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Week in Review - 3/16/20

By Industry Intel posted 03-16-2020 00:00


Airlines In Crisis

As more countries close their borders, international global corporate travel is effectively shut down. As of Monday morning, the U.S. government also was mulling domestic travel restrictions, according to media reports.

Leaders at American, Delta and United early last week said they saw no need for U.S. government intervention in the sector. But by Monday, the Oneworld, SkyTeam and Star Alliance global partnerships issued a joint statement urging governments worldwide to "evaluate all possible means to assist the airline industry during this unprecedented period."

Individual airlines are updating route suspensions every day. Among the latest announcements, Delta said it would cut systemwide capacity by 40 percent and United conveyed plans to pare its March and April operations by 50 percent.

"The speed of the demand fall-off is unlike anything we've seen – and we've seen a lot in our business," according to a statement from Delta CEO Ed Bastian. "The situation is fluid and likely to be getting worse."

Other airline reactions include freezing hiring, offering voluntary leave packages, grounding aircraft, deferring new aircraft deliveries, delaying pension contributions and share repurchase programs, halting pilot and flight attendant training classes, putting a hold capital expenditures and cutting expenses everywhere they can.

"The current crisis is a test of the ability of our restructured industry to withstand the type of shock that we have never been able to withstand before," said American Airlines CEO Doug Parker.

Travel management companies began laying off employees. Several told The Company Dime about workforce reductions, pay cuts, hiring freezes and other measures. Safe Harbors Business Travel CEO Jay Ellenby told the U.S. House Committee on Small Business that Safe Harbors and other TMCs started laying off employees "in large numbers." He said many small businesses could not provide paid sick leave or health insurance and would not be able to operate if staff reductions were necessary.

Corporate buyers and their preferred hotels began adjusting expectations. In some cases hotels agreed to waive minimum-night thresholds and offer rates below those negotiated for 2020. Hotels also are reopening blacked-out dates as they seek business to fill rooms left empty by event cancelations.

Airbnb joined hotel chains in allowing many guests to cancel reservations without penalties. The company's "extenuating circumstances" policy applied to bookings made before March 14 for stays starting on or before April 14.

STR said the overall occupancy at U.S. hotels fell during the week ending March 6 by 7.3 percent compared with a year earlier. ADR was down 4.6 percent, and revenue per available room fell 11.6 percent. “This is quite likely the beginning of a bad run that will get worse before it gets better,” according to STR senior VP of lodging insights Jan Freitag. ADR for corporate bookings dropped 2.5 percent in the United States during the first two weeks of March, according to Tripbam data.

Doing good. Some organisations are looking for ways to create a few positives from an overwhelmingly negative situation. For example, as buyers and conference hotels determine how best to deal with massive cancelations, they may consider donating the food prepared for an event — or the funds allocated for it — to local food banks. In one case, a company that had to cancel a meeting in Nashville and got no financial relief from the hotel regarding the room block asked if those rooms could be made available to those displaced by the recent tornadoes in the area.

Compiled by the editors of