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Wednesday, October 29, 2008

T-Myths™ Are the myths just about online travel?


Recently, PhoCusWright published a press release that talked about their most recent consumer research debunking six online travel myths. As usual, PhoCusWright nailed the issues right on the head and have backed them up with research.

But I firmly believe that the myths that we need to break down are actually at a much higher level than just online travel. And rather than rounding up the usual suspects for online surveys (the air traveler), we need to open up our world to include the broader spectrum of travelers.

Few are aware that with online travel ecommerce at $137b, that still just represents 18.5% of total US travel spending. TIA reports that travel spending is at $740b. Since travel agents represent $129b of that spending, there is still a tremendous market opportunity, irrespective of what channel and what model is used. In fact a $474b market by my calculations!

Tapping into true growth opportunities at this juncture requires that we break down the three top myths plaguing this industry. It won't happen just by wishing it were so.

At Solutionz, we call them T-Myths™ and irrespective of what channel consumers use, it is imperative that we as an industry break them and find ways to tap into the incredible upside that still exists in what we call the "real" mass market.

We address this in our latest "Not-So-White" paper series on the Drive Market, which on November 1st is being updated and republished under the title "T-Myths - Breaking down the travel myths and tapping into the real mass market".

Here are our top 3 T-Myths:
  • Air travel is the mass market
  • The current technologies meet the needs of the mass market
  • We know our customers and their behaviors and intent
We will be addressing each of these in an upcoming T-Myth blog series.

Stay tuned, as Solutionz is also crafting a special version of our RapidStrategy™ workshop to help companies explore and capitalize on this growth opportunity.

Chicke Fitzgerald

Friday, October 24, 2008

Favorite Quote reminds us to look forward, not get stuck on where we are

"I don't skate to where the puck is, I skate to where the puck will be."
Wayne Gretzky

In the travel industry we've been living fat, dumb and happy for the past 30 years, relying on the foundation established by the GDSs in 1978 - selling the core products: air, car and hotel and also extensions, tour, cruise, insurance and attractions.

The primary market has been the business air traveler and the vacation traveler who primarily travels by air.

Suppliers have been moving away from traditional distribution channels with what can almost be called religious fervor, making disintermediation an art form to be publicly lauded.

Strange thing about both of these trends, is that they are incredibly short sighted. They are "skating to where the puck is".

I believe that "skating to where the puck will be" entails a thorough evaluation of the whole market opportunity for product and service sales and that if a traditional channel is variable cost AND high margin, that moving away from it on purpose is just plain insanity.

Building value, differentiation and profitability in the multiple channels (click, walk, talk, beep) where consumers live is the holy grail. That is the true art form that we should be seeking to master.

Chicke Fitzgerald

Belated announcement - Never to late to tout success!


If you haven't checked out our journey planning tool lately, please see what it is possible to accomplish with nothing but sheer entrepreneurial grit and determination!

www.roadescapes.com

Chicke Fitzgerald
CEO Solutionz Group and LeisureLogix

Wednesday, October 22, 2008

Hotel performance metrics down year over year - mirroring airline capacity declines


Smith Travel Research reported today that the US Hotel Industry posted declines in two key performance measurements for this past week.

Occupancy fell 7.3% to 64.2% and the revenue per available room fell 7.1% to close at $69.76. The average daily room rate stayed fairly steady at a .1% increase to $108.61.

Brad Garner, VP of Operations and Client Services for STR stated in the release that “Airport locations led the rate of decline in occupancy and RevPAR—down 10.0 percent and 11.0 percent, respectively, and while capacity issues have been front and center recently, the lack of business travel into airport locations seems a bit more troubling as the fourth quarter unfolds and into 2009.”

The airport property decline is consistent with what we've been seeing on the airline capacity and frequency fronts, so this confirms that the hotel sector will not be immune to the cuts. Across the board results however seem to be between 4 and 6% lower than the capacity cuts themselves.

We can only hope that after the election, the media hype about the economy will subsid somewhat (please tell me that it will.....) and that then consumers and corporations will not be as fearful about spending, particularly on travel.

I am always curious as to how much of a recession in this media saturated world is stimulated by the fear that they engender. I'm ready for a new topic. How about you?

Chicke Fitzgerald


Tuesday, October 21, 2008

First signs of 4th quarter airline cutbacks are visible

Yesterday in my post, I talked about the year to date ARC statistics from the perspective of the average airfare being up both domestically and internationally. Which, as I stated, was good news for the airlines, but not so good for consumers (unless you fancy that empty center seat that has been popping up more and more over the last few weeks).

Today I learned that on an airline transaction basis (the total documents processed via ARC), the first two weeks of October are down 13% year over year. So this is not just seasonality kicking in. This is the first signs of the magnitude of the 4th quarter cutbacks.

According to my source at ARC, they are generally seeing 30 days from ticketing to travel, which sounds a bit long to me, but I will take them at their word as they are squarely in the data analysis business (lest you think they are purely a clearing house).

So November schedules are already well into the double digits as it relates to capacity and frequency reduction.

I suspect we will see the trickle down impact of this with the GDSs as well for their 4th quarter booking numbers.

Hmmmmmm...... time to figure out how to stimulate spending. Let me ponder that one for tomorrow.

Chicke Fitzgerald

Monday, October 20, 2008

$71 per barrel for crude - What will it change?

Despite what should have been the busiest travel season of the year, last week Southwest Airlines reported its first quarterly loss in 17 years. Continental and Delta also reported losses, citing high summer fuel costs as the chief culprit.

When the fuel costs hit $140 per barrel this summer, most US airline executives kicked into high gear, cutting capacity and frequency, paring costs and boosting revenues by increasing prices and adding as many fees as they thought the traveling public would bear, but as 3rd quarter results are now reflecting, the efforts to cut costs and augment revenues was not enough to offset the unprecedented cost of fuel.

On Friday, the price of crude oil futures fell to $71.85, well below the price one year ago and nearly 50% lower than the historic high this summer.

No one can dispute that airlines will benefit from lower crude oil futures, but what will the travel industry as a whole see in the near term from this sharp drop?

We should as an industry be celebrating, but I don’t hear any cheers or even a sense of optimism peeking through from the usual pundits.

It is important to understand that out of every barrel of oil (which apparently holds just under 45 gallons), 22.6 gallons goes to gasoline and just 5.5 gallons goes to jet fuel, with the balance going to asphalt, home fuel oil and other products such as lubricants and various gasses. So who benefits most from the drop in price? Will it follow this same distribution formula?

Will the airlines actually reap the kind of benefits shown in the chart above as it relates to their costs? Perhaps not quite as starkly as the chart shows, but they should definitely see lower costs than they did this summer. And will passengers see a corresponding drop in fares? I suspect not.

Actually I will be more definitive here, lest you see my statement as pure opinion.

  • Per ARC, year to date, airfares are up 10% domestically from last year’s average of $310.15 to $343.68 at the end of September.
  • And internationally, the ARC ticket average for international tickets is up 7% from $799.22 at the end of 2007 to $854.12.

It is safe to say that the crude oil price drop has already been most readily visible at the pump.

I hadn’t been paying attention to the price of crude oil since I published my white paper on the drive market, and so this weekend when I actually saw gas below $3/gal in Florida I thought it was a mistake.

Will we see even lower gas prices and more people driving that used to fly? If what I saw at the gas pumps this weekend holds true and airline prices stay as high as they have been, then most assuredly so.

This reinforces to me that my unrelenting pursuit of the drive market is on target. This market already represents 85% of all travel in the US and as a market segment should just get larger and stronger over time.

If you are interested in seeing how your business can benefit from this largely untapped market, please see my white paper on the drive market and check out the syndicated market study that the Solutionz Group and Mandala Research are fielding this fall (see story below).

I believe that this is a time to pursue revenue growth. We can't save our way to prosperity.


Chicke Fitzgerald

Tuesday, October 14, 2008

Economic Downturn - Where do we go from here?


The economic news is bad. The losses are real. The Dow is swinging wildly. People are hurting. The government is having to be the financial sector's white knight.

But watch and wait. It always comes. As sure as day follows night, and summer follows winter, economic downturns are followed by recovery.

Job #1 during a downturn is to smartly prepare for recovery.

The good news is that Travel and Tourism rebounds more quickly than the general economy. The fundamental behind this is that people see travel as a right, not a priviledge. And while people may stay closer to home or take less exotic trips, they generally don't cancel their vacation altogether. So be patient. Plan. Retool for growth and focus on the customer.

While the economic downturn in 1992 and the period following 9/11 brought dire results, as shown in the following diagrams, the rebound of the world travel economy was swift and strong and worldwide employment came back stronger than before.


2007 saw continued broad-based strength in the Travel & Tourism economy, although generally below 2006's dynamic growth rates. Growth of just over 4% was in fact achieved.



The World Travel and Tourism Council and its counterpart organizations are optimistic, yet at the same time realistic.

In 2008, growth is expected to slow to 3% but this expansion is still healthy given the difficult economic environment. Tourism's contribution to global economic activity and employment is expected to continue increasing over the coming ten years.

According to the World Travel and Tourism Council, real GDP growth for the Travel & Tourism economy is expected to be 3.0% in 2008, down from 4.1% in 2007, but to average 4.0% per annum over the coming 10 years.

The US government's investment in our banks, announced this morning, should help to restore stability to the banking system and to stimulate our economy.

Let's share the WTTC's optimism and prepare for growth. Take advantage of a little downtime for planning. You can't ever go wrong by focusing on the customer at a time like this.

  • Let's offer them vacation alternatives that acknowledge their challenges
  • Let's outline where they can go on "one tank trips" since air service is being cut back so substantially
  • Let's help them rediscover America and fuel our own economy moving forward


Chicke Fitzgerald

Monday, October 13, 2008

Solutionz and Mandala Research are launching a new syndicated research project



Solutionz and Mandala Research have teamed up to leverage the Solutionz Group's strong distribution expertise and Mandala's deep experience evaluating consumer behavior.

Watch for this new research report in early 2009, which will provide a comprehensive picture of the drive market from both the consumer perspective and from the travel industry's viewpoint.

The drive market represents 85% of the 1b overnight trips and 78% of all travel spending ($495b) in the US, according to the Travel Industry Association.

Keep your eyes open for the official press release about this new partnership.

To participate in the study as a sponsor, please contact Annette Hogan, Managing Partner of the Solutionz Group. Annette may be reached at: annette@solutionz.com 305-496-6787

Friday, October 10, 2008

IS EXECUTION ENOUGH TO FUEL INNOVATION? Comment on Timothy O'Neil-Dunne's article on "Technology is great, but it's the how that matters"

In a recent article in 4Hoteliers.com, Timothy O'Neil-Dunne (who incidentally is my former partner, and knows me quite well) made the following observation, focusing on how we frequently fall in love with technology, yet "see it parked on a shelf".

He segued from a discussion about smart phones, Blackberry, the iPod, right into the following comment.

=========================================================
For example, at the 2007 PhoCuswright Conference, arguably one of these places where the arbiters of what’s cool in Travel Technology hang out, the winner of the 5-minute pitch was a company called LeisureLogix. Great idea, lousy execution and zero sales. They quietly sank beneath the waves.
==========================================================

Timothy, Timothy, Timothy - It is beneath the waves where the power builds up....... Keep your eyes open. True innovation doesn't happen overnight. Rip tides can be terribly deceiving and hidden under churning waters.

I actually loved the segue between the iPhone and our Journey Planning product. I frequently use that in our pitch to investors. Our journey planning tool takes trip planning/booking, location based content and mapping/navigation and knits them together, much in the way that iPhone knits together personal assistant technology (phone book, calendar, to do lists), a camera, a music device and a GPS. What has previously been a very fragmented experience (planning a trip by car) is now a much easier task with RoadEscapes.com.

I will say that I guardedly agree with you about having technology see the light of day all being about execution.

By the way, it is very easy for companies like Apple and Rim to innovate AND to execute. Deep pockets have a way of smoothing that over and shortening development to market cycles.

Try doing that with your own life savings and talking angel investors into backing your dream before you can even demonstrate a product, or getting someone like Travelocity to sign an agreement to put the product on their site before you have written a single line of code. Paying payroll with Master Card and Visa, borrowing against your life insurance and working without a salary for two years have a way of ferreting out how serious you are about innovation. Remember the old adage "put your money where your mouth is"? I've been living that!

And I'm in very good company. Patrick Grady of Rearden Commerce at the recent Beat Live conference in Cleveland talked about how he paid payroll with his savings until Rearden got to the place where they could raise significant external capital. I will venture an educated guess that it took Patrick longer than 2 years to achieve his vision, since he began his journey in 2000 during similarly challenging financial times. So I actually feel very blessed Timothy to be where LeisureLogix is right now.

We did, quite wisely I might add, ramp down earlier this year when the original business model didn't match our expectations. That is what smart entrepreneurs do when their own funds are on the line for their dream. I have the incredible good fortune to have a patient angel investor and a very loyal group of supporters who have in large part donated their time (in exchange for equity of course) to keep the product moving forward and the company alive.

I also am blessed to have 12 years of business growth consulting experience (4 glorious years with you as my partner I might add.....), and am now applying that business incubation expertise to LeisureLogix, with the help of Solutionz Managing Partner and co-owner, Annette Hogan, who is acting as the CMO of LeisureLogix and Kit Cox, doing the work of what seems like 20 people right now, who you will remember from when you and I helped to build LasVegas.com, also in very challenging economic times, in 2002/2003.

Bottom line is that the product was and is still on target in getting this industry out of what I believe to be a broken metaphor - WHERE are you going and WHEN and a total focus on price. This dialogue, whether online or in a traditional travel agency environment only suits an air traveler, which in this country only includes 15% of all travel. 85% of all travelers drive. And check out the balance of spending, all the while remembering that the top Private Equity firms in this industry (TPG, Silverlake, Blackstone, BC and Cinven) have invested over $16 BILLION in the 15% piece of the pie that produces just $140b in annual spending.


According to TIA, the drive market represents 78% of all spending on travel in this country. And online travel and even the tradtional travel community have not even scratched the surface on the spending in the drive category.

PhoCusWright cites that online travel is at $137b and offline travel agency revenues are just over $129b. Do the math. There is still a LOT of opportunity to tap and at LeisureLogix we have our sights squarely on the bigger pie.

With LeisureLogix' award winning RoadEscapes.com product (by the way, we recently were awarded the new online travel category Silver award from Travel Weekly) we have introduced not only a tool for the drive market, but we've overhauled travel search to allow you to begin planning from WHO you are traveling with, WHAT you like to do (irrespective of WHERE you are going) and HOW you are traveling. We've even broadened the WHERE and WHEN metaphors. And we have introduced a multi-dimensional, multi-faceted "persona" known as the electronic twin or eTwin™ that allows you to actually get cross-category, relevant results when you enter a phrase or a keyword.

We have spent the last 9 months regrouping in incubation mode, but you of all people, know me well enough to know that we are definitely not out.

The product is alive and well at www.roadescapes.com. We just did a soft launch of this site in September as we further refine our new model and some very exciting and totally unique capabilities.

We have raised $6m to date and are not done by any stretch of the imagination! AND we are very patient. The news of our demise is greatly overstated.

I bought a book last night in the airport, published by the Harvard Business School Press in a new series titled "Lessons Learned" that quotes Brent Hoberman, co-founder of LastMinute.com as saying "Entrepreneurs must be tenacious. They should never take no for an answer." That is my mantra.

Thanks for remind us how important execution is Timothy. I do agree wholeheartedly, but don't forget that investment and risk are also essential elements and that with the $16b investment in the GDS industry by the Private Equity players we are still in a "sea of same".

I may be "quietly beneath the waves" right now Timothy but make no mistake, it is under the Blue Ocean and I am happy to ride this out and harness the power of the rip tide.


Chicke Fitzgerald
Extreme Entrepreneur, Author of "Bootstrap Business" (coming 1Q09) and CEO of both the Solutionz Group and LeisureLogix




(to read Timothy's original article - please click here) Your comments welcome!

Friday, October 03, 2008

Innovation requires risk and a dash of entrepreneurial spirit

Today as we face a challenging economy and ever increasing belt-tightening, there is an unfortunate consequence on our industry.

Innovation is being quashed.

No one planned for this to happen. But happen, it has.

The innovations over the last few years have been incremental at best.

The GDS firms, once the innovation leaders of our industry, are now owned by private equity [and highly leveraged as a result]. They have hunkered down, outsourced, laid off and for the most part are sticking to their core business - milking the cash cow. That is not to say that they do not have bright people working on solutions for the future, but their focus by the very nature of their reliance on the airline traveler for the bulk of their revenues, is on surviving the airline cutbacks and the potential decline of booking activity that could result. They have actually done a masterful job of cost cutting and preserving their margins for their shareholders. But most would agree that it is tough to innovate when you have cut not only into the muscle, but into the bone of your organization.

The online players and GDS New Entrants (GNEs to their friends), who have also been significant contributors on the innovation front since the advent of the Internet, are also facing some uncertainty, which tends to stifle or at least redirect investment. And the more these companies rely on airline bookings for their revenues, the greater the uncertainty.

You can't blame any of them.

Like their private counterparts, these companies have to serve their public and venture shareholders and do their best to eke out a profit by cutting costs until we see some signs of recovery.

But whether large or small, public, private or venture backed, we can't save our way to prosperity, as true prosperity relies heavily on innovation.

Somehow during times like these, spending on R&D, internal think tanks and even acquisition of smaller, more agile innovators has slowed down considerably for the larger firms in the industry. Again, no real surprise there. It is easier to stay with the status quo and wait for better times to return to innovation spending.

There is an age old saying from the book of Proverbs that says "Where there is no vision, people perish". I would take this further and say that where there is no vision and no innovation-led risk and investment, companies and entire industries perish.

Leaders of the large, well-funded companies deal every day with the natural tension between stepping out and taking investment risk versus maintaining the status quo. Innovation requires risk and investment at the outset and it requires positive energy and excitement to thrive.

The entrepreneurs in our industry have been charging full force toward the creation of the next generation of technology and customer experience. But funding these ventures is tough and generally, their pockets aren't deep and bootstrapping is the norm versus the exception.

Angel investors can deepen those pockets somewhat, but there is still often a gap in getting a dream to market and the "no man's land" between needing $1-3m to get your dream over the line and the $10m deals that most venture firms consider their minimum, is vast.

Once you get the technology built, you still have to build out the infrastructure to support the business and oh yeah, you have to attract customers. Often, the venture community won't fund a business without a solid revenue stream and getting there is hard when you have been operating on a shoestring during the build process. Finding a "white knight" to help you get over the finish line is every entrepreneur's dream.

But it takes a very special investor or strategic partner to believe in true innovation and to see industry changing technology for what it is.

This spring, I will be coming out with a new book, titled Bootstrap Business. Actually, I'm one of many contributors to the book. The book will be released in the spring of 2009 and features best-selling authors Tom Hopkins (How to Master the Art of Selling), Jack Canfield (One Minute Manager), and John Christensen (FISH!).

In it, I talk about how it doesn't really take a fortune to get true innovation to market. In fact, most entrepreneurs would kill for just a 10 person team and a $100k marketing budget to get their dream to the next level.

Most of the big firms in the industry waste more resources than that annually just in unproductive meetings and conference calls alone - planning the next meeting to plan the next planning session. Say it isn't so! I lived it for nearly 20 years as a member of corporate America and in my 12 years as a consultant have seen "meeting inertia" paralyze organizations.

Amongst entrepreneurs risk is not a dirty word and fortunately we don't have to spin our days from meeting to conference call to meeting, never truly finding time to get work done.

Most of us have actually put our life savings on the line, more than once have paid payroll with Master Card or Visa and have had to make the tough choice of balancing the need to travel to sell your wares or raise money, with keeping needed talent on payroll.

My signature line is that I'm an extreme entrepreneur. For those that don't know, this is actually code for "I've been working 2 years without a paycheck". To do that you've gotta believe in what you are doing.

Entrepreneurial innovation is one part risk, one part irrepressible drive, one part altruism, two parts passion and some would say, one part lunacy. And that innovation doesn't usually focus on small, incremental steps forward, but instead, giant leaps of not only faith, but of monumental change. Sometimes it is change in the status quo, change in consumer or business behavior and sometimes it is a wholesale change in approach or technology.

I've led this kind of change from within major companies as a salaried employee, from outside as a consultant and now as an entrepreneur. I have to tell you from personal experience that no matter the cost, and whether you are a person responsible for product innovation within a corporation, an online player, a supplier, a venture backed firm or you are still going it alone as an entrepreneur, there is nothing like innovation to spark growth.

And it feels awfully good when you can see the top of the mountain ahead and when you hear cheers from behind. It gives you the spark needed to take that next step that is needed to get your idea implemented.

I am envisioning right now what it feels to BE on top of the mountain.

Imagine if you will what would happen if we marry entrepreneurial spirit with corporate discipline and a focus on execution and fund innovation properly. Whew. That would be powerful.

Innovation. It will be the difference between success and failure as we move forward.

If you're a believer, call me. Let's make it happen together.

Chicke Fitzgerald
813-925-0789
Founder and CEO of the Solutionz Group - 12 years of growth and innovation consulting, as well as business incubation of the following ventures:

LeisureLogix - Industry changing technology marrying trip planning, location based content, mapping and navigation (www.roadescapes.com)
Executive Girlfriend's Group - Connecting the executive women of our industry
HotelsbyHospitals.com - Helping patients and their families and friends in times of need
KidsforHumanity - A charity for kids to participate in - because helping hands come in all sizes

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