What 'Snowpocalypse' Cost Business

Retailers Lost at Least $1 Billion. The Travel Industry? Incalculable Goodwill

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NEW YORK (AdAge.com) -- Call it the billion-dollar snowstorm.

The day-after-Christmas blizzard that virtually paralyzed the Northeast and dumped snow as far south as South Carolina could end up costing an estimated $1.5 billion -- $1 billion in lost retail dollars from traditional post-Christmas sales, upward of $200 million for the airline industry and tens of millions more in ancillary costs such as lost production for some workers and overtime wages for others.

Credit: Bloomberg
Chicago-based ShopperTrak, which records retail sales and customer traffic at more than 70,000 stores across the country, said the blizzard brought sales to a halt during a period that is "fairly crucial for retailers," said company founder Bill Martin. "And at this point, the prospect of momentarily pausing a potential $1 billion in sales has the collective industry holding its breath." But he added that retail strength should pick up late into last week and over the weekend, offsetting some of that $1 billion.

The airline industry lost not only an estimated $200 million, but -- fair or not -- incalculable goodwill as airports closed, carriers scrambled to rebook passengers and TV networks broadcast global images of people sleeping on terminal floors and waiting in long lines for limited food options.

New York-based travel industry expert Joe Brancatelli estimated that 1 million travelers were affected based on 9,500 flight cancellations. And although the airlines say it's too early to put a figure on the losses, Mr. Brancatelli said "for New York-hubbed airlines like Continental, JetBlue and American, I'm sure the cost will be north of $50 million each."

That's $150 million alone for those three carriers, and close to $200 million when you factor in the "tens of millions for other carriers," said Bob Harrell, a New York-based airline industry consultant. "It doesn't take long to get up north of $150 million," he said, including travelers who get refunds; airlines paying for hotels and meals for some customers; shelling out overtime for flight crews, gate crews and reservation agents; and the cost of flight diversions themselves.

Mr. Harrell said that although hotels based at or near airports saw an increase -- Ad Age reported early last week that occupancy at the Hyatt Regency Pittsburgh Int'l Airport went from 50% midday Sunday to near full by the end of the day, thanks to passengers who'd been diverted en route to the East Coast -- it was partly offset by cancelled reservations at other hotels that patrons couldn't get to because of the storm.

And while there were numerous stories of people renting cars to drive home instead of waiting days for a rebooked flight, the car-rental industry was about as flat as hotels. "We were very busy Christmas weekend at the airport," said Laura Bryant, spokeswoman for Enterprise Holdings, the St. Louis-based parent company of Enterprise, Alamo and National rental cars. "On top of that, many customers have not been able to return their vehicles because their flights were canceled. We have sufficient fleet and flexibility to handle our customers with reservations, and are able to accommodate most travelers who walk up with last-minute requests."

And while the airlines sustained financial damage, they also got hit with some brand damage for their inability to communicate sufficiently with stranded travelers. "Where you can blame the airlines is for their appalling understaffing at airports and at call centers," said Mr. Brancatelli. "Most carriers cannot process re-accommodations online (it's a financial-accounting thing more than a tech issue), so it has to be done with a human being. They simply don't have enough human beings. And airlines don't think they have much of a responsibility to staff for extraordinary circumstances anymore."

One of the biggest complaints was that callers couldn't get through to rebook flights. American Airlines spokesman Ed Martelle said last week that the airline simply "ran out of lines. We're in the process now of getting more lines up and bringing more people in to handle the volume."

Mr. Brancatelli agreed, but said, "By and large, airlines have now adopted this attitude: 'You don't pay enough in fares for us to justify our having assets available when there are irregular operations.'"

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