Ever wonder why you pay one price for an airline ticket, while the person next to you paid hundreds more? Or less? Or why the ticket price changed in the five minutes it took you to decide to buy it?

West Virginia University Economics Professor William Reece can explain it, and has written a newly published textbook to help teach high-level economics students about that and the other ins-and-outs of the $800-billion-a-year industry from an economics viewpoint.

Reece has taught the economics of tourism each year since 2002, and now his course is part of the WVU College of Business and Economics tourism and hospitality initiative.

The answer to the fluctuating ticket prices is called “revenue management,” a basic feature of business in the modern airline industry that allows for maximum use of “fixed assets,” in this case, airplanes.

The explanation: Business travelers are less sensitive to price and will pay more, while leisure travelers may reconsider a trip if the price is too high. That’s the short form. The long explanation involves demand curves, marginal revenues, capacity and consumer surplus, among other concepts.

The textbook, “The Economics of Tourism,” delves into problems in the airline industry and traces the downfall of industry icons such as Pan American, Eastern and TWA. In this section, Reece examines aircraft manufacturers and equipment, labor, maintenance, airport fees, fuel and a host of other factors that have an impact on the industry. The book is published by Pearson Prentice Hall.

“I needed a book for my class,” Reece said, “and I found all kinds of books on tourism and hospitality, but little on the economics of the industry. So, I decided to write one.”

Reece said tourism, generally, has been hit hard by the recession because it is a costly activity that businesses and consumers curtail during economic hard times. But for those who can travel, “Actually, now is a great time to travel because there are some really good deals,” he said.

“By the end of 2005 we saw about one-half of the U.S. airline industry in bankruptcy,” Reece said. “Fuel costs are again rising, and this is a major threat to the industry. During 2007 and 2008, fuel prices rose to record levels, leading to widespread industry losses. At the time I was finishing the book, oil was at $140 a barrel. The recession has clobbered the industry, too.”

The text is geared toward students in upper-level undergraduate courses and graduate students. Dr. Reece joined WVU in 1990. He earned a Ph.D. in economics at Washington University (St. Louis) in 1975.

His recent publications include “Casinos, Hotels, and Crime,” which is forthcoming in Contemporary Economic Policy, “Household Mobility and Cellular Telephone Demand,” in Applied Economics Letters, “Are Senior Leisure Travelers Different?” Journal of Travel Research; and “Demographics of Hawaii Leisure Travel, Journal of Hospitality & Tourism Research.

-WVU-

tt/11-17-09

CONTACT: Dr. William Reece
(304) 293-4039, wreece@wvu.edu