To spur travel in the months immediately following Sept. 11,
industry suppliers were slashing prices. In some segments, the
strategy seemed to work all too well -- bookings rose, but yields
never did. Is that a lingering effect of Sept. 11 ... or the
current realities of the Internet?
Michelle Kassner: The prices came down so much
after Sept. 11 that there's been a shift in the consumer's
perception of value. Expectations have changed -- they believe that
no one's traveling, therefore there are always great prices out
there, and it's very hard to bring rates up with that psyche.
Sam Katz: A significant issue is the
transparency of the Internet and the growth of the Internet market.
There's a whole set of [pricing] actions that people are taking
without the normal set of rational and analytic support. It used to
be that I could predict that if I did the following, it would
stimulate this in my yield management. But now it's like,
Hotels.com is doing this or Expedia's doing that, so I've got to do
this other thing.
Michelle Peluso: The fundamental question is,
what are we doing as an industry to our pricing practices? I think
this started before Sept. 11 -- it was heightened because of Sept.
11, and will continue. The Internet has created this extraordinary
transparency on pricing and to some extent -- either willingly or
unwillingly -- we have, in the minds of consumers, made what should
be brand loyalty in travel into commodity purchasing.
Rolf Hoehn: The consumer attitude about pricing
really has been driven by the developments on the technology side.
In the past, the airlines said, OK, we have different channels
through which we operate, and some of those channels are exclusive
to a certain contract customer. But all of a sudden employees have
access to cheaper fares than corporate travel managers can
negotiate.
The pricing model has been broken for a long time. The question
is, was there any willingness on the part of the airlines to
recognize that and to make adjustments, or is it that they have now
been forced into that situation through 9/11 and through the
technology providers?
For additional coverage, see:
• Travel execs see industry at a crossroads
• Post-Sept.11, a new norm is taking shape
• Travel industry shows signs of resilience
• Airlines still in crisis mode one year later
• Turbulent times force Europe to shift focus
• TW agent poll: Better times are coming