With the help of Jim Tennant of The Tennant Group and Michael Meyer of Rate-Highway Inc., we are conducting rate surveys on a weekly basis and providing analysis and comments where appropriate. We publish this monthly recap in our electronic edition and more comprehensive looks in the print editions.
For only the second time since November 2012 — a period of 19 months — rates in May were down from the same month last year. Recently, we have been seeing significant year-over-year increases, but increases of this magnitude could not continue indefinitely.
We still believe that the summer will be strong, since there is no indication that the industry is over-fleeted or travel will be down. But double digit increases are not looking likely.
When it comes to specific cities, Chicago and Seattle are both down significantly, Boston is recovering from low rates last year and Miami is showing normal shoulder season weakness.
Comparison of Six-City to 50-City Average Quotes
As we have previously discussed, we have been collecting rate quotes for the top 50 U.S. airports since mid-May 2013. The intention is to switch from the current six-city survey to the 50-city survey when we have 13 full months, allowing us to do a year-over-year comparison.
This comparison will occur with the upcoming June survey; therefore, May is the last time we will be using the six-city results exclusively. In June, along with our regular look at rates, we will show the six-city results compared to the 50-city results for the last year. This will help understand the significance of the new results after the transition.
The chart below compares the weekly average rate quotes for the six cities that we have been surveying for three years with the average of the 50 largest U. S. airports’ rate quotes.
Because the spread between the largest and the smallest of the 50 is significant (the largest has more than 14 times the passenger volume of the smallest), we decided to compare the simple average of all 50 cities’ rates — as we do for the six-city average — with a weighted average, in which we weighted each city’s average rate by its passenger volume.
Rate data provided by Rate-Highway, a leading provider of revenue management services for the auto rental industry. Rates are an average of aggregator/OTA rates for all vendors present in the markets listed on the date of the survey. These tables and graph show the average of all base rate quotes per day for an ICAR at the six or 50 airports shown, for arrivals 15 to 21 days ahead of the date of the survey for two- and seven-day rentals.
As might be expected, the much larger sample reduces the volatility of the quotes, because a major event in one city, such as Easter break in Miami, has far less effect on the average. The quotes themselves, besides being less volatile with the larger sample, are somewhat different in absolute terms, as well.
The larger sample’s weighted average rate is higher over the last 12 months than the simple average, indicating that the larger airports have higher rates on average. The six-city simple average, consisting of six large airports, is higher than the 50-city simple average, but lower than the 50-city weighted average.
Looking at individual cities over the past 12 months, the highest 52-week average quote was Ronald Reagan Washington National Airport (DCA) at $87.64. It was nearly three times higher than the lowest average quote for San Diego International Airport (SAN) at $29.49.
The larger sample gives us the opportunity to group the cities by region and look at regional trends and comparisons. We looked at regions a few months ago and will do so again on a regular basis.
Based on the work we have done so far, we believe the larger sample will yield more meaningful results and justifies the extra effort.