Japan’s outbound market. Remember it?

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

Foxtrots – leading the industry in a dance.

July 25 2010


Japan’s outbound market. Remember it?

For a decade, nearly two, Japan’s outbound market was the only one in Asia that counted – not only for companies outside Asia in the inbound business, but those in Asia as well.

A company’s or destination’s marketing maturity was judged on its success in attracting a segment of the Japan market. The task was tough, but the rewards were high.

Everyone knew about Japan’s group market, of course (remember the flag-bearing tour leaders), and most knew about segments such as SLs (single ladies; now relabelled YFs, young females), seniors (empty nesters), the often-young Guam- and Hawaii-bound holidaymaking pleasure-seekers, and the uncouth provincials travelling-for-sex (but that was not discussed in polite marketing circles). And they were all good spenders – perhaps 50% above other markets.

What happened? Certainly, part of the reason for the change is the economy. Remember when Japanese buyers were in the news every day – buying a Van Gogh, a resort in Queensland, apartments in Manhattan, hotels and hotel companies?

Today, the Tokyo stock market, despite having climbed in recent months, is 73% below its 1991 peak; some ski apartments in Japan (a notable asset affected by the exuberant bubble) are worth 10% what they cost before the fall; and the country’s nominal GDP is lower than it was in 1992.

One economics analyst has given one reason for the 20-year economic hiatus that we also see in the outbound travel market – loss of confidence.

Statistically, Japan was also the only market in Asia that counted – more than twice the size of the next. Up and up it went – although, with hindsight, its actual growth did not quite match the gentle-giant image.

The total was 1mn travellers in 1970, then 4mn in 1980, and 11mn in 1990, then 18mn in 2000 – which still remains the peak year.

But was it in the 1990s when things started to go wrong? In 1996 there was a big boost, of which much was related to Hong Kong – visiting the destination in its last year as a British colony. In 1997, Japan’s overall outbound market was flat, and it fell in 1998, partly because of Asia’s economic crisis. There was good recovery in 2001, but then 9/11 damaged results for that year. But perhaps more; even if the terrorists targetted the US, it was Japan that seemed more fearful.

Now, Japanese seem to have lost the will to travel. Gone is the excitement for foreign places that produced that boost in 1996. In the decade just passed, there were annual declines in five years and flat in a 6th, and an average annual 2% decline.

JTBF (Japan Travel Bureau Foundation, no longer directly related to the JTB travel agency), forecasts 7.4% growth this year – which would take the total to 16.6mn, the figure it first reached 15 years earlier, in 1996. If the outbound business was Toyota, a result such as that would be considered a national disaster.

The Fox


New Alitalia. New Milan plan.

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

Foxtrots – leading the industry in a dance.

July 21 2010


New Alitalia. New Milan plan.



HE Alitalia group has introduced a three-year development plan for service at two of Milan’s three airports. The essentials are:

[] Alitalia so-called premium service from Linate. It forecasts an increase in seat sales from 5.4mn in 2009 to 6mn in 2012 – an undemanding 3.6% growth annually.

[] Launch of a new business-plan, in 2011, for Air One flights from Malpensa. ‘Smart Carrier Air One’ flights to 14 domestic and international points (including Budapest, Istanbul, Munich, Sofia, Warsaw) at low base fares – US$35 (at US$1 to €0.72) for domestic destinations and US$100 for international.

Alitalia says that AO passengers will get seat assignment, baggage transfers, frequent-flyer miles, airport check-in, and tickets available through call centres and travel agencies as well as internet.

Management has misunderstood the LFA (low-fare-airline) business model.

If this is a decision by AO management and not Alitalia management, then it fits earlier patterns – AO management made the same mistake when AO was an independent airline. Although generally considered a success, AO was actually failing badly just before it became an Alitalia subsidiary, running unsustainable seat factors in the 50%-range.

If management from Alitalia or its partner Air France are running AO’s Milan operation, then they have so fare shown no understanding of the LFA model – beyond the requirement to offer ‘low fares’.

Of course passengers would like frills, apparently at no cost to them, but an LFA cannot afford to offer them at no cost. If AO sticks with those low fares noted above, along with the ‘frills’ such as frequent-flyer miles, then the Alitalia group will lose money on this venture, unless it can maintain average seat factors in the mid-90s. But much also depends on the sales model – the rate of fare increases up to the day of the flight, and the level (dishonourable) fare-supplement that most LFAs list under ‘fees’. The market usually reacts quickly to any abuse there – but it depends on competition.

AO is a good move, however, in that it will likely compete on some routes with the more-costly new Lufthansa division based on Milan. Ironically, AO was an LH affiliate before merging into Alitalia.

The other possible positive development is that Alitalia is in a good position to use AO to copy the newish Qantas/Jetstar business model – what I call the ‘J-Plan’. Under this, Qantas-owned lower-cost Jetstar reduces operating costs in the Qantas group by taking over some Qantas routes, or starting new ones that might otherwise be operated by Qantas at higher costs.

Alitalia has an urgent need to reduce its operating costs, but finds it difficult because unions do not want to allow flexibility or cutbacks. If the group follows the J-Plan, parent Alitalia airline would stop growing, and so hold back profitless increase in costs, and AO would grow the group at lower costs.

The AO move in Milan might actually be the same as a J-Plan, but wrapped in a pseudo-LFA cover to attract passengers. Those frills – frequent-flyer-miles etc – indicate that in reality AO-Milan is a lower-cost regular airline, and not an LFA.

[] Objectives 2010-12. Alitalia forecasts that it will double seat sales at Malpensa, from 1.5mn in 2009 to 3mn in 2012. It says growth this year has already been 20% – although I calculate that it needs an annual 26% growth to reach that 2012 target.

Overall, destinations from Milan will increase from 39 in 2009 to 47 in 2012 and seat sales from 6.9mn to 9mn – an annual 9% growth.

These targets need to be seen against the company’s sizeable decline in recent years – a 15% fall in 2009, 26% in 2008, and flat in 2007 and 2006. Its peak was 31mn seats sold (including traffic from then-independent AO) in 2007; it counted just over 21mn in 2009. Planned growth in Milan will recover only 20% of that loss.

The Fox

Regent Hotel Group. Web 1.0.

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

Foxtrots – leading the industry in a dance.

July 20 2010


Regent Hotel Group. Web 1.0.



HAT the monthly People-in-Travel report calls the ‘Retro Regent’ is certainly retro in terms of its online website information.

The hotel group has been sold by the Carlson Group to Taiwan’s Formosa International. And Formosa has vowed to return the group to its Asian roots and has hired Bob Burns, one of the four executives responsible for its initial success, has honorary chairman.

(The August issue of PinT will comprise a full report on these moves. The other three are Rudy Greiner, Georg Rafael, Adrian Zecha.)


Not everything can be done immediately, but Formosa is shamefully slow and ineffective in its website management.

To date, all web links to the Regent group still lead to the website of the previous owner. But Carlson’s website has deleted all mention of Regent – presumably because Carlson does not want any link that shows how ineffective it was in its 10-plus years of running Regent.

Even the website of the Taipei Regent hotel – which is owned by Formosa – is still reporting that the Regent group is owned by Carlson!

If that were not bad enough, the site also notes that the Taipei Regent is a ‘Four Seasons Hotel’. But given the tight control that Four Seasons still has over the Regent name, that may be the truth. Four Seasons bought the Regent group after Burns lost control in 1992 – and actually asked Burns to resign from the company he founded.

Also, the Regent Taipei website opens in Chinese – which might be good for pride, but it is not good for international marketing.

The Fox

Trottings: Into Italy.

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Travel stories from The Fox’s Friends.

July 14 2010


Trottings: Into Italy.


 AM in Italy, on holiday.

Drove down from the south of France to Rome on the coastal autostrada and superstrada. Italy has a low speed limit on the autostrada of 110kph (it is 130kph in France). I generally drive at 120-130 in Italy, but need to keep an eye on the mirror – not for police but for the stream of cars travelling at 150-175, and the occasional one closer to 200.

After Rome, now in Poggio Bustone in the nearby hills. Poggio is the birthplace of Lucio Battisti. Not the pre-Castro dictator in Cuba (actually Battista), but the pop singer of the 70s/80s.

For those who don’t know him, Battisti should certainly be one of the greats in pop music and certainly deserves a high place in the international scene. I would put him in the world top-10, up there with the Beatles, Elvis, Jackson, etc.

But because he sang mostly in Italian – although he also spent some time in Los Angeles – he is hardly known outside Italy. For a taste, try on You-Tube – Il mio canto libero, Emozioni, Il nostro caro angelo – preferably the studio versions, not live performances.

Battisti died in 1998, reportedly of cancer. In Poggio they say the reason was kidney problems, but that might be the same thing.

I am not in Poggio for Battisti, but it is nice to be here because of that connection. There are still many from the Battisti family here, but this is the extended Italian family, so I may know more about Lucio than many of them!

The Fox’s Friends


HPL. Today a hotel group.

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

Foxtrots – leading the industry in a dance.

July 13 2010


HPL. Today a hotel group.


ROM time to time, HPL operates like a regular hotel group, but usually reverts to being a real-estate operation when opportunities to buy and sell interfere with the hotel management business.

Currently, the hotel side is in the ascendant, meaning that some moves make hotel marketing sense rather than pure real-estate sense.

A key indicator was the conversion of the group’s owned Orchard Meridien hotel in Singapore into a Concorde after the management agreement with Starwood expired in October 2008. The parent company gives out some of its hotels to manage, but this Orchard move indicates renewed support for HPL.

HPL also owns the Hard Rock hotel franchise for Asia except Japan. HPL management says that its development philosophy is the Concorde brandname for city-centre, corporate hotels, and HR for resorts. HR growth has been slow – about one hotel every five years – but locations have been poor, apart from the first, in Bali.

The second was in Pattaya, whereas it should have been in the other higher-standard Thai resort, Phuket. Then HPL announced plans to build in Port Dickson – which must have prompted HR franchisor management back in Florida to pull out their maps of Asia.

Although Port Dickson was on the drawing board for about five years, it has now mercifully been taken off, although the short-notice opening of a HR hotel in Penang in 2009 makes up for this in numbers.

Unfortunately, though, Penang is not a suitable HR destination either; a good destination would be the Maldives, where HPL actually has three resorts. Two are managed by Four Seasons, of which one opened for a few months in what was the group’s would-be Concorde Resorts division. The third is the Rihiveli, a 48-bunglaow resort in the south. This is in HPL’s now unbranded and uncoordinated resort division. Before, the Rihiveli was well supported by the French-market, and HPL has maintained this link.

There are others in this division – which is considered to have started with the Lakehouse in Cameron Highlands, close to Kuala Lumpur. Another is the Casa del Mar on Langkawi island in Malaysia. And a fourth, due this September, is the Casa del Rio -which, despite that name, will be in Melaka, Malaysia.


I believe that HPL’s 4-property non-branded resorts need a brandname. Making most sense would be a revival of the ‘Concorde Resort’. A move in this direction would confirm HPL’s continued commitment to its hotels as a hotel-not-real-estate business.


A CR brandname could also be applied to the Concorde Inn at Kuala Lumpur airport; the group’s only CI. If there are no plans for other CIs, the property’s resort-like atmosphere – unlike an airport hotel – would make it suitable to become a CR.

The Fox