After radically cutting seat capacity on direct routes to
and from the United States and Hong Kong last year, carriers have begun to put
capacity back into the market, which has shown a rebound in the early part of
2010.
Travel to the Asian city rose considerably in January year
over year, with visitors from long-haul markets up 18.7 percent and Americas
visitors increasing 16.9 percent, according to the Hong Kong Tourism Board.
Overall, visitors were up 5.9 percent.
While the capacity comeback in the first half of the year on
flights to and from the United States can satisfy some of the improved demand,
the new available seat capacity dwarfs the amount taken out in the first half
of last year, which totaled 20 percent of all seats, according to OAG.
Cathay Pacific Airways is increasing its seat capacity about
10,000, or 7.2 percent, to just shy of 149,000 on the Los Angeles-Hong Kong
route, according to OAG data. On its flights to and from San Francisco, the
carrier is raising seat capacity at a similar rate. The airline's New York-Hong
Kong route capacity is flat compared with the first half of last year. Overall,
the Hong Kong home carrier last year reduced its direct U.S. seat capacity by
50 percent.
Delta Air Lines is initiating direct service from Detroit
with 5,796 seats during the first half of the year.
United Airlines, which last year discontinued its Hong Kong service
out of Los Angeles International Airport, is holding its capacity flat compared
with the first six months of 2009 on its San Francisco and Chicago routes to
the city.
Continental Airlines is reducing its seat capacity to Hong
Kong from its Newark hub by less than 300 seats, keeping overall capacity
relatively flat.
The lone carrier to materially reduce serving Hong Kong from
the United States directly, Singapore Airlines, is cutting seat capacity by
more than 1,100 seats.
The demand comeback in the waning months of 2009 and first
few of 2010 already has driven carriers to raise fares on Hong Kong flights,
according to some travel management company executives.
HRG Hong Kong general manager Joe Birrell said the "majority
of the airlines are increasing their fares by 10 percent to 15 percent,
especially on major routes."
He noted that airlines, including Cathay Pacific and
regional carrier Dragonair, implemented stricter restrictions in ticket
cancellations and changes.
Vice president of supplier relations Noah Tratt said Egencia's
2010 forecast released in the fall so far has held true: Average ticket prices
are 1 percent higher on North America-originating flights to Hong Kong.
FCm Travel Solutions executive general manager of Greater
China David Fraser said that the average trip cost in Asia/Pacific in 2009
decreased $273, 31 percent less than 2008.
Although business travelers are returning to the skies, they
continue to downgrade their class of service, according to Fraser.
"Since mid-to-late 2009, we definitely saw increases in
corporate travel and more specifically corporate buyers returning to long-haul
travel from the U.S.
and Europe, albeit in lower numbers than peak times,"
said Fraser. "Negotiations are strengthening as corporate clients are recommencing
their usual business travel patterns of 2008, albeit they are traveling further
down the back of the plane."
Business travel demand growth also has impacted room rates
in Hong Kong, where occupancy levels stayed relatively robust in 2009 compared
with other corporate travel hub cities.
According to the Hong Kong Tourism Board, weak long-haul
business travel led to a decline in overnight visitor arrivals in 2009. Average
hotel occupancy in all categories was 78 percent last year, down from 85 percent
in 2008. Upper-tier hotels, where Western business travelers tend to stay,
averaged 72 percent occupancy, a seven-percentage-point difference from the
year prior.
Those numbers have surged this year. In January 2010,
occupancy in all hotel categories reached 87 percent, up from 79 percent in
January 2009.
However, the rise in occupancy levels has not driven average
daily rates higher. Egencia's Tratt said average daily rates in the city in
2010 were in line with its earlier forecast to receive a 4 percent drop year
over year.
HRG's Birrell also said corporate clients have secured lower
average daily rates for 2010.