Why Flights Stay Cheap While Travel Costs Rise

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Why does travel feel so expensive right now? In this episode of the Skift Travel Podcast, Sarah Kopit and Seth Borko unpack a structural shift in the economy that’s quietly reshaping travel.

It starts with a simple observation: flights have stayed relatively cheap for decades, while hotels, food, and experiences have become significantly more expensive.

The reason comes down to how different parts of the economy respond to innovation.

Airlines have found ways to do more with less — larger planes, fewer crew, more efficient operations. But travel experiences, from hotel stays to restaurants, still rely heavily on human labor. And that labor has become more expensive.

Presented by ⁠⁠⁠⁠Viasat Ads⁠⁠⁠⁠. Click ⁠⁠⁠⁠here⁠⁠⁠⁠ to learn more!

Watch This Episode

The number of the week is 19. $19, that was how much it cost me to buy an omelet at Denny’s. Last week in upstate New York, in the Catskills, and as many of you road warriors know, those Denny’s are often right next to a hotel.

And all of these businesses, they are getting squeezed. And the biggest names are telling us, they’re warning us really, that these cost pressures are only getting worse.

So the question is, why is travel getting so expensive, and who really is in control of it? Seth, answer that question. Tell me, what is the answer to that?

Please clarify for our audios.

I don’t think it’s IHOP. I don’t think the answer is to just switch to another pancake house or something like that. I think that’s, yeah, my local diner in New York City, the omelettes are up there.

That’s a lot.

I know, right? I was thinking maybe Denny’s would, I did order off the value menu, but I shouldn’t say I had to pay $19 for the omelette. I passed on the omelette.

I did not want to pay $19 for the omelette.

It’s an expensive world out there. And I think one of the key pieces to this story is people.

It’s productivity, it’s labor, it’s innovation, and it’s most importantly, which sectors are able to benefit from the fruits of innovation, like software, like technology, like, I mean, there’s others, like agriculture, and which ones are, require

the same amount of effort. And I think it’s one of these interesting things. And I think that the omelet example is kind of indicative of this.

Nowadays, you can run a startup with, with a vibe code in, you know, you can run a startup with a handful of people. Well, guess what? It takes the same amount of people to crack an egg as it did 100 years ago, right?

Like the fry cook takes the same amount of time, labor, energy, skill today as it did 100 years ago.

Whereas we can build, develop, deploy software for 100 times, whatever the number is, 10 times, 20 times, 100 times cheaper than we could in the past. And so TVs are cheap, software is cheap and eggs are expensive.

That’s the problem. And people are expensive. So that’s what we’re going to talk about today.

We’re going to talk about price and cost and labor and all of those good things. But before we do, a few updates from last week. So when we were, right when we were recording last week, Artemis 2 was about to blast off.

3:06

Space Exploration Future

If I watched it live, I may have shed a little tear. I found it very moving. I don’t know.

I’m a sucker for these things. So I think they’re slingshotting around the moon right now and we’ll be back at some point in the near future. So congratulations to everyone who is doing that.

I mean, I am such a space junkie, but what they want to do, I mean, they want to put people on the moon.

They’re going to touch down, right?

No. They’re just circling. But the goal of this whole effort is to put a base.

To put someone on the moon.

Put a man back on the moon.

But not just a man.

I think it’s amazing. Like a business.

They want to put a whole settlement on the moon and eventually Mars. This is the start of that.

I love it. I think it is the most inspirational thing. I think it’s just so long overdue.

It’s like a promise of the 60s or the 70s that we’re only just getting around to now, right? I feel like we are overdue for some good news, for some inspirational science, for some, I don’t know. It’s amazing.

Although for all of you sci-fi geeks out there like me, I have just finished watching all six seasons of The Expanse.

Anybody who has not seen The Expanse, you’re just going to have to bear with me for a moment.

They have all of this real hardcore science in there about what it would be like for a human being to be born in space and possibly be born on the moon or be born on Mars.

What that does to the human body, not being able to withstand gravity, bones possibly being brittler. It was interesting.

Yesterday, I think it was in the New York Times, I saw an opinion piece right on the front page that talked about what the consequences might be of having people travel to space and spend lots of time and maybe even live in different conditions than

we have here on Earth. They mentioned all of these things. This person who was a scientist said, you know, there is a question, if you were born on the moon or born on Mars, you may not be able to come back to Earth as a human.

And it might actually like kickstart a new evolutionary kind of like branch of human being. So like we’re like we’re really getting out there into all of those questions, all of those things.

Do we dare go too far down the sci-fi rabbit hole? Do I dare bring up? Always.

I mean, it’s cool now. I’m almost embarrassed to bring up anime, but anime is cool now. And there’s a sci-fi anime where they called Gundam, where they talk about space noids as a distinct continuation of human evolution.

Yeah.

Yeah, exactly.

It’s funny.

I am not into anime. That’s I never got there.

Well, it was weird and uncool way back when. It was also hard to access. And I watched a lot more growing up.

I don’t really watch too much of it now, although we did have some former journalists and reporters at Skift back in the day who were big anime fans. Sure, we still are. But it’s huge now.

By the way, tourism, because this is a travel podcast, there is a tourism angle here, which by the way, the Japanese government has invested a lot of money in making Japan cool and making anime cool and in harnessing that sci-fi anime demand to get

people to travel. There is a travel angle to all this. We’re not just talking about our hobbies and interests and the news.

Although maybe. The most interesting thing I’ve read this week though is the New Yorker piece on Sam Altman.

6:53

AI and Capitalism

Have you read that yet? It’s Ronan Farrow’s.

Ronan Farrow did a short. This is so indicative of the issues with the media landscape today. But Ronan Farrow did a TikTok, YouTube, Instagram short, where he explained the thesis of his article.

And I watched the 90-second short, but I didn’t sit down and read the article.

It’s going to take you longer than 90 seconds to read it. I had to break it up into like three chunks yesterday, but it was amazing.

I mean, it’s one of the best kind of profiles or like behind the scenes look, because everything that he talks about in there, which we covered at Skift, which was when Sam Altman was fired from OpenAI. And he talks a lot about Brian Chesky.

Brian Chesky and Sam Altman are very close, and he was instrumental in what OpenAI calls the blip, a very sci-fi term as well. The blip being the time from when Sam Altman was fired to when he returned, I think it was five days.

Brian was around for a lot of that. And Ronan Farrow got access to every one. It’s just an incredible piece.

I highly recommend that all of you read it.

Did reading the story, the profile, make you think differently about some of OpenAI’s business models? We’ve talked a lot about OpenAI’s discovery search as discovery layer.

We’ve talked about OpenAI and ChatGPT has had these fits and starts with going into advertising, going into video, they’ve pulled back. Did it make you think differently about the business side of things?

Not really. And I think a lot of that is because I’m just a cynical person or I can be. And I do think that capitalism is going to prevail always, in the way that our society is set up now.

And that was one of the thesis of the article, really, and something that they really talked about in that Sam Altman and all of the players that are behind the scenes in AI, especially 10 years ago, talked a lot about that.

I mean, it was like a central core thing because like OpenAI, I believe still to this day, it is a non-profit. Yeah. And just about why they did that and how they started.

But I think that is going away. I mean, that is not how it is going to be moving forward.

Well, even today, it is a non-profit, but it’s a non-profit that owns a for-profit that has a share in a board of a this, of a that, of a whatever.

I don’t know. I just-

Capitalism will prevail. This thing will be monetized. Investors will ultimately require return on their investment if they are to continue funding this technology.

I agree with all of that. But I feel like there are these founders, Steve Jobs, who believes that you kind of got to show the consumer what they want. Capitalism has prevailed in smartphones, but Steve Jobs showed people that they wanted smartphones.

There are these founders like Elon Musk, speaking of space travel, who said, we need to go to space. I want to go to space. I want to build SpaceX.

Now, they’ve attracted capital. They’ve built these tools. They’ve found market niches.

So, capitalism will do its thing and make this technology cheap and widely available. And if it’s going to continue to be funded, investors will demand a return. But there are these certain founders that shape the direction that the market’s going.

And I think of Steve Jobs, who famously said, the market was giving people Nokia phones. And he said, you want a smartphone? And he introduced them to the study of a smartphone.

And then the market did its thing and made smartphones cheap and widely available. But he was instrumental as a individual in shaping us from this world of mobile phone to smartphone.

And Sam Altman seems to be that person for the, or maybe is not this person for the AIR. Like obviously, capitalism will do, I agree with you that the market forces will do what market forces do, the invisible hand will be there.

But does he, I don’t know, was there anything about the, I don’t know, I was just pushing a little bit more in that direction?

Yeah, I mean, it just, especially after, because it’s not just OpenAI anymore. I mean, Anthropic, I think you could argue is even the better tool, here in April of 2026.

Well, I dated that because it swings wildly depending upon who’s got what and who’s released what at any given moment.

But I sort of think that if what you’re talking about from a business perspective is how to not have this type of technology that is so life altering, world building, world crushing, perhaps not in the hands of capitalism, I think that’s over.

I don’t like, unless the world comes together and put some sort of like, you know, referendum, which that’s never going to happen. So I think the genie is out of the bottle. I think we’re a decade too late to stop it.

Well, I have so many thoughts on that, but let’s move on.

I think the only other major technology that I think of people who talk about that way is like nuclear weapons and people even say with nuclear weapons, genie out of the bottle and yeah.

Well, and just one more thing on this because I could talk about this forever. But they talked a lot about, I mean, OpenAI’s name came from the Manhattan Project. Really?

Yeah. They talk about that. Ronan Farrow talks about that in the article about how that was the comparison that they were using about 10 years ago, was with what they were doing.

They thought that they were sitting on the next Manhattan Project and how they were going to deploy this technology best. I know.

Well, I think there actually is a transition to one of the main topics of our conversation today, which is about economics, which is about innovation, which is about investment and this stuff.

13:10

Cost Disease Impact

I read this great article that I thought it was worth us reacting to and it actually comes from a non-skift source. We do, in fact, read non-skift. We think Skift is the best journal we’ve been traveling with.

We do, in fact, read non-skift sources. This is how complicated the world of media has gotten. There is a substack run by Derek Thompson, who is a former Atlantic writer, and it’s called the Derek Thompson substack.

But the person who actually authored this article is someone by the name of Alex Maiasi. So, it’s a guest post on the Derek Thompson substack. It’s not Derek Thompson.

But we’ll give credit to Alex and to Derek. And it was a great post that I think is worth reacting to, called Why Cost Disease is the Secret Force Behind America’s Toxic Solitude.

And the basic thesis is, I’m reading the subhead, is that screens got cheap and shared experiences got expensive.

And I think that this has a really meaningful insight, and that that insight applies to both the consumer of, it shapes the behavior of travel consumers, why they want to travel, because they are so much more antisocial today than they are.

And it also shapes a lot of the fundamental cost factors that are plaguing travel, especially in the US and Europe and the developed world.

Yeah, I mean, it doesn’t take very much anymore to do a lot of these kind of non-manual, non-human centered tasks.

I mean, you just think about like, how easy it is to find information, how easy it is to write something, the quality of that writing is, you know, to be, to be determined, you know, to be discussed.

But it just, that type of thing, and this is why we’ve, as we’ve talked before about the kind of the white collar bloodbath and jobs, it’s become increasingly easy, cheap, fast, to recreate a lot, especially the non-creative work, just the task-based

work. And so all of that stuff that happens behind, behind the scenes is becoming very, very, very, very cheap.

But as you said, to have somebody who is, you know, waiting for you at the front desk, who is going to clean your room, who is going to crack your eggs and whip them up.

And, you know, I mean, you can think about the Jetsons type, you know, scenario, but we have not gotten there yet. Like, it’s a lot easier for our computer friends to write a book than it is to clean your room.

Totally.

So this is what’s making it more expensive to travel because it’s so human intensive for better or worse. And I think a lot of people will say better.

And well, yeah, yeah. So the economic phenomenon is called cost disease. It has to do with labor costs.

I don’t know that I love calling labor cost a disease because that’s our salaries, but let’s go with this economic term. And this economist in the 60s named William Baumel really is responsible for this idea.

And what he kind of said was, we have more advanced fertilizer, so one farmer can produce a lot more crops. In the modern world, semiconductors are a lot cheaper, so we can produce a lot more phones.

Now with AI, white collar work is becoming much more automated. So one white collar work can produce a lot more work. A computer’s made accounting much more efficient, made programming much more efficient, right?

But his key point is a violinist playing Schubert. In order to perform a Schubert performance, you still need a violinist to play Schubert, and it takes just as much time and just as many violinists.

I think the word in this article is he says, you can’t innovate your way to a three-person quartet. A quartet requires four people. There’s no innovation that makes a quartet three people.

A three-person band is fundamentally different from a four-person band. And so there are certain industries that are just fundamentally intrinsically people, people-driven and you can’t get rid of the number of people.

And those industries, because labor gets more expensive in developed worlds, those industries get more expensive as time goes on. And so to go see a quartet nowadays is very expensive. Basically, phones are cheap, opera is expensive.

It’s sort of the gist of this. Opera used to be cheap, theater used to be cheap, movies used to be cheap. Now movies are expensive, now theater is expensive.

Now a lot of the art, this is a big thing that affects a lot of the arts, a lot of service industries and a lot of leisure industries. And it’s why they’re struggling.

And so when content, online content is cheap to produce, when smartphones are cheap and when in-person content, theater, arts, bowling alleys, there’s a very famous piece called Bowling Alone, about the destruction of social networks across America

and the world. Well, it still takes more or less the same amount of people to run a bowling alley today as it did in the 70s. So bowling is more expensive, whereas it takes a lot less to produce a smartphone.

So of course people find themselves doing the cheaper things and therefore they find themselves doing the screen time things because screen time is cheap and in-person time is expensive.

But do you think that that’s one of the reasons why even though travel is expensive, it really is something that people are, we’ve seen this in your research over and over and over and over again.

It’s the thing that people, when they do have extra money, it’s what they want to spend their money on. I think it’s because they spend so much time. It’s like you and I, we talk like this all the time, right?

But we really relish when we actually get to get together in real life.

3D.

That’s kind of, yeah, in 3D, yeah, exactly. That’s why people are willing to spend the money. But it really doesn’t help.

It’s kind of hard for the businesses though, because they’re the ones that are kind of caught in the middle of this.

I think that’s the right point.

As we think about how this cost-disease idea and this antisocial cost-disease and expenses drive in, less social behavior ties into travel, people are more and more isolated, they’re more and more fragmented, more and more times in front of screens.

The antidote to that is travel. And yet, travel is suffering from the same issue.

It takes more or less, and get us in the email and in the comments and tell me where I’m wrong, but it takes more or less the same amount of people to run a hotel today as it did 30 years ago.

If you run a full-service Marriott, you have more or less the same amount of staff between front desk housekeepers, accounts receivable folks, general managers, night shift.

You have more or less the same amount of people to run that hotel today as you did 30 years ago.

And therefore, your labor costs have definitely gone up, your costs have gone up, and you’ve kind of been left with no choice but to pass along those costs to the consumer. And therefore, travel has gotten really expensive.

So it’s this idea where we started this show that it takes, if you want to serve an egg, if you want to serve an omelet with a full service staff and a chef, you still got to pay the waitress or waiter, you still got to hire the cook, you still got

to crack that egg. You can’t necessarily, there are things you can do, but you can’t fully automate that away, and therefore an omelet costs $19.

Well, if you want to run a full service hotel, two brand standards with full service laundry, full service housekeeping, check in, meet the security standards, meet all those standards, well guess what?

Now it’s $250, $300, $400 a night, and now the cities that have a lot of these hotels are becoming unaffordable, and what’s happening is you can pay $19 for an omelet in New York City, or even in upstate New York, it’s probably more in New York City,

$400 a night to stay in New York City, or you can fly to Mexico City. I know. You can get your social fix for a fraction of the price because the labor costs are lower in Mexico City. I love Mexico City.

That’s why, as to so many Americans, which leads to overtourism, which leads to a lot of problems. This is what we’re seeing. Labor cost is this fundamental structural cost.

It’s driving up the price of hotels. It’s making us less social. We’re looking to travel as the antidote, and then we’re all traveling with cheap airfares.

We’re all traveling to the same places where labor costs are low and we’re driving over tourism.

I was going to mention that we talk about how travel is expensive and it is, but there is one bright shining exception to that, and that is airline tickets.

22:19

Hotel Industry Challenges

I always say, I was telling Jay the other day, Jay Shavit, that I’m from Michigan, as many of you know, also the Wolverines won.

Go Blue.

I have to give a little shout out to the Wolverines. So I’ve been flying from Michigan to New York and back, where my family is, for 25 years.

And I think the cost to get to and from Michigan has been the same for 25 years, anywhere from $200 to $250. That’s it, always for 25 years.

The whole time, it’s never really changed. That’s a great example of technological innovation driving cost because-

Well, as J would say, regulation.

It’s both. It’s both. It’s deregulation, which happened in the 70s.

But in the 1980s, a 737 could carry maybe like 85 to 120, 130 passengers.

It was the 90s, Seth. It’s the 90s for me.

What?

Let’s not take me all the way back to the 80s.

No, no, no. I’m not saying use. For you, it was the 2000s.

Come on. All right.

I’ll give you that.

There you go. No, no. I’m saying airlines were deregulated in the 70s.

And immediately following deregulation in the 80s, a 737 would carry maybe 100 passengers. Nowadays, that’s why they did the maxes. A 737 max can carry almost, I mean, if you configure it right, up to 170 people.

We used to fly these giant 747s with four engines. And that means twice as much maintenance as a two-engine plane. With four engines, we used to have three or four pilots.

We used to have navigators who would sit in the cockpits of these things. Now, we fly those long-haul international routes on narrow bodies.

We carry a similar number of people’s, much more fuel-efficient engines, two engines instead of four, two pilots instead of two pilots and a navigator. So aviation has done more with less. They’ve innovated.

They’ve also unbundled. They’ve sold first-class seats, which subsidized the back of the house. And so a lot of that innovation has paid for continuously cheaper tickets.

Whereas in hotels, if you run, again, you run a 300-room full-service hotel, you have brand standards that you still need the same number of front-desk staff as you did in the 90s. More or less, maybe you need a little bit less.

I mean, that is where we’re seeing innovation, right? That is one of the things we are seeing, is we’re seeing moves to more limited-service hotels.

We’re seeing more advanced property management software that maybe does let you run a front desk with fewer people. We’re seeing self-check-in. Now, you do need less front desk staff because people can check in on their own.

They don’t need to go and talk to your front desk staff.

Where we are seeing technology and innovation, we are seeing price competitiveness, but you just can’t run the old school luxury that some people want, or the old school full service that some people want for the same cost that you could 20, 30 years

ago. But you can in Mexico, you can in India, you can in many parts of Asia.

Do you see this as a feature or a flaw of travel?

It just is. It’s something that we’re going to have to reckon with. If we want travel to be affordable, we have to figure this out.

The answer is not, you can’t just cut labor costs like that. The answer is not just pay people less. We already see in the issue.

When you pay people less, they go to work in distribution centers. And that was the big issue that travel. So you need to raise your wages to keep up with market wages.

Otherwise, everyone’s just going to work in a FedEx distribution center. So the industry stuck between a rock and a hard place, I think. I don’t know the solution.

Yeah.

I’ll give you a little preview.

26:35

Hotel Owner Struggles

I’m writing a story right now about how hoteliers, the owners, not the brands, are really getting squeezed right now.

And in a lot of the smaller outfits, they talked a lot about what you just said, Seth, which is that it is so hard to find people, to come and work at the hotel, to find labor, because they can just go.

They mentioned Walmart and they mentioned Amazon over and over and over again, because they can go and work for these big companies and get benefits or whatever. It’s a better gig for them than possibly working on the housekeeping stuff.

And it’s just really difficult in how they pay. The hotel owners are having now to, I mean, they would maybe say overpay. I would say maybe it’s just that’s what the market demands.

But they’re feeling that pressure from both sides.

Totally. And that’s partially why many of the brands themselves got out of the business of operating hotels. Because there is a lot of IP scales, right?

Intellectual property is a great business that scales. And now there’s a lot of hotel groups there, effectively in the IP business and in the sales and marketing business. And that is a very high margin business and very scalable business.

And I would also say IP, just coming right back to the beginning of this conversation, IP and a white collar workforce is one of the things that is getting cheaper because of our computer fronts.

Yes, exactly. So it’s all very connected.

It’s all 100% connected. And this is how the economy is transforming. And so I don’t, to be honest with you, I don’t know the, I think the answer is, it needs to be technology.

You need to find efficiency, and you need to do more with less at a hotel. You just need to, it sucks, but you need to.

I think the answer has to be some changes in brand formats and in how these franchise agreements and these brand standards are written. Limited service is clearly the way to go, but limited service doesn’t commit the same price point.

So like, I mean, we always, we kind of, I think it’s no secret that like we’re fans of Citizen M, but Citizen M has built these like downtown, basically modern, like European and American, the equivalent of pod capsule hotels. Yeah.

It’s clearly all labor based. And then, I mean, so what? You need slightly different ways of operating your hotels, you need more limited service ways.

Take a page from the airlines. I mean, it’s going to be some form of unbundling. Let the suites pay for and subsidize the cheaper rooms, just like first class on the plane subsidizes the economy.

You know, let people not pay for the services they don’t need. Let people who need the other services, so like ancillary revenue to offset your costs, unbundling and ancillary revenue to offset some of your costs.

Changes to brand formats to make you more structurally efficient. Technology to do more with less. But it’s tough.

The only other lever, I mean, I don’t know.

How much burden do you put on the brands here, on the Hilton’s and the Marriott’s of the world?

I mean, they got out of the business on purpose, but they are now asset light, somebody else is asset heavy, and those folks who are the asset heavy, they’re struggling.

How much responsibility do the Hilton’s and the Marriott’s of the world have to come in and help?

Quite a lot. I mean, quite a lot. I don’t think it’s unfair to just beat up the Marriott’s and the Hilton’s of the world.

When I speak to the brand development teams at those companies, these new concepts that they’re launching, which I’ve somewhat criticized, it’s like there’s too many brands.

I think one of the reasons they’re launching the new brands is they’re trying to create new brands that are more owner-friendly brands.

I know for a fact that whether they succeed or not, that they think about owner costs deeply upfront as part of the brand design process.

Part of what they may be doing is rolling out new brands that have different consumer expectations around cost and have different brand standards around cost. But what do you do with an existing property that has existing brand standards?

And customers expect a certain level of service and performance. The brands are tuned to it. The owners are tuned to it.

And in fact, I like Citizen M. I will never get my wife to say to Citizen M. Never.

Why not?

It’s too small.

The rooms are too small. She doesn’t want a small room. So what do we do as an industry?

There is, I don’t know, there is a breaking point. I guess the other answer is you pivot to luxury, which is what so many people are doing.

Which, like, and like that’s not the answer, because like I need to stay at it. I need to stay somewhere. Like when I go places, like, I, you know, I’m not going to stay, I don’t want to stay.

I don’t want to pay luxury prices, Seth. Like that is the thing. So today, actually, later today, I’m getting on a train, getting on a train.

It’s been a long time since I’ve taken the Amtrak. I’ll let you know how that is. Getting on a train, going to Philly for like the biggest hotel owner event that exists like in the US.

And I’m going to talk to a lot of these hotel owners and my piece will be out probably next week.

Yeah. Ask them what they say. I think there’s a lot of the…

I mean, part of it is on the actual owner finance inside. The reality is, dare we say it, some of these people are going to go bankrupt. And if you can buy the property for cheap enough, you can reset your financing cost low enough to make it work.

There is a benefit to… Not a benefit, but there is a natural kind of… Yeah.

Cycle to bankruptcy and restructuring that does get you out. Like if you overpaid for your property. But like, yeah, I mean, let’s think about the cost of a hotel.

There’s the property and the financing cost, construction costs. Construction costs have gone way up.

Way up.

Financing costs. Yeah.

Insurance. Way up.

Insurance. Way up. Financing cost.

As the Fed cuts, they’re getting easier, but they’re not great.

It’s still, I mean, it’s still… For most hotel owners who either bought or financed, what was it, like five or six years ago, I mean, we’re still at like double.

Yeah, absolutely. And that would be the benefit of a bank, of a refinancing or a restructuring of a portfolio is you get in at a low cost basis without having to pay that new build, new financing cost.

You’ve got labor cost, which is a really hard one to fix, but automation, changes to brand standards, those are your levers. You’ve got distribution cost and franchising cost. I mean, that is a big piece of the pie.

That is 8, 10, 15, 20% right off the top, that comes straight off of revenue.

So if you can improve that, there’s a huge opportunity there, whether that is more direct to consumer within a brand or even build in a property level brand, like a micro brand that has a reputation.

This is where the AI discovery story also comes in. Then other than that, there’s some food costs and supplier costs. There are benefits to scale there, especially when you have distribution agreements to a brand.

Then the only other lever is revenue. Can you charge more or unbundle or charge ancillaries or upsell or I don’t know? Or get longer length of stays?

Yeah.

And therein lies the premium question, kind of, a little bit. So there’s the end of that.

But then just to kind of circle back, I do worry that all the people like taking premium out of it, all of the people that want to stay at the mid-scale hotels, if they’re the ones who are kind of losing their jobs because of AI and everything that

It’s also why Vegas is in trouble and New York City is in trouble.

And even the Catskills is struggling. Like the great middle-class American vacation is now a resort in Cancun. It’s not Route 66, it’s not the Borscht Belt, it’s not Vegas anymore because of these affordability concerns.

So Seth, should that bring us to our winners and losers of the week?

35:05

Weekly Winners Losers

It should.

I mean, do you want to mention briefly? Because we were talking about distribution costs, that Hyatt has a new CEO.

Oh, yes, please do.

One of the big, I was saying, we’re going through the costs, and I kind of said it quickly, but distribution costs between the actual loyalty costs, the marketing costs, and the franchise fees, and all that stuff is actually a big and overlooked

lever. And we actually just reported a really interesting piece of news about Hyatt’s C-suite realigning its executive compensation, so that when you asked me this question, literally about brand alignment versus owner alignment, this is something

that Hyatt’s done that I think is actually really interesting. They’re aligning their C-suite pay with channel distribution mix so that their bonuses will be based on driving more business through lower cost distribution channels.

One of the most fascinating things about how the United States especially structures its public…

Like the disclosures required of publicly traded companies is that there’s all sorts of stuff in there about pay, about executive pay, compensation, who gets what. And so, Sean O’Neill, our Senior Hotel Editor, he went through some of these filings.

And it’s what you just said. Like they had in there about how they were tying bonuses to getting people to book direct. And for one of the cases that Sean looked at, I mean, it didn’t happen.

Like the employer, the executive in question, did not get his bonus because he didn’t meet the goal. And it’s just a really interesting thing that what some of the brands are doing to try to get, to try to battle all of these other little businesses.

I mean, now they’re huge businesses, the OTAs and such that are popping up trying to take money out of their hands.

But it kind of shows just behind the scenes, like all of the different switches that the hotels are trying to use, the levers to like fix a problem for them.

Which goes back to one of the things you were saying earlier, which is, are the hotel brands to blame? How much responsibility do hotel brands have for fixing this hotel cost problem? And here’s a great example of where they’re actually pushing.

A Hyatt flag is expensive and an OTA distribution commission is expensive. And to pay both of them is very expensive. And so we talk about labor costs.

There is room to come down on distribution costs. We talked about, by the way, a parallel was we talked about how can airlines have gotten so cheap? Will hotels have gotten so expensive?

And airlines have gone from paying a 10 plus commission to a 2% commission. Their distribution costs have fallen dramatically over the last 20 years as a result of strong direct branded traffic.

And in theory, that is the value that the brands are supposed to deliver to the owners. And so what can the hotel groups do? They can say, we can give you direct traffic.

And if we don’t give you direct traffic, then our executives will not get paid. And if we do, that is, we will incentivize our executives to the best of our ability to give you direct traffic. That is something that a hotel group can do.

So I do think that it can be fun to do X versus Y and to say, it’s the hotel owners versus the hotel brands. But the hotel owners are customers of the hotel brands.

In some ways, they’re most important customer, more important than the traveler themselves. And it’s cool to see these little, you know, it’s subtle. And I guess that’s why, shameless self-promotion here.

I guess that’s why Skift is so great, what it does and why Skift is so many, that kind of nuance about how a hotel brand structures, its executive compensation tells you a lot about hotel brand, hotel owner dynamics that might get lost in a different

And it’s interesting, in my reporting on this particular story, I didn’t really get the sense that it was a us versus them thing.

It’s not, yeah.

I didn’t.

It’s more complicated and more nuanced, and just for all the reasons, for all the reasons that we have just talked about. I’ll save the rest for the…

Yeah, save the rest for the reporting and for future podcast episodes. And I think with that, we should go to our winners and losers and close out the podcast.

So I already mentioned my winner of the week. So I’m just gonna go with the University of Michigan. Because, so not only the University of Michigan, I, Sarah Kopit, non-sports fan, won my family bracket.

So all my cousins and everybody, we had a March Madness bracket, I won. And in my acceptance speech for the title, I said I would like to thank the vibes.

You know, I would like to thank all of the cities and colleges that my friends have gone to, the pleasing color combinations of some of the logos, which influenced my choices, and the funny mascots. I’m really a sucker for a funny mascot.

So that was how I picked my winning bracket this year, but mostly I won because, you know, Michigan won, so.

Go blue.

Go blue. I don’t really have a loser this week. I think, I mean, maybe the world, I don’t know.

Like, we’ve had, it was a bit of a nail-biter last night here. We’re recording this Wednesday morning. So we are in a two-week ceasefire.

The market is loving things, so I don’t know.

It’s funny, I was gonna say, it’s funny you call that a loser. I was gonna call it, the winner is, this week’s winner is anyone who needs to buy anything that involves fuel costs. Yes, that’s better.

That’s better.

See, we’re like a John and Paul thing right now. Seth being Paul, me being John.

Yeah, we didn’t talk about the Iran War all this week. That was intentional. We’re trying to move off of geopolitics, even though it’s so important for the industry.

But I would be remiss if I did not note at the end of this episode that as we record this episode, West Texas Intermediate Crude Oil is trading at around $72 USD. Whoa. Which.

I hadn’t looked.

I actually hadn’t looked since before the open.

It’s a major roller coaster, a major roller coaster from $112 a barrel at $70 a barrel. We can read the huge sigh of relief. And I’m no geopolitical strategist.

I won’t say whether this ceasefire and the relative position of the parties is better or worse. I won’t say whether the US or the Iran or whatever is a winner or a loser. I will say that anyone who has to buy fuel today is a winner.

And that is good news for the global economy.

There you go. I’ll take it. I’ll take it, Seth.

All right. Thanks everybody for listening. Thanks for tuning in and we will see you next week.

See you next time.