The anti-competitive travel business.
FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.
2009 November 28
The anti-competitive travel business.
I have just had a revelation, courtesy of a new plan from France’s visitor promotion organisation, Atout France (don’t ask).
It concerns competition and the European Union efforts to try to ensure there is a level playing field in business activity in the EU, and in particular when it comes to state-owned companies.
The story begins with plans by France’s VPO to spend US$730mn over the next decade to promote what it calls “social tourism”. The government wants to make it easier and/or cheaper for disadvantaged people in France such as disabled, single-parents, seniors, or young workers to take their holidays in France.
Details of the plan have not yet been clarified, but the support seems likely to be in form of subsidies – giving a hotel say, $100, so that the actual price of a week’s holiday is $400 to the disadvantaged traveller rather than $500.
(It also wants to build what it calls “affordable accommodation”. Coming from the country that gave Accor’s Formule 1 US$45/€30 hotels to the world, which might be a bit dumb.)
Criticising a plan to help disadvantaged people is obviously a task fraught with danger. But to me two things seem wrong. Firstly, why are seniors and young people considered ‘disadvantaged’? That seems to be a somewhat negative interpretation of society.
But my other point is not so academic.
Look at the plan this way. The government in France is paying out money so that its own citizens (and only its citizens) travel in their own country. Isn’t that anti-competitive?
If the government also gave money for them to travel to Germany or Italy or the US, ok, but only in France?
Think of a parallel. The government pays money to car companies in France so that they can sell their cars at a lower price – $1000 for a Renault, compared with $1200 for the equivalent Fiat or Opel. Then yes, that would be clearly anti-competitive and the (non-French) car manufacturers and their governments would likely complain.
I think governments still do not think of the travel business as an industry, despite its size. So they have not thought of moves like this in terms of competition.
There is no problem with a VPO promoting travel-in-France, but once money starts changing hands, then it moves into another element. I look forward to seeing the EU at least make a comment on these plans by France’s state agency.
The Fox
British Airways/Iberia. Two wrongs make a right?
FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.
2009 November 23
British Airways/Iberia. Two wrongs make a right?
Okay, I accept that calling two grand airlines such as British Airways and Iberia “wrongs” is not quite right…
But I do want to draw attention to a few factors. Firstly, British Airways.
I have criticised the Open Skies (sic) subsidiary of British Airways for a number of reasons on a number of occasions. The reason that OS has failed (or up for sale; meaning in this case, almost the same thing) is not the economic recession – that is just a convenient explanation, which will be widely accepted.
The reason is that it was a badly thought-out plan. A dumb name for a start, although the person who first thought of it (we suspect BA CEO Willie Walsh) thought it was very clever. The best name would have been British Airways. Why did it need a different name because it was flying New York to Paris instead of to London?
Any why oh why did BA buy a failing airline (L’Avion, un nom debile) to merge into a not-yet-started airline? Particularly that L’Avion had a different market and product than planned for Open Skies!
As I am so often saying, PAGPFT – people are getting paid for this?
I guess BA’s Open Skies is worth the same as two other failed airlines that it created and then sold (DBA and Go) – US$1?
Secondly, Iberia.
Interestingly, Iberia has also just admitted a new-airline mistake similar to BA’s. Well, not admitted in words, but by moving it out. IB’s creation was Clickair, a so-called low-fare-airline, which it has now merged into Vueling, the surviving name. From the start, Iberia’s management did not appear to understand LFA operations, as seen from its decision to give Clickair some IB flights to operate.
(That’s actually a hybrid, not an LFA, and similar to what Qantas is creating with Jetstar. I am not sure Jetstar will work – at present it is a marketing mess, but not yet clear that it will be an economic mess.)
Iberia did not seem to know what it had created, or what it wanted to create. But then Antonio Vazquez took over as chairman and CEO of Iberia, replacing Fernando Conte, who resigned. “I’ve come to Iberia with the objective of closing a deal with British Airways,” Vazquez declared.
It all seemed too pat. Vazquez was chairman of tobacco company Altadis and negotiated its acquisition by Britain’s Imperial Tobacco. Hint – so he must be the right man to negotiate a merger of IB with BA.
The now-departed Conte was making statements that might have been true but which were not politic. He pointed out that now BA was weaker than when talks started, so the IB share of the combined operation should be higher.
The BA/IB merger deal is expected to 55/45 in favour of BA. In fact, that is extraordinarily low for BA. In terms of seats sold, the ratio in 2008 between the two airlines was 59/41, in terms of capacity (ASKs) 69/31, and in terms of traffic (RPKs) 68/32.
I think Vazquez has been just a facilitator, making the best deal he can. I think he has done very well.
Conversely, I already thought that Willie Walsh, was not actually qualified for the BA CEO job. As CEO of Aer Lingus, he had converted the airline into a sort of low-fare-airline. It seemed to be working, but is now unravelling. I wonder, in fact, if Walsh should have got BA to merge with a failing Aer Lingus instead of Iberia? Now, another airline will do that.
Has Walsh surpassed his capabilities? He is due to become CEO of the combined group – not a good sign. Do BA and IB deserve one another?
The Fox
PAGPFT in France. ‘All’, or nothing?
FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.
2009 November 14
PAGPFT in France. ‘All’, or nothing?
(PAGPFT, pronounced PAG-puffed; People Are Getting Paid For This.)
For understanding the French language, I am quite good. But for misunderstanding it, I cannot beat the French. In this case, ‘the French’ is France’s destination-marketing-organisation.
Earlier this year, a new logo for the DMO was introduced. Quite neat, and clear – the words ‘France’, its red-white-blue colours, and a female line drawing.
Now, the promotional body has changed its name from ‘Maison de la France’ to ‘Atout France’. This change also includes an administrative change because ODIT, which thinks up development strategies for visitor promotion, has been merged with MDLF into Atout France (AF).
(As a digression, how can anyone justify having ODIT as a separate body? Didn’t MDLF need to work out development strategies for visitor promotion before it did any promotion? The probable explanation is that this is France, perhaps the best advanced economy outside communism for creating wasteful bureaucracies.)
I believe that AF will run into confusion similar to the MDLF experience.
Many, even in the travel business, did not understand that MDLF was the name of the destination’s visitor-promotion body. In fact, many changed the name when marketing in other countries (including Singapore, UK, US); no-one seemed to interpret this as a slap in the face for HQ.
In some ways, the MDLF name was clever. But being ‘clever’ in terms of marketing and promotion is not necessarily an advantage. You need to be effective. They might be boring, but Visit Britain, Tourism Australia, etc, are unbeatable.
From poor comprehension of the ‘MDLF’ name, to ‘Atout France’. Wow.
What does ‘Atout France’ mean? (And the fact that the question needs to be asked means that the name is already a failure.)
It is complicated in that ‘atout’ is a not-common French word. It means ‘trump’ or ‘plus’ or ‘advantage’. Or could it be ‘a tout’ combined, meaning ‘all’, ‘everything’? Forgetting that ‘maison’ is a better-known word than ‘atout’, it still needs explanation.
The oddities do not stop there. The AF logo highlights the letter ‘A’ in both words, so you read ‘AA’. Don’t worry, this has no meaning; it is just a designer affectation.
Stop to think – when you flash-read ‘Maison de la France’, ‘Atout France’, and ‘France Tourism’ (or even ‘France Tourisme’), which tells you immediately this is about the visitor business? No brainer.
I presume the AF name was thought up by a minister unfamiliar with the travel business; the minister who announced the change, Herve Novelli, also looks after other activities, so he fits the description. Or even El Presidente, Nicholas Sarkozy? Or Christian Mantei, the head of AF?
Whoever, he did not realise, or ignored the fact that that the main audience is outside France, and mostly non-French speaking. Surely only a senior person could have thought it up; if a middle-ranking manager came up with this name, he would have been ignored. It seems pride in France has got in the way of commonsense.
Last oddities:
-The website address for AF is www.odit-france-fr!
-Don’t go there to learn more; it is all in French – no other language.
The Fox
Heads heard: Andrew Cosslett.
FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.
2009 September 16
Heads heard: Andrew Cosslett.
Paraphrased and unsynchronised comments from Andrew Cosslett, CEO of InterContinental Hotels:
-We have a big system to drive all the demand there is. The downturn will last at least through most of this year if not into 2010. There will be many more brands. We have been removing 25,000 hotel rooms a year in Holiday Inn, mainly in the US, and so with the number of new HIs opening we will have a new group in a few years’ time.
-[On why InterContinental is selling most of its hotels.] Well, for example, Singapore Airlines does not build its own planes. [Yes, but it does own them...]
-[On why so many hotel brands.] Look at the car industry. They have so many brands and many provide facilities we did not even know we needed. And all packaged in a way to make it attractive to us. [Mixing the troubled car business into something that sounds similar to the sub-prime financial packaging, and saying this is a good example, seems untimely at best.]
-We think we need to know more about sleep – because these days the business traveller gets has less downtime. [Although we do not agree with much of what Cosslett says, this is smart thinking. A hotel room needs to have more facilities which support the 'travel lifestyle' of a key market segment. This could be, for instance, an easy chair with facilities for working on a laptop (a movable rest for the computer) and facing the television, so that the guest can work, relax and watch TV screen at the same time.]
The Fox
Gabriele Burgio. Head of NH Hoteles.
FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.
2009 September 14
Gabriele Burgio. Head of NH Hoteles.
Paraphrased:
-60% of our growth comes from acquisitions. In theory, hotels are cheap as a result of the crisis, but this is not reflected in the prices currently asked – except in the stock price of companies that are quoted in the stock market. We have not seen opportunities; maybe some will come.
-We bought a hotel company in Italy [Jolly], but in general Italy is not doing well. There has been a severe drop in tourists in Rome, and there have been a lot of special problems. Like for like, Italy is losing at least 5%. We are relaunching in Italy – we had stopped marketing.
-We have abandoned the ‘EdeNH’ [sic] brandname because there were too many ‘Eden’ hotels in the world; not EdeNH, but it was causing complications nevertheless. What speaks is the resort itself, so our top hotels will have a name, not necessarily NH. [When EdeNH was introduced, we said it would not last because it could not be pronounced, in Spanish or English.]
-We have a special hotel in Milan, with which we will launch our new brandname, ‘NHow’. And we plan to open a NHow in Berlin in the second part of this year. [I think the NHow brandname is particularly good - as good as EdeNH was bad.]
-There are plenty of expansion opportunities in Latin America. We have five new hotels in Mexico, plus Colombia and Panama. For instance, Buenos Aires has huge potential. We could have 50 hotels there; after all, we have 42 in Madrid. But we are not interested in new regions such as Asia Pacific, because we don’t have enough resources.
-Our focus is on corporate clients. Our main markets are Spain, Germany, then Italy. We do surprisingly well in Germany. One survey showed that we are the second brand of choice for German travellers in Germany, and the 7th for German travellers in the world.
-Distribution – travel agencies, intermediaries, companies – is complex. There is no solution; you just have to understand it, and have the right management; it is like mixing hot and cold water in a shower.
The Fox
Hire education. Geoffrey Lipman.
FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.
2009 September 12
Hire education. Geoffrey Lipman.
He is no longer Mr Geoffrey Lipman, but Professor Lipman. By custom, the recipient of an honorary degree – this one was awarded by the Griffith University in Queensland – does not use the title in this way. But Lipman is, well, Lipman.
He founded and headed WTTC (World Travel & Tourism Council), now widely accepted as the top-level link between the travel business and governments. He could even be credited with creating the (admittedly superfluous) multiple-noun ‘travel and tourism’. We suspect T&T because he could hardly call his WTTC merely WTC – too close to rival WTO.
After leaving WTTC, Lipman busied himself with other activities and associations, but did not achieve the success he had with WTTC. He then moved into (you could say “moved onto”) the World Tourism Organization.
He has never been a success in business; only with associations.
He is now assistant secretary-general at the WTO, and has built this (new; his creation) position into an important one. In many ways, he has been the leader, leaving WTO’s head Francesco Frangialli to be what he was best at – administration.
But with headmaster-Frangialli going, formally, end of last month, could the professor get expelled? Or will he try to stay on as deputy headmaster, or even try to become headmaster?
(In one sense he must hurry. He is a UK national, and the WTO has an archaic rule that its staff must be nationals of a WTO member. Visit Britain is a member but – to WTO’s embarrassment – is resigning only two years after rejoining.)
Discuss.
The Fox
PAGPFT (pronounced PAG-puffed); People Are Getting Paid For This.
FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.
2009 September 09
PAGPFT (pronounced PAG-puffed); People Are Getting Paid For This.
-This story is a little complex, so I have omitted certain parts. I was travelling Melbourne-Rome on Qantas with a day-long stopover in Hong Kong. Leaving Hong Kong on British Airways I had a single-bag allowance.
But ex-Australia, one of my two bags missed a connection, and was to be delivered hours before my departure from Hong Kong. BA would not relent; I could not check in the 2nd bag (which normally fits into the first suitcase). The supervisor even suggested that I could take the second bag as cabin baggage. If I would get past first controls in HK, I would not get past others.
This is another example of ‘empowerment’ gone wrong – empowerment to make bad decisions.
-For health control in Hong Kong, we had been asked to complete a form – for identification for swine flu. The form asked me for ‘Flight Number’, so I prepared that document. When my turn came at the desk, the agent asked “Seat Number Please”. I now realise that the words “Flight Number” really mean “Flight Number and Seat Number”. I should have guessed.
-Am I spoiling the fun to point out that sealing bags for duty-free goods is not really safe? It would be rather simple for terrorists to make their own sealed bags – or simply buy them from a rogue employee.
-Finally, I hear that Qantas has changed its safety announcement. Before it said about aircraft seating, that “every aircraft is different”. In an earlier column, The Fox pointed out that this was wrong. Qantas has now changed it to “every aircraft type is different”, as I suggested. I won’t be a curmudgeon to point out that although this is now technically correct, isn’t it sort-of silly? It is simply a more sophisticated way of saying “different aircraft are different”.
The Fox
London PAGPFT (pronounced PAG-puffed); People Are Getting Paid For This.
FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.
2009 September 07
London PAGPFT (pronounced PAG-puffed); People Are Getting Paid For This.
-Transferring at London Heathrow, international-to-international, I passed four signs asking me to ‘Show Boarding Pass’, so I prepared that document. When my turn came at the desk, the agent asked “Passport Please”. I now realise that the words “Show Boarding Pass” really mean “Show Passport and Boarding Pass”. I should have guessed.
-Some authorities need an Editor. Who was the person who got paid for a decision to change the word ‘Immigration’ to ‘Border Control’? I accept that BC is well understood by say 75% of people who arrive in the UK, but that compares with 95% that I reckon understand ‘Immigration’.
-Someone else who needs an Editor – A British Airways on-board announcement talks of “dedicated coaches” for transfer passengers to other terminals. Are “dedicated coaches” actually “enthusiastic helpers”, or would using the word “buses” be understood by more people?
-French-language translation of security warning at London Heathrow is wrong. It advises that ‘baggage abandonee’ will be destroyed, but the warning is not for baggage abandoned, it is actually for ‘baggage non-supervisee’.
-The aviation industry has security problems with passengers making direct transfers, particularly when they have bought duty-free liquor – which is cleared at the departure airport, but not at a transfer airport. But I came across something odd the other day. I was not allowed to buy liquor in a sealed bag from Hong Kong airport if I was making a transfer at London. But I found I was allowed if I bought liquor in a sealed bag on board British Airways. If there is a difference in security, it is minor. This sounds more like a commercial arrangement; BA has made an agreement with security for special clearance. I propose this loophole is closed – in the interests of security.
The Fox
WTO. A STEP too far?
FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.
2009 July 16
WTO. A STEP too far?
A report in eTurbo News, which concentrates on the travel business despite its name, has run a report on WTO’s STEP* program. I have copied this in its entirety, making only light sub-editing changes.
World Tourism Organization affiliated offices (Osaka and Korea) were recently audited with regards to the various programs that are using the WTO logo. In the words, of Taleb Rifai, WTO’s incoming secretary general, “A lot of controversy was centred on the STEP Foundation.” Find out why and what he intends to do to rectify the situation in the exclusive chat with eTN.
eTN: The audit highlights that STEP hasn’t really fulfilled its promise.
Rifai: I believe this is a little bit unfair to the STEP foundation. I think what the report outlined is that decisions were taken by the foundation that were not completely clear or in line or consistent with what the secretariat was doing. Or, the other side of the story is that the secretariat was not completely aware or the STEP Foundation did not get from the secretariat what it really needed. To conclude that the foundation was not able to fulfil its role when it’s only less than two and a half years old with a mandate such as eliminating poverty is a little bit unfair. I think they did a lot, they were able to raise money, and they were able to produce very significant, small, but impactful projects. It’s not the output that is at question here, it is the management of the governance model that is at question.
eTN: How much influence does Korea have currently on the management of STEP, in that they donated US$5mn?
Rifai: That is exactly the point: Is STEP a Korean foundation or a UNWTO* foundation? It’s neither. This is where the confusion is. From the principle point of view, it is not a Korean foundation; it’s a UNWTO foundation. From a practical and realistic point of view, the kind of relationship that has developed throughput the last two years was not one that enabled us at UNWTO or the foundation to clearly say who is running the show. It’s a management challenge, not a challenge of substance.
eTN: How do you meet the challenge of transparency?
Rifai: By clearly defining where we stand. And I am more in favour of saying of going one of two clear paths: either we say that absolutely and completely a part and partial of UNWTO and we manage it, we direct it, we appoint the people in charge, we audit it, and we make sure all programs are consistent with our programs or we say no, let’s respect the integrity of each one of these organisations. This is a Korean organisation and they have absolutely every right to utilise their money or other people’s money. It’s a foundation registered in Korea, and we operate as a secretariat with them in accordance to a memorandum of understanding that defines the roles of each and every one of them.
eTN: So which one is it?
Rifai: Which one are we going to put in place? Well, I am simply saying as the person in-charge of the secretariat I am ready to live with either of those options depending what the Korean government would prefer. What I am not ready to live with is anything in between.
eTN: I am still confused. So, who then decides?
Rifai: We definitely have to decide on this, but we cannot decide alone. We have to sit down with the people from Korea, with the foundation people and we say this is one model and this is the other model. I, from the secretariat perspective, am ready to live with either model. I am ready to live with a model that says this is yours, you take care of it. If we take care of it, then have to completely direct it and completely control it. If the Korean partners wish a different level of autonomy or a different level of operation, then I would respect the fact that this would remain an independent organization.
eTN: Then STEP would not be a WTO initiative.
Rifai: Absolutely. It would be a STEP Foundation without neither using our name nor our logo, but absolutely one that works with us on joint projects and can very easily say that they are a foundation that is working in association with the UNWTO whichever the formula is. But, not this confused model, of neither part of us, nor independent from us.
eTN: Why was this not defined from day one?
Rifai: You know, you start with good intentions and you try to move along to see how things develop. Many issues that are on the table now were probably not anticipated. And this is just not with the STEP Foundation, you know. With the Center of Excellence in Montreal we faced the same issue and we settled it in one very clear direction. This is a center that is based in Montreal, funded by the government of Canada, it is an independent center, has its own program. We have absolutely no control or any desire to control its budget and management team, but we are engaged with them on a three years memorandum of understanding which defines the interface between us. Once the three years is over, we either re-new or modify this understanding or we don’t. So, the model is clear.
eTN: There’s talk within media circles that former WTO secretary general Frangialli is going to head STEP, can you confirm this?
Rifai: Well, the current board of directors of the STEP Foundation did recommend naming Francesco Frangialli as president of the foundation. They did take such a decision. This decision has not become active yet. So in that sense, yes, I confirm, they took this decision. The board of the foundation took the decision, but I think all of this will have to be seen in the light of how we decide on the relationship with STEP. That has to be done before the general assembly in October. If we go to the option of STEP is an independent foundation that is free to decide who are the members of its board, who is its president, how to run their accounting, their budgets, their programs and their plans, they are free to choose whoever they want to be president or head of this foundation. If, on the other hand, the model is different, this whole realm of this decision will have to come back to the secretariat and will have to be reviewed in that light.
eTN: Is it a bit unfair to those who have donated to STEP who did so under the premise that it is under the WTO umbrella? Now you’re saying that you’re ready to relinquish the control to Korea if it becomes an independent organization. How would you justify this to those who have donated?
Rifai: I have to clarify one thing – the STEP Foundation is a part of the STEP Initiative. People that have donated to the STEP Initiatives have donated in majority of donations outside of the STEP Foundations, directly with us. Organizations like SNV, Italian government, French government. All of these initiatives were operated under our direct management, not the management of the STEP Foundation. The fact is, the funds and donation of the foundation continue to remain primarily those of Korea. So, no funds from other donors have gone into the budget of the foundation as such. So there is absolutely no effect on our relationship with the foundation and how it develops. There’s no effect on any other projects and other donations. We have a department within UNWTO that is working with other partners other than the foundation on STEP Initiatives. STEP is a concept. It is not just a foundation.
eTN: So what’s STEP as a foundation, what has it done? Its achievements?
Rifai: It has done two very important things. First, it has raised the most substantial amount of money by the Korean government, which has encouraged others, in principle, to buy into this idea, and, of course, through the funds raised in the foundation we were able to execute the largest number of projects. The foundation commissioned us as secretariat to be executors of this project, just like UNDP (United Nations Development Programme) or the World Bank. In that regard, they have contributed. The second most important part that the foundation has contributed to is raising the awareness of the potential impact and the potential of tourism vis-a-vis poverty alleviation on the level of awareness and consciousness they have done a great deal and I must give them credit for that.
eTN: So the US$5mn was used to raise awareness?
Rifai: And implement projects. We have over US$2.5-$3mn that went directly into projects.
eTN: Can you name some of those projects?
Rifai: Oh, absolutely. We have 54 projects in Africa, Latin America, and Asia. I can provide you with complete lists of those. Ethiopia, Senegal, Mali, Ecuador, Nicaragua, Vietnam.
*STEP = Sustaining Tourism, Eliminating Poverty. UNWTO = WTO abbreviates its fullname, World Tourism Organization, as UNWTO.
China; new hotels, new style
FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.
2009 June 08
China; new hotels, new style
As the hotel sector in Beijing matures, three newly-opened hotels mark a change in style:
[] The 43-room Aman at Summer Palace (Aman Resorts’ first in China) is a conversion of a 19th-century palace just outside the wall of the Summer Palace’s Garden of Harmonious Interests in the northern tip of the park.
The Summer Palace is a Unesco heritage site, and until recently Beijing authorities would have been wary of allowing a hotel development – however sensitive the design may be – in the vicinity.
[] The 99-room Opposite House (of the Swire Hotels group) is a modern design by Japanese architect Kengo Kuma, in Sanlitun, Beijing’s popular bar and restaurant area.
With an exterior covered in emerald-coloured glass, and restaurants and bars by top international chefs, the hotel is targeting the top end market with rack rates starting at US$472 (Y3220).
[] The minimalist 55-room boutique hotel, The Emperor, is the first urban hotel in China with membership of Design Hotels (a representation and marketing group).
Close to Tiananmen Square and surrounded by traditional Chinese low-rise houses and courtyards, the hotel has a classic Chinese-style exterior, but contemporary orange and white interiors, and a glass-floored restaurant serving so-called fusion food.
The Fox
