Friday, November 28, 2008
As I mentioned, VFR (visiting friends and relatives) travel is at its highest in November and December. If you are reading this from grandmas, then you will understand the over the river and through the woods title.
Reaching this market is key to achieving growth in this very large sector. Over 26% of all travel in the US is VFR travel. While this has traditionally been seen as a group that does not stay in hotels, with the right tools, that can change.
Check us out at www.roadescapes.com.
And enjoy the leftover turkey and pumpkin pie!
Monday, November 24, 2008
Year to date, we are seeing a 3.4% decline in occupancy, with a 6.5% decline year-over-year for the month of October. This is not surprising since air travel frequency and capacity in most cities is seeing a 15-20% decline.
The fourth quarter is traditionally one of the worst quarters in travel, largely due to the fact that the two major holidays in November and December are the "over the river and through the woods" kinds of vacations - by car and a large amount of friends and family visits, versus vacations.
The first quarter of 2009 will be telling, that is when booking volumes normally increase substantially. So we wait....
Saturday, November 22, 2008
Wednesday, November 19, 2008
I missed the innovation day yesterday. My mail contained the list of finalists in the Center Stage 5 minutes of fame contest, culled down from the over 30 presenters.
Last year my technology firm, LeisureLogix won the 5 minutes of fame for our RoadTrip Wizard product (now known as RoadEscapes.com). Some would say (and for those that follow my former partner Timothy's blog, he did say...) that we were a flash in the pan and way off the radar.
Those would be the ones that don't know me very well......
I saw this video today and was not only inspired. I look forward to the day that our company name is inserted in an updated version!!
Life = Risk
Go for it! You can't win sitting on the bench.
Saturday, November 15, 2008
I've been in this industry for 30 years, so nothing should surprise me. But this morning, I am downright angry at Delta. Perhaps it is unfair to single them out, because I suspect that others have policies that are just as insane, but nevertheless I feel honor bound to rant this morning and this is just enough to get me to switch airlines, just on principle.
I had used SkyMiles to buy my ticket to PhoCusWright next week. So far so good. Then I had to rearrange my schedule to go to a meeting in Chicago on Monday. I saw that DL was going to charge me $100 to redeposit my SkyMiles and then over $200 to purchase a new ticket using SkyMiles (I won't even get into why this is SO wrong on so many levels). Anyway, since I wasn't sure at the time that the flights that I needed would even be available for the number of SkyMiles I have left, I made the decision to go ahead and buy the TPA/ORD/LAX ticket and then just use the return from the SkyMiles ticket. Silly me...... I've known about Delta's "married segment" rule for well over 10 years, so I cannot account for my lapse of memory at that given moment. For those of you that don't understand that little rule, if I had not shown up for the 7am flight on Monday to LA, they would have cancelled my return, EVEN though I purchased a $600 ticket to replace the "FREE" (well not so free as you will see) segment.
So today I called, just to cancel the outbound on the SkyMiles ticket, as I wouldn't be needing it. And you guessed it, they are charging me $100 for NOT using that segment. Nevermind, I already paid $100 for redeeming my SkyMiles which were originally intended to allow me to travel FREE..... argh.
So for those of you who haven't seen the original "If Airlines Sold Paint" story, here it is. It has actually gotten much more absurd than Alan's original 1998 version, but here it is.
[ By Alan H. Hess. Originally published in Travel Weekly, October 1998. ]-------------------------------------------------
[ (c) 1998. Reproduced with the permission of the author. ]
** Buying paint from a hardware store **
Customer: Hi, how much is your interior flat latex paint in Bone White?
Clerk: We have a medium quality, which is $16 a gallon, and premium,
which is $22 a gallon. How many gallons would you like?
Customer: I'll take five gallons of the medium quality, please.
Clerk: That will be $80 plus tax.
** Buying paint from an airline **
Customer: Hi, how much is your paint?
Clerk: Well, sir, that all depends.
Customer: Depends on what?
Clerk: Actually a lot of things.
Customer: How about giving me an average price?
Clerk: Wow, that's too hard a question. The lowest price is $9 a
gallon, and we have 150 different prices up to $200 a gallon.
Customer: What's the difference in the paint?
Clerk: Oh, there isn't any difference; it's all the same paint.
Customer: Well, then, I'd like some of that $9 paint.
Clerk: Well, first I need to ask you a few questions. When do you
intend to use it?
Customer: I want to paint tomorrow, on my day off.
Clerk: Sir, the paint for tomorrow is the $200 paint.
Customer: What? When would I have to paint in order to get the $9
Clerk: That would be in three weeks, but you will also have to agree
to start painting before Friday of that week and continue painting
until at least Sunday.
Customer: You've got to be kidding!
Clerk: Sir, we don't kid around here. Of course, I'll have to check
to see if we have any of that paint available before I can sell it to
Customer: What do you mean check to see if you can sell it to me? You
have shelves full of that stuff; I can see it right there.
Clerk: Just because you can see it doesn't mean that we have it. It
may be the same paint, but we sell only a certain number of gallons on
any given week. Oh, and by the way, the price just went to $12.
Customer: You mean the price went up while we were talking?
Clerk: Yes, sir. You see, we change prices and rules thousands of
times a day, and since you haven't actually walked out of the store
with your paint yet, we just decided to change. Unless you want the
same thing to happen again, I would suggest that you get on with your
purchase. How many gallons do you want?
Customer: I don't know exactly. Maybe five gallons. Maybe I should
buy six gallons just to make sure I have enough.
Clerk: Oh, no, sir, you can't do that. If you buy the paint and then
don't use it, you will be liable for penalties and possible
confiscation of the paint you already have.
Clerk: That's right. We can sell you enough paint to do your
kitchen, bathroom, hall, and north bedroom, but if you stop painting
before you do the bedroom, you will violation of our tariffs.
Customer: But what does it mater to your whether I use all the paint?
I already paid for it!
Clerk: Sir, there's no point in getting upset; that's just the way it
is. We make plans upon the idea that you will use all the paint, and
when you don't, it just causes us all kinds of problems.
Customer: This is crazy! I suppose something terrible will happen if
I don't keep painting until after Saturday night!
Clerk: Yes, sir, it will.
Customer: Well, that does it! I'm going somewhere else to buy my
Clerk: That won't do you any good, sir. We all have the same rules.
Traveling by car is looking better and better and better....... if LA weren't so far away, I'd do it in a heartbeat, particularly with gas nearing $2 per gallon.
Thursday, November 13, 2008
The stock market had a wild ride today. The Dow dropped briefly below 8,000 — falling more than 300 points — to retest lows that it hit Oct. 10 before a sharp climb into positive territory. The Standard & Poor's 500 index dropped to 818.69 before staging its own strong rally. The Dow closed up 6.67% at 8,835 and the S&P closed up 6.92%.
Once again, we are seeing the benefits of low crude prices at the gas pump (as low as $1.50 per gallon in Houston), but so far, not seeing the benefits flowing through to our air tickets prices.
In fact, in ARC's latest monthly sales report, domestic air ticket prices were up 10% on average to $342.61, versus $310.15 in September.
United stock closed up 17.9% today. Delta was up 10.85% and Continental was up 8.62%.
So Mr. Airline CEO, whats up?
Tuesday, November 11, 2008
It is a simple question really. There has to be a way.
The title for this blog was inspired by an article with a similar title published by Forrester today - How To Increase Grocery Sales In A Grim Economy.
But the conclusion of my analysis couldn't be farther from the Forrester conclusion.
Author Bracewell-Lewis wrote that "Grocers Must Target Price-Sensitive, High-Spending Online Grocery Shoppers" and that they should essentially discount their products to stimulate sales. In fact, she said "Grocers should reposition themselves as discounters on the Net — as Tesco has done — to directly compete with discounters that do not sell online."
The travel industry [and travel suppliers in particular] have been doing this for a decade now and personally, I do not think that discounting is the answer. In fact, I couldn't disagree more.
Let's revisit the T-Myths that I wrote about last week, as I believe the answer is staring us squarely in the face.
* 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
For 10 years, online travel retailers (and suppliers alike) have been catering to the air traveler. Air travelers account for just 15% of all trips annually and 22% of all travel spending in the US. It is time to shift our focus to the drive market, which represents the other 85% of all trips and the other 78% of all spending.
Our technologies and tools only deal effectively with point to point travel and generally only work when the consumer knows precisely WHERE and WHEN they want to travel. Although 11 of 20 consumers using search engines in the travel category are searching for maps and driving directions, the bulk of travel technologies do not include mapping and routing amongst their services or if they do, it is just the point to point variety offered by MapQuest or Google. The drive market needs integrated travel search and booking, as well as mapping and navigation and they need local content, such as restaurants and shopping, the top two activities for travelers. This information, if provided, is generally narrative information, versus being able to add these points of interest into a trip/itinerary.
We've gotten away with generic delivery of information about available inventory (e.g. hotels and cars) and basic profiles which show vendor preference and not much more. Our CRM systems are one dimensional and only reflect projected behavior under a single scenario. But as humans, our choices change based on WHO we are with and WHAT we like to do under various scenarios or based on our intent or even HOW we are traveling.
Even Google has desensitized us to our need for relevant content. Why would we accept 543,000 entries for restaurants in Tampa, when all we really are interested in are Indian and Thai restaurants?
It is time for a change. We can't behave the way we used to behave in better times. Less people are flying, more people are driving. We need tools and sales approaches geared to the large, unserved market.
If I am beginning to sound like a broken record, it is because it is frustrating to hear the level of anxiety about our current state of affairs when there is something that can be done about it.
I was reading in a book last night (the Divine Mentor) that one of the greatest maladies is the phenomenon of living inconsistently with what we believe or said another way, living inconsistently with truth [otherwise known as incongruence] is one of the foremost causes of anxiety.
The truth is that there is a market out there that we as an industry are not adequately serving. It will take some effort and some investment to serve it properly. But to throw our hands up and accept the status quo as truth, will only result in further anxiety and angst.
Let's solve the problem together.
Wednesday, November 05, 2008
In Asia, the Nikkei, the major index for the Tokyo Stock Exchange, closed up 4.5%. South Korea's Kospi composite index finished with a 2.4% advance, according to Dow Jones. The Hang Seng index in Hong Kong ended up 3.7%. The Australian All Ordinaries index was up almost 3% at its close and the markets in Taiwan and the Philippines ended lower.European stocks and U.S. futures fell after Democrat Barack Obama was projected to have been elected President of the United States. London's FT-100 and Paris' CAC-40 eeach fell more than 2%, while Germany's Dax was about 1.5% lower.
It remains to be seen how the markets will close today in Europe and how the US markets will react.
But it is the longer term results that will matter.
In the Obama camp, optimism is the order of the day, but it will still be over two months before he will be able to personally impact the economy through the implementation of his various programs. But the behind the scenes work will begin now. First with the formation of his cabinet and firming up various key appointments so that he can hit the ground running on January 20th.
One thing is for sure. The travel industry will benefit if our economy improves. And Obama did make a number of promises that we hope that he will keep:
- Revitalize transportation infrastructure by
- strengthening the core infrastructure
- adding new jobs through a new national transportation infrastructure
- improving and modernizing air traffic control
- strengthening airline safety and regulation
- supporting Amtrak funding
- supporting the development of high speed freight and passenger rail networks
- strengthening air transportation in underserved areas
- modernizing our water infrastructure
- improving transportation access to jobs
- Bolster airport security
- Safeguard mass public transportation
Tuesday, November 04, 2008
Airlines are indeed enjoying much lower fuel costs than they did in the summer of 2008.
Perhaps the use of the word "enjoy" and the notion that recovery is around the corner is a bit like a weatherman in the middle of a hurricane talking about tomorrow's sunshine. At least that was the observation of a writer in Airline Weekly this week.
When the prices were high, the airlines kicked into high gear, cutting costs, trimming schedules, parking aircraft in the desert and finding ways to charge passengers for various services, previously offered gratis.
Now that the prices are low (remembering that everything is relative), will they hand off a slice of those profits to consumer? Not likely! And what will be the impact on the other sectors of the industry?
The GDS companies depend on airline ticket sales for 90% of their revenues. And the hospitality industry also caters to the air traveler as their primary market. What will become of them?It is an interesting conundrum that must face airline executives at this juncture. The dire situation that they found themselves in this summer has subsided. They reacted, adjusted and are now even predicting profits in early 2009. So what do they do now? How will they be seen by their peers and by the press and by their customers?
To Wall Street and their Board, they no doubt will be heroes. Perhaps the chief executives will even be dubbed "turn around artists" and awarded bonuses, much to the chagrin of furloughed employees.
They will take a significant amount of criticism from the press and perhaps even be accused of greed as they pocket the difference in the fuel prices of the summer and now, versus handing it to the consumers as has happened at the pump.
To the consumers, well, it is a mixed bag of reactions. For the business traveler, it is nice to have empty center seats on their frequent trips. Frequent travelers have adjusted their packing habits to reduce the need for checking extra bags for a fee, they have figured out that they can buy a bottle of water in the airport versus paying $5 on board for the precious H20 and most of them have received a pair or two of high quality noise-canceling headphones on a birthday or on Christmas, so they aren't having to pay to listen to the audio or a movie. For the leisure travelers, perhaps they aren't flying as much due to the high fares and enjoying family time in the car instead.
I loved the quote from Michael E Levine, a former airlines executive who teaches at New York University's School of Law, in the Financial Times article that cautioned that carriers need to tread carefully even as they benefit from the rapid descent in fuel costs. Mr Levine points out that it is paying passengers, and not cheap fuel or brand-new efficient aircraft, that shape an airline's fate. Can you say amen to that?
At the end of the day, if the airlines remain with the status quo, we will have fewer flights, translating into fewer seats for sale, online and offline.
The GDSs will suffer a decline in bookings, travel agencies will see (and in fact have already seen) a decline in tickets issued and hotels and restaurants will have fewer guests. As I mentioned a few days ago, ARC is already reporting double digit declines in agency ticketing in October.
And of course as we wait for consumer confidence to be restored, we keep one eye on the price of a barrel of oil, as who is to say what will happen to it moving forward?
In the meantime, is the onus is on the airlines to play their proper role in stimulating the economy by lowering prices? Would you if you were in their shoes?
If we are in fact just on the upside of the jet fuel roller coaster ride and another downturn (in the form of higher oil prices) is around the bend, then perhaps they are wise about banking the profits and storing up for a rainy day.
Monday, November 03, 2008
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.
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