Reports; low scores. Euromonitor, Nielsen, Research & Markets.

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FOXTROTS

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.

Foxtrots – leading the industry in a dance.

2009 April 06

Reports; low scores. Euromonitor, Nielsen, Research & Markets.

I present quick reviews of a series of reports on various aspects of the travel business. The range is wide – China, India, business travel, medical travel, etc – but a surprising number make surprising mistakes:

 

 

Euromonitor (EM), despite its name, tackles subjects further afield. A current one is business travel. Unfortunately, some material is questionable, and EM rejected our requests for clarification. Points:

-Business travel market was 194mn in 2007. (WTO says worldwide arrivals were 903mn, so that means a 21% share; I would expect at least 30%.) Asia Pacific takes 27% of both the outbound and inbound markets; North America takes 10% and 6%, West Europe 36% and 41%.

-Self-evident (SE), erroneous (E), or bizarre (B) comment: SE-“Fuel surcharges affect ticket prices”. E-“Lower profits for” (among others) Oasis; yet it stopped flying last April. B-“Air travel shifting to Asia”. B-“Business-only travel also developing amongst longhaul flights” -(but business-only travel has been part of longhaul flights since the beginning). SE-“Hotel openings [help] shortage of rooms”.

-EM lists progress in “chained hotel markets”, but will not confirm that this means destinations with chain hotels – which I presume must mean nearly every destination with more than (10?) hotels. For Asia Pacific, the company says China will grow fastest in “outlets” (assumed to mean hotel openings) 2007-12, growing 57%. Next, Vietnam 55%, India 52%, Philippines 30%, Indonesia 27%. (No other destinations are included, but the biggest gap is Macau – a report in Travel Business Analyst shows 186% growth over almost the same period, although probably 40% of that is not ‘chained’).

-A list of bizarre (again) bullet-point descriptions for MICE destinations: Bali – ‘best charm…’, India – ‘dedicated hubs for high-growth sectors’, Malaysia – ‘warmth and hospitality’, Thailand – ‘ultimate client servicing…top rate facilities’.

-A section on future business travel, see table, could be interesting. Although I might dispute some developments, our main challenge is on numbers. These seem too low, but given the absence of clarification (on share of total, for instance, and EM’s 2007 totals) I cannot go further.

Fortunately, some information is interesting:

-For travel spend, 31% of those surveyed expected 2008 travel spend to be higher than 2007; 27% expect 2009 spend to be same as 2008; 63% expect higher 2009 spend because of higher air fares; 25% to spend more as a result of more travel.

(Overall, I find this report shockingly deficient in quality, clarity, and relevance. If this is an indication of other EM reports, I urge would-be buyers to look elsewhere.)

 

 

 

India, outbound. According to an AS Nielsen report:

-Over 1996-2006, India’s outbound market “expanded by…10% annually, well above world average.” (My data, derived from PATA data, shows 9.2%.)

-“Latest figures put outbound growth at 16% in 2006.” (PATA’s own 2007 data shows 17% growth.)

-“The average traveller spent US$1700 per trip, which amounts to a US$15bn…market.” (No source was given for these figures. WTO, which gets most of its data from official sources, puts the figures much lower – US$6.8bn in 2006, growing 9.6% to US$8.2bn in 2007. That would mean average spend (in 2006) of US$930, not Nielsen’s US$1700.)

 

 

 

Also on India from Research & Markets, a company:

-10mn annual arrivals in 2009. (The total was 4.9mn in 2007, so that would mean a 43% annual increase this year and in 2009 and thus, like so much of R&M data, not believable.) The average annual increase has been 9.3% this decade.

-India’s medical tourism will reach US$2bn in 2011. R&M says this would represent an average annual growth (probably from 2007) of 61%.

-Outbound travel from India is expected to increase at an average annual growth of 13.3% over 2008-12. (This decade, growth has been similar – an annual 13.7%.)

-For the hotel sector, R&M reports that India has a shortage of 150,000 rooms.

 

 

 

And R&M on medical tourism (MT):

-In 2007, Asia generated MT revenues of US$3.4bn, 12.7% of the world market.

-In 2007, 2.9mn MTs visited India, Malaysia, Philippines, Singapore, Thailand. (That would be 5.6%; I find this too high to believe – unless its MT definition includes visits to pharmacy, doctor, etc.)

-Average annual growth rate of MT in Asia expected to be 17.6% over 2007-12.

 

 

 

And on China, inbound:

-China forecast to count US$53bn (quoted in US$; a risk these days of sizeable fluctuating exchange rates) revenue from international visitor arrivals in 2010, plus US$124bn (at US$1 to Y6.85) from domestic travel. (R&M does not name the source of these figures.)

  (That total, of US$185bn (R&M’s count), would compare with what China’s NTO put at US$159bn in 2007, which calculates to an average annual growth of 5.2% and which looks low by a fact of two. Also, the WTO puts the 2007 international visitor spend at US$41.9bn; if R&M is using WTO data, AAGR on this segment would be 8.1%, which seems closer to likely outcome.)

 

 

 

 

The Fox

Air Asia. Hagiography from The Economist.

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FOXTROTS

 

 

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning. 

Foxtrots – leading the industry in a dance.

 

 

2009 April 01

 

Air Asia. Hagiography from The Economist.

 

The Economist, usually a hard-headed observer of business, goes soft when it writes about the travel business, often writing hagiographic features. Perhaps its travel-business writer is not very good and/or new?

 

A current one is on Air Asia. Following are some comments:

 

 

[] ‘After seeing a TV interview with the founder of Easyjet, [Tony Fernandes, Air Asia’s founder] went to the airline’s London Luton base to see how the airline operated.’

 

If this is a true story, he would not have learned much. Because all you can see are planes arriving and leaving. A key factor is turnaround time (best is 20” but not more than 30”), but then also important are to have a simple fare structure – cheap fares three months in advance but increasing near flight time. And inflight service – selling food etc, but also with passengers helping to keep the cabin clean. Fernandes would have seen none of that at the airport.

 

 

[] ‘He returned the following day with a video camera.’

 

Sorry, nothing he captured on film would have helped him with Air Asia – unless it was to write a tag-line on the plane’s cabin – Now Everyone Can Fly.

 

 

[] ‘He decided to start [Air Asia] only if it could be profitable from the first day.’

 

Sorry, folks, that might be a nice story for publication, but that could not happen – particularly as some invited free guests were on Air Asia’s first flights, as well as free tickets for the public to attract publicity.

 

 

[] ‘It was widely assumed that the LFA model would not work in Asia because customers expected high levels of service.’

 

I didn’t; I rubbished the comments about the market’s need for cushions and comforts. I said when passengers saw those low fares – say $20 instead of $150 – they would happily fly without a cushion and ‘free’ brandy. That service matter was western-implanted consultants’’ philosophy, but note that many in Europe still say the same thing – that Ryanair’s airports are too far away from the city served, for instance, that it does not respect the customer, and so on. And then look at Ryanair’s business success – selling more seats than either Air France, British Airways, or Lufthansa, systemwide, not just Europe.

 

 

[] ‘AA targets 22mn passengers this year.’

 

But TE’s reporter did not note (know?) that AA’s two subsidiaries in Indonesia and Thailand are growing slower than the original operation in Malaysia – even though they are newer and smaller. The reason is that ID and TH are not good places to base an airline. The AA group needs to have airlines in some bigger and stronger economies, such as China, Hong Kong, Taiwan, Japan, Korea. But it can’t get into those markets, so it opens in weak markets, such as ID and TH. And it has said (but gone quiet recently) that is also planning something in VN – another loser.

 

Also, include those two subsidiaries and the passenger total was already 23mn in 2008 – according to my calculations (AA tries to hide figures for its two subsidiaries). If that 22mn mentioned in The Economist is just for AA’s main Malaysia operation, then the task looks tough. AA would need to achieve 50% growth this year, although it managed only 21% in 2008.

 

The Fox

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