An austerity drive sweeping through Europe is putting a spotlight on the lavish lifestyles of top officials and big organizations, and New York is feeling the impact as the go-to destination for these big spenders.

EU Parliament

The European Commission stands accused of spending more than €7.5 million (US$11 million) on private jet travel, luxury resorts, parties and handing out expensive Tiffany jewelry to guests.

But the one story that’s getting all the attention in the European news media is a $41,000 bill for a four-night stay at the Peninsula Hotel in New York by EU President José Manuel Barroso.

Barroso had come to New York for the General Assembly of the United Nations. The European Commission has a convenient explanation for the huge bill—it’s New York’s fault.

In response to a question raised in the European Parliament, they said that luxury hotels in New York jack up their rates when a big event like the U.N. General Assembly brings in hundreds of large international delegations.

Then there’s the hotel maid incident involving IMF chief and French politician Dominique Strauss-Kahn and another one involving an Egyptian businessman that have made luxury New York hotels like the Sofitel and Pierre infamous.

One of the side stories of the DSK incident is a spotlight on the opulent lifestyles of IMF officials. DSK was staying in a $3,000 luxury suite at the Sofitel, and questions were raised in France about who’s paying for it. Considering the IMF’s role as a global banker for distressed nations, it’s a particularly bad situation.

Coupled with the Greek bailout crisis and a £10 billion (US$14.65 billion) government waste cutting plan underway in the United Kingdom, these incidents have the makings of a full-blown AIG Effect where officials and corporate executives get taken down by the media and public for spending too much.

The BBC, for example, is taking heat for booking 200 rooms in 14 luxury hotels for the Glastonbury Festival. In London, civil servants have apparently spent £25 million (US$36.63 million) on credit cards for late-night pizzas, iPads, snowmobiles and…luxury hotels.  The total travel bill came to £3 million, of which £1.5 million (US$2.47 million) was for luxury five-star hotels all over the world.

The fear of a media take-down will curtail heavy spending by high-profile European travelers when they come to Washington, D.C., and other U.S. cities, but the biggest impact will be felt in New York. Four of the top international tourism markets into New York are European, with the United Kingdom on top, with more than one million visitors each year.

Photo – CGP Grey

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Groupon

Feature 1: The much-awaited Groupon IPO is here, and Wall Street got blown away by the numbers. A registration statement filed with the SEC shows a $750 million public offering. Groupon posted a stunning 2,241 percent growth last year.

Groupon also announced the launch of a deals site with Expedia: “Groupon Getaways with Expedia” will allow more than 135,000 hotels listed on Expedia to offer deeply discounted travel deals.

They plan to start with Canada and the United States, and then expand to other countries and include package deals, airline tickets, car rentals, cruises and destination activities.

Groupon files for $750 million IPO - Washington Post (video, pr)
Groupon’s revenue grew 2,241 percent last year - WSJ
Groupon and Expedia partner to launch travel deals site – Expedia.com
Funny or die: Groupon’s fate hinges on words - NYT

Airbnb

Feature 2: Airbnb also created quite a stir this week, with a funding round that reportedly exceeded $100 million at a $1 billion valuation, including a large investment by Ashton Kutcher. Detractors followed the fame and fortune.

Instead of basking in the glow of investors’ confidence, Airbnb found itself at the wrong end of a sting with accusations of farming Craigslist to boost vacation rental listings.

Airbnb has arrived: Raising mega-round at a $1 billion+ valuation - TechCrunch
Airbnb’s soaring valuation a wake-up call to independent hotels - TechCrunch
Airbnb farmed Craigslist, says competitor - SF Chronicle
The price of success – Portfolio.com

Here’s the rest of the week’s interesting news:

HomeAway books first-quarter profit ahead of IPO – AllThingsD
Hawaiian beach vacation sparks Urbanspoon co-founder to start Dwellable - GeekWire

Waikiki Edition vs. Marriott/Ian Schrager lawsuit filing – Bickel & Brewer (pdf, see pr)
Marriott content with Edition’s slow growth - HNN
Ian Schrager speaks out on ‘frivolous’ lawsuit - HotelChatter

Pierre, Sofitel hotels in NYC to give maids panic devices - NBC New York
Toronto hotel workers need panic buttons too, union says - thestar.com
GWU study: Hospitality management grads earn less than all other business majors – Georgetown.edu (pdf)

Google finds Canadians ignoring travel apps - thestar.com
Smart phone app for high-tech grilled cheese in Silicon Valley - BusinessWeek
Smart beach trash cans debut in Santa Monica with social photo sharing - smdp.com

Airline fuel bills today are anything but peanuts - AP
Airline fee revenue soars to $21.5 billion - UpTake

Comcast to pay $1 billion for Blackstone stake in Universal Orlando - The Wrap Media
EU clears Axa, Permira online travel agency venture - WSJ

CMO Strategy: Q&A with Homewood Suites VP global marketing Carla Raynor - AdAge
Social CMO series: How JetBlue’s social media strategy took flight - Mashable

Photos - wovox; Airbnb

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The American Airlines vs. Global Distribution Systems (GDS) fight over American’s Direct Connect is devolving into a messy fight to be decided by the courts instead of market demand, new technology or mutual agreement.

AA Orbitz Distribution Update

On June 1, 2011, the Illinois Circuit Court of Cook County issued a ruling in favor of Travelport, granting injunctive relief against American Airlines.

American had banned Orbitz from displaying AA fares and schedules on Orbitz.com and Orbitz for Business since December 2010, and the matter is being argued in the courts.

Effective immediately, the new ruling restores American’s full schedule of flights on Orbitz pending the outcome of the litigation.

“Travelport is delighted with the Court’s ruling requiring AA’s fares to be reinstated on Orbitz and enabling consumers to book AA tickets through Orbitz,” said Travelport’s Chief Commercial Officer, Kurt Ekert. “We view this as a significant ruling.”

The timing of the court ruling is ironic, considering that American just released a private video on its YouTube channel that tells Orbitz customers “A Whole World is Missing” because American Airlines fares can’t be seen on Orbitz.

It’s also rather inconvenient timing, because American’s Direct Connect fight with Sabre Holdings is heating up again. The AA vs. Sabre litigation was put on hold until June, but the truce is apparently over. American has now added Sabre to the anti-trust lawsuit it had filed against Travelport in April 2011.

American’s statement defending Sabre’s inclusion says that its decision to “include Sabre to the antitrust lawsuit comes after American attempted for several months to resolve disputes over distribution of the airline’s fares and schedules, as American sought commercially reasonable terms for distribution through the Sabre GDS, but Sabre has been unresponsive to those requests.”

Sabre responded in kind, filing an antitrust lawsuit against America Airlines, seeking damages and an injunction preventing AA from continuing to force travel agents and other customers to use Direct Connect.

“Our preference was to extend the current legal ‘stand down,’” said Chris Kroeger, senior vice president, Sabre Travel Network. “However it is apparent based on AA’s actions that Sabre has no choice but to pursue legal remedies. In parallel, we will continue to pursue through negotiations a distribution agreement with AA that meets the needs of all constituents.”

In the statement defending their lawsuit, Sabre accused American Airlines of “attempting to eliminate the GDSs.” When the U.S. Department of Justice is conducting its own anti-trust investigation of the GDSs and the concerned players are busy filing anti-trust lawsuits against each other and attempting “elimination,” it’s fair to say that this won’t end well.

Read full statements: Orbitz, Travelport, AA, Sabre

Photo – AA Distribution Blog

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From checked baggage fees to fuel charges on frequent-flyer tickets, airline add-ons have proven to be a boon to carriers in recent years, raking in $21.46 billion in 2010, about double what was collected in 2008, according to a study released Tuesday.

Total add-on revenues are up 38 percent from 2009, and 96 percent from 2008. The report, produced by IdeaWorks Company, a Shorewood, Wisconsin-based consulting company specializing in ancillary revenue, and Amadeus Corp., a travel-technology company based in Madrid, Spain, culls information from 47 airlines that included some type of ancillary fees in 2010 financial filings. In 2007, just 23 airlines disclosed such income.

“Ancillary revenue has become an enduring part of airline income statements, as revealed by this study,” says Ian Wheeler, Amadeus VP of marketing and distribution. “True financial success for airlines is boosted when these services are available through online, travel agency and corporate travel distribution channels.”

Add-on revenue includes baggage and change fees, Wi-Fi and entertainment services, co-branded credit card fees, lounge passes, purchases of reward points—basically any amount of revenue generated above and beyond the initial price of an airline ticket. The segment initially was dominated by low-cost carriers as a way to supplement income, but since the 2008 spike in fuel costs, major carriers have jumped on the á la carte bandwagon.

The report combines domestic and international carriers in its top 10 totals. Four out of the five top airlines pulling in ancillary revenue in the chart below are U.S. carriers, with figures jumping significantly from 2009 totals.

As a percentage of total revenue, the top U.S. fee generators are Allegiant Air (29.2 percent), Spirit (22.6 percent) and United Continental (14.7 percent). Revenue per passenger leaders are United Continental ($34.32), Allegiant Air ($32.86), Spirit ($25.16), Alaska Airlines ($23.68) and Delta ($22.75).

IdeaWorks anticipates the trend to continue in 2011, with airlines coming up with even more creative means of capturing our precious travel dollars.

Photo: IdeaWorks and Amadeus

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