economy cabin sections.
As with the high-end situation, United will almost certainly follow American and Delta, so the big question is how the others will respond. So far, we have no indication, but the “we will not be undersold” airfare tradition exerts a strong pull.
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Consumer advocate Ed Perkins has been writing about travel for more than three decades. The founding editor of the Consumer Reports Travel Letter, he continues to inform travelers and fight consumer abuses every day at SmarterTravel.
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