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Friday, March 01, 2013

Sequestration - Impact on our industry?

As a result of Congress missing today’s sequestration deadline, a series of large automatic spending cuts are set to take place for federal programs and the travel industry is not immune.

Over the next nine years, a total of $1.2 trillion in cuts will take place - with $85 billion in automatic spending cuts occurring by the end of this fiscal year. 

AHLA today sent out a note to members indicating that cuts will have wide ranging affects, particularly relating to the travel industry.
  • Government travel will likely be the first item cut as federal agencies seek to reduce budgets. Hotels can expect to see meetings postponed, travel bookings shortened, and government planners delaying contract signings as they await a congressional solution. 
  • The Federal Aviation Administration (FAA) estimates it will have to furlough the majority of its 47,000 employees, forcing the nation's busiest airports to close runways and eliminate certain shifts for control towers. This will result in widespread flight delays and cancellations.
  • Secretary of Homeland Security Janet Napolitano recently stated that the sequestration-prompted furloughs for the Transportation Security Administration (TSA) will “substantially increase passenger wait times at airport security checkpoints.”
  • National parks will be closed. The impacts of this step have been seen before, during the previous government shutdown in 1995, as the National Park Service shuttered 368 sites, turning away 7 million visitors, while national monuments and museums were closed to another 2 million visitors.
  • The Department of Homeland Security estimates it will have to furlough 5,000 border patrol agents.
TSA has been dubbed "thousands standing around"
but with sequestration, this will no longer be the case
In short, air travel, which has been painful since September 11th and the introduction of the TSA, will become more painful, with fewer TSA agents and fewer air traffic controllers.  And the number of people traveling for business, will have a corresponding decrease.

The cost of travel will go up overall, because what you used to be able to do in a day trip will now take at least one overnight.  This is somewhat good news for the hotel industry, but it is likely that just as many companies will decide to finally invest in a reasonable teleconferencing system and reduce business travel all together.   

Centralized sales and service teams will again become decentralized and those driving to visit customers and prospects will continue to outpace those that fly.  (56% of business travel is by car today, so this number will increase.)

If travel decreases, the GDSs will have fewer bookings, those that service hotels with food, wine, flowers, linens, will have less business, restaurant business will suffer, and it goes on and on.

I will withhold my commentary on the blame game going on in Washington.  All that I will say is that my 12 and 14 year old are not allowed to tattle and blame things on each other.  They have to work it out.   If they can do it, so can our elected officials.

Stay tuned.


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