Budget airlineshave transformed tourism in Europe - Stockhom feels the effect

The article "Budget airlines have transformed tourism in Europe - Stockhom feels the effects" deals with the example of the Sweedish capital whose over night stays have rised by 10% per annum since Ryanair has decided to fly there. Indeed, this text underlines that from 3 million low cost passengers in 1994, there were 107 million in 2004. According to Chris Martin, Senior President of JonesLang LaSalle Hotels, this has had 3 effects:

- A push effect: cities like Barcelona, Stockholm, Budapest or Prague have seen a strong increase in tourism some years after the introduction of budget airlines in their local airports.

- A pull effect: a decrease in demand for rooms from the locals as they also started flying cheap as well

- A derived effect: the number of hotel suppliers and the demand for rooms have rised in secondary airports where Ryanair flies such as the Stansted airport for instance. (It is situated in the Great Britain's capital outskirt)

So what are the consequences in terms of Revenue Management for the hospitality industry?

It seems that now everybody flies cheap from the middle-class people to managers, from students to the elderly. Budget airlines travelers do not take into account their comfort during their journey anymore but the price that it costs them to go from one point to another. Price has become primordial. Since there is no more one kind of customer segment flying, I can imagine that it is very difficult for hotels to tackle efficiently those travelers and attract them as they hardly have any information about them. Since those travelers are so different, how can hotel managers know what price those potential customers are ready to pay for a room?

Therefore, how do they manage the bookings of their rooms? If those travelers do not book their hotel beforehands, how can they know how many customers they can expect? This also has a consequence on the cost of staff and other purchases such as food and beverages.

One can also suppose that since low cost airline travelers are very sensitive to price, they might just decide to go off for a week end and take the cheapest ticket on line, regardless to where they will end up. This means that the price of an airplane ticket on a budget airline website will have a major impact on the number of travelers who will choose a destination. For example, if Ryanair decides to rise the ticket price to go to Stockhoolm, will there still be that many tourists in that city? This will also automatically have a perverse effect on the local hospitality industry.

Another question that can also be raised is to which extent advertisements about a country or a city to which Ryanair flies, attracts potential customers for a week end? This is to say how can one know why a destination has been chosen rather than another? Is it just because of the cost of the airline ticket or do external advertising also have a role to play in the way low cost travelers choose their destinations?