Texas gets bigger. Buying into travel.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance. 


2007 March 30



Texas gets bigger. Buying into travel.


Coming soon to a neighbourhood near you. Two years ago it was the Cendant group that was moving into a position of world market dominance in the travel business – with substantial hotel interests plus a comprehensive retail distribution network, most particularly in online sales. 


That turned out to be a non-event as Cendant (inexplicably) decided to break itself apart as soon as it got itself together. 


Not quite the same is the new big player – Texas Pacific Group. In an extraordinary buying spree just before the end of 2006,
Texas agreed to buy Harrah’s (the
Las Vegas gambling operation and which is expected to move soon into
Macau in some form), Sabre (which includes Travelocity, Lastminute, and Zuji), and Qantas. And it already has equity in three
US airlines.


Whereas Cendant’s missing link in core travel business operations was and airline company, the gap for
Texas is the hotel business. So it would seem reasonable to expect that the group will succeed in buying a big hotel operation in the next few months. Although it is difficult to identify a pattern in the type of travel operations that
Texas is buying, there does seem to be a preference for US operations and the Pacific.


That would point to Shangri-La, but we do not believe that company would be for sale – even partially, although
Texas appears to prefer 100% buy-outs with other investment partners.


Of course, buying travel operations and running them effectively are not necessarily skills which are automatically concomitant. And the still-unanswered question is whether
Texas will seek to manage its new acquisitions in order to earn more from synergies, or will it leave them as unlinked investments that happen to be in the same industry?


We favour the management route, not least because Qantas at least is not having a good time. Its passenger loads in 2006 were falling, it has just been refused permission for closer cooperation with Air New
Zealand, and it faces ever-fiercer competition on its main Australia-Europe routes – from Qatar Airways, and the UAE’s Emirates and Etihad.


Also, the Sabre group has only recently acquired Lastminute and Zuji. These, together with Gullivers Travel, are widespread operations around the world – and Lastminute and Zuji may not yet be profitable. And they themselves need to work on synergies. 


This does not mean that
Texas has bought a package of trouble. As with the Cendant build-up, there are tremendous opportunities for the travel companies now under
Texas control. But it has bought companies which require crucial and quick management decisions.







James Hogan. Union with Etihad.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance. 



2007 March 28





James Hogan. Union with Etihad. 

James Hogan joined Etihad Airways as chief executive almost the day after he left the same job at Gulf Air – which he held for four years. We believe his appointment changes the airline business in the Gulf – but then, almost by definition, in other parts of the world as well. 

When Etihad was launched in late-2003, we thought it an inferior copy-cat of Emirates. We changed our minds quickly when we saw the pace of its expansion, the quality of its service. And, almost more than anything else, its route strategy – as at Emirates, which we describe as a “one-stop-shop”. Meaning one stop from many points in AfricaMiddle East and Europe to many points in those regions and also, increasingly, Asia Pacific. 

With Hogan running the airline, it can seriously challenge Emirates’ dominance and superiority. 

There is intense rivalry between the two, although this is more regional politics than commercial. Emirates is based in Dubai, the most prominent of the seven United Arab Emirates. And Etihad is based in Abu Dhabi, the capital of the UAE. 

Abu Dhabi has long considered itself superior to those traders down in Dubai. But obviously a burgeoning worldly Dubai with a successful Emirates airline, has required some reflection. 

Etihad (which means Union) cheekily calls itself the national airline of the UAE, even though it is actually the airline of Abu Dhabi. But that is presumably a riposte to Dubai cheekily naming its airline ‘Emirates’, when it is actually the airline of Dubai. 

Hogan was credited with turning around Gulf Air financially. 

In fact, we find this “turning around” an overrated skill; it is really quite simple to cut costs, particularly if you then leave town before any damage as a result of reduced spending is perceived. Give us nearly any company, and we can make it profitable the following year. 

The difference though for Hogan is that Etihad does not need any financial turnaround. Abu Dhabi is rich (much much richer than Dubai) and so its airline operation, being financially unrestrained, can have more potential. 

We see Etihad under Hogan not just challenging Emirates and matching its business model, but going further. Speculating – all-business-class division/subsidiary; mass-movement (A380) division/subsidiary; moving, Swissair-like, into owning other airlines?  



Starwood x2. New brands.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance. 



2007 March 26



Starwood x2. New brands. 


The two Starwood companies are introducing new brands. 


– Starwood Hotels* is introducing a new extended-stay hotel brand – Element. The new brand is described as “smart design, modern style”, and providing a “social” environment with design features inspired by nature, where guests can be “in their element”. 


Lobbies will be lit by natural light from multi-storey window-walls while public spaces within the hotels will include a water feature. Amenities include a courtyard and patio where guests can sit by an outdoor fire pit and barbeque. 


Starwood anticipates 500 Element hotels worldwide – but the timescale is not known. The first is expected to be in
Lexington, Massachusetts

in early 2008.


The first hotel in Starwood’s other new brand – ‘Aloft’, a mid-priced, reduced-service version of W Hotels – is due in 2007. This brand is also expected to total 500 hotels by 2015. 


– Starwood Capital* goes for green. It has launched the ‘1’ hotel brand, which it describers as “luxury, eco-friendly” hotels. 


1 hotels will be based on environmentally-sustainable internal and external design, and will follow green construction and operating principles together with a commitment to consumption of natural resources. SC wants to demonstrate that green principles can coexist and enhance a luxury hospitality experience. 


The US Natural Resources Defense Council will be an environmental advisor on 1s – with the initial goal of setting a new standard for environmental excellence and, over time, to transform the entire hotel industry. And each 1 will donate 1% of its revenue to local environmental organisations.  


The first four 1s – all in the
US – will be new-builds. The first may be in
Seattle, due late 2008; others are

Mountain ski resort (
Scottsdale (
Arizona), and
Fort Lauderdale (
Florida). The first international 1 will be in
Paris, a renovation of an existing hotel. (SC bought 800 hotels in
Europe in 2005, most of them in
France, and in 2006 launched a luxury brand under the name of one of them, the Crillon in


Other target locations are
Los Angeles, New York, and
Washington. The aim will be to have 15 hotels signed or under construction within two years.


*Starwood Hotels and Starwood Capital are no longer directly linked.

Korean Air. Significant expansion.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance.



2007 March 23



Korean Air. Significant expansion. 


At the end of last month, Korean Air added two significant routes in
Malaysia and
Thailand from


Frequency to Kota Kinabalu and Pattaya is only 3-4 times weekly with 149-seat B737-800s, but the key factor is that these are almost-entirely tourist-traffic routes. The Pattaya route may take growth from
Thailand’s main resort, Phuket – which has still not recovered from the downturn following the December 2004 tsunami.  


Korean Air also plans extraordinary expansion of its
China network (including
Hong Kong and


This includes: Operating three daily flights Seoul-Beijing/Hong Kong/Shanghai in 2007; adding 12 new destinations over the next four years from its current 20; expanding cooperation/links with Guangzhou-based China Southern in particular (in the process of becoming a formal member of Sky Team, of which Korean is a founder member).

Maldives. Opening new zone.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance. 




2007 March 21



Maldives. Opening new zone.


The tourism ministry of the
Maldives says arrivals have now surpassed pre-tsunami levels. But according to data we have (in fact, sourced from the Maldives), the visitor total through August this year was still 6% down on 2004, and only in one of the eight months was the total higher than in 2004.


Another source puts the 2006 target at 600,000.    


Meanwhile, Four Seasons has opened its second resort, on Landda Giraavaru, and reopened its first on Kuda Huraa – closed after the tsunami. Also opening this year have been Minor’s Anantara, Starwood’s W, and two new Coco Palms. 


35 new islands will be developed in the new central and southern tourism zones – planned to open tourism more evenly across the atolls. Over the next five years this should add 5000-7000 beds to the current 17,400. First to open in the newly-designated southern zone should be the Shangri-La, in late 2007. 


And there are more air services to Male. Bangkok Airways has restarted its flights from
Bangkok, and Singapore Airlines now operates daily from
Singapore. Also, there is expected to be a new international airport on Gan to service the southern zone.

Tourist offices. Getting it wrong.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance.




2007 March 19



Tourist offices. Getting it wrong. 


The pattern is depressingly-common. New appointed administrators of the visitor business change what was there before – good or bad. Usually the reasons are political; the outgoing administration was from a rival party, so by definition must have the wrong policies. 


Some changes look like well-meaning ideas from an inexperienced team driven by what it wants for the destination, not what travellers want from the destination. 


Sustainability and environment-friendly tourism are
Thailand’s new credos for the new government’s new minister of tourism, Suvit Yodmani. He wants to re-orient the destination’s tourism strategy – less prestigious and costly projects, and more focus on a sustainable environment and training.


The minister promises funds to restore 1000 sites and monuments of historical or natural importance. The promotional theme of ‘
Bangkok, fashion hub’ has been dropped, replaced by ‘kitchen, window to the world’ (literal translation), promoting
Thailand through Thai restaurants around the world.


We presume these policies will be adjusted when it is realised they are costly, ineffective, or when visitor growth slows. But perhaps the first move could be to speed up counting of visitors; so far it has just February 2006 data. 


Nepal’s new minister for tourism and aviation has proposed a master plan for tourism.


This will incorporate policies, strategies, and action plans for development, expansion, and promotion of the visitor business. The minister hopes to better integrate private initiatives with the government’s tourism agenda. 


The government puts peace and security as vital elements of any tourism development. The minister wants the travel trade to develop special packages for travellers from
China and
India is already
Nepal’s largest inbound market, but has fallen in recent years – as have most markets.


The Nepal Tourism Board will restructured again to become a National Tourism Council which will integrate representatives from all visitor sectors. And Air
Nepal will also be converted into a company entity – which should give it more autonomy in commercial decisions.


Is there any change here, apart from renaming the NTO?  


Then there is
Indonesia. As we noted last month, for the second year running, the country’s minister of tourism, Jero Wacik, did not attend the destination’s most important travel exhibition, Time, run by a semi-government department.


Wacik (whose first name, embarrassingly, is changed to Zero by his detractors) can be found in
Berlin for ITB and
London for WTM, however.

Travel and the environment.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance. 



2007 March 16



Travel and the environment. 


More companies seem to be selling their environmental attributes. From around the world: 


– Projects at
Brisbane airport include a man-made freshwater lake, on-airport recycled water treatment plant, and a recycled water pipeline.


The airport has halved water consumption over the past 12 months and targets another half over the next year.  


– Amazon Nature Tours, a Brazil-based tour operator, has launched Expedition Cruises. This is a 7-day cruise within a new reserve in the centre of the Amazon – created by the Institute for the Environment by combining smaller ones. It is large enough to preserve the biological diversity of this still-undeveloped part of the Amazon. 


Customers explore the rainforest on foot and from the ship’s launches to discover plants and animals, as well as navigating in unmapped territory. Groups of up to 18 will be led by naturalist guides. 


– World Wildlife Fund in
Canada has teamed up with Canadian tour operator Horizon – which specialises in luxury travel – to develop a formal travel programme for donors and others interested in travel experiences that would bring them closer to nature and the work of the WWF. The proposed line-up for 2007 includes the
Newfoundland, and
British Columbia in
Canada, and internationally to
Cuba and


France’s railway company, SNCF, has introduced an ‘eco-indicator’ – which not only compares fares and time for a trip on a train, plane, or car, but also a pollution index.


For example, Paris-London by train costs US$88, takes 100 minutes, and has a ‘CO2 index’ of 3.7. A flight is US$137, 80mins, and 103 CO2; a car is US$158, 300mins, and 161 CO2. 


– Taj Hotels and Conservation Corporation Africa have formed a joint-venture to develop luxury lodges in wildlife and natural parks in


The first opens this month – Mahua Kothi in the Bandhavgarh national park. Then Baghvan on the edge of the Pench national park, due next January or February, then others in Corbett, Kanha, and Panna tiger reserves. 


The maxim, says Taj, is to “leave the lightest footprint” by using local materials. CC Africa will train and monitor the naturalist guides. 


– Kenya-based Governors’ Camp Group is building a luxury gorilla-watching lodge in
Rwanda. The Sabyinyo Silverback Lodge, with six cottages and two suites, located by the Parc National des Volcans, is due to open early 2007.


The project has followed environmental and ecological guidelines, and has involved establishing a community trust that benefits some 5000 families living in the surrounding area. 


The African Wildlife Foundation, the International Gorilla Conservation Programme, and the Rwanda Office of Tourism and National Parks, are working to ensure the lodge will have a positive impact on the area.

Air France. Going low.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance.




2007 March 14



France. Going low.


France plans to launch another airline operation in
France this year, offering charters, and regular flights with low fares.


The airline’s name may be Transavia.fr (Tfr), based on Transavia.com (Tcom), a 100% subsidiary of AF’s KLM division. Tfr would be 60% owned by AF and 40% by Tcom. Initial aircraft fleet would be four leased 186-seat B737-800s, due to increase to nine by 2009. 


Tfr flights from its Paris Orly base would be to “favourite destinations” of travellers from
France – naming
Spain, and
Tunisia. Those are not the top four, and missing from that list are
UK, and a medium-haul route, the


Tfr would not operate on routes flown by AF, and would operate only leisure routes – with 67 flights weekly starting this spring. 


At the same time, Tcom plans unspecified charter flights from Paris Orly. Tcom in the
has 31 B737-700s and -800s. In its latest fiscal year, its revenue was US$585mn (€468mn).
  Other relevant factors:


– AF says its decision was based on growth in the leisure market, and requests from the travel trade. 


– AF says Tcom has been looking “for some time” into the possibility of operating from bases outside


– Tfr staff will be employed under French labour laws. 


– Seats will be sold by the travel trade, on Tcom’s website, and through call-centres. 


We see numerous faults with the business plan as announced: 


– Hybrid airlines do not work or, rather, they do not make profit. Part of the problem is the intense flexibility required for a LFA, but not in a charter airline. 


However, if Tcom is running the charter operation from Paris Orly, this can be considered two airlines under (almost) the same name. That could work. 


– French labour laws. Social costs make staff costs high, but more important is the lack of labour flexibility. And that is precisely what is required in a LFA. 


Lotfi Belhassine, founder of would-be LFA Air Liberte, now closed, told Travel Business Analyst that his mistake was to establish the airline in
France – because of French labour laws, and unresponsive working attitudes.


– Late launch. For an operation starting April, the website should be operating before Christmas. Nothing there yet. 


– Leisure flights. Limiting an airline to these restricts Tfr to an at-best 7-month season. What happens to those high-cost staff in the off-season, particularly if fares are to be low? And why limit to leisure routes if there is already a big limitation in that it will not compete with AF? Why not also business routes not operated by AF? 


– And that in itself threatens the viability of Tfr. If it cannot fly routes on which it sees a market if AF is already there, then its viability is threatened. 


That said, we doubt Tfr is a commercial venture. It is a way to stop airlines such as Easyjet and Ryanair expanding as much as they would like in the
France market. Just by being there, Tfr would limit the airport slots that could be allocated to other airlines – and possibly on routes that would compete with AF.

‘New’ London. Regenerating.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance.




2007 March 12



London. Regenerating.


The ‘New’
London is a fast-changing area which encompasses four Thames-side districts of Bankside, Pool of London, Southwark, and
East London.


All have been targets of regeneration for some time, but winning the bid for the 2012 Olympics has put new impetus into upgrading transport, accommodation, and attractions – in addition, of course, to new sports facilities. Developments include: 


 – O2 (formerly the Millennium Dome), due to open its 23,000-seat arena for live entertainment, music and sports this year. The centre also has a 1800-seat theatre (to be a
Europe home for Cirque du Soleil), an ice rink, 10-screen cinema, and restaurants.  


– The new planetarium at Maritime Greenwich, due to open this spring, is a focal point of a US$28mn (at US$1 to £0.53) ‘Time and Space’ project that also includes new galleries and an education centre.   


– Bioa, a new US$150mn aquarium which recreates ecosystems (the Amazon,
UK, Indo-Pacific, and
Atlantic Ocean) with plants, fish, and free flying birds, is due to open 2009. It targets 1mn visitors a year.


– The 4-star 169-room Radisson Edwardian hotel in

Wharf in the Silvertown Quays development (a large urban regeneration project) is due to open this year. And Hilton opened two hotels in the area in 2006 –

Wharf and



– The Docklands Light Railway has an additional US$85mn for development. It plans to introduce 24 new trains (usually about five carriages) from May 2007, and the new Stratford-Woolwich Arsenal line is due to open in 2009. (Woolwich Arsenal is south of the
Thames near
Greenwich; not to be confused with the Arsenal football club, which is in north


IATA. More barbs from Bisignani

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance.




2007 March 09



IATA. More barbs from Bisignani 


We believe Giovanni Bisignani, head of IATA, is a good leader for the airlines he represents. And he talks straight. We have already run some of his ‘barbs’; here are two more: 


– Safety. A responsible industry cannot tolerate any governments that doesn’t take safety seriously. The safety record of Democratic Congo,
Sierra Leone,
Equatorial Guinea, and
Swaziland is an embarrassment for our industry. The last three have taken some action. But we need results fast. Flags of convenience have no place in a safe industry.


– Environment. Governments must not block our progress. Too often governments base policy on myths and don’t worry about the inconvenient facts. But killing myths alone is not a solution. We are a responsible industry working on solutions with a solid strategy.  


First, eliminate the 12% inefficiency in air traffic management. Second, invest in new technology – as long as taxes don’t rob us of cash. Third, explore global emissions trading options. Don’t get distracted with regional schemes.

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