The aviation industry and the convention business go hand-in-hand. Whether you’re traveling for a site visit or your attendees are calculating travel expenses to participate in an upcoming meeting, activity in the air has a direct impact on the activity in convention centers and hotel meeting spaces. While cities around the US continue to invest in expansion and renovation plans for convention centers, air carriers can’t always follow suit.
“The US domestic market is largely seen as being mature with limited growth opportunities,” Brian Pearce, Chief Economist, International Air Transport Association, says. “Therefore, it is difficult to predict the creation of new hub cities.”
According to Airlines for America, the number of daily seats offered for domestic service has fallen from nearly 2.8 million in 2007 to an expected 2.37 million in 2015. With fewer seats and limited ability to expand, what does the next generation of air travel look like? And what will it mean for the convention business?
1) The concept of a “hub city” may no longer matter.
Because of growth restrictions, the future of aviation may not be defined by the traditional major markets where carriers have established presences. While carriers will continue to gauge which markets can support new service, Brett Snyder, President of Cranky Flier and renowned air travel expert, says they will also want to know which cities are investing in new attractions and new hotel rooms.
“This isn’t about hubs,” Snyder says. “We’ve spent the last couple decades shedding hubs in this country, and those old days aren’t coming back. Instead, what we see now is targeted opportunity in markets where hubs have disappeared or where legacy carriers have shrunk.”
Those opportunities are helping mid-size airports fast-track their growth. Consider New Orleans, San Jose, Calif. and Austin, which stood among the fastest-growing United States airports according to data from Airline Weekly at the end of 2013. That growth has continued, too. In Austin, 16 new routes have already been announced or launched in 2015.
“We’ve seen tremendous growth at the airport. It’s been nonstop since January 2010, and it really reflects Austin’s growth and the Central Texas region’s growth,” Jim Halbrook, spokesman for Austin-Bergstrom International Airport, said in a recent Austin American-Statesman interview. “It shows airlines have confidence in this market. As long as our economies of the area continue to grow, we can plan on airlines adding new service.”
2) What used to be known as “second-tier” cities will be first stops for international attendees.
As associations look to expand their reaches and attract global audiences, air carriers are making it easier to welcome attendees to new US destinations. Consider Delta’s new daily Salt Lake City-Amsterdam service, or Condor’s new Portland, Oregon-Frankfurt, Germany service. In Austin, the business community has come together to support a range of new service options including the daily British Airways 787 Dreamliner nonstop service to London Heathrow. The new addition highlights the importance of local business activity in determining where to add service.
"We're ecstatic that British Airways decided to add nonstop service between London and Austin. It shows that they see the future potential for this marketplace as the epicenter of central Texas," Bob Lander, President and CEO of the Austin Convention and Visitors Bureau, said when BA announced the service. "Visitors from the UK currently represent our top overseas market and we know that this flight has helped us increase that number. Additionally, the Heathrow gateway allows us to open up our destination for both leisure and business travelers from EU markets like Germany, France, and the Netherlands."
Due to the success of the flight since the launch in 2014, British Airways will be increasing capacity later this year on the route, too.
3) The era of consolidation may not be over.
After the recent United-Continental, Delta-Northwest and American-Airline mergers, is there any room remaining for the aviation industry to shrink even further? Yes.
“Don’t we all wonder just how long it will take before the three to five lower-cost airlines in the States will consolidate?” Bill Franke, managing partner of Phoenix-based equity firm Indigo Partners, said in a speech at the 2015 Airline Economics Conference in Dublin.
In a recent interview with the International Air Transport Association, American Airlines CEO, Doug Parker, highlighted a key benefit for travelers when airlines merge forces.
“It’s a network business and a large network is what customers want,” Parker said. “They don’t want to split their frequent-flyer miles across a couple of airlines if they don’t have to.”
4) Fares will be fair.
Will limited growth potential and a limited number of carriers spell trouble for you and your attendees when it comes to costs? Fear not. While some analysts worry that continued consolidation will lead to higher fares, the industry’s recent history of mergers seems to indicate that travelers can still enjoy affordable ticket prices. IATA’s most recent economic outlook forecasts that average fares before surcharges and taxes will decline by nine percent in real terms versus 2014. In fact, the average round trip fare before surcharges and taxes is down by 64 percent after adjusting for inflation.
This educational article was brought to you by Austin, Texas, a city that continues to grow even more accessible and affordable for travelers from around the world. In 2014, Austin-Bergstrom Airport serviced a record number of 10.7 million passengers and debuted its new British-Airways nonstop service to London Heathrow. Air Canada also recently added non-stop service to Toronto. As more travelers and meeting attendees flock to Austin, they will find plenty of new hotel options after the opening of a new JW Marriott and a new Fairmont slated to open in 2017. For more information on taking your next meeting to Austin, click here.