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Monday, November 03, 2008

The Travel Economy - Poised to bounce back?

Yesterday morning I was listening to a program where a Houston preacher was talking about how various trees react when subjected to hurricane force winds.

While he was taking about our character and nature as it relates to the trees, it occurred to me there is also a very strong parallel to the economy.

In his sermon he talked first about the mighty oak. While it stands very talk and looks very solid, when category 3 winds come, amazingly, they break in pieces, causing damage in their wake. I would observe that the major financial institutions, AIG, Lehman Brothers and many of the banks are like the mighty oak. Who would have ever thought that when the winds of the credit crisis blew, that these companies would break into pieces, needing rescue instead of providing shade and shelter in the storm?

The second tree was the pine. No matter how tall the pine tree, the fact is that it does have very shallow root systems and when the winds blow, they are often the first to fall, also damaging anything in its path. The mortgage companies that spearheaded sub-prime mortgages, allowing the American public to leverage themselves beyond reason, are like the pines. It isn't difficult to imagine that these would be the first to fall and we have seen the damage left in this particular storm's wake.

Our industry, the travel industry, is much more like the stout palm. While the winds of economic crisis are clearly blowing, like the palm, we bend and it may even seem like we will never recover from the effects of the storm.

But our industry is resilient, in fact incredibly so. No matter how hard and how long the winds blow, we bounce back. We adjust, we maintain a spirit of hope that when the winds stop blowing we will actually emerge stronger. And this hope is well founded. The root system of the palm is actually strengthened as the tree is bent by the punishing winds.

While consumer spending and consumer confidence are suffering, for most, consumers don't see travel as a luxury, but as a birthright. So while they may put off buying a new car, opting for driving their current one a bit longer, or they may choose not to buy a new couch or to get the latest video or audio toys, when their vacation time rolls around, they may do something less exotic, stay closer to home, or drive versus fly, but they won't cancel their time off.

While we are bent by the winds, we need to focus on strengthen our root systems - retooling our plans, adjusting our cost structure, refocusing our efforts beyond the storm, looking for growth opportunities once the sun begins to shine again, as it inevitably will.

It is important to note that even a palm can break and topple if it behaves like an oak or a pine.

On the distribution front, if you are inflexible, holding on to the way you have always done things, you may not weather the storm. If your roots do not go deep and you ignore the basics (understanding the benefits of a variable cost channel versus shifting everything to a fixed cost base, or embracing channels that yield significantly lower profits where the delta between the two is higher than the cost of the external channel), you will topple like the pine.

Leadership matters. How would you characterize your leadership style?

Customer attitudes are important. If you hold fast to rules and regulations and are not sensitive to your customers, you will break like the oak no matter how strong your brand has been in the past. If you give lip service to the customer and end up nickel and diming them to death, then you too will topple like the pine.

Customer intimacy is important. Measure yourself against the type of tree that you resemble in your attitudes on the front line.

As I sit here on a glorious Monday morning in Tampa, I am so glad that I'm surrounded by palm trees, even though as of Saturday another hurricane season has come and gone.

I patiently await the passing of this economic storm as well.

Meanwhile, if you have a chance to invest in an oak, a pine or a palm, I'd go for the palm every time.

Chicke Fitzgerald
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