Tourism and the airline industry, part 1

Next week Premier Gordon Campbell is expected to announce the Squamish campus of Capilano College will become a centre for leadership and innovation in tourism education and training. It’s the latest in a series of moves that shows the provincial government is determined to make tourism a major part of the provincial economy. The creation of a Ministry of State for Resort Development earlier this year and last year’s challenge to the tourism industry to double in size in a decade reinforce the importance of tourism in the Liberals’ plans for B.C.

The B.C. tourism industry, including Whistler, which is a significant player in the mix, is anxious to take on that challenge. Indeed, many would argue that even after a devastating series of blows, starting with the Sept. 11th terrorist attacks and continuing through SARS, the tourism industry is far feistier and more willing to adapt than lots of other industries would be if faced with similar obstacles.

One of the most significant steps people in the tourism industry across North America have taken since 9/11 is to reduce the emphasis on destination visitors and concentrate on regional markets. That has meant attracting more visitors who live within driving distance and nurturing regional airline business, as Sun Peaks did last winter convincing Horizon Air to fly into Kamloops and as various parties are trying to do at the Pemberton Airport.

While the regional airline business is most welcome it doesn’t replace the destination tourism business that was building, and in some cases booming, prior to 9/11. This is where the tourism business needs to return to in the long run.

The airline industry is going through some fundamental changes. The problem, for the tourism and airline industries, is that not everyone in the airline business realizes this.

Discussions about the airline industry in Canada too often boil down to how to save Air Canada. But south of the border, where there are numerous airlines in trouble, the debate has gone further. A July 11 New York Times story summed it up: "In a year when beleaguered carriers hoped they would bounce back into prosperity after a deep slump brought on by the Sept. 11 attacks, they are instead facing a market that may have changed more fundamentally than at any time since the industry was deregulated in 1978. As a result, even the biggest companies may have to remake themselves radically, quickly and permanently, or face extinction."

The Times’ story suggests there are two schools of thought on what airlines should be doing in the United States. One school believes that if airlines simply cut costs they can survive. The other school believes airlines need to abandon traditional assumptions such as the hub-and-spoke system and one-size-fits-all mega airlines. Indeed, with discount airlines making money on high volume routes in North America and Europe, individual airlines dominating service to specific cities, particularly in the United States, and other airlines being very competitive in specific regions, it’s difficult to see a role for the traditional airlines.

Intrawest’s alliance with Alaska Airlines and WestJet for a proposed service to Pemberton demonstrates the regional nature of the business. Alaska, based in Seattle, specializes in routes on the West Coast of the continent and thus has a north-south axis. Calgary-based WestJet provides a strong east-west axis.

There is one more assumption that needs to die if the airline industry is truly going to adjust to a new world order: that the business traveller is king. Business travel – premium seats paid for by corporations – used to account for much of the profitability of traditional airlines. The Internet and other means of communication have reduced the frequency of business travel. A softer economy has also meant companies are less inclined to pay premium fares. The result is that when business travel is necessary, more and more of it is done on discount airlines.

But many airlines, and the governments that regulate them and in some cases prop them up, continue to follow the traditional model built around the business traveller. The obvious alternative is the tourist.

The airline industry as a whole – in particular the large, traditional carriers – has been slow to grasp this. In their minds international tourists are those who fly to Europe for summer vacations or fly south to sit on a beach in the winter. This thinking needs to change.

Continued next week.


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