Airline Wars Create a Windfall : Low Fares Stimulate Auto Rentals and Other Ground-Based Services

In the aftermath of the summer air fare wars of 1992, the biggest winners include some companies that didn’t sell a single ticket.

Auto rental agencies, airport shuttle buses and hotel chains are among the most direct beneficiaries from the upsurge in travel. And unlike the airlines, they did not have to slash their profits or their throats to pick up the additional customers.

“The airlines did the work for them,” said James Cammisa, publisher of Travel Industry Indicators, a research and travel trend newsletter. “They have benefited from a windfall in terms of bookings.”

One big example is the auto rental industry. Between 70% to 80% of all rental cars are picked up at airports, said Gary S. Rubin, executive editor of Auto Rental News.

Avis, which had anticipated meager growth before the fare war, said summer reservations are now running nearly 30% ahead of last year, while bookings by vacation travelers are up a whopping 66%. The company has been forced to delay the retirement of some cars to meet the demand.

“Everybody has made their summer reservation,” Avis spokesman Ray Noble said. “They are having a hard time finding a car available.”

So far, the summer has spawned two air fare wars. The first and most dramatic was launched in late May when American Airlines cut vacation fares in half to counter a promotion by Northwest Airlines. A second, scaled-down sale initiated by Continental Airlines last week expires Friday.

Prices were so low during the 50%-off promotion--a Los Angeles-New York round trip cost only $200--that 9 million people who hadn’t planned on flying this summer ended up buying tickets, according to the U.S. Travel Data Center.

The millions of additional travelers have boosted the fortunes of airport shuttle companies. Prime Time Airport Shuttle is preparing to expand its fleet of 100 crimson vans to handle the unexpected surge in passengers traveling to and from four airports in Los Angeles and Orange counties. Passenger traffic is running more than 12% ahead of last summer, President John Kindt said.

“It really has helped us,” said Kindt of the fare war. “The vans are running pretty full.”

Many airline passengers also stay at hotels. About 60% of hotel guests in Los Angeles have traveled by airplane, said Bruce Baltin, a lodging industry expert at PKF Consulting in Los Angeles

“I’m sure the (fare war) has helped the hotel business,” Baltin said.

However, only 40% of summer travelers in general check into a hotel or motel room. Many of the bargain hunters who scooped up half-off tickets are also likely to stay for free with family or in low-priced accommodations, many travel industry observers said.

“A disproportionate number of the new or additional travelers are either staying with friends or relatives,” said Marc Yanofsky, senior vice president of marketing for Hyatt Hotels.

Summer revenue at Hyatt is running 35% ahead of last year. But aggressive advertising and generous discounts have as much to do with the increase as the fare war, Yanofsky said.

Indeed, many of those 24 million people who purchased discount tickets intended to travel this summer by air or by other forms of transportation, analysts said. In addition, some travelers might have simply adjusted--not expanded--their travel budgets, allocating more money for airline tickets and less for other travel expenditures.

“It’s difficult to predict whether or not the air fare war actually stimulated additional travel,” said Steve Tripp, a spokesman for Phoenix-based Best Western International, where summer reservations are up 10% from last year. “It may have just shifted (demand) within the year.”

All the attention devoted to the crowded skies this summer has also obscured the fact that most leisure trips--at least 80%--are taken in a car. While airline passenger traffic soars, summer road trips are expected to grow 4% from last year. But some of the people who planned to drive to their summer destination may now fly, diverting money away from roadside motels, restaurants and attractions.

Such a diversion would be a concern for 1,800 Best Western motels and hotels, where 80% of guests arrive by car. “It could easily have an impact on the highway properties,” Tripp said.