Poland Tourism Chief Gets Fired Over Axing Auschwitz From Press Tours

Czarek Sokolowski  / Associated Press

Poland’s tourism minister says he has fired the head of the national tourist organization after he said he wanted to remove the Auschwitz memorial and a Jewish history museum from tours for foreign journalists. Pictured is the main gate of the former German Nazi death camp of Auschwitz, Poland. Czarek Sokolowski / Associated Press

Skift Take: Auschwitz is one of the top points of interest for visitors in Poland. But, avoiding a tragic and horrific time in a country’s history is not how you move forward with new tourism branding and messaging, which Poland has sought to do in recent years.

— Dan Peltier

Poland’s tourism minister said Wednesday he was firing the head of the national tourism organization after he said he wanted to remove the Auschwitz memorial and a Jewish history museum from tours for foreign journalists.

Witold Banka said on Twitter he was dismissing Marek Olszewski immediately over “scandalous remarks” the head of the Polish Organization of Tourism made in Wednesday’s Gazeta Wyborcza daily.

The newspaper quoted Olszewski as saying he wanted to “promote the values of Poland‘s culture” and had “no need to show places and events relating to the history of other nations.”

According to the paper, he had removed the site of the former Nazi death camp of Auschwitz and Polin Museum of the History of Poland’s Jews, in Warsaw, from tours for foreign journalists.

“Auschwitz is not a tourism product but a place of martyrdom and deep thought, while we do promotion of Poland as a tourist attraction,” Olszewski said.

During World War II some 1.1 million people, mainly Jews but also Poles, Roma, Russians and other nationals were killed at Auschwitz.

This article was from The Associated Press and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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Uber Asian Rival Grab Adds Toyota as Investor in $2.5 Billion Funding Round

Grab

Lim Kell Jay is the head honcho of the Singapore office of Grab, the ride-hailing app based in the city state. Grab has grabbed $2.5 billion in funding this year to fend off Uber. Grab

Skift Take: New Uber CEO Dara Khosrowshahi has many challenges to contend with, and one is Singapore-based ride-hailing company Grab.

— Sean O’Neill

Singapore-based ride-hailing company Grab said Wednesday that it has raised $2.5 billion in a funding round that included an investment from Toyota Group — adding to an investment by Japan’s Softbank — as the companies also announced a new technological partnership. A personal story puts this news into context.

A recent trip to the coastal city of Danang in Vietnam reminded me why Grab is Southeast Asia’s dominant ride-hailing operator.

During the Vietnam War, Danang was where first American combat troops landed, serving as a busy American air base. Today, there are 55 kilometers of pristine white-sand beaches, lined with new resorts. The plane arrived late at night, so our party booked the hotel’s car service. The 30-minute ride in a seven-seater van cost 950,000 dong, or about $41.

The next day, we had no trouble finding a ride to Hoi An, a Unesco World Heritage site that cost 600,000 dong ($26). The driver seemed pretty happy—later that day, I learned why. After some shopping, I opened my Uber and Grab apps to see if they worked. Grab was available, so we hailed a van to go to a seafood restaurant a 20-minute ride away, and the quoted price was just 48,000 dong ($2)!

Not only that, I got a text message from the driver, Trinh Hai Ho: “I am arriving now.”

“Can you please come directly to the taxi stand outside the lobby?” I replied, and he showed up right away.

I soon learned that Trinh Hai Ho doesn’t speak a word of English—Grab’s in-app messaging service had seamlessly translated the messages. Although I knew Grab had introduced this service in October, it was still an eye-opening experience to see it in action. For the next four days, we used nothing but Grab to go everywhere, including three trips to Madame Lan Restaurant  for amazing Vietnamese food. (Highly recommended!)

My experience with Grab, which debuted in 2012, shows why the startup is doing well in Southeast Asia, where it competes head-to-head with Uber across seven countries: Indonesia, Malaysia, Myanmar, Singapore, the Philippines, Thailand and Vietnam. And just today, Toyota announced it’s making a strategic investment in Grab.

In-app translation isn’t exactly new; Didi, the ride-railing company that vanquished Uber in China, also offers the feature. Uber’s rivals are using it in the right way in the right places to improve customer experience. All of this underscores how Grab better understands the needs of its local customers, such as accepting cash when Uber only took credit cards in places where cash ruled.

Today, Grab is in 87 cities and is aiming to hit 100 by the end of this year. Grab now has 95 percent in third-party taxi-hailing and 72 percent in private-vehicle rides, according to the company. Uber struck deals with Didi in China and Yandex in Russia, effectively ceding markets there to larger, more locally dominant rivals. It’s fair to ask whether that might happen with Grab.

Meanwhile, the competition is good for consumers. My last Grab ride in Danang was from the city to the airport. It cost just $3.

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European Train Operators Want Slice Of UK Rail Companies Ahead of Brexit

Christopher Jasper  / Bloomberg

The UK may be clattering toward an exit from the European Union, but its railways are headed full pelt in the opposite direction. Christopher Jasper / Bloomberg

Skift Take: How the UK’s transportation infrastructure will remain connected to mainland Europe is a question that will continue to loom large as Brexit talks roll on.

— Dan Peltier

The UK may be clattering toward an exit from the European Union, but its railways are headed full pelt in the opposite direction.

As Brexit talks continue, the national rail companies of France, Germany, Italy and the Netherlands are snapping up contracts spanning London commuter routes to long-distance expresses as private British firms struggle to compete with the lower cost of capital available to their state-owned rivals.

Two decades after the world’s oldest railroad was privatized, 14 of 19 major U.K. franchises are at least partly controlled by government-owned operators from mainland Europe. Even as the split from the EU looms, Rome-based Trenitalia SpA is planning the biggest raid yet with a bid to run the 55 billion-pound ($71 billion) High Speed 2 line between London and northern England.

Overseas operators are ramping up efforts to grab a bigger slice of the world’s biggest open rail market as steps toward liberalization elsewhere proceed more slowly than expected. With U.K. passenger journeys doubling to 1.7 billion since privatization and ticket prices set to rise the most in five years in 2018 because of a peg to inflation, European state players are being joined by Japanese and Chinese companies eager for a slice of the franchise pie.

Foreign control of the rail network is an emotive subject in Britain, where trains have played a key role in the economy since horses pulled the first carriages back in the early 1800s. During the industrial revolution, steam locomotives delivered raw materials to mills and factories and shuttled goods throughout the country and for export around the world. The system was privatized in the 1990s as one of the last major sell-offs of state assets begun by the Conservative administration of Margaret Thatcher.

‘Priced Out’

Go-Ahead Group Plc, Britain’s biggest rail operator, says it doesn’t expect Brexit to stymie the overseas challenge, and that while competition is welcome, the government must ensure awards aren’t distorted by foreign firms making low-ball bids to gain a foothold in the U.K. The company was this month ousted from a contract to run trains in Birmingham, England’s second-biggest city, by the Abellio arm of state-owned Nederlandse Spoorwegen.

“If the government wants me to export abroad we need work in the U.K.,” Go-Ahead Chief Executive Officer David Brown said in an interview. “If I’m priced out, then we won’t be exporting. We are not going to bid for things that are unsustainable. Sometimes a foreign operator may have different criteria.”

Since last year’s Brexit vote, state-controlled Deutsche Bahn AG’s Arriva unit has won a two-year extension to its CrossCountry franchise stretching 775 miles from Cornwall to Scotland, taken over the London Overground network, and been confirmed as operator of the Northern regional concession.

Over the same period, in addition to its Birmingham win, Abellio has been awarded the Greater Anglia franchise for a further nine years, edging out Aberdeen-based FirstGroup Plc and London-based National Express Group Plc. And Trenitalia in January agreed to buy National Express’s contract to run the C2C line between the capital and satellite towns to the east, signaling the exit from U.K. rail of a company once ranked as its biggest player.

Cheaper Financing

For Arriva — bought by Deutsche Bahn for 1.6 billion pounds in 2010 in the German giant’s first move into U.K. rail — there’s no question that being part of Europe’s biggest railway company confers an advantage in raising cash.

“We benefit so much from German ownership — from the treasury of Deutsche Bahn,” CEO Manfred Rudhart said in an interview. “We have access to financing streams that we never had as a listed company. That is a massive benefit in terms of our ability to invest in U.K. projects.” Rudhart has told DB that Brexit shouldn’t impact U.K. business fundamentally.

The lower capital costs conferred by state ownership have become critical as the government seeks to wring more revenue out of rail infrastructure, causing margins on U.K. franchises shrink to around 3 percent from 10 percent when the network was first privatized. That trend has rendered U.K. rail unattractive, National Express said after selling its C2C contract, predicting that a slowdown U.K. passenger growth will “present significant challenges” to other operators.

HS2 Face-Off

European companies also have an advantage because they’re vertically integrated, meaning that they have experience of running infrastructure projects, not just train operations, according to Mark McVicar, an analyst at Barclays in London. That’s becoming more important as the government looks to reduce the role of state-backed track and stations manager Network Rail.

The extent of foreign penetration of U.K. rail was revealed by the list of competitors for the HS2 line in June. Trenitalia, partnered with FirstGroup, will draw on its experience with Italy’s Red Arrow expresses in bidding for a route on which trains could reach 225 miles per hour. That’s compelled Richard Branson’s Virgin Trains and ally Stagecoach Plc, the operator of the predecessor franchise, to team up with French leviathan SNCF, which operates the TGV service. Completing the lineup is an all-Chinese venture of Hong Kong’s and MTR Corp. and Guangshen Railway Co.

U.K. companies say their chief concern is a lack of reciprocity, especially given EU rules requiring member countries to move toward liberalization. Go-Ahead, though a long-time partner of SNCF, is unable to compete in many mainland nations, according to Brown, who says foreign operators are honing their skills in Britain so that they can be better prepared to protect their position at home once more markets are pried open.

Even Deutsche Bahn admits to frustration at the pace of change given that Germany, too, is beginning to invite foreign tenders. “If someone comes into our travel market it’s not unreasonable to ask that their market is opened up as well,” Rudhart said.

Meanwhile, there are some in Britain who say Brexit should be used as a trigger to turn back the clock on privatization and re-nationalize the network. Unions, in particular, argue that if the railway is returning to state control, the state in question should at least be the U.K.

“Even from the early days foreign governments have tried to get their snout in the trough,” said Mick Whelan, general secretary of train drivers’ union Aslef. “We shouldn’t let them keep it there.”

This article was written by Christopher Jasper from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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Allegiant Air Will Enter the Hotel and Condo Business With Massive Florida Property

Allegiant Air

Allegiant Air is developing a Florida hotel and condo property called Sunseeker Resorts. The airline is calculating this is a natural extension of its air business. Allegiant Air

Skift Take: At least one high-profile Allegiant Air executive left the airline recently in part because he didn’t want it to divest from its core mission of flying passengers, multiple sources have told Skift. But the project is happening anyways. We’ll see if Allegiant has more success than other airlines that have entered the hotel business.

— Rachel Bronstein

After 18 years flying as an airline for the price conscious, Allegiant Travel Co. wants to add real estate development to its list of corporate activities. The company is embarking on an audacious plan to build a 22-acre resort compound with a hotel, condominiums, bars, and restaurants on the Florida Gulf Coast in Port Charlotte.

The real estate offshoot, called Sunseeker Resorts, will have a 75-room hotel, along with about 720 condo units, ranging from $650,000 to $1.1 million based on size. The property, when finished in late 2019 or 2020, will also include North America’s largest private-resort swimming pool.

Longer term, Allegiant wants to tout its success with the Sunseeker property as a bid to begin managing other leisure-destination hotels for fees, further diversifying its revenue, President John Redmond said Tuesday. It also sees lucrative opportunities in developing new food and beverage brands and restaurants it can use at other locations, plus meeting and banquet space, a marina with boat slip leases, and the ability of owners to rent their condos as part of the hotel operation.

All this new business development is, of course, far afield from the core operation of running an 88-jet airline with nationwide, less-than-daily service from small burgs to leisure destinations in Florida, Las Vegas, and Phoenix—a model that has proved wildly profitable. The airline is simultaneously working this summer to improve its operational reliability, which suffered earlier this year, while also shifting to an all-Airbus fleet by 2020.

“They’re not playing on their home field anymore”

It’s hardly revolutionary for an airline to own or build traveler accommodations— Pan American Airways did it right after World War II, when founder Juan Trippe opened the carrier’s first hotel in Brazil. The chain expanded into the InterContinental brand under Pan Am ownership for 35 years before the airline’s financial pinch caused it to sell the hotels in 1981.

In the 1980s, United Airlines’ parent briefly became the Allegis Corp., a full-service travel conglomerate that aimed to meet the full range of travel needs by piecing together the airline with its ownership of Hertz rental cars and the Westin and Hilton hotel chains. (United had acquired Hilton from another airline, TWA.) The conglomeration effort died ignominiously in 1987 amid a shareholder battle, two years after the Hertz acquisition and almost 20 years after the company had bought Westin. United’s parent sold off everything but the airline.

A few carriers—including All Nippon Airways Co. Ltd and Icelandair Group—still own hotels, perceiving them as a natural commercial fit. But that’s about it.

Investors have shaved 29 percent off Allegiant’s share price this year

The fear among Allegiant investors is that the project could prove to be both costly and distracting. Allegiant spent $35 million to acquire 20 parcels from 15 owners to stitch together its development site. The company says it will fund the project with presale deposits, collecting roughly 30 percent of a condo’s sale price before the particular unit is completed. As units are finished and sold, Allegiant aims to roll that income into financing further construction and keeping project costs away from its balance sheet. Owners’ fees are expected to cover operating costs and future maintenance on the hotel rooms and condos.

“Our cash investment will never be more than something around the cost of a plane,” Redmond said. (Allegiant officials said they won’t have a firm view of overall costs until further planning is completed next month.)

Not everyone is convinced this novel endeavor will succeed. Real estate is a different business, with different types of cycles, returns, and competition than Allegiant sees with air service, noted Seth Kaplan, a managing partner at trade journal Airline Weekly. He likens the business shift to a sports team “playing an away game—they’re not playing on their home field anymore.”

There’s also the old saw about not messing with a good thing. At a time of increasing airline competition, Sunseeker could further imperil the airline’s stellar profits of late: Over the past 12 months, Allegiant and Ryanair Holdings Plc have been the world’s most profitable carriers, with a roughly 22 percent operating margin.

For Allegiant, however, such great numbers actually mark a stark drop from the past two years, when its almost 30 percent margins were among the best in the industry worldwide. Investors, meanwhile, have shaved 29 percent off Allegiant’s share price this year, spooked by the big airlines and their efforts to combat ultra-low-cost carriers such as Allegiant and Spirit Airlines Inc.

“The fact that people fly our plane doesn’t mean they’re broke”

It’s also fair to wonder whether Allegiant’s customer base, which paid an average $112 for a flight in the second quarter, is the best source of buyers for seaside condos that could cost nearly $1 million, plus recurring homeowner fees.

“The fact that people fly our plane doesn’t mean they’re broke,” Redmond said Tuesday on a conference call. “The people are flying the plane because they’re going to a leisure destination.”

Still, the carrier has an escape plan—namely, becoming a real estate flipper. Allegiant has modeled the “absolute worst downside” for its Florida project, which would be to sell the property, said Redmond, a former executive at MGM Resorts International Inc. and Caesars World Inc. who joined Las Vegas-based Allegiant in September 2016.

“The land is worth a hell of a lot more aggregated up as a 22-acre parcel, and flipping it to some other developer, than it was as 20 separate parcels not on the market,” Redmond said.

While it remains an open question whether the Florida condo market will prove lucrative for an ULCC, Allegiant’s record of making so much money in a financially fraught industry will prompt many industry observers and investors to “give them the benefit of the doubt,” Kaplan said. “Generally speaking, don’t bet against Allegiant.”

©2017 Bloomberg L.P.

This article was written by Justin Bachman from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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Lyft Expands Into 32 New States as Battle With Uber Heats Up

Susan Montoya Bryan  / Associated Press

The signature pink mustache of ride-booking company Lyft sits on the hood of a vehicle during a news conference. Lyft will expand into 32 new U.S. states. Susan Montoya Bryan / Associated Press

Skift Take: Lyft is shooting its shot while Uber tries to get its act together. But it’ll be hard for Lyft to compete in rural areas where Uber already dominates the ridesharing market and has brand recognition, even if drivers are active on both services.

— Andrew Sheivachman

Lyft is driving into the countryside in an effort to raise ridership and steal market share from rival Uber.

The much smaller Lyft announced Thursday that it is offering service to passengers in every corner of 32 U.S. states, including hard-to-reach rural areas. The move boosts the number of states with full coverage to 40.

Uber, which controls about 70 percent of the U.S. ride-hailing market, says it has near-statewide coverage in nine states. A spokeswoman was skeptical that any company could provide timely service in all areas within a state’s boundaries.

For Lyft, the expansion is a bold move into unserved areas and a gamble that it can carve new markets out of even the most rural areas that have ride-hailing needs but no consistent service. Until now, using a smartphone to summon a ride mainly was reserved for larger metropolitan areas with a lot of people and more potential riders.

Jaime Raczka, regional director of new markets for Lyft, said the initiative will allow the company to outmatch its rivals in terms of coverage area and the number of people with access to its platform. Before Thursday, 79 percent of the U.S. population could get Lyft service. With Thursday’s move, that number rises to 94 percent, she said.

Recruiting Drive

To pull off the expansion, Lyft has been recruiting new drivers for months, many in smaller towns that weren’t previously served. The company wouldn’t say how many drivers it added, only that it has about 700,000 nationwide.

Currently Lyft has statewide service in New York, New Jersey, Rhode Island, Connecticut, Florida, Maine, Delaware and Hawaii. As of Thursday it added Alaska, Arizona, California, Georgia, Iowa, Idaho, Indiana, Kansas, Kentucky, Maryland, Maine, Michigan, Missouri, Mississippi, Montana, North Carolina, North Dakota, Nebraska, New Hampshire, New Mexico, Nevada, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Wisconsin, West Virginia and Wyoming.

Lyft has at least some coverage in all 50 states, and decided to offer full coverage in the 40 that have consistent statewide ride-hailing regulations, Raczka said. The company said it will even offer rides in the most rural expanses of Alaska and the far reaches of Michigan’s Upper Peninsula.

Just how long it takes to get a ride will vary by area. She wouldn’t give an average response time or fare estimate for rural areas, but conceded that initially it may take more than 10 minutes to get a ride in remote places. Those who have important trips such as traveling to an airport to catch a flight might want to use Lyft’s scheduled ride service if it’s available, she said.

In New York, where Lyft has had statewide service since June, the company’s app showed few cars in the Finger Lakes region late Wednesday night. In Corning, a small town near the Pennsylvania border, the closest Lyft ride was 74 miles and more than an hour away in Binghamton. The app gave no estimate of a pickup time like it does in urban areas.

Raczka says experience has shown that as people find out about the service, they summon more rides and more drivers usually follow. “We do improve service levels once we get into markets,” she said.

Uber says is has close to statewide coverage is in Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Maryland, Virginia and Florida. Spokeswoman MoMo Zhou questioned whether Lyft would have drivers available for rides in areas with low demand.

There’s clearly a market for ride services in rural areas, especially from people who are older, disabled or injured, said Gartner analyst Michael Ramsey. Until it becomes established, Lyft will have to pay drivers extra to fetch passengers in rural areas, generating some big losses, he said.

“That will allow them to gain market share, but it’s not going to be free,” Ramsey said.

He expects demand to grow and eventually pay off for Lyft. “There are a lot of people who need mobility, and especially in rural communities, don’t have access to it,” he said. “Demand comes from the supply, and vice versa.”

This article was written by Tom Krisher from The Associated Press and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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Ctrip Makes Offline Store Push in China as Its Profit Margins Rise

Ctrip

Visiting the Forbidden City in Beijing is just one of the many types of trips that can be booked via Ctrip, an online travel company that reported record revenues this week. Ctrip

Skift Take: Ctrip is betting on 6,000 franchise shops to take aim at cities where most travel shopping happens offline. At the same time, it hopes to increase its operating margins to Priceline-like levels. The two initiatives don’t necessarily collide since Ctrip doesn’t own the real estate or pay labor costs for the offline shops.

— Sean O’Neill

Ctrip has debuted brick-and-mortar travel agencies in China in its latest push to gain a foothold in elusive second-tier cities.

Ctrip created two types of franchised store: Ctrip-branded stores aim at the mid-to-high end of the market, which primarily means the country’s largest cities. Qunar-branded stores aim at second-tier cities.

Since the start of the year, Ctrip and Qunar have opened more than 400 retail stores in city centers, with about 200 more in the pipeline.

Separately, last autumn Ctrip acquired a controlling interest in offline travel agency Traveling Bestone. That brought nearly 5,500 stores, also with the franchise model, into its portfolio.

Speaking Thursday morning Beijing time during the company’s second quarter earnings call, Ctrip chief executive Jane Jie Sun said, “We plan to have 6,500 stores in operation by the end of this year.”

Shop owners bear the labor and rent costs and pay Ctrip a franchise fee. Sun said Ctrip provides the technology, branding, and product, while the shop owners apply their knowledge of a local market to reach new customers with the right products.

After only a few months, these stores are averaging revenue of about $300,000 a month, Sun said. It’s “possible” the stores will be at a break-even stage for the parent company within a year, she added.

This year the company has run marketing campaigns in second-tier cities. This, combined with the opening of stores, has led to gains in customer acquisition and user engagement. Executive chairman James Jianzhang Liang said, “In the second quarter, user traffic in the second-tier cities increased 50 percent year-over-year.”

Ctrip isn’t alone in seeing that offline shops can be a route to amplifying an online travel group’s goals. TUI Group’s chief marketing officer noted when he was speaking at Skift Forum Europe that bricks-and-mortar retail still matters to tour brands.

Profit Expectations

Offline moves won’t be enough to help in the short-term to enable the parent company to attain Priceline-level operating margins — a key expectation of investors over the next year.

Ctrip still lags behind its U.S. counterparts in terms of its operating profit margin. But Skift Research expects, in the long-term, “meaningful margin expansion for Ctrip through a combination of operating leverage (expenses growing more slowly than revenue) and synergies from the Qunar and Skyscanner acquisitions.”

Ctrip is already making progress, having boosted its operating margin from the single digits in 2015. It reported a 15 percent operating margin for the first quarter of the year. On Thursday, it reported an operating margin of 18 percent for the second quarter of 2017.

But there is still room to grow. Those figures are still only about half of the operating margin of approximately the mid-30s for the Priceline Group, the U.S. and European-based travel giant.

Sun said she is confident the company will “bring the operating margin to the 20 percent to 30 percent level in the next one to two years.”

Revenue growth remains relatively strong. In the second quarter, Ctrip reported net revenue of $945 million, representing a 45 percent rise from the same period a year earlier. The company attributed the gains to growth in particular to “organic businesses” and air ticketing.

Ctrip executives did not mention possible acquisitions during the call. But, in May they told the Wall Street Journal that they are “actively looking” for opportunities in China and abroad. The travel giant is sitting on an approximately $5 billion cash pile.

In sum, Ctrip dominates online travel in China and is pushing more into the lucrative offline and outbound markets. For context, earlier this month, Skift published its in-person Q&A at the Beijing headquarters with CEO Jane Jie Sun about these trends.

For more insight on the company, Skift Research released provided a new research report this summer: A Deep Dive Into Ctrip and the China Online Travel Market 2017.

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Last Chance for Skift Global Forum Group Rates

Skift Take: Skift Global Forum is rapidly approaching and you don’t want to attend alone. Grab your colleagues and save when you register as a group before it’s too late!

— Rafat Ali

Our flagship event, Skift Global Forum, is less than four weeks away. That’s right! In just one short month on September 26-27, the leading innovators in travel will descend upon Jazz at Lincoln Center’s Frederick P. Rose Hall, Time Warner Center, NY for two days of non-stop talks and networking. Have you secured your spot?

Not Yet! I Want to Register Now

If you’ve waited this long to register, don’t panic. We are still offering group rates, but only through the end of next week! What you’ll learn at our forum is invaluable. That’s why we’re offering a discount off each ticket, when three or more people from the same company sign up via one registration.

Saving when you register is easy — There’s no promo code necessary, just add three or more colleagues to your registration and you’ll see these discounts automatically applied at checkout.

  • 3 People — 15% off each ticket
  • 4-5 People — 20% off each ticket
  • 6-9 People — 25% off each ticket 
  • 10-14 People — 30% off each ticket
  • 15+ People— 35% off each ticket

That’s up to $1,200 off each ticket in savings!* What are you waiting for! Now is the time to grab your colleagues and get approval from your boss to join us at Skift Global Forum. Tickets are close to being sold out and our group discounts will expire Sunday 9/10 at 11:59pm ET. Get to registering.

Secure Your Spot Before It’s Too Late

We couldn’t bring our event to life every year without the support of our incredible sponsors: AccentureAdobeAIGAmadeus AirlinesAmerican Express, Away Luggage, ButtonCriteoFareportal, Hobo Bags, HotelTonightITP, KDS, Luggage HeroMapboxProColombia, SimulmediaSmartlingSojern, TastemadeThe Points GuyTravelsify and Visit Jordan.

To become a sponsor or for any other questions you may have, email forum@skift.com.

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Houston Flights Restart in Early Sign of Very Tentative Recovery

Bloomberg

Houston’s airports began trudging back into operation Wednesday, with the first commercial traffic in three days offering a faint symbol of recovery from the devastation of Hurricane Harvey. Bloomberg

Skift Take: When passengers arrive at George Bush International Airport in Houston, then what? Getting anywhere on the roads is nearly impossible. Recovery is going to take a very long time.

— Dennis Schaal

Houston’s airports began trudging back into operation Wednesday, with the first commercial traffic in three days offering a faint symbol of recovery from the devastation of Hurricane Harvey.

United Airlines and Delta Air Lines started service and others are expected to soon follow suit. But so far, it’s just a trickle. United, which has a major hub at George Bush Intercontinental Airport, is initially scheduling three daily arrivals and three departures. On a typical day, 480 United flights take off.

The slow pace reflects what’s likely to be a slog of a rebound for most businesses in Harvey’s deadly path. After more than 50 inches of rain, Houston is a city of islands. Flood levels were dropping as the sun came out but some neighborhoods remain swamped. Whether companies can function depends largely on the luck of location.

“It’s a tale of two cities,” said Andrew Segal, chief executive officer of Boxer Property Management Co., which owns or manages 55 office buildings in Houston. “If you’re flooded and lost power, it’s horrible. If not, you’re back to work in a day or two.”

Commerce all but shut down during the initial deluge from Harvey, which hit the Texas coast late last week as a Category 4 hurricane and then dumped record rainfall on the nation’s fourth-largest city and heart of its oil-and-gas industry. A few businesses never closed and some were only briefly shuttered, with McDonald’s Corp. flipping burgers again at dozens of its restaurants by Sunday. Wednesday saw more grocery stores turning the lights back on.

‘Slow Journey’

But the Port of Houston and 10 other Gulf Coast ports of call remained shut, stranding 28 tankers laden with more than 18 million barrels of foreign crude offshore. The Port of Corpus Christi is targeting a Sept. 4 return to service. In Houston, there’s no timetable for docking to start up. Union Pacific Corp. and Kansas City Southern are working to restore rail service along the Texas coast.

The storm continues to have a profound impact on U.S. energy markets. Gasoline futures rose to the highest since 2014 after flooding shut the Colonial pipeline, the key artery carrying fuel from the Gulf Coast oil refineries to New York and other cities in the Northeast.

With Harvey making a second landfall Wednesday morning near the Texas-Louisiana border, the number of oil refineries that have gone off line expanded to 14. They included the nation’s largest in Port Arthur, and it’s too soon to predict when all that capacity will return.

“Anybody who tells you they know exactly what the situation is with every piece of their business, I’ll be honest with you — it’s just not possible,” said Marc Cannon, a spokesman for AutoNation Inc., which has 17 retail stores and seven collision centers in the Houston area that it’s planning to open Thursday. “It’s going to be a very slow journey back to being fully up and running.”

Getting the airports into service took days. Employees couldn’t make it to work. Before Wednesday only a few non-commercial flights landed with relief supplies and airline personnel. Ground transportation is still a challenge.

Energy Hub

“You need to make sure there’s a way to get out of the airport complex,” said Ross Feinstein, a spokesman for American Airlines Group Inc. “We don’t want to fly them to a place and utterly desert them there.”

American plans to start some flights Thursday. Southwest Airlines Co. said it would resume limited service Sept. 2 from William P. Hobby Airport.

“Just because it’s stopped raining doesn’t mean the impact is over yet,” said Mark Drusch, an airline consultant at ICF and former executive at Delta and Continental Airlines, which was later acquired by United. “It’s not going to be a full operation without concerns probably for another five days.”

Harvey could end up being the most costly weather disaster in U.S. history, with its relentless rains flooding thousands of homes and crippling an energy hub where major employers include Exxon Mobil Corp., Chevron Corp. and Halliburton Co.

‘Open Quickly’

Greater Houston includes eight counties, and is home to almost 1 in 12 U.S. workers. The recovery effort across the region could last for years. But businesses big and small should do all in their power to get back into action, said Jeff Schlegelmilch, deputy director of the National Center for Disaster Preparedness at Columbia University’s Earth Institute.

“It’s in everyone’s best interest for things to get open quickly,” he said. “The economic engine drives the community — and the longer a business stays closed the more likely it is that it’s never going to reopen.”

Among those that didn’t close was event-designer Prashe Decor, whose 40,000-square-foot warehouse was spared by the flooding. It had weddings on its books, including in Iowa next week; one in Port Arthur was canceled but a pre-nuptials party in Houston will still take place Thursday, though in a venue for 200 guests rather than the 1,200 originally invited.

“In a service-oriented and time-sensitive business, shutting down I don’t think is an option,” owner Pramel Shah said. “In the future we will be more proactive in telling people that in an unpredictable city like Houston, they need to be getting event insurance.”

Replenishing ATMs

Houston had advance warning that Harvey was on its way, and companies prepared. Cullen/Frost Bankers Inc. replenished its ATMs with cash beforehand and in the immediate aftermath relied on video from security cameras to assess damage at its 33 branches. “They’re supplied for normal business levels,” said Bill Day, a bank spokesman. “But there’s not much normal happening in Houston these days.”

Auto retailer Group 1 Automotive Inc. rented parking space and moved thousands of cars onto high ground before Harvey’s arrival. Kroger Co. and Wal-Mart Stores Inc. sent in thousands of extra truckloads of goods.

Making Bread

After stores started reopening “bread was probably our biggest area of need,” said Todd Manley, a regional Wal-Mart vice president. Employees had to take extreme measures. “We were even showing customers recipes for how to make their own bread at home with flour and yeast, the old fashioned way.”

Queues formed outside some markets around town; staffed with skeleton crews, they let people enter in small groups. “We metered customers in,” Manley said.

People were thrilled to be able to restock, said Scott McClelland, president of the Houston division of the Texas chain H-E-B, which had put most of its 80 outlets back into service by Wednesday. “They were coming over to hug me.”

Regulars at the Hay Merchant had similar reactions when the pub in the Montrose district on Monday started pouring the 80 beers it has on tap. The brews have held out, though by Tuesday all the burgers and chicken wings on hand were gone.

“It was very clear that our neighbors were a bit stir crazy,” said Lindsey Brown, the pub’s publicist, who has been pulling duty as a hostess and table busser. “They were looking for a bit of normalcy. We’ve had a lot of people say exactly that — thank you for opening because it feels normal again.”)

–With assistance from Joe Carroll Mary Schlangenstein Thomas Black David Wethe John Lippert Lucia Kassai Laura Blewitt Jenny Surane Christopher Palmeri and Will Kennedy

©2017 Bloomberg L.P.

This article was written by Prashant Gopal, Jeff Green and Michael Sasso from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

Ryan Wolkov

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Google May Finally Face a Showdown With Regulators Over Its Evolving Travel Tools

Skift

Under a Flight Insights section of its metasearch product, Google has added new tools. For example, tap on Dates to see a calendar view of date combinations with the cheapest prices highlighted in green and the most expensive in red. Skift

Skift Take: Google now prods its users to try to cut their travel costs by considering alternative airports and other tricks. Yet the incremental moves may not appease a European watchdog that may question its broader business practices in travel.

— Sean O’Neill

Is Google naughty or nice? In the past week, this perennially smoldering debate on the travel industry’s conference circuit got fresh fuel.

On the “naughty” side, a Times of London article claimed that the European Commission had told one of its reporters that it is investigating Google’s flights and hotel services business.

But the commission has not made an official announcement about investigating Google’s travel practice. And Politico’s Brussels site reported Tuesday that its sources say the commission has not yet decided whether to pursue a complaint against Google Flights.

An investigation would pose a threat to Google given that Europe’s watchdog and regulatory body fined the U.S.-based search giant $2.7 billion, or 2.42 billion euro, in June for alleged “abuse of market dominance” for its not-dissimilar shopping ads for retail goods.

Google will appeal the case. In response to that shopping ruling, Google issued a statement: “When you use Google to search for products, we try to give you what you’re looking for. Our ability to do that well isn’t favoring ourselves, or any particular site or seller – it’s the result of hard work and constant innovation, based on user feedback.”

Based on Google executives’ past comments, it would seem likely that they would make similar arguments about their travel comparison services.

Some travel industry lobbyists disagree. Christoph Klenner, secretary-general of the European Technology and Travel Services Associationwhose members include Amadeus, Booking.com, Expedia, and Sabre — has asked the commission to investigate.

Klenner also issued a statement: “Google leaves competitors with no choice but to buy visibility. Because there is no alternative to Google, online travel companies are prepared to, and do in reality, bid up to their entire margin to be placed near the top of Google’s search results. All this money cannot be spent to innovate or to offer consumers better deals.”

The commission noted that Google’s market share in most European countries exceeds 90 percent, a sign of monopoly power that could be misused to push consumers to its preferred products. Google’s advocates counter that that statistic doesn’t count other sites that aren’t strictly speaking search businesses, such as Amazon and eBay, as alternatives for consumers.

Google draws the ire of many travel executives for its size as an advertising platform. Skift estimated that Google generated at least about $12.2 billion in revenue from travel advertisers in 2016. To get an idea of the scope, Expedia generated $8.7 billion in revenue in 2016, for example.

New Tools for Consumers

On the “nice” — or pro-consumer — side of the ledger this week, Google added  functionality to its flight and hotel search products that will make it easier for flexible consumers to find bargains.

The tools mainly added more contextual information about the ticket and hotel prices they  display. The tools make it easier for a consumer to find cheaper alternatives that they might otherwise miss, given that only so many search options can be crammed into a small mobile screen.

U.S.-based Google users, and soon consumers worldwide, have begun to see a new section in the Google Flights search display called Flight Insights. The section provides a visual, mobile-optimized way of discovering whether it would be cheaper to travel on a different day or if it would be cheaper to fly in or out of an alternate airport.

Nabil Naghdy, the Swiss-based manager of the flight search product, wrote in a blog post that U.S. consumers using mobile devices can now see a calendar view of date combinations for any given flight deal, with the least expensive fares highlighted in green and the priciest ones in red.

Ben Austin, the San Francisco-based manager of the hotel search product, said the company has also made it easier to find the cheapest dates to book a hotel with a new nightly rate calendar view, and a new chart with historical rate trends to see how competitive today’s rates actually are.

To be fair, these are functions that were pioneered by metasearch companies like Kayak and Skyscanner years ago.

In our informal tests, the search results were blazingly fast. Industry competitors like Kayak CEO Steve Hafner have conceded in the past that Google has an annoying ability to deliver the industry’s fastest response time on mobile — though its results are often not as comprehensive as what other providers offer. That speediness happens by pre-computing millions of possible prices and then using that cache of data to push answers whenever a consumer runs a search for a specific trip.

Engineers under the travel engineering director Dave Marmaros work with Richard Holden, who heads Google’s product teams in travel, to choose to solve niche user experience problems via relentless testing.

Over time, the search giant’s new travel tools may speed up the trip-planning process for millions of users. For example, at a quick glance, a consumer can now see nearby airports on an interactive map, viewing the distance between each one and a user’s final destination. Users can then shop by airports of their choosing, making a tradeoff between convenience and airfares levels.

Incremental Strategy

The incremental nature of the new functionality Google rolls out is almost comically small in proportion to the fear that the travel industry has about the tech company. However, it’s not so comical when coupled with the market share gains Google is making at the expense of competitors.

For fans of the company, Google’s approach to travel search appears to be led by engineers laser-focused on a couple of challenges that, if solved, could boost margins per transaction simply by delivering a better user experience rather than through what critics charge is an abuse of market power. As of early 2015, the company said its flights product wasn’t even profitable.

The incremental, user-focused approach dovetails with things that company executives have said about their strategy.

Rob Torres, writing earlier this year for the annual Economic Impact Research paper from World Travel & Tourism Council, said: “From initial research to on-location assistance, mobile devices have the ability to truly transform the core of travel experience… But only if companies reimagine their offering in a user and mobile-first way.”

Torres translated that goal into a few practical steps, such as delivering a mobile experience that assists the traveler, agnostic as to whether it is via a Web or app channel, and developing for fast page load times with a goal of pages loading in less than two seconds on global networks, meaning 2G or 3G.

Google’s new travel-search functionality coincidentally exemplifies a mobile-first approach. For example, users can now see more dates with desirable fares by swiping left on their mobile device screen for an efficient user experience on a tiny screen.

Google claims that its incremental changes result in bottom-line differences. A year ago, Google Flights began notifying flyers when airfares would expire. Google says today that “almost 10 percent of the time that a Google Flights user sees a tip, they choose to change their original travel dates.”

To be fair, that claim is not as solid as it looks. The company bases that claim on a July survey of 467 U.S.-based adults who planned a vacation in the last year rather than its data of how actual consumers used its tools.

But the broader point is that the company thinks the incremental approach is resonating with consumers.

Likewise, with its market power and resources, there’s little reason for Google to be in any hurry.

Speaking at the Skift Global Forum in September, Google Travel’s vice president of engineering, Oliver Heckmann, said the company wants consumers to begin their travel planning in the earliest stages through its search engine and associated products, and it does not seek to become a trip-planning site.

Speaking at the Phocuswright conference, Kayak’s Hafner said: “If we were all the CEO of Google we would be doing the … same thing. Look, they built a great service, people go use Google, if they want to provide answers to people showing travel intent on Google they are well within their space to do that.”

Clearly, the “naughty or nice” debate will last for some time — unless EU regulators, and perhaps their U.S. counterparts, actually step in.

Ryan Wolkov

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The Money Uber’s New CEO Left Behind at Expedia

Skift

Dara Khosrowshahi at the Skift Global Forum 2016 in New York City. Skift

Skift Take: Suddenly former Expedia CEO Dara Khosrowshahi walks away from substantial unvested compensation. Becoming CEO of Uber may have been a once in a lifetime opportunity for Khosrowshahi, but we expect that Uber had to compensate him for his treasure trove of unvested options to pry him away.

— Jared Wein

Like others, we can only speculate how much Uber is paying its new CEO. Looking at past salary, bonus, and stock compensation at Expedia helps shed light on what Dara Khosrowshahi may be looking at from Uber.

Khosrowshahi’s salary as Expedia CEO was $1 million per year for the past three years. Base salary would likely be comparable at Uber, but that is far less important than incentive compensation, including stock options. This would be the case for most CEOs at large companies, including Uber, which has a private valuation of nearly $70 billion.

What was left behind

The glaring number in the chart below is $90.8 million in options granted in 2015.


Source: Company Filings, Skift Estimates

Within the 2015 option package, Khosrowshahi received the equivalent of 1.6 million shares that was to vest equally on two dates, March 31, 2018 and March 31, 2020. His second award was for 1.1 million shares. This would have vested in one tranche on September 30, 2020 if Expedia’s stock price hit $170; this is 18 percent above yesterday’s closing price and 50 percent above the 2016 year-end close.

Additionally, there are another 337,500 unvested underlying shares in previous awards.

Consensus seems to be that Khosrowshahi leaves behind something in the neighborhood of $160 million to $200 million in unvested compensation. Without busting out a Black-Scholes analysis or performing Monte Carlo simulations, we can see that even at the low end, simply assuming yesterday’s EXPE closing price of $144 without volatility and time considered, the options are worth more than $152 million. At a $170 level, these options would likely be worth more than $200 million.

Our simple approximation is done as follows:

(Underlying Securities * August 29 EXPE Closing Price) – (Underlying Securities * Option Strike Price)

We emphasize that this is not a true option valuation method where we would need to consider interest rates, volatility, and time, but is meant to give a rough sense of the options he leaves behind.


Source: Company Filings, Skift Estimates

What comes with Khosrowshahi

Filings show that Khosrowshahi has already exercised $14 million worth of his options. Additionally, he has 152,000 shares of exercisable (vested) stock that would roughly be worth around $85 million.


Source: Company Filings, Skift Estimates

What might uber be paying

To entice Khosrowshahi to leave a company he loved and helped build into a global leader in travel, we guess that the pay package has the potential to hit well over $200 million, with compensation heavily weighted toward incentive compensation. We believe that hiring Khosrowshahi was a smart choice for Uber, but he has a lot to clean up before the company can IPO at an acceptable valuation to its investors.

Impact on Expedia shareholders

If Expedia’s CEO was also its founder, there could have been an overhang for existing investors fearing that a large shareholder would immediately sell a large block of shares, placing downward pressure on the value of the stock. Because Barry Diller holds around 20 percent of shares and Liberty holds 16 percent (in addition to each owning all of the 12.8 million supervoting Class B shares) and Khosrowshahi only owning around 1 percent, there will not be a large liquidity event nor a change in voting control.

Ryan Wolkov

PRC Time Shares

Author: Ryan Wolkov

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