Pain at the Pump
Here we go again. Just in time for the spring and summer vacation season, oil tops $100 a barrel and the pundits say gas at the pump will approach or pass $4 a gallon by Memorial Day. Sounds familiar, doesn't it? Here's the storyline the media has spun every spring since 9/11: Gas will rise this summer to levels that will hurt consumers so much they'll forego their summer driving or flying vacations in favor of lawn work and barbecues at home.
In past summers, gas has risen on cue, but nobody told consumers they couldn't or shouldn't travel. As hotel advertising mogul Peter Yesawich says, “vacation is a birthright for Americans.” Apparently we'll endure a lot, including high fuel costs, in order to take our sacred beach, mountain, camping, shopping, tennis or golf vacations. It's written in the genes of most every baby boomer and it's part of the DNA of all Gen X and Yers.
It could be different this year, however. The media is doing its part to note — and correctly so — that oil has surpassed record pricing levels ($104 a barrel on March 5) and, as a result, the long-predicted $4-a-gallon average for gasoline might happen. The stock market is shaky; consumer confidence is tanking; layoffs and business closings dominate the headlines; and the fallout from the sub-prime mortgage mess has affected or will directly or indirectly affect all of us. Let's face it, we're in an economic recession, and that's never good for any business, especially for a commoditized and often-optional activity like travel.
This time around, however, there are several silver linings that should buffer the business from serious harm. The industry is reacting differently than it did during previous economic cycles. For one, we're not facing serious overbuilding, and the general queasiness among lenders will probably serve to tamp down any urges to build too much too fast. And as Noble Investments' Mit Shah told Carlo Wolff, and reported in this issue (pg. 42), hoteliers have learned “pretty intelligent revenue management” in the past six years, which will guard “against a deeper erosion of RevPAR.”
And new research from Yesawich's Y Partnership agency reinforces the notion that consumers aren't willing to give up travel this summer. Its most recent travelhorizons survey shows that the percentage of U.S. households planning an overnight trip has remained steady every month since last June. Despite all the bad news they've heard and the economic uncertainty for the near term, Americans are still very committed to their vacations.
But the best news comes from the federal government in the form of tax rebates. As part of legislation passed in January to stimulate the economy, most taxpayers will be getting a nice check in addition to any refund they're due from the 2007 tax returns. The one-time, non-taxable payments will be sent to more than 130 million households. A married couple can receive as much as $1,200, plus $300 for each child. The best news: The checks will be sent beginning in May, which is the prime time for vacation planning, and my guess is that's what many, if not most, families will do with the cash. It could be a good summer, after all.
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