Goodbye Las Vegas

LAS VEGAS and Orlando, two of the biggest leisure-travel destinations in the country, are both feeling growing twinges of apprehension. And it has nothing to do with an imminent roll of the dice or a plunge on a thrill ride.
Both places are facing alarming reductions in commercial air service as airlines whack away at markets where fares are traditionally cheap. According to OAG, the airline-schedule data company, the number of flights scheduled for this fall is down nearly 13 percent for both Las Vegas and Orlando, versus the same period last year. Additionally, US Airways has said it plans to reduce its Las Vegas service by 20 percent this fall.
Joe Brancatelli, publisher of the subscription travel Web site Joesentme.com and a close observer of the airline business for over two decades, said the tourist businesses in Las Vegas and Orlando were “very, very worried” about disappearing flights and scrambling for solutions.
M. Ponder Harrison, managing director for marketing at the low-fare carrier Allegiant Air, based in Las Vegas, said: “What you’re seeing in Las Vegas and other leisure markets like Orlando is a kind of mild panic setting in, because all of a sudden airline seats are evaporating.” In June, Allegiant reported a jaw-dropping load factor — the number of seats occupied — of 94 percent. Most major carriers had a load factor of about 80 percent in June.
Allegiant, whose routes link destinations like Las Vegas, Orlando and Phoenix with about 50 smaller cities, is buying six MD-80 planes to add to its fleet of 36 MD-80s, most of which are configured in a single class with 125 seats.
Six more planes, with just over 700 seats, won’t make much of a dent in the looming air-service crisis for Las Vegas and Orlando. But Allegiant has been a pioneer in a type of travel packaging that could help ease the problem — and that some tourism officials are hoping to develop themselves, on a bigger scale.
In recent years, Allegiant has entered into packaging deals with hotels and casinos, rental car companies and attractions like Las Vegas shows and Orlando-area theme parks. These packages effectively subsidize low fares. Last year, Allegiant sold 395,000 hotel rooms as part of packages for its customers.
Allegiant also uses four airplanes exclusively for charter flights on behalf of the Harrah’s casino company.
Given that commercial airlines, facing continued high oil prices and deteriorating finances, are likely to cut even more capacity from budget-travel leisure markets, local subsidizing of some air service becomes a reasonable proposition, Mr. Brancatelli suggested.
There’s precedent. In 1999, Harrah’s and the Rio casino in Las Vegas each invested $15 million to help start a low-fare carrier, National Airlines, to add more seat capacity into Las Vegas from the East Coast. (National went out of business in 2002.)
With airlines parking hundreds of unwanted aircraft, he said, “there are an awful lot of airplanes sitting around and available to someone who is thinking about maybe running charter flights in partnerships with specific destinations.”
In Orlando, local business and tourism executives recently started a working group called Air Team Orlando to develop models for addressing the looming problems. Gary Sain, president of the Orlando/Orange County Convention and Visitors Bureau, said that “we’re working with airlines more aggressively than ever before” on ideas like packaging airfares, hotels and theme park attractions to entice more travelers, at least on existing flights. They are also working with foreign airlines, he said.
SO far, domestic and international tourism in Orlando has held up despite rising fares and a souring economy, Mr. Sain said. But “there is no question as we get into the fall we’re going to see a decrease in seating capacity,” he said. “People are skittish right now.”
Future indicators for leisure travel look bad, at least for the next six or nine months.
Last week, PKF Hospitality Research released an analysis saying that already-known air-service cutbacks could cause a drop in lodging demand greater than what was experienced by travel tourism after 9/11.
Las Vegas, Orlando and Phoenix are “more susceptible” than other major destinations to the cutbacks because of their reliance on cheap tickets and long-haul flights, said Mark Woodworth, president of PKF.
“There’s something happening within the airline industry that we simply have not seen before,” he said.