Travel Industry

I’m not one to say “I told you so,” but it’s darn tempting to throw that phrase at New York City officials who implemented the tax on travel agencies selling available rooms in the Big Apple.

Lots of rooms, lots of taxes

After trying to figure out what the law says and exactly how to implement it this fall, the American Society of Travel Agents and a host of big online Internet players (i.e. Expedia, Hotels.com, Orbitz, Priceline and Travelocity) responded this week with a lawsuit against the city. The grounds: extending the hotel room occupancy tax to “third-party travel intermediaries” is “unconstitutional and illegal” as the city “has no inherent power to tax.”

Other points in the lawsuit bring up the fact that New York City failed to answer critical questions and the City’s interpretation of its new rules was unacceptable. To rub salt in the wound, the City of New York imposed the tax without notice, hearing or other opportunity for meaningful input.

ASTA’s senior vice president had previously said the law was written by ”people who don’t know about the industry who just want more money.”

Technically, I predicted that travel agencies would retaliate with a huge drop in bookings in the fourth quarter. I was correct about the retaliation part — a lawsuit could deter other cities from pulling this stunt in the next six months. The move is predictably popular among travel agents, although it is aimed only at stopping taxation on online hotel bookings at the moment, which could end up giving their biggest competitors an advantage they don’t enjoy. But that’s for another day. Fighting back is the first order of business.

Happy holidays, Mayor Bloomberg.

Travel Weekly’s seventh annual Readers’ Choice Awards were handed out at an awards ceremony held at the Plaza Hotel in New York. Winners were selected in 58 categories overall, including airlines, cars, hospitality, rail, GDS, tour, cruise, destination and theme parks.

Travel Weekly Readers' Choice Awards

Marriott International got the award for being the best domestic hotel chain and for offering the best Sales & Service. IHG was voted as the best hotel chain for both Europe and Asia. Four Seasons got the award for being the best luxury hotel chain.

In the cruise sector, Carnival was the best domestic cruise line, but Royal Caribbean International and Celebrity Cruises – each part of Royal Caribbean Cruises, LTD corporation – swept 7 out 10 cruise awards. RCI was the overall winner and also won for offering the best Sales & Service. The best cruise ship category was also won by Royal Caribbean’s Freedom of the Seas.

Tom Coiro, VP of Direct Line Cruises who attended the event at the Plaza Hotel as a guest of Celebrity Cruises, observed that “It was incredible to watch! Before Dondra [Dondra Ritzenthaler, Senior VP of Sales for Celebrity Cruises] and Vicki [Vicki Freed, Senior VP of Sales and Marketing for Royal Caribbean International] could return to their seats, they were being called back up to the stage to receive another award.”

Under airlines, Southwest Airlines won the award for best domestic airline, while Virgin Atlantic and Singapore Airlines were declared best for International and Business/First Class respectively.

Las Vegas was voted in as the best U.S. City in the Destination category, while Hawaii took home the award for best U.S. State.

Mike McCartney, Hawaii Tourism Authority’s president and CEO, said that “We are truly honored that Hawaii has been chosen for such a prestigious award…HTA will continue to work with our marketing partners and Hawaii’s visitor industry to ensure that our islands continue to be recognized as a desirable and premier travel destination.”

Maui was voted as Hawaii’s best island, while Bellagio was declared as the best hotel in Las Vegas. The St. Regis Bora Bora was declared as the best resort in the world.

In Europe, Italy won the best country and for Rome as the best city, while Asia/Pacific was swept by Australia, which was named the best country with Sydney as the best city.

Hertz swept the car rental category by winning both domestic and international arenas. The Best GDS was Sabre and Walt Disney World was the best in theme parks. The best domestic tour operator was GOGO Worldwide Vacations, with Trafalgar Tours winning the international category, and Travel Impressions for Sales & Service.

Here’s the full list of winners, and these were the nominees.

Holiday travel just got cheaper

It’s all over USA Today this morning: the airlines have waived their advance purchase rules, meaning folks can buy their way home this holiday without paying more than those who booked in advance. As the nation’s newspaper points out, American Airlines everyday no-advance purchase airfares between Dallas and New York City were selling yesterday for $1,858 roundtrip. Today, the route is priced as low as $388 roundtrip. (Atlanta to Seattle fell from $1,198 to $258 on Delta.)

That’s excellent news for consumers, of course. No one should have to finance a visit with family over the holiday for the next 12 months.

But this comes on the heels of the airlines swearing themselves blue in the face that wouldn’t happen this year. Travel agents have been spreading the word that capacity is down, prices are up and the old “buy now, or pay more later” adage was definitely in full force for the holidays. Only now it isn’t, and the travel agency segment looks like used car salesmen. My sincere condolences go out to the poor family that paid nearly $1,200 for a ticket yesterday because you, frankly, were screwed.

And good luck, American Airlines/United/Delta/Northwest/US Airways/Frontier/AirTran/ Midwest getting folks to buy seats a few months out on the 2010 holidays, which would be so helpful to your bottom line. You’ve just trained them to wait until December 21 for the deal.

Merry Christmas, travelers!

I certainly don’t have an MBA degree hanging on my wall; my business knowledge comes from two decades as a business reporter and a few years of being a business owner myself. But that gives me enough common sense to wonder if sticking to your guns wouldn’t be worth trying at some point. The airlines have fallen into the couponing trap, and don’t have the strength of will to pull themselves out. Meanwhile, William Maloney, CEO of ASTA, describes 2009 as “miserable, probably one of the worst for the travel industry. Airlines, hotels, tours, cruise lines — everyone saw a downturn in revenue.”

If the definition of insanity is to do the same thing over and over and expect a different outcome, then discounting holiday fares is insanity.

Meanwhile, Arnie Weissman at Travel Weekly is calling this the decade of fear for the travel industry. He points the finger at 9-11 and consumers’ reactions. “For how many years will Americans react to each new perceived danger by canceling travel plans?” Weissmann asks. That goes both ways: how long will suppliers in this niche be afraid to step out and try something new?

Photography: jetalone, uggboy (Flickr)

Last week, Caroline Beteta, California Tourism CEO and National Chair of the U.S. Travel Association, wrote a piece in the Sacramento Business Journal which stressed the point that the media is bent on keeping the anti-travel rhetoric alive, inspite of the issue having lost its potency beyond companies which recieved a TARP bailout.

Meetings Mean Business

She singles out a CBS affiliate that sent undercover reporters to a Palm Springs resort to cover the American Association of State Highway and Transportation Officials convention, where CALTRANS employees were meeting with federal officials.

Meanwhile, back in Washington DC, the anti-travel rhetoric’s latest target is the DHS. The DHS Inspector-General released a report on Friday which noted that from 2005 to 2007, Homeland Security spent $110 million on conference-related activities.

Even though the report also praised Homeland Security’s CFO for issuing a department wide policy on employee travel expenses and conference planning in October 2008, the media has already begun to use bits and pieces of the report to create a controversy where none exists.

Here’s an example – Millions spent on security retreats…This kind of sensationalist journalism threatens to derail the economy a lot more than any real or percieved excess in corporate travel.

Caroline Beteta, in her article, makes this crystal clear by pointing out that the convention attended by CALTRANS employees generated an economic impact of $1 million to the Palm Springs region and is helping secure federal funding for the state’s road projects.

U.S. businesses spent more than $200 billion on business-related travel in 2008. An Oxford Economics study commissioned by the U.S. Travel Assoc. showed that for every dollar spent on business travel, companies realize $12.50 in incremental value and $3.80 in profits. 

Meetings, events and performance incentive travel in the United States are responsible for almost 15% of all domestic travel, generating 1 million jobs and $27 billion in wages.

A recent Ypartnership survey showed that 35% of those surveyed are planning on fewer meetings in 2010 due to fears over attendant publicity and image issues. This would result in a $2.5 billion economic impact loss for local economies.

In order to send this message to the media that less meetings mean lost business, an alliance of Meetings Industry Groups has come together in a joint venture to fund a new study on the economic benefits of corporate meetings and events. PricewaterhouseCoopers has been hired to complete the study.

The associations party to this effort include the U.S. Travel Association, Convention Industry Council (CIC), Destination Travel Foundation (DMAI), American Hotel and Lodging Association (AH&LA), American Society of Association Executives (ASAE), Meeting Professionals International (MPI), Professional Convention Management Association (PCMA),  International Special Events Society (ISES), and the Association of Destination Management Executives (ADME).

U.S. Travel Association President and CEO Roger Dow added that “This is a great example of the industry moving forward together.”

In addition to being one of the funding organizations, the U.S. Travel Association’s research team will be the project manager, with the CIC as the contract administrator. The study will take 12 months to complete.

Sandusky, Ohio based theme park operator Cedar Fair, L.P. (NYSE: FUN) has agreed to be acquired by New York based private equity firm Apollo Management LP for $700 million, along with the assumption of about $1.6 billion of outstanding debt, for a total deal value of approximately $2.4 billion.

Knotts Berry Farm, CA

Cedar Fair Entertainment Company owns and operates six outdoor water parks, one indoor water park, five hotels and 11 amusement parks, including California’s Great America in Santa Clara, CA and Knott’s Berry Farm in Buena Park, CA.

Cedar Fair unitholders will receive $11.50 in cash for each Cedar Fair limited partnership unit that they hold. The transaction has been financed through a $1.95 billion financing package put together by a group including J.P. Morgan and BofA, among others.

Apparently it was a unanimous decision by the Board to approve the merger with Apollo Management LP, an affiliate of Apollo Global Market. After the news hit the wires, shares of Cedar Fair jumped 29% in after hours trading.

According to their third quarter results, Cedar Fair’s net revenues for the first nine months of 2009 decreased by $66.5 million as compared to last year. Net income for the first nine months of 2009 decreased $0.8 million to $61.7 million. Their parks put together recieved 18.8 million visits, which is 1.2 million less than during the same period last year.  

Cedar Fair’s chairman, president and CEO Dick Kinzel said that ”We have considered a wide range of strategic alternatives over the past several years. After considering these strategic alternatives, we have concluded that the transaction with Apollo is in the best interest of our unitholders.”

Aaron Stone, a Senior Partner at Apollo, said that Appolo was “firmly committed to Cedar Fair’s continued growth as an industry leading amusement park operator.”

Upon completion of the merger – expected in the second quarter in 2010, Cedar Fair, currently a publicly traded partnership, will become a private company wholly-owned by Apollo Management LP.

Related posts:-
Blackstone Consolidates Theme Park Holdings with AB-InBev Deal

The Brazilian Ministry of Tourism and Embratur (Brazil’s Tourism Board) have unveiled Plano Aquarela 2020 – a 10 year plan with ambitious targets for ramping up visitation numbers and tourist spending.

Plano Aquarela 2020

Brazil is host to both the 2014 FIFA World Cup and the 2016 Olympic Games, events which Brazil hopes will offer a permanent boost to it’s brand and tourism industry. Sports figures prominently among the focus areas in the plan, which also includes sun and beach, eco-tourism, culture, and business/events.

Jeanine Pires, President of Embratur, says that the “Olympic Games, preceded by a FIFA World Cup, will leave an infrastructure legacy that affects directly tourism. It also means four years of a mega advertising campaign which will transform the country’s image.”

The estimates in the plan are based on an analysis of tourism growth in past host countries for both the Olympic and Paralympic Games and the World Cup. Key quantitative targets in Aquarela 2020 include :

• 113% increase in international arrivals leading to 11.1 million inbound, foreign visitors.
• 304% increase in foreign tourist spending to US$17.6 billion.
• 500,000 additional visitors in 2014 when the country hosts the World Cup, and a 15% increase in 2016 when the Olympic Games are held in Rio.
• Growth rate at least 1% higher than the growth rate for all other South American countries.
•  27% share of all tourists from the continent.

Brazil’s tourist arrivals have increased from 4.7m in 2001 to 7.2m in 2008, projected to increase to 9.2m by 2014. In 2008, foreign tourists in Brazil spent a total of $5.78 billion.

Photo courtesy Embratur

Related posts:-
The Olympic Effect – Chicago Lost, but Chicago Tourism Strikes Gold
Olympic Avoidance Effect – Tourism Tanks in Whistler & Vancouver

The Franchise Business Economic Outlook for 2010 is forecasting a 2 percent increase in the number of business-format franchises next year — to the tune of 18,000 new establishments. The good news is that will be a gain of 36,000 jobs after watching 400,000 jobs disappear in 2010. The gross value of goods and services produced by franchise businesses (aka economic output), is forecast to increase 2.8 percent to $868.3 billion—an increase of $23.6 billion in 2010.

Business owners not jumping in bed with lodging franchise

“We are pleased that the 2010 outlook for franchise businesses is projected to be more positive than 2009, but access to credit remains a major hurdle to increase jobs and economic output at the levels we have seen during past recoveries,” says International Franchise Association president and  CEO Matthew Shay.

And — surprise! — lodging is expected to feel this crunch more than its fellow franchise systems, according to the IFA in D.C. Employment is expected to decline in lodging (-2.4 percent) while increasing in 8 other sectors, with the largest percentage increases expected in real estate (1.3 percent), quick service restaurants (0.8 percent), retail food (0.7 percent) and personal services (0.7 percent). Lodging is the only sector of the top 10 expected to decline in the number of establishments, too. Quick service restaurants, on the other hand, will see the biggest jump at 3.1 percent new units.

“The U.S. economy is expected to experience slow growth in 2010 as the nation begins to recover from the recession. The Franchise Business Economic Outlook for 2010’s macro view of the economy anticipates nominal gross domestic product (GDP) to grow 3.8 percent, while economy wide employment is projected to increase 0.4 percent in 2010,” says Drew Lyon, principal in PricewaterhouseCoopers’ National Economics & Statistics practice. “Our forecast is for output of all franchise business sectors to expand modestly in 2010 as the recovery takes hold.”

Photography: MoToMo (Flickr)

At 10.27 am on Dec 15, 2009, Boeing’s 787 Dreamliner finally took off on its maiden 3-hour flight from Paine Field in Everett, Wash. and landed safely at Seattle’s Boeing Field. The successful test flight marks a milestone not only in Boeing’s long-delayed delivery schedule for the 787, but also for Boeing stock (NYSE: BA).

Boeing 787 Dreamliner - First Flight Takeoff K64825-01

Boeing Co. has been trending upwards for the last two months, in anticipation of the 787’s takeoff. It started off around $47 at the beginning of November, and had steadily climbed up to $55.67 by Dec 15.

With the successful test flight behind them, and looking forward to the first delivery in 2010, analysts estimate now that Boeing stock is going to hit $60 and keep climbing.

Boeing has bagged 840 orders for the $160 million 787 Dreamliner plane from some 55 airlines, worth a total of $140 billion.

What makes the 787 Dreamliner the fastest-selling new commercial jetliner in history, and so important to Boeing, is the revolutionary improvements in range (9400 miles), cargo capacity (45% more), fuel efficiency (20% more) and noise reduction (60% less). The plane is made of lightweight carbon-composites to reduce fuel consumption.

Even so, Boeing has had a torrid time with it – five delays spread over more than 2 years had kept the Dreamliner program on the ground for an extra 30 months. They were supposed to deliver the first plane in May 2008. The first delivery is now scheduled for the fourth quarter of 2010, to Japan’s All Nippon Airways.

Also, the recession led to the cancellation of 70 orders, and Boeing is in the middle of a round of massive layoffs, seeking to reduce their workforce by 10,000. After Boeing announced a $1.6b third quarter loss, CFO James Bell said in a memo that the 787 Dreamliner’s setbacks were “having a significant impact on our financial performance.”

Another issue at stake is whether Boeing can now use the momentum from the test flight to swing around from research to mass production and stick to the current delivery schedule, inspite of the layoffs and the teething problems faced by the 787 program.

Boeing’s European competitor Airbus managed to beat Boeing to the gate by rolling out its own Jumbo A380, but has since been beset by production issues, and Airbus officials say the production cost of the A380 still outstrips the selling cost. 

Also, inspite of the extended production time, the problems and kinks with the A380 are still being worked out on the go – An Air France A380 flight from New York to Paris was cancelled yesterday due to fuel-tank issues. On Nov. 27, an Air France A380 on the same route was forced to return to New York 90 minutes into its flight because of an unspecified technical issue.

If Boeing can avoid all this and ensure smooth production, delivery and a hitch-free commercial launch by its consumers, then Boeing Co. stock is going to be worth a lot more than $60. Even if there are a few hiccups along the way, the 787 Dreamliner still has what it takes to pull Boeing out of the slump.

Photo courtesy Boeing Co.

Whether the UN Climate Change Summit (COP15) in Copenhagen, Denmark produces a global consenus on emissions cuts remains to be seen. Even so, the conference already offers valuable insight into how to organize ’successful’ green meetings on a massive scale.

Copenhagen Sustainable Meetings Protocol

The organizers are preparing a Copenhagen Sustainable Meetings Protocol (CSMP) based on the planning efforts undertaken for COP15. CSMP is expected be used as a template for organizing similar large, complex, multi stakeholder meetings in a sustainable way.

COP15 is responsible for generating 40,500 tons of emissions, including travel to and from Copenhagen for all the attendees. As per UN requirements, the host nation has to compensate for the local transport emissions, which only accounts for about 10% of the total.

But Denmark chose to make the entire event carbon-neutral, and so they’re spending around $1.02 million on carbon offsets, made via a project to replace polluting kilns in Bangladesh, which will cut more than 100,000 tonnes of CO2 emissions each year.

As for the efforts to reduce emissions – Delegates are being encouraged to travel around on bikes and use public transit. A fleet of 150 limos powered by bioethanol, algae diesel or hydrogen is available. Bottled water is strictly frowned upon, and tap water has been made available in plenty throughout and around the Bella Conference Center. There’s a windmill outside the center producing electricity for use.

The prior preparation has been equally thorough. The MCI Group was charged with finding and allocating 75,000 hotel rooms for the conference. In the 18 months prior to the conference, MCI gave higher visibility on COP15’s online reservation pages to hotels which were already certified green, or were willing to do so. This resulted in the number of certified green hotels in Copenhagen jumping from 18% to 53% during this period.

All this being mapped out into the CSMP no doubt points to a very green future for the meetings industry, but the sweetest takeaway for the industry probably came from Jan-Christoph Napierski, the Head of Sustainability for COP15, in response to critics who accuse the conference of adding to climate change by filling an entire city with travelers enjoying luxurious hotels, restaurants and elite transport.

Says Napierski, “I think it is necessary that people meet face to face to come up with an agreement that everyone can sign.”

When the Head of Sustainability for the United Nations’ Climate Change Summit says its necessary to hold face-to-face meetings in order to get things done, that gives you a very big boost.

Combined with the widespread adoption of the Copenhagen Sustainable Meetings Protocol (CSMP) and similar frameworks for smaller corporate meetings, this could very well lead to a situation where the meetings industry is no longer at odds with environmentalists.

CSMP is scheduled for completion in February 2010, and is the result of a joint effort by the Danish Ministry of Foreign Affairs, VisitDenmark – the National tourism and meetings organisation, the City of Copenhagen, Wonderful Copenhagen Convention & Visitors bureau, pharmaceutical corporation Novo Nordisk, and the MCI Group.

Carnival Dream

Carnival Corp. has reached out to protect its Carnival, Princess, Holland America, Cunard and Seabourn lines reputations online by updating its paid search requirements and guidelines for third parties. Essentially, this means that when a consumer searches by brand name, they will find themselves at the official website as opposed to a travel agent’s.

It’s really nothing out of the ordinary, company officials insist — every retailer is now working to protect outsiders from bidding on their branded keywords. “When a consumer searches for Carnival, they’re seeking Carnival content and the goal is to provide the cleanest, straight path to the most comprehensive Carnival content available, which is on Carnival.com,” spokeswoman Jennifer De La Cruz told Travel Weekly.

The company plans to continue maintaining an agency locator database so online seekers aren’t necessarily encouraged to bypass third parties, and the decision didn’t cut off agencies’ ability to use its name in the ad text portion of search results. Of course, that’s allowable as long as the agency stays within the new guidelines in the first place.

Carnival Dream

Reaction from the travel agent ranks is mixed. Among the comments at Travel Weekly:

• The ruling makes sense for specific searches like “Carnival Dream,” but what about the person looking for generic terms carnival, dream?

• This is definitely another anti-agent move full of double talk and ill will … but it does level the playing field among those vying for a commission.

• The industry needs to ban together and protest, lest other operators get the same idea. In fact, why not boycott them for 24 hours and show them how powerful agents are?

• This idea is doomed to failure because cruise lines have far too many cabins to fill by themselves.

• Can Carnival legally require Google not to allow anyone else to use those names?

•What about an SEO company that doesn’t have a contract with Carnival and wants to buy key words containing the Carnival name or names of their ships?

• Hey, do the big OTA have to play by these rules, too? Huh, Expedia, Orbitz and Travelocity? (Best line in the responses: “I can see some big online agencies with really snug pucker bands over this restriction.”)

My assessment as both a travel agent and business journalist? It’s a clever way to kill two birds with one stone. Yes, it does protect brand marketing efforts as they claim. Yes, it’s done in retail, where the customer and store have a direct relationship. But the fact that consumers will book directly on the site where they’ve been directed means Carnival pays no commission on those bookings — and that financial detail hasn’t escaped a single person in their C-suites. It makes sense on the bottom line and that will always be the engine that drives capitalism. The same capitalism that allows agents to come up with an answer rather than merely accept the spoonful of medicine.

Photography: Julie Sturgeon