Cost of flying down 17% in one year -- so where is everyone?

Everskyward said:
My perception is that it happened more slowly. Things were headed downhill even in the spring and summer of 2008 with the high fuel prices. Remember how much people complained about them?
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True, high gas prices were slowly strangling things. However, we did not see any impact on business travel until right around the election. As soon as the credit markets locked up, every business (and most government entities) froze their travel budgets, or eliminated them entirely.

Right now, the State of Iowa, the City of Iowa City, and the University of Iowa have ALL frozen travel. As much as we like to cater to pilots at our aviation themed hotel on weekends, during the week our "bread & butter" is business travelers -- and that segment of our market simply went away last November. It ain't back yet.

:frown2:
 
woodstock said:
and the housing market going to hell in a handbasket since... 2006?

Yeah, that was SUDDEN. Like a light switch.
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Our housing market was soaring here last year, without missing a beat from 2006 or 2007. It's only now gone down a smidge, but it's still doing fine here in Iowa City.

Housing markets that crashed were the ones that had been driven sky-high by speculators. In most of the country, that didn't take place, and (as a result) the economic collapse didn't start until late 2008. YMMV.
 
What lowered costs do you perceive the FBO's or existing leaseback owners are not passing through to the consumer?
Jay Honeck said:
It *is* odd, no? All FBOs appear to be doing the same thing right now -- RAISING prices in the face of declining demand. This, of course, makes no sense in the real world, where the rest of us are furiously CUTTING prices in order to compete...
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Jay Honeck said:
True, high gas prices were slowly strangling things. However, we did not see any impact on business travel until right around the election. As soon as the credit markets locked up, every business (and most government entities) froze their travel budgets, or eliminated them entirely.
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I would say that, for us, the slowdown in charter started at least as early as last summer for us and slowly escalated from there. It was gradual, though, not like someone switched off the lights at any particular time.
 
wabower said:
What lowered costs do you perceive the FBO's or existing leaseback owners are not passing through to the consumer?
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Prices of many essential business items have been dropping. Savvy FBOs with city leases should be able to re-up at a lower monthly rate. Prices of tools, computers, office supplies and -- most importantly -- human resources continue to decline.

Examples: I just negotiated a 50% reduction in my phone book advertising, for only a slightly smaller ad. Our wages (and those of our employees) have been (and will continue to be) frozen. The cost of auto maintenance has dropped, as many local shops are slashing prices in order to compete and survive. (And many are resorting to barter, which is great in down times.) Magazine subscriptions (and we get 'em all) have been cut over 50% in the last six months. You can buy a new car right now for a song.

The list goes on and on. We are now charging the same price for a jacuzzi suite that we did in 2002, before we remodeled them into the aviation theme suites.

We are in deflationary times for many basic items. FBOs are going to have an extremely difficult time if they don't react. In fact, it's probably already too late for many of them.
 
Everskyward said:
I would say that, for us, the slowdown in charter started at least as early as last summer for us and slowly escalated from there. It was gradual, though, not like someone switched off the lights at any particular time.
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I'm not well-acquainted with the charter industry -- my only connection to it is conversationally with our FBO in Iowa City, and as the head of our local airport users group -- but the owner of our FBO has mentioned in public forums that his competitors started bidding charter jobs well below actual cost beginning last fall. That's a tough row to hoe.

As with so many other things going on in our economy right now, it is unsustainable in the long run.
 
woodstock said:
I believe it was your linkage to the election.

Incidentally, the crash happened in September, no? Which by most calendars is before November.
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I'd be glad to debate the causes of our economic crash with you -- but not in this forum.

My only linkage to the election in this thread was in the timing of our business slow-down. It occurred last November, and was literally like a light switch. One week the business was there, the next week it wasn't -- and it hasn't come back yet.

Our weekend getaway travel is still fine, although the fly-in business remains WAY down. Our corporate extended stay segment is still there, although it has weakened. But business travel (defined as Mon-Fri working travelers, in town on business) simply went away.

We've been extremely lucky to keep our weekend business. If you look at the numbers for the lodging industry over the last two quarters, most hotels have not been so fortunate.
 
Jay Honeck said:
If you look at the numbers for the lodging industry over the last two quarters, most hotels have not been so fortunate.
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Marriott's REVPAR is only down 20% for Q1 2009, year over year. They charge a lot for their rooms, too. I wonder how they do it?


Trapper John
 
It's a shame the data breakdown for Marriott, similar to what Jay provided is not available in order to make a apples to apples comparison. Jay is showing a large decline in 1 segment of his business model as opposed to the entire revenue stream as defined by REVPAR that you posted. So I guess my question to Jay is this: How does your REVPAR compare year to year?
 
Jay Honeck said:
My only linkage to the election in this thread was in the timing of our business slow-down. It occurred last November, and was literally like a light switch. One week the business was there, the next week it wasn't -- and it hasn't come back yet.

Our weekend getaway travel is still fine, although the fly-in business remains WAY down. Our corporate extended stay segment is still there, although it has weakened. But business travel (defined as Mon-Fri working travelers, in town on business) simply went away.
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Here we last made a profit in the first quarter of '08.
 
Pretty much what has been said. Prices of rentals went up with gas prices, and haven't yet come back down. The other problem is that it's a downward spiral. Fewer people fly causes fewer planes and related services to be made, which decreases supply. People raise prices to get a higher margin (since you lose any economies of scale) to keep the doors open, driving more people out of flying because they can't afford it. Rinse and repeat.

I don't know if flying was ever something that would be considered easily accessible to the masses. I know a number of people who've been flying for years and can afford it fine without having some of the standard high-paying jobs (doctor/lawyer/etc.), but they've also made sacrifices for it and they tend to be hobby pilots who use their planes for recreation rather than for practical transport purposes. Nothing wrong with that, of course, but I do believe that people who use their planes for serious transport tend to do GA a better service by showing that these planes aren't just for rich people to go gallivanting around and buzzing their friend's houses.

The "GA Serves America" campaign exists to try to get the non-pilots out there to help understand that GA is a force for good and should continue to exist. That's the first step of the equation. The second step is getting as many people as possible interested in flying and flying themselves, this especially includes those who can afford to dump a bunch of money into it and would then want to influence policy to keep it going. Right now we're below the critical mass required for aviation to sustain itself, especially as the number of pilots out there decrease rather than increase.

So, the solution comes from within our ranks to try to get as many people as possible into aviation, and those who don't want to fly themselves, get them to understand why GA is a good thing.
 
No offense, but if you think any of those costs materially impact the aircraft rental business, you're reading the wrong papers.

The airplanes they rent either belong to them or their lease-back customers. They have not renegotiated the debt, so the monthly nut is unchanged. Insurance and other fixed costs have not changed appreciably. Insurance may actually be up a dime. Parts and component costs have not decreased. Labor costs are unchanged as are hangar and tiedown costs.

A used Garmin 430 will sell for as much or more on Ebay this week as it did last summer. Cost of sending a starter/generator/alternator for overhaul is as much or more. Fuel prices have dropped for sure, but most rental companies did not fully price the increases into their rates as fuel prices spiked, especially after business dropped so sharply as as a result of the recession.

Used airplane prices and fuel costs are down, but nothing else in the own/op equation has dropped accordingly. So if you want cheaper flying (an oxymoron in the eyes of most) your only method of capturing any percieved savings is that iif you by now at a lower price point you will potentially lose less when you sell at an even lower price point, and perhaps spend a bit less when you fly. Hell of an incentive plan, eh?


a
Jay Honeck said:
Prices of many essential business items have been dropping. Savvy FBOs with city leases should be able to re-up at a lower monthly rate. Prices of tools, computers, office supplies and -- most importantly -- human resources continue to decline.

Examples: I just negotiated a 50% reduction in my phone book advertising, for only a slightly smaller ad. Our wages (and those of our employees) have been (and will continue to be) frozen. The cost of auto maintenance has dropped, as many local shops are slashing prices in order to compete and survive. (And many are resorting to barter, which is great in down times.) Magazine subscriptions (and we get 'em all) have been cut over 50% in the last six months. You can buy a new car right now for a song.

The list goes on and on. We are now charging the same price for a jacuzzi suite that we did in 2002, before we remodeled them into the aviation theme suites.

We are in deflationary times for many basic items. FBOs are going to have an extremely difficult time if they don't react. In fact, it's probably already too late for many of them.
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wabower said:
Used airplane prices and fuel costs are down, but nothing else in the own/op equation has dropped accordingly. So if you want cheaper flying (an oxymoron in the eyes of most) your only method of capturing any percieved savings is that iif you by now at a lower price point you will potentially lose less when you sell at an even lower price point, and perhaps spend a bit less when you fly. Hell of an incentive plan, eh?
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This part is true. It makes it more affordable to buy an airplane for sure, but it still costs just as much to own. The lower purchase price can make purchasing a plane more attractive and attainable, for sure, but with some nice planes out there selling for the $40-60k range, it doesn't take long before you've spent that much on ownership, especially if you buy some of the more maintenance intensive beasts out there.

The best bets for "cheap" flying are some of the LSAs and small/fast experimentals out there that give you lower ownership costs while maintaining relatively affordable purchase prices, but at the cost of having low useful load. I was talking to a friend last night and saying that if all I bought a Lancair 360, I'd do all kinds of personal fun trips where I'd just go somewhere because I felt like it, and it would be doable since I'd be paying very little for ownership and operating costs. The idea is attractive (and one I may pursue one day) - but I decided to focus on a different mission that required things like FIKI and a high useful load, hence the Aztec.
 
Jay Honeck said:
I'm not well-acquainted with the charter industry -- my only connection to it is conversationally with our FBO in Iowa City, and as the head of our local airport users group -- but the owner of our FBO has mentioned in public forums that his competitors started bidding charter jobs well below actual cost beginning last fall. That's a tough row to hoe.
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Here the FAA Business Jet Report for March 2009 which shows some trends. It looks like the slowdown started in the spring of 2008 which is about how I remember it.

March 2009 Business Jet Report

The charter industry is pretty cutthroat to begin with and has become even more so with some companies bidding trips which are seemingly below cost. It's very hard to compete with that.
 
Trapper John said:
Marriott's REVPAR is only down 20% for Q1 2009, year over year. They charge a lot for their rooms, too. I wonder how they do it? Trapper John
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"Only 20%"? That is a train wreck, by any measure.

Around here, Marriott facilities are owned by the gummint, and leased back to Marriott at a loss. Google "Coralville, Iowa Marriott" for details.
 
Jay Honeck said:
"Only 20%"? That is a train wreck, by any measure.

Around here, Marriott facilities are owned by the gummint, and leased back to Marriott at a loss. Google "Coralville, Iowa Marriott" for details.
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I did and found nothing that you are referring to, it was just all ads for the convention center and job listing to work there.
 
Jay Honeck said:
The talking heads who keep saying the recession started in late '07 are just blowing smoke -- the economy didn't collapse until last fall of '08.
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Those of us in high tech felt way sooner than late 2007 I can tell you that. It has been a flat several years. We got a small bounce form the bubble burst of the late 90's in 2004 but it was only transitory and the decline started again and not just my company. My job has been working with all the big and small telco vendors and operators. World wide we all saw a decline in that segment.
 
Jay Honeck said:
"Only 20%"? That is a train wreck, by any measure.
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They still made a nice profit, so I wouldn't call it a train wreck.

Around here, Marriott facilities are owned by the gummint, and leased back to Marriott at a loss. Google "Coralville, Iowa Marriott" for details.
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Looks like a very nice facility in a good location - good for them.


Trapper John
 
If the cost of flying is down 17% why is the USDOT-DOD per diem website reporting allowable cost per mile is now up to $1.24?
 
smigaldi said:
I did and found nothing that you are referring to, it was just all ads for the convention center and job listing to work there.
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Five years ago the politicians running the city of Coralville (which has the goose that laid the golden egg -- the biggest shopping mall in Iowa) decided that they wanted to have a convention center on the site of an old (but beloved, by locals) truck stop. (Coralville is Iowa City's sister city, and has always had an inferiority complex. The two cities have virtually grown together, but have been very different politically.)

The Coralville city fathers shopped the idea to all the major chains -- Marriott, Sheraton, Hilton, etc. -- and none of them wanted anything to do with it. It simply made no sense to build a $60 million convention center in little Coralville, Iowa, after all. In fact, it was a laughably stupid idea.

So, in their own inimitable fashion, the politicians decided to do it themselves. Using 100% taxpayer funds, they built themselves a castle -- a $60 MILLION convention center. They now lease it to Marriott Corporation AT A LOSS.

What's truly ironic is that now the Sheraton in Iowa City -- the only other "convention center" in the area -- has seen its business decimated by this brand, new gummint abomination. It was recently sold to an investment group for pennies on the dollar.

And now, get this: The new owners have gone to the city of Iowa City and begged for corporate welfare (in the form of $6.5 million in tax abatements) so that they can effectively compete with the gummint-owned Marriott!

Incredibly, the Sheraton was deemed by the Iowa City city council to be "too big to fail" (sound familiar?) and the tax abatement was approved.

It is to weep. Mary and I worked seven years on nights and weekends, remodeling our old hotel using cash flow only -- no debt. Now, our two biggest competitors in the market are gummint owned.
 
New mare just got new city-owned hotel approved adjacent to Dallas convention center (even after referendum forced/funded by local hoteliers to the tune of mega-mils). When the convention center was a pit, the hotel guys bet on the market center area as the convention biz-hub, but the facilities quickly became insufficient to get the big events. So the city rebuilt the convention center and tried to get a hotel group to build a facility, to no avail. Now the city is going to do it with our money.

Hard deal to figure out, since it's clear (at least to me) that convention business isn't coming back without an on-site facility similar to those in other major-market cities. OTOH, I don't like the public sector intruding into and competing private sector business. Just ain't fair. Seems like there was a better solution, but evidently that door has closed.

Jay Honeck said:
Five years ago the politicians running the city of Coralville (which has the goose that laid the golden egg -- the biggest shopping mall in Iowa) decided that they wanted to have a convention center on the site of an old (but beloved, by locals) truck stop. (Coralville is Iowa City's sister city, and has always had an inferiority complex. The two cities have virtually grown together, but have been very different politically.)

The Coralville city fathers shopped the idea to all the major chains -- Marriott, Sheraton, Hilton, etc. -- and none of them wanted anything to do with it. It simply made no sense to build a $60 million convention center in little Coralville, Iowa, after all. In fact, it was a laughably stupid idea.

So, in their own inimitable fashion, the politicians decided to do it themselves. Using 100% taxpayer funds, they built themselves a castle -- a $60 MILLION convention center. They now lease it to Marriott Corporation AT A LOSS.

What's truly ironic is that now the Sheraton in Iowa City -- the only other "convention center" in the area -- has seen its business decimated by this brand, new gummint abomination. It was recently sold to an investment group for pennies on the dollar.

And now, get this: The new owners have gone to the city of Iowa City and begged for corporate welfare (in the form of $6.5 million in tax abatements) so that they can effectively compete with the gummint-owned Marriott!

Incredibly, the Sheraton was deemed by the Iowa City city council to be "too big to fail" (sound familiar?) and the tax abatement was approved.

It is to weep. Mary and I worked seven years on nights and weekends, remodeling our old hotel using cash flow only -- no debt. Now, our two biggest competitors in the market are gummint owned.
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Interesting story, Jay. I was just reading last week that Glendale, AZ is going to be on the hook for $180 million in bonds for the awfully-named Jobing.com Arena, as the Phoenix Coyotes NHL team leaves town and heads back to Canada.

As to the topic of this thread, I see very little of aviation coming down in price. Yes, 100LL from last summer's insane prices. And the price of planes, which is nice if you haven't bought one already. My insurance was quoted less this year, mostly because of decreased hull value, but I decided to pay the same as last year so I could get the $1 mil smooth coverage, up from $1m/$250k limits.
 
Jay Honeck said:
Five years ago the politicians running the city of Coralville (which has the goose that laid the golden egg -- the biggest shopping mall in Iowa) decided that they wanted to have a convention center on the site of an old (but beloved, by locals) truck stop. (Coralville is Iowa City's sister city, and has always had an inferiority complex. The two cities have virtually grown together, but have been very different politically.)[
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Actually, Coral Ridge is the 3rd largest mall, behind Jordan Creek in WDM and Merle Hay in DM in terms of gross leasable space. Coral Ridge would rank second in sales volume, though.

What's truly ironic is that now the Sheraton in Iowa City -- the only other "convention center" in the area -- has seen its business decimated by this brand, new gummint abomination. It was recently sold to an investment group for pennies on the dollar.
Click to expand...

The Sheraton was showing its age. And now it's being extensively renovated, which is a good thing.

And now, get this: The new owners have gone to the city of Iowa City and begged for corporate welfare (in the form of $6.5 million in tax abatements) so that they can effectively compete with the gummint-owned Marriott!

Incredibly, the Sheraton was deemed by the Iowa City city council to be "too big to fail" (sound familiar?) and the tax abatement was approved.
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Tax abatement for urban redevelopment or improvement is hardly new, nor is it inappropriate in this case, where the hotel serves essentially as an anchor for the pedestrian mall, which, in case you hadn't noticed, hasn't been doing particularly well for the last couple of years. It was a good decision to improve the area.

It is to weep. Mary and I worked seven years on nights and weekends, remodeling our old hotel using cash flow only -- no debt. Now, our two biggest competitors in the market are gummint owned.
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Given your location, you probably could have gotten an enterprise zone declaration and received a 10% investment tax credit, or at least earned a refund for the sales tax you paid on your renovations.


Trapper John
 
Jay Honeck said:
It is to weep. Mary and I worked seven years on nights and weekends, remodeling our old hotel using cash flow only -- no debt. Now, our two biggest competitors in the market are gummint owned.
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Well, I'm doing my part: on the way home from Huntsville Monday evening, I'm stopping at your inn for the night.
 
Ah, life in the People's Democratic Republic of Johnson County.

Jay H your only hope is that the niche theme market survives untouched. Barbarians!
 
Trapper John said:
Given your location, you probably could have gotten an enterprise zone declaration and received a 10% investment tax credit, or at least earned a refund for the sales tax you paid on your renovations.
Trapper John
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I know this may surprise you, but I don't want corporate welfare. I won't apply for it, I won't accept it, and those who do accept it disgust me. All I want is a level playing field.

Sadly, in two of the three businesses I have owned, my biggest, toughest competitors have been government-owned entities. When I was a kid growing up in small-town America, being told that we lived in the land of opportunity, I never would have believed that possible -- but it has come to pass.
 
Jay Honeck said:
Five years ago the politicians running the city of Coralville (which has the goose that laid the golden egg -- the biggest shopping mall in Iowa) decided that they wanted to have a convention center on the site of an old (but beloved, by locals) truck stop. (Coralville is Iowa City's sister city, and has always had an inferiority complex. The two cities have virtually grown together, but have been very different politically.)

The Coralville city fathers shopped the idea to all the major chains -- Marriott, Sheraton, Hilton, etc. -- and none of them wanted anything to do with it. It simply made no sense to build a $60 million convention center in little Coralville, Iowa, after all. In fact, it was a laughably stupid idea.

So, in their own inimitable fashion, the politicians decided to do it themselves. Using 100% taxpayer funds, they built themselves a castle -- a $60 MILLION convention center. They now lease it to Marriott Corporation AT A LOSS.

What's truly ironic is that now the Sheraton in Iowa City -- the only other "convention center" in the area -- has seen its business decimated by this brand, new gummint abomination. It was recently sold to an investment group for pennies on the dollar.

And now, get this: The new owners have gone to the city of Iowa City and begged for corporate welfare (in the form of $6.5 million in tax abatements) so that they can effectively compete with the gummint-owned Marriott!

Incredibly, the Sheraton was deemed by the Iowa City city council to be "too big to fail" (sound familiar?) and the tax abatement was approved.

It is to weep. Mary and I worked seven years on nights and weekends, remodeling our old hotel using cash flow only -- no debt. Now, our two biggest competitors in the market are gummint owned.
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Look at it from another perspective, the convention center makes infinitely more sense than the rainforest that was going to be built :) I never did understand the link between Iowa City / Coralville and rainforests. I guess too many tourists were heading to the Amazon or Hawaii vs. Iowa...

Flying does appear to be down everywhere I have been recently. Makes it hard to sell the current plane, but it will make the next purchase a lot easier if I can just get there.

Eric Bartsch
 
Look at it from another perspective, the convention center makes infinitely more sense than the rainforest that was going to be built :)
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True dat! Amazingly, it took making Iowa City/Coralville the laughing-stock of America in the national media before THAT pile of pork slithered off the table. Even THEN it almost happened! Imagine -- an artificial rain forest, in IOWA! How lame is that?

Of course, now they're proposing (and have received funding) to build a "literary theme park" -- I kid you not. Now, don't get me wrong -- I'm as much for literature as the next guy -- but do they REALLY think that kids will be attracted to a literary theme park?

Flying does appear to be down everywhere I have been recently. Makes it hard to sell the current plane, but it will make the next purchase a lot easier if I can just get there.
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The owner of our FBO announced Thursday night that their business is down 50%. He's got his pilots mowing grass to keep them employed, and his mechanics are on 4-day weeks.

It is BAD. Even with "cheap" gas, few are flying.
 
Actually, Coral Ridge is the 3rd largest mall, behind Jordan Creek in WDM and Merle Hay in DM in terms of gross leasable space. Coral Ridge would rank second in sales volume, though.
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It was the biggest mall in Iowa when it was built 11 years ago.

The Sheraton was showing its age. And now it's being extensively renovated, which is a good thing.
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Only if you think using taxpayer's money to renovate a privately-owned business is a valid governmental function.


Tax abatement for urban redevelopment or improvement is hardly new, nor is it inappropriate in this case, where the hotel serves essentially as an anchor for the pedestrian mall, which, in case you hadn't noticed, hasn't been doing particularly well for the last couple of years. It was a good decision to improve the area.
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Uh, I don't know when you last visited Iowa City, but the ped mall remains the heart of Iowa City, and is thriving. Mary and I were just there last night, enjoying the "Friday Music on the Ped Mall", and there were many thousands of people basking in the great spring weather. There are dozens of restaurants, bars, and a diminished number of shops, thanks to the Coralridge mall -- but very few empty storefronts.

The ped mall will always be a "sure thing" for restaurants and bars, thanks to its position relative to the University of Iowa. With tens of thousands of students and support staff surrounding it, businesses on the ped mall will continue to thrive -- with or without a gummint-subsidized hotel.

Back to flying: Mary and I were adding up our hours from the last 12 months (for insurance renewal) and were surprised to see that our flying hours dropped about 20% last year, despite now having two planes at our disposal. Our drop wasn't due to anything financial -- last year was our best year, ever -- but instead was mostly due to the big flood here last summer, which kept us so busy that we didn't get to fly much during the "prime" summer season.

Now, of course, with the economy taking a dump we're feeling the pinch financially. Luckily the Ercoupe is so cheap to fly ($15/hour, dry) that even my starving college-student son can afford to keep current...

:smile:
 
Jay, how is the weather in Iowa in mid-November? How about those Iowa winters?
 
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woodstock said:
Jay, how is the weather in Iowa in mid-November? How about those Iowa winters?
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Flying is hit and miss in winter, of course -- but when we get a bubble of Canadian high pressure over us, it's the best flying of the year.

It's cold, for sure, but the Pathfinder has a *great* heater...

:smile:
 
I promised myself I'd fly 10 hours a month after getting a plane. As it turns out, my annual average is only about 30 hours total. The economy isn't changing my flying much. In fact, the gas hasn't really come down but that's because the FBO used a "fuel surcharge" on their rentals to cover the huge increase so they havent changed their rates for a couple of years and that was back when all 3 warriors went under the engine overhaul.
 
Jay Honeck said:
....snip....Only if you think using taxpayer's money to renovate a privately-owned business is a valid governmental function. ....snip....
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I think if the government wants to subsidize anyone, it should be the citizens. They shouldn't be giving FOR PROFIT businesses a free ride! If the business isn't stronge enough to survive without government tax breaks or handouts, we're probably better off without them.
Good for you Jay for fighting the good fight and proving it can be done honestly.
 
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