Airport-Style Body Scanners Tested in Los Angeles Subway System

Mike Balsamo  / Associated Press

A body scanner is tested at Union Station subway station in Los Angeles August 16, 2017. The scanners are aimed to detect firearms and explosives. Mike Balsamo / Associated Press

Skift Take: Officials in Los Angeles say the machines can scan about 600 people per hour in a bid to detect mass casualty threats. It seems like a great move if the system is effective.

— Sean O’Neill

Aiming to stay ahead of an evolving threat against transit systems worldwide, officials in Los Angeles are testing out airport-style body scanners that screen subway passengers for firearms and explosives.

As commuters raced to get on their trains Wednesday, the Los Angeles County Metropolitan Transportation Authority launched a two-day pilot program. But officials quickly experienced a hiccup when a scanner being demonstrated Wednesday morning at Union Station malfunctioned before passengers could be put through the machine.

Metro is conducting the pilot program to evaluate the accuracy and capacity of the portable machines amid the hustle and bustle underground and determine if the scanners could become permanent fixtures in the Los Angeles transit system.

The machines use sensors to scan a person as they walk through, searching for firearms and explosive compounds, said Dave Sotero, a Metro spokesman. Passengers don’t need to unload laptops or take off their jackets or shoes as the radio waves scan them to detect anomalies.

“It is specifically designed to test for mass-casualty threats,” Sotero said. “The technology enables the system to locate on the body where there is a potential threat, and it appears on a video screen.”

Metro is conducting the pilot program to evaluate the accuracy and capacity of the portable machines and determine if the scanners could become permanent fixtures in the Los Angeles transit system.

Each machine is designed to scan about 600 people per hour, Sotero said. About 150,000 passengers ride on Metro’s Red Line daily, he said.

“This is designed so you don’t have to wait,” Sotero said. “The idea is that you have a continuous flow of people through the security system without causing a backlog and causing people to miss their trains.”

Similar to airport checkpoints, when someone passes through the scanner, they are held for a few seconds while law enforcement officers watch a monitor that shows the location on any anomalies the body. Several security officers stood guard at the screening checkpoint at Union Station on Wednesday morning. Large signs advised passengers that the screening is voluntary.

The scanners sell for about $60,000 each, said Chris McLaughlin, a vice president with Evolv Technology, which makes the system.

“I think it is a good idea with everything that has been going on and ISIS,” passenger Jazmin Rosales, 29, said. “As long as it doesn’t take too long, at least you know you can feel safe.”

___

 

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Van Plows Into Crowd in Barcelona Tourism Area

Associated Press

A law enforcement official takes charge after a van struck pedestrians in a popular area of the city August 17, 2017. Associated Press

Skift Take: Preliminary reports say the area was crowded with Barcelona residents and tourists at the time of the incident.

— Dennis Schaal

A white van jumped the sidewalk Thursday in Barcelona’s historic Las Ramblas district, crashing into a summer crowd of residents and tourists and injuring several people, police said.

[Update: Police in Spain have confirmed there are fatalities after a van slammed into pedestrians in Barcelona’s historic Las Ramblas district.

Catalan police tweeted that “there are mortal victims and injured from the crash” without specifying numbers. The Barcelona-based La Vanguardia newspaper is reporting at least one dead and 20 injured.

A van jumpted the sidewalk in Barcelona’s iconic Las Ramblas area, slamming into pedestrians. At least five were seen lying on the ground on the popular tourist street.

El Pais newspaper, citing unnamed police sources, says the two perpetrators are holed up in a bar in central Barcelona. Various local media reports have called it a terror attack, but authorities haven’t officially confirmed it.]

In a photograph shown by public broadcaster RTVE, three people were lying on the ground in the street of the northern Spanish city Thursday afternoon, apparently being helped by police and others. Other videos showed five people down and recorded people screaming as they fled the scene.

Police cordoned off the broad, popular street, ordering stores and nearby Metro and train stations to close. They asked people to stay away from the area so as not to get in the way of emergency services. A helicopter hovered over the scene.

[Skift Editor’s Note: CNN is reporting that Barcelona police said this was “most likely” a terrorist attack.]

Las Ramblas, a street of stalls and shops that cuts through the center of Barcelona, is one of the city’s top tourist destinations. People walk down a wide, pedestrianized path in the center of the street, but cars can travel on either side.

The Spanish newspaper El Pais quoted unnamed police sources as saying the perpetrators of the crash were holed up in a bar in Tallers Street. There was no immediate police confirmation of the report.

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Cathay Pacific Reports Worst First-Half Loss in Two Decades

Cathay Pacific

Cathay has had to resort to discounts for its premium class tickets, causing passenger yields to decline. Shown is a passenger next to the airline’s logo. Cathay Pacific

Skift Take: Cathay Pacific has too much capacity and too high of a cost structure given dropping fares on many routes. Some analysts float the idea of a takeover by Air China.

— Sean O’Neill

Cathay Pacific Airways Ltd. is slipping in its efforts to get passengers to pay more for its premium services in a test for new Chief Executive Officer Rupert Hogg as the company reported back-to-back losses.

Passenger yields continued to decline in the first half of the year, led by its services to North America and Europe, as discounts to help fill seats took a toll on the key metric of profitability. The measure — the money earned from carrying a passenger for one kilometer — declined 5.2 percent to 51.5 Hong Kong cents, hovering around the lowest level since 2009, Cathay said in a statement Wednesday.

Buffeted by budget carriers and deep-pocketed competitors on the mainland, Cathay is at the crossroads. It risks being eclipsed by Chinese airlines that offer cheaper, direct long-haul flights from cities like Shanghai, Guangzhou and Shenzhen, bypassing Hong Kong, whose prominence as a hub has declined relative to the burgeoning wealth of the surrounding cities in southern China.

The marquee airline reported a net loss of HK$2.05 billion ($262 million) for the six months through June, potentially putting it on course for the first back-to-back annual losses in its 70-year history. The loss compares with the median HK$1.2 billion loss forecast in a Bloomberg survey of three analysts.

Read More: Is Cathay’s Late Show a Final Bow for Independence?: Gadfly

“We do not expect the operating environment in the second half of 2017 to improve materially,” Hong Kong-based Cathay’s Chairman John Slosar said in the statement. “We expect to see the benefits of our transformation in the second half of 2017, and the effects will accelerate in 2018.”

Cathay isn’t the only airline feeling the heat of competition. Singapore Airlines Ltd., under pressure from rivals such as Emirates Airline and Etihad Airways PJSC, said in June jobs are likely to be cut as part of a review it said had started more than six months earlier.

Hogg, who took over as Cathay’s CEO on May 1, announced the elimination of 600 jobs the same month as part of a three-year transformation program Asia’s biggest international airline revealed earlier in the year.

Cathay has had to resort to seasonal discounts for its front seats after saying last year that premium travel was slumping, causing passenger yields to decline.

Cathay has reported losses only for three years since it was founded in 1946 — once in 1998 in the aftermath of the Asian financial crisis; again, in 2008 as the global credit crisis unfolded; and, last year as a result of fuel-hedging bets gone wrong and intensifying competition.

Highlights from the statement:

  • Revenue in 1H rose 0.4% to HK$45.9 billion
  • Passenger load factor rose to 84.7% from 84.5% a year ago
  • Revenue passengers carried declined 0.5%
  • Yield on routes between Hong Kong and mainland China was under pressure because of increased competition, particularly from low-cost carriers
  • Cargo demand was robust in the first half
  • Other major adverse factors were higher fuel prices (including the effect of Cathay’s hedging), the strength of the Hong Kong dollar on revenues denominated in other currencies and higher aircraft maintenance costs

(Updates with highlights from earnings toward the end.)

 

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Barcelona Is Trying to Come to Terms With Its Overtourism Problem

Mathieu Marquer  / Flickr

La Rambla in central Barcelona. The backlash against tourists in the city has been building. Mathieu Marquer / Flickr

Skift Take: The backlash against tourism in Barcelona is building. Authorities in the city are trying to quell the anger by bringing in certain restrictions but at the moment it doesn’t seem to be working.

— Patrick Whyte

When Edgar Torras started leading tours of Barcelona, locals thanked him for bringing in tourists. Seventeen years later, they pelted his customers with eggs and the city has further restricted his route to avoid over-crowding in the historic center.

“Suddenly we seem to be the enemy,” said Torras, founder of Barcelona Segway Glides.

It’s becoming part of the tourist scene not mentioned in the guidebooks. Some Spaniards increasingly view visitors as a burden rather than an economic boon, with a backlash building in Barcelona and other hot spots. Last month, masked youths attacked a tourist bus in the city, and a protest against incomers is set to take place in the Basque resort of San Sebastian on Thursday.

With Spain the world’s biggest tourist destination after France and the U.S., the government is beginning to worry that the unrest could undermine that status. Tourism accounts for about 13 percent of all jobs in Spain. The number of foreign visitors will rise about 12 percent this year to a record 84 million in 2017, according to analysts at CaixaBank SA.

“It’s one of the sectors that is most driving our economy today and we have to look after it and support it,” Prime Minister Mariano Rajoy said this month. “If people come here it is because they like Spain.”

On Aug. 12, about 200 people from the Barceloneta neighborhood took to the city’s beach to protest the proliferation of tourist apartments, the El Pais newspaper reported. Youths targeting a tourist bus in Barcelona last month punctured a tire and sprayed it with a slogan saying “tourism kills neighborhoods.”

Locals object to the hoards of tourists crowding city streets and sometimes their antisocial behavior. Barcelona has cracked down on unlicensed rentals for tourists that residents blame for the surge in tourist numbers.

“If you go to one of the Barcelona neighborhoods affected, you can understand the anger,” said Jordi Alberich, director general of Cercle d’Economia, a Barcelona-based business association. “There has been a lot of complacency about the cost of tourism and now the model is very hard to change.”

If anything, numbers are set to increase, with cruise ships pouring into ports across the nation. As many as 3.6 million cruise passengers disembarked in Spanish ports in the first half of 2017, double the amount of a decade ago, according to the Public Works Ministry.

Fighting Back

As well as restricting Segway tours, Barcelona Mayor Ada Colau has taken more sweeping steps to forbid new hotels to open in the center of the city and clamped down on unlicensed room rentals through platforms such as Airbnb Inc.

For Torras, the latest restriction is a fresh blow to his business after the council stopped him taking tours down the Barcelona beach front last year. Typically, he leads two three-hour tours each day for up to six people who pay 70 euros each to be guided round neighborhoods such as the Gothic Quarter, Ramblas area and old port. He relies on his summer business to get through the winter.

“This is the time when we have to save,” Torras said.

 

©2017 Bloomberg L.P.

 

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Air Berlin’s Collapse Gives Lufthansa a Chance to Expand Its Low-Cost Airline

Richard Weiss  / Bloomberg

Lufthansa aircraft. The airline group could use Air Berlin’s collapse to boost its Eurowings low-cost unit. Richard Weiss / Bloomberg

Skift Take: Lufthansa seems to be the obvious suitor for at least some of Air Berlin’s business. Picking up some of the slots from its former rival would give it a chance to really grow its low-cost Eurowings unit, which could lead to the introduction of more routes to North America.

— Patrick Whyte

Air Berlin Plc’s insolvency could open the way for Deutsche Lufthansa AG to add new hubs for inter-continental flights while allowing short-haul discount specialist EasyJet Plc to boost its presence in the German capital.

The ailing carrier’s Berlin and Dusseldorf bases provide Lufthansa’s lower-cost Eurowings arm with a chance to expand a long-haul network currently limited to Cologne-Bonn airport and a fledgling operation in Munich. At the same time, slots in Berlin used for short-haul services could help EasyJet narrow the gap to Ryanair Holdings Plc in Europe’s biggest economy.

Air Berlin filed for insolvency Tuesday as leading shareholder Etihad Airways PJSC of Abu Dhabi pulled the plug on funding the unprofitable carrier, which will rely on a government loan to keep flying for the next three months. Lufthansa, Germany’s biggest airline and the No. 3 in Europe, revealed that it was in talks about buying parts of its national rival, while EasyJet has also expressed an interest, according to people familiar with the matter.

A deal could be “very attractive” for Lufthansa if it can acquire elements of Air Berlin, which has 8,600 workers, without taking on the company’s debt or staff contracts, Sanford C. Bernstein & Co. analysts including Daniel Roeska said in a note. There’s also a “strategic rationale” behind EasyJet making a move, and the U.K. carrier has the business model to make a transaction work, they said.

While the 150 million-euro ($177 million) loan should get Germans home from their summer vacations, Air Berlin will likely run out of cash at the end of the three-month period, setting a deadline for negotiations, Bernstein said.

Antitrust Hurdle

Lufthansa, which is unlikely to be able to buy all of Air Berlin for antitrust reasons, already has strong links to its one-time arch rival following a deal that handed it 38 of the smaller carrier’s Airbus SE A320-series planes plus crews under a six-year lease deal. Some 33 of those aircraft are slated for deployment with Eurowings and five with the group’s Austrian Airlines division.

At the same time, Air Berlin planned to offload its own Austrian unit Niki, which has 21 A321 jets, by combining it with 14 aircraft from TUI AG, Europe’s largest tour operator. Though the plan suffered a setback in June when TUI failed to agree terms with Etihad, it said Tuesday that it’s ready to participate in Air Berlin’s restructuring. Thomas Cook Group Plc’s Condor arm, which books seats on Air Berlin flights, also said it could play an “active role” in a rescue plan.

Air Berlin’s Swiss Belair arm, which has seven A320-family planes, is set to close at the end of the summer, according to an announcement in March, while the company was due to full control of regional affiliate LGW, with 20 Bombardier Inc. Q400 turboprops.

The restructuring steps were designed to trim the Air Berlin fleet to just 75 jets from almost 150, leaving it focused on inter-continental routes from Berlin and Dusseldorf, fed by shorter European flights, plus minor hubs in Munich and Stuttgart. It currently serves about 20 long-haul destinations with 17 Airbus A330 wide-body jets, with the focus on the U.S. and the Caribbean.

Rump Air Berlin ~75 aircraft 17 A330s, 20 Q400s, rest A320 family Main bases Dusseldorf and Berlin Lufthansa and possibly EasyJet interested
Lufthansa lease ~38 aircraft 33 A320-family leased to Eurowings, five to Austrian Airlines Eurowings bases plus Vienna Lufthansa owns some planes; may take over workforce
Leisure
carrier
~35 aircraft 21 A321s at Niki, 14 Boeing 737s leased from TUIfly Vienna-based TUI, Condor have an interest

As Air Berlin’s doesn’t own its aircraft, the main value for suitors may be in its landing rights, which are usually distributed by a national coordinator after airlines apply for them. German Economic Minister Brigitte Zypries, though, said slots may be sold off by the insolvency administrator to raise funds.

Lufthansa’s global strategy is increasingly built around beefing up Eurowings, initially created to defend its European turf against the likes of Ryanair by taking over short-haul routes outside of its Frankfurt and Munich hubs.

While the unit has been swollen by the Air Berlin lease deal and the acquisition of Brussels Airlines, the transfer of existing short-haul routes from the parent airline has been slowed by union opposition, putting new emphasis on expanding long-haul services. By the end of this year Eurowings will have more than 160 aircraft spread across 11 bases, including a fleet of A330s.

At the very least, Lufthansa is likely to want to safeguard the leased Air Berlin planes, which fly mainly on Mediterranean routes, according to Bernstein, and could use that structure to add more operations from the smaller carrier.

Lost Ground

For EasyJet, acquiring parts of the Air Berlin short-haul business would help make up lost ground in Germany, where it lags well behind Ryanair. The Luton, England-based company announced in June that it would shut a base in Hamburg, where it stations four A320-series aircraft, at the end of the summer season, leaving only its Berlin operation, which utilizes 12 planes.

Ryanair locates nine jets in Berlin, but also has eight other bases in Germany including Cologne-Bonn and Hamburg, as well as Frankfurt, where it will station seven planes this winter in a direct challenge to Lufthansa at its primary hub. A 10th base will open in Memmingen, outside Munich, in September.

Complicating matters, EasyJet’s Berlin flights operate out of Schoenefeld airport rather than the main Tegel hub used by Air Berlin. Current thinking calls for Tegel to be closed when the new and long-delayed Berlin Brandenburg hub opens, though those plans are under review.

Whether EasyJet or Ryanair buys Air Berlin assets, both are likely to benefit from the German No. 2’s exit, with one competitor less in the market, Per-Ola Hellgren, an analyst at Landesbank Baden-Wuerttemberg, said in an investor note. Eurowings has a higher cost base than both carriers, he said.

Progress on a carve up of Air Berlin could be rapid, according to Bernstein’s Roeska, with Lufthansa keen to bolster its defenses against low-cost carriers and the German government eager to protect jobs in an election year. The alternative could make Germany “a clear target for imminent attack,” he said.

“If there is no deal, and Air Berlin collapses, Lufthansa will be facing a large capacity gap in the German market at precisely the time Ryanair is looking to make good on its ambitious expansion.”

 

©2017 Bloomberg L.P.

 

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Airline Loyalty Programs Are Losing Their Luster — Even for Frequent Flyers

Associated Press

A travel walks in front of an advertisement for a Delta Air Lines branded credit card. It’s now easier for many travelers to earn miles through credit cards than by flying. Associated Press

Skift Take: Airline miles aren’t worth as much as they once were. But should that come as a surprise? Four airlines control the vast majority of U.S. domestic market share. With less competition, carriers don’t need to be as generous to spur loyalty.

— Brian Sumers

Airline loyalty programs are losing much of their allure even for frequent flyers, and the rules for navigating the system have changed.

Flying is no longer the best way to earn miles or points. The biggest bang for your buck comes from signing up for the right credit card.

And those come-ons from the airline to sell you miles? Ignore them unless you are very close to a qualifying for a big trip.

Frequent-flyer programs get relatively little attention from Wall Street, and their financial importance to the airlines is not widely understood by travelers, who just hope to earn a free flight now and then.

Airline profits are subject to vagaries like the price of fuel, the actions of competitors on key routes, even the weather. Amid all that uncertainty, the airlines have found a reliable source of revenue in selling miles to banks, which then use the miles to persuade consumers to sign up for the cards and use them as much as possible.

“The bottom line is that the business of selling miles is a very profitable one and has proven historically to be far less cyclical than the core airline,” Joseph DeNardi, a Stifel analyst who tracks airlines, said this month in a note to clients.

The downside for airline customers is that the world is awash in frequent-flier miles, and the airlines are constantly making each mile, or point, less valuable. Many trips don’t earn as many miles or points as they once did, and the price for claiming a reward flight keeps going up. In many cases, availability of reward seats on flights has gotten worse.

“It is harder to use miles at the price that people are expecting to pay,” says Gary Leff, who writes the View from the Wing travel blog.

Even for frequent flyers like Leff, a once-cherished benefit of the miles — using them to upgrade to first class — has been diminished because airlines sell more of those upgrades for cash.

That doesn’t mean travelers shouldn’t sign up for the airline programs. After all, there is no charge for joining.

It does require rethinking how to earn, keep and redeem miles. Many of the strategies revolve around credit cards:

— Watch credit card offers for bonuses. Banks often offer the biggest bang. JPMorgan Chase shook up the sector last year with a 100,000-mile bonus for signing up for the Sapphire Reserve card, which came with a hefty annual fee.

— Even if you make purchases with another card, consider getting the card of the airline you usually fly to enjoy benefits such as priority boarding and free bag-checking, even on so-called basic economy tickets. If you check a bag a few times a year, you will more than offset the annual fee.

— To stretch your miles, redeem them to fly midweek. Brian Karimzad of MileCards.com says it takes an average 30,574 miles for a Tuesday flight but 41,332 for a Sunday trip.

— Don’t let miles expire. On American Airlines, which runs the biggest frequent-flyer program, you don’t have to fly, you just have to make a purchase within 18 months on partners that range from other airlines to restaurants and flower shops. Miles on Delta Air Lines and JetBlue Airways don’t expire.

— Ignore your airline when it sends yet another email asking if you’d like to buy miles. The exception is when you are just a few miles short of earning a big trip, says John DiScala, who runs the JohnnyJet.com travel website.

—Use ’em while you’ve got ’em. The value of your miles won’t go up.

Airlines often raise the number of miles needed for certain flights, with United Airlines being the most recent example. Airlines used to announce big mile-price increases once every several years but now make smaller hikes more frequently. “Either way you’re going to pay more three years from now,” says Karimzad.

Over the past several years, American, Delta, United and Southwest have all linked rewards to how much customers spend, not how many miles or flights they take. That means frequent-flyer programs are a better deal now for people who buy expensive tickets, such as business class.

The change has put an end to “mileage runs,” the cheap but long flights that die-hards would take just to puff up their frequent-flyer accounts.

“It has weeded out a lot of people who were gaming it — you can’t blame the airlines for wanting to do that,” DiScala says, “but it stings as a consumer.”

___

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Hotel CEOs Say They’re Cautiously Optimistic About Corporate Travel

Abel Uribe  / Chicago Tribune

A guest checks in at a Le Meridien hotel. Hotels are still seeing weakness in their corporate and group business, even though occupancy rates are at all-time highs. Abel Uribe / Chicago Tribune

Skift Take: But shouldn’t hotel executives be a bit more concerned? At least that’s what one analyst is wondering, and we are too.

— Deanna Ting

Hotel occupancy in the U.S. was the highest it’s ever been during a second quarter — 69.5 percent, according to STR in 2017. Unemployment is at a record low of 4.3 percent. The gross domestic product, or GDP, is sluggishly moving up.

But you wouldn’t know it if you were to examine the major hotel companies’ revenue per available room (RevPAR) indices, or their average daily rates for the most recent quarter, says Michael Bellisario, senior research analyst for Baird Equity Research.

“Consumer confidence is at near all-time highs,” he said. “Almost any macro indicator we’ve looked at would say the setup for 2017 would be a lot better, election and improved sentiment aside. Why isn’t RevPAR better?”

While domestic RevPAR was up for most major hotel companies in the second quarter, it wasn’t quite as high as you might expect given the current economic indicators. The second quarter was also, generally, still weak in the areas of corporate and group travel, as noted by the CEOs of Hilton and Marriott International.

Hilton CEO Christopher Nassetta described the corporate travel environment as “cautiously optimistic” and said he hoped there would be more activity in terms of tax reform to “help change the psychology with our corporate customers.”

He noted: “The impact of it would be positive in the sense of driving more free cash flow into people’s businesses, so they’d have more to play with to hire and invest.” Nasetta also noted that group business at his hotels was “weaker.”

Marriott CEO Arne Sorenson echoed similar sentiments, saying “companies…are being very cautious about travel and very cautious about managing expenses, and [there are] others which seem to be spending as if they’re having a great party.”

He described corporate transient travel — or business travel that doesn’t include conferences or meetings — as being “anemic” and said Marriott’s group business was also “weaker” in the second quarter. Sorenson believes the best indicator of the health of the economy is the GDP, and he said that too “has been quite anemic.”

Many hotel company executives noted weakness in their group business, primarily due to calendar shifts: Easter moved into April during the second quarter and because Jewish holidays are shifting into late September this year, companies anticipate the third quarter will also be weaker for group business, said Bellisario.

Even so, Bellisario said, “We don’t want calendar shifts to be an excuse for weakness. Ninety days later, we might find some weakness. It does feel like there’s something else going on out there that’s not just calendar shifts that are impacting weaker near-term results.”

Mitigating Factors

What might be causing this softness? Bellisario isn’t sure, and it seems like the industry doesn’t quite know yet, either. The early optimism we saw from the hotel industry at the beginning of the year, post-election, hasn’t quite played out the way we thought it would, even though consumer sentiment has improved and the stock market is doing well.

He said that while demand for corporate travel is still there, “it’s really a price sensitivity issue” whereby “big companies are cutting costs and watching them very closely.” He said companies are having their employees travel for fewer days, and staying at select-service brands versus full-service ones. “It’s a combination of new supply and customers having a lot more options, so they’re being more price sensitive and not paying up for the better room.”

Bellisario also said that real estate investment trusts — also known as REITs, which usually fund the development for and often own the hotel properties consumers stay in — are suffering in big cities because so much of their business is skewed toward corporate travel. Those REITs, he noted, were “more negative and pessimistic” in their second-quarter earnings calls than the hotel management companies.

Another factor that may be coming more into play is what many in the industry refer to as “shadow supply,” the result of the growing popularity of alternative accommodations platforms like Airbnb. These are situations during which extra accommodations become available during high-demand times like a city-wide event, making it harder for hotels to raise their rates as much as before.

“That average daily rate pop is what’s missing in hotels today,” Bellisario said. “That has structurally changed because of all these home sharing options.”

Still, some CEOs aren’t so convinced that alternative accommodations are having an impact on their corporate travel business.

“It’s easy to get caught up in these big shifts that are going on, quarter to quarter. If you cleanse [that data], there’s really not that much going on quarter to quarter,” Nassetta told analysts. “You can’t say, when you sit where I sit, that the factors you just described — or heaven forbid I talk about the other things I know that are on your mind for fear of going into the black hole of Airbnb — but that some of those things don’t have some impact. But here’s the thing…nothing that we’re looking at suggests any of those things are having a material impact. It really is the economy. It really is that you’ve got growth, but it’s fairly anemic, broader growth.”

In fact, Nassetta also noted he thinks competition from Airbnb may actually be assisting hotel companies, at least in terms of their distribution agreements with the online travel agencies such as Booking.com and Expedia.

Sorenson, who also noted that his company had a system-wide occupancy rate of nearly 80 percent for the second quarter in North America, said “you would expect a little bit more pricing movement. But I think underneath that, you’ve got relatively more strength in leisure, which is more price-sensitive than corporate business is.”

He added that because the lodging industry has “thousands of franchisees who are pricing their own hotels on a day-to-day basis” and there is “radical transparency in pricing” thanks to online travel agencies and metasearch sites, “that may have some impact on our ability to move rates in this cycle compared to prior cycles.”

Whatever the reasons for this weakness in corporate and group travel, it will be interesting to see how the Marriott and Hilton’s recent cancellation policy changes also have an impact on their ability to keep average daily rates high. Those moves are signs that the hotels are trying to find other ways to keep revenues up, and to keep hotel owners happy.

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Tour Operator CEOs Say Turkey Is Coming Back to Take the Strain Off Spain

TUI Group

TUI Group’s Magic Life Jacaranda resort in the Antalya region of Turkey. The tour operator has seen an upturn in fortunes for the country. TUI Group

Skift Take: Tour operators have longed for Turkey and, to a lesser extent, Egypt and Tunisia to return to their previous popularity. All of these destinations offer better value to consumers than Spain, which is at close-to-full capacity and more expensive. Their return is also good news for the people who rely on tourism for a living.

— Patrick Whyte

“Spain is full” has been a familiar refrain from European travel bosses for the last year or so.

The Mediterranean destination has long been popular, especially with sun-starved Northern Europeans, but recently its historic cities and sandy beaches have pulled in even more tourists.

The UNWTO’s latest tourism report revealed that in 2016 Spain saw its international arrivals increase by 10.3 percent to 75.6 million.

While Spain might be trending upward (as indeed are the likes of Cyprus and Portugal) other destinations popular with European vacationers found it much, much tougher.

In 2016, Turkey reported a 30 percent drop in foreign arrivals, Egypt’s international tourist number declined by 43 percent, and although Tunisia saw a 6.8 percent rise, the figure is still down from 2014.

All these declining numbers are a result of terrorism and other geo-political issues that have dogged each of these countries in their own specific ways.

This made things hard for tour operators in 2016, who couldn’t rely on the usual supply of cheap hotel beds in the Middle East and North Africa and instead had to fight for hotels in pricier Western European destinations.

Recent results for the big European travel companies show that this might be changing.

TUI Group’s chief executive Fritz Joussen said the company was “pretty bullish on Turkey,” adding: “I mean we see not only a stabilizing demand, not only Russia coming in, but also rebuilding demand in Europe.” This certainly wasn’t the case for TUI earlier this year.

The same trend has been seen by TUI’s smaller rival Thomas Cook with chief executive Peter Fankhauser saying, “we have seen a continued pick-up in demand for Turkey.”

According to Fankhauser, there has also been growth in both Tunisia and Egypt, as well, and this will help ease the situation in Spain.

“The pressures on margins in Spain, at a certain level, are going to be less because… the more Turkey is normalizing, the more Tunisia is coming up as a fully fledged destination, the more Egypt is coming up, especially during winter, the less we have cost pressure on Spain. And this situation is going to normalize,” he said.

Turkey at least looks like it is winning back consumers. For the first six months of the year foreign visitor numbers are up by 14 percent. Tunisia can also expect to bounce back in 2018 after the UK Foreign Office relaxed its travel advice.

Monarch Still Suffering

Both TUI and Thomas Cook saw an improvement in their respective third quarter financial results, something that should not come as a shock given the kinder operating environment so far in 2017 – a very different story from 2016.

UK airline and tour operator group Monarch is not a publicly listed company and only has to file accounts once a year and its results for the year up to the end of October 2016 have just been released.

Revenue slumped by 18.6 percent to $868.6 million (£674.3 million). It crashed from a pre-tax profit of $23.8 million (£18.5 million) in 2015 to a loss of $383.8 million (£298 million) last year. Granted much of this was down to accounting write-downs related to aircraft leases and impairments but it is still a troubling sign.

Monarch cited the closure of Egypt’s Sharm el Sheikh airport to UK airlines, terrorism in Turkey, and Brexit as three of the reasons for the revenue drop.

The worrying thing for Monarch is that trading doesn’t seem to have improved so far this year either as the accounts note that “yield pressure” has continued, which will lead to “a large year over year fall in annual revenue.”

It shouldn’t be forgotten that Monarch came close to going out of business last year and has struggled on a number of occasions in the past. But its continuing woes show it isn’t simply a case of having a benign operating environment, you need to have a viable business model, too.

Ryan Wolkov

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Travel-Tilting Hedge Funds Are Investing in Airlines and Online Travel Agencies

United Airlines

An interior of a United plane. Both Par Capital Management and Altimeter Capital Management are major investors in United Airlines. United Airlines

Skift Take: Follow the money — at your own risk, of course. These two hedge funds are putting their money in airline and online travel agency stocks, often investing in competitors. Rising tides lift all boats, after all.

— Dennis Schaal

Where is the supposed smart money investing in travel these days? What’s hot and what’s not?

Two of the most prominent hedge funds with a big travel focus, Paul Reeder’s Par Capital Management and Brad Gerstner’s Altimeter Capital Management, are investing heavily in airlines and online travel agencies, and both started or increased their investments in Avis Budget Group in the second quarter. Avis Budget Group had a tough second quarter, however.

Par Capital Management in the second quarter increased its stakes in Avis Budget Group, Delta, El Dorado Resorts, Red Rock Resorts and Trivago while it disposed of its stocks in Xenia Hotels and Isle of Capri Casinos. The hedge fund, which had $8.7 billion in total market value at the end of June, also downsized its holdings in Alaska Airlines, MGM Resorts International, Penn National Gaming, and TripAdvisor.

Stephen Kaufer, CEO of TripAdvisor, is speaking at Skift Global Forum 2017. Get Tickets Now

Meanwhile, the smaller Altimeter Capital Management increased its stakes in Alaska Airlines, United and Yelp while disposing of its shares in Allegiant Travel, which owns Allegiant Air. Altimeter made new investments in Avis Budget Group and TripAdvisor. Altimeter had a total market value of $2.4 billion at the end of June.

Hedge funds such as these two are required to disclose their holdings in quarterly Securities and Exchange Commission filings; the most recent Altimeter Capital disclosure is linked here, and Par Capital is here. Skift broke out their travel holdings and any changed positions in the charts below. You can quibble with companies we categorized as “travel,” including Yelp and Global Eagle Entertainment, for example, but Yelp is obviously big in restaurants and has some travel-booking partnerships, and Global Eagle Entertainment provides content and Wi-Fi connectivity to the airline industry.

We toyed with including Alphabet Inc. (Google) in our charts since it has such huge travel business, but in the end we didn’t because travel makes up perhaps — very roughly — just 13 to 16 percent of its total revenue. Altimeter Capital Management had 6,400 shares of Alphabet worth $5.96 million in the second quarter, and Par Capital Management had no stake.

Alibaba might also have been included — we could make an argument either way — although the China-based e-commerce company doesn’t break out revenue for Fliggy, its marketplace that includes both online travel booking and second-hand auctions. Alibaba’s core commerce segment accounted for 85 percent of revenue in fiscal 2017, but the platform offers a lot more than travel. Altimeter has 25,750 shares in Alibaba that were valued at $3.62 million on June 30; Par is not an investor.

Among the takeaways, it is interesting to see that some airline stocks are hot after years of losses. The two hedge funds incidentally led a proxy fight at United Airlines in 2016.

Another trend, which won’t comes as a surprise to seasoned investors, is that these hedge funds buy stocks in competing players whether they are investing in airlines or online travel agencies.

But won’t any United gains hurt Delta and any Priceline Group inroads pinch Expedia, for example? Not necessarily.

Par Capital Management has investments in Alaska, American, Delta, JetBlue, Southwest, and United, as well as Ctrip, Expedia, Priceline, TripAdvisor, and Trivago, for instance.

That sector-wide focus has its limits, of course. While Par Capital Management maintained its holdings in Ctrip, Expedia, and Priceline, it sold some of its shares in TripAdvisor, which has seen its stock price tanking as it transitions to mobile and metasearch.

Par Capital Management’s investment focus was even more uneven in gaming-related stocks. While the hedge fund held onto its 9.25 million shares in Boyd Gaming in the second quarter, Par Capital downsized its stakes in MGM Resorts, Penn National Gaming, and Pinnacle Entertainment.

Meanwhile, Altimeter Capital Management has investments in Alaska Air Group, American Airlines Group, Delta, and United. Unlike Par Capital, Altimeter has no investments in low-cost carriers JetBlue or Southwest, and disposed of its stake in Allegiant Travel in the second quarter.

In its own endorsement of the trajectory of online travel, Altimeter had investments in Ctrip, Expedia, the Priceline Group, Yelp, and a new one, TripAdvisor.

In the second quarter, Par Capital Management’s top three travel investments were in United ($1.22 billion), Expedia ($1.16 billon), and Delta ($702.16 million).

Altimeter Capital Managements top 3 investments as of the end of June were United ($775.7 million), Expedia ($700 million), and the Priceline Group ($230.07 million).

While Par Capital Management had some hotel/gaming investments (Boyd Gaming, Caesars Acquisition Co., Eldorado Resorts, MGM Resorts, Penn National Gaming, Pinnacle Entertainment, and Red Rock Resorts) in the second quarter, Altimeter Capital Management had none.

Neither had any cruise investments.

Of course, there are many other hedge funds and institutions that invest in travel. Warren Buffett’s Berkshire Hathaway has famously returned to airline investments. And hedge fund Tiger Global secured a new investment in the Priceline Group in the second quarter. Tiger Global purchased 1.04 million shares ($1.95 billion) in the second quarter.

Here’s at look at the travel holdings of two prominent travel-oriented hedge funds. Both invest in other sectors, too.

Par Capital Management Postions Q2 2017
Total Positions in Travel 22
New Positions 1
Increased Positions 5
Same Positions 11
Decreased Positions 5
Disposed Positions 2

 

Par Capital Management Travel Investments Q2 2017
Investments Value x $1,000 Percent Change Shares Percent Change
Alaska Air Group $22,400 -99.99% 2,500,000 -44.47%
American Airlines Group $83,851 18.95% 1,666,351 0.00%
Avis Budget Group $178,362 30.45% 6,540,608 41.51%
Boyd Gaming $229,659 12.72% 9,256,701 0%
Caesars Acquisition Co.* $10,682 N/A 560,719 N/A
Canadian Pacific Railway $39,632 9.45% 246,450 0.00%
Ctrip $2,154 9.56% 40,000 0.00%
Delta Air Lines $702,157 38.06% 13,065,809 18.07%
Eldorado Resorts $149,496 96.74% 7,474,779 86.17%
Expedia $1,164,042 18.08% 7,814,983 0%
Global Eagle Entertainment $103,173 11.59% 28,981,072 0%
Hertz $67,719 -34.43% 5,888,576 0%
JetBlue $72,903 10.77% 3,193,290 0%
MGM Resorts International $123,433 -35.11% 3,994,800 -42.47%
Penn National Gaming $38,694 -29.04% 1,808,113 -38.89%
Pinnacle Entertainment $1,005 -83.57% 50,854 -83.77%
The Priceline Group $258,141 5.08% 138,005 0.00%
Red Rock Resorts $55,626 33.42% 2,362,032 25.66%
Southwest Airlines $349,115 15.58% 5,618,200 0%
TripAdvisor $102,971 -49.85% 2,695,569 -43.34%
Trivago $147,496 101.37% 6,234,000 10.89%
United Continental Holdings $1,226,177 6.52% 16,294,711 0%

* Class A shares

Altimeter Capital Management Positions Q2 2017
Total Positions in Travel 10
New Positions 2
Increased Positions 3
Same Positions 5
Decreased Positions 0
Disposed Positions 1

 

Altimeter Capital Management Travel Investments Q2 2017
Investments Value x $1,000 Percent Change Shares Percent Change
Alaska Air Group $85,495 -0.89% 952,489 1.82%
American Airlines Group $42,772 18.80% 850,000 0%
Avis Budget Group $818 N/A 30,000 N/A
Ctrip $69,318 9.58% 1,287,009 0%
Delta Air Lines $46,402 16.92% 863,455 0%
Expedia Inc. $669,994 18.05% 4,498,111 0%
The Priceline Group $230,074 5.08% 123,000 0%
TripAdvisor $5,570 N/A 145,800 N/A
United Continental Holdings $775,659 10,307,765 7.04%
Yelp* $6,946 104.89% 231,370 123.54%

* Class A shares

Ryan Wolkov

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Author: Ryan Wolkov

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Skift Global Forum 2017: Hear From Marriott, Airbnb and the Biggest Names in Hospitality

Skift

Marriott CEO Arne Sorenson, speaking on stage at the Skift Global Forum 2016. Skift

Skift Take: From direct booking campaigns to the growing popularity of Airbnb, there’s a lot to talk about with the most influential decision-makers in hospitality.

— Deanna Ting

Marriott International CEO Arne Sorenson, just days after completing his company’s long-awaited $13.3-billion acquisition of Starwood Hotels & Resorts, spoke at length about Marriott’s plans for linking both companies.

Former Starwood Hotels & Resorts CEO Frits van Paasschen said he didn’t think the timing of the Marriott acquisition wasn’t in his former company’s favor, especially for its shareholders.

Veteran hotelier Chip Conley, founder of Joie de Vivre Hotels and former global head of hospitality and strategy for Airbnb, told the audience what hotels could learn from Airbnb, and vice versa.

Former Two Roads Hospitality CEO Niki Leondakis, now CEO of Equinox Fitness Clubs, said that real innovation in hospitality comes from internal disruption.

Standard International CEO and managing partner Amar Lalvani, along with Bunkhouse COO Liz Lambert, said that hotels with a lifestyle edge will continue to thrive, even in the sharing economy age.

And former Generator Hostels CEO Fredrik Korallus listed the many reasons why the hotel industry should be paying more attention to hostels.

Those were just a few tidbits from Skift Global Forum 2016 (all of which you can revisit in the videos below). But get ready for 2017.

Arne Sorenson, CEO of Marriott International, is speaking at Skift Global Forum 2017. Get Tickets Now

From fighting the online travel agencies like Booking.com and Expedia in their efforts to get more direct bookings, the state of the mergers and acquisitions scene, developments in both artificial intelligence and mobile technology, and the ever-looming threat of Airbnb, the most influential CEOs in hospitality will all be at Skift Global Forum 2017.

They include:

  • Airbnb co-founder and chief strategy officer Nathan Blecharczyk
  • Marriott CEO Arne Sorenson
  • Hilton CEO Christopher Nassetta
  • Wyndham Hotel Group CEO Geoff Ballotti
  • InterContinental Hotels Group CEO Keith Barr
  • Vacasa co-founder and CEO Eric Breon.

All of them will step up to the stage at Skift Global Forum 2017 in New York City September 26–27 to state their cases about where they think their companies and the travel industry are heading.

Rounding out the field of hospitality veterans will be LaQuinta Inns & Suites EVP and CMO Julie Cary and Aman COO Roland Fasel.

Attend Skift Global Forum 2017

What Happened in 2016

To get a sense of what you can expect from speakers and the event, watch these conversations that took place at last year’s event.

Marriott CEO Arne Sorenson

Attend Skift Global Forum 2017

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, SimulmediaSmartlingSojernThe Points GuyTravelsify and Visit Jordan.

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

Ryan Wolkov

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Author: Ryan Wolkov

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