Second City Blues

When Mona Eskridge started planning September's annual conference of the Chicago-based Association of Federal Judges, she was pleased with the cost of lodging she found in Cincinnati.

"One thing that's great about Cincinnati is that we were able to secure a wonderful group rate at a three-diamond [property]," says Eskridge, president of Chicago-based planning firm Eskridge & Associates. "Once they knew we were a national conference, they were really willing to negotiate with us."

But when Eskridge needed to send her production crew to her host city to prepare for the conference, she didn't fare as well. "Because of the costs of flying into the Cincinnati/Northern Kentucky airport, we've had to fly the production crew into Dayton," Eskridge says. "I couldn't believe it when I saw the price comparison of the two airports. We saved around $200 on a round-trip ticket, and with a crew of six to eight, that really adds up. We now have the additional logistical problem of getting them into downtown Cincinnati, which we hadn't anticipated, but that cost doesn't equal the savings."

Little did she know, the cost of flying into the Cincinnati market has increased more than it has in any other U.S. market. According to the Bureau of Transportation Statistics' (BTS) Air Travel Price Index (ATPI), which tracks ticket prices at the nation's top 85 airports, Cincinnati's prices rose by 26 percent between the fourth quarters of 2004 and 2005. "I guess I'm a living example of that," says Eskridge.

And she's not alone. According to recent member-based research conducted by the Alexandria, VA-based National Business Travel Association (NBTA), nearly two-thirds of travel managers say that increased fuel prices are impacting their travel purchasing, and more than one-third now encourage or require less travel altogether. NBTA found that an "overwhelming 89.1 percent of respondents indicate that if airfares remain at increased levels or continue to rise, they might amend their 2007 travel budgets." And the higher cost of travel is particularly painful for those planners who routinely book meetings in second- or third-tier cities because of lower average daily costs of doing business; rising airfare costs and fewer available seats are making getting to these cities, in particular, more expensive and less convenient.



BY THE NUMBERS

Skyrocketing fuel costs have put a stranglehold on the troubled airline industry, causing already struggling carriers to cut back on seating capacity in certain markets. "There was a sense of an excess of seats in the domestic marketplaces," says John Heimlich, vice president and chief economist for the Washington D.C.-based Air Transport Association of America. "That glut of available seats [that the airlines have traditionally maintained] is completely unsustainable at today's fuel costs." At the same time, demand is growing, enabling the country's 10 largest airlines to fill 81.1 percent of their available seats in April—a record for that time of year. As a result, at presstime, the cost of airfare had already increased 10.5 percent year over year.

Smaller cities are particularly vulnerable. "Airlines have reduced the size of the aircraft flying into many destinations," in an effort to increase fuel efficiency and reduce the number of empty seats, says Suzanne Oxley, supervisor of transportation planning for Minneapolis-based Carlson Marketing. "Of course, hub cities still have the larger aircraft, so it's the smaller cities that are most impacted by this," she says. "And that impacts the cost of tickets, because carriers only sell a certain percentage of seats at the lowest fares." Indeed, of the 10 cities with the highest percent increase in air ticket cost, nine are smaller, non-hub airports.



A palatable TRADE-OFF

So planners who have chosen smaller cities for their affordability are now bracing for the impact of higher transportation costs. For the first time, Eskridge and her client decided to institute a cap on travel for incoming speakers. And another first: She's included information for the alternate airport as well as the toll-free number for Amtrak in her registration materials. "We're tweaking [the process] as we go, trying to offer solutions for those who don't have [frequent flyer] miles or other ways to get around the rising costs," Eskridge says. "I will be curious to see if our board member attendance is affected, because they fund their travel entirely out of their own pockets."

Other planners also worry about attendance levels dropping. "I'm absolutely concerned," says Pauline Vela, who plans the annual meetings for the Oakland, CA-based association, The Leadership Learning Community. "A lot of our attendees are working for community-based organizations and not all are wellfunded. So airfare is definitely a factor in destination choice."

Still, representatives from cities on the ATPI's top 10 insist that the price increases haven't had much of an impact. "Yes, we had a high percentage increase, but our prices were pretty low to begin with," argues Martin Armes, director of communication and marketing for the Greater Raleigh CVB in North Carolina (a market that, along with neighboring Durham, saw the eighth-highest airline ticket price increase). "We have not seen a drop in business or travel," says Deanna Holt, assistant director of marketing and communication at the Greensboro, NC, CVB. Greensboro/High Point saw the second- highest ticket price increase in the country. "This March was one of the best months we have ever had in the collection of hotel revenue, and April is right behind it. Greensboro is still a great value when you consider all the costs of a trip."

And that is, in the end, a sentiment echoed by meeting planners. "Yes, our attendees will have to spend more on their airfare, but then again, we did get a great hotel rate," says Eskridge. "So, it's an acceptable trade-off."