I looked at the awful Q3 results for Orlando last week, and this week it’s time to look at the other market everyone’s talking about: Las Vegas.
Las Vegas is similar to Orlando in that it saw a big run-up in capacity from ultra low cost carriers (ULCCs), among others, and that led to weakness in fares. But in Q3 2023, the DOT DB1B domestic data shows a very different result than what we saw in Orlando.
% Change in Domestic Passengers Q3 2023 vs Q3 2022
While passenger numbers were way up in Orlando in Q3 on all types of airlines, ULCCs fled Las Vegas in Q3. On the other hand, Southwest actually grew Las Vegas more than Orlando while the legacies were up too… but not as much as they were in Orlando.
Overall, passenger numbers were up 9 percent in Orlando, but in Las Vegas they were flat. So, what did that do to fares in relation to Orlando? You can probably guess the answer.
% Change in Average Fare Q3 2023 vs Q3 2022
The ULCCs still saw fares drop, but with so much less capacity, the drop paled in comparison to the jaw-dropping plunge in Orlando. With total capacity shrinking — primarily from the ULCCs — the legacy airlines were able to moderate their fare drops. And then there’s Southwest which absolutely hit it out of the park with a big fare increase despite the capacity growth.
So yes, with less capacity, the industry did better in Las Vegas than Orlando across the board. This is the blueprint for getting out of this mess. They need to find other places to put their airplanes where demand is higher compared to the capacity in the market. I’ll have more on that with a closer look at Spirit this week, but I’m not ready to let the Vegas vs Orlando comparison go just yet.
Something bothered me about these numbers. Why was it that the airlines realized they had too much capacity in Vegas but they somehow couldn’t see it in Orlando?
I started looking at scheduled seats by month. Fare data is only given quarterly, but scheduled seats can be broken down in a much more granular way. Las Vegas and Orlando have similar overall seat numbers, so it makes a comparison relatively easy. Take a look at this chart that shows by month the difference in seats between Las Vegas and Orlando.
Those spikes where Las Vegas has far more capacity than Orlando? That is largely in September, the worst month for travel in Florida. I’m not so sure it’s a great month for Las Vegas either, but it is better there than in Florida. So, Q3 data is tough since it’s really two seasons that we can’t break apart. you have peak summer until mid-August and then travel demand drops until it falls off a cliff after Labor Day.
Notice in fall of 2022 that Las Vegas hit a peak in seats vs Orlando. By 2023, it had moderated. And that is a key to looking at this data.
Let’s look at this another way. Here you’ll see seats by month as a percent of the same month in 2019.
What this shows us is that as travel started to rebound out of the pandemic, Florida was open and surged ahead faster than Vegas. Orlando fully recovered within a year while Las Vegas remained low until after the summer when airlines had nowhere else to put airplanes. By summer of 2022 through the end of the year, it was Las Vegas that saw capacity pour in, reaching a higher percent of 2019 than Orlando all the way up until summer of 2023.
Starting in summer 2023 (which means Q3), Las Vegas has moderated growth while Orlando zoomed ahead. So what we have here is an easier year-over-year comparison for Las Vegas than for Orlando just based on the timing of when capacity has been added.
The ULCCs must have seen the weakness in Las Vegas earlier since they had pushed capacity up so high. They didn’t learn that Orlando was also a problem until it was too late. Now, the game is afoot, and the ULCCs are all trying to rebalance their networks. More to come on this shortly.
