It's an almost weekly event in my inbox - an alert (or story) about travel to Hawaii pops up. For the last 16 months, the sentiment has remained the same - travel is off as hotels reports lower and lower occupancy. Last summer was nothing to write home about and I have read estimates that occupancy is down ANOTHER 14-16 percent this summer. Yet air fares have not dropped. Conspiracy? Not likely. Lower demand yes, but then why hasn't that impacted air fares downward since supply and demand is supposed to dictate those levels.
Some suggest (and I would have been one of them) that it is caused by less capacity, since two major Hawaii bound airlines went under last year. But that is not the real reason either, according to industry spokeperson Rick Seaney. So what would the reason be?
All you frequent flyers! It turns out that supply and demand does not work so well when the demand does not result in revenue. Seaney was quoted in an article that under normal circumstances, when a carrier (to a lucrative destination) goes belly-up, other carriers (normally) rush in to pick up the 'gravy'. But in this case, because so many of Hawaii bound passengers use frequent flyer miles instead of paying cash on the barrel head, there is no incentive for UAL to increase flights or some other carrier to rush in with a plethora of new flights.
In the past, when both business travelers and cash paying customers ruled the skies, airlines simply limited the number of seats they would offer to frequent fliers using earned mileage and they could absorb the 'freebies' by offsetting the loss of revenue with those paying higher (or even regular) fares. I suspect when demand from business travelers tanked and U.S. residents balked at traveliing ANYWHERE this year, that meant more seats for frequent fliers and airline employee and companion fare flyers, which brings no revenue to the carrier. Even imposing fuel surcharges and babbage and weight restrictions didn't help apparently. Demand is STILL down for hotel occupancy in Hawaii and joptel prices keep on plunging, but it appears the 'right' type of consumer is not doing the traveling.
So let this be a lesson to all you frquent flier miles people! Start vacationing in the Caribbean or Mexico or Honduras and use your free miles there so the rest of us that pay cash can go to Hawaii and get lower fares to boot! The hotels in Hawaii will greatly appreciate your gesture.