Dubai Hotel Owner Sues Viceroy Alleging Mismanagement and Fraud

Razan Alzayani  / Bloomberg

The developer of a luxury hotel in Dubai is suing Viceroy Hotel Management, alleging mismanagement, fraud, and libel. Razan Alzayani / Bloomberg

Skift Take: This case is a perfect example of how things can go awry when a hotel developer and a hotel management company don’t see eye to eye.

— Deanna Ting

The owner of a $1 billion luxury hotel in Dubai claims the management company it fired just three months after opening is still scaring off visitors.

Described as a fusion of California cool and Dubai spectacle, the beachfront resort with views of the Arabian Sea offers 477 rooms and suites, plus 10 restaurants and nightlife spots.

It opened on March 31 and almost nothing has gone right since, according to a lawsuit filed Thursday in Los Angeles by developer Kabir Mulchandani’s Five Holdings Ltd. The company says it grew concerned about how Viceroy Hotel Management Inc. was running the property when it started hearing complaints from guests about the food and the service.

When it looked into the guests’ gripes, Five Holdings discovered those were just the tip of the iceberg.

“Investigations by two respected accounting firms into the operations of the hotel have revealed fraudulent accountings, breach of trust, self-dealing, doctored invoices, phony budgets, unapproved budget overruns, and concealment of mismanagement by Viceroy Dubai,” Five Holdings said in the complaint.

Representatives of Viceroy Hotel Group didn’t immediately respond to a request for comment on the allegations.

In June the owner canceled the contract with Viceroy and the name of the resort was changed from the Viceroy Palm Jumeirah Dubai to the FIVE Palm Jumeirah Dubai.

That’s when the real mischief started, according to the complaint. Viceroy allegedly told dozens of travel agencies that it was deemed by a Dubai court to be the rightful manager of the hotel and that they could be fined or imprisoned if they booked rooms at the resort.

As a result, Expedia Inc. refused to book the hotel until its legal team has evaluated whether Viceroy’s claims were true, according to the lawsuit. All told, Five Holdings estimates it may have lost more than $100 million in contracts, bookings and other opportunities because of the alleged interference by Viceroy. The complaint includes claims for libel and defamation.

Complicating matters, Viceroy and Five Holdings are embroiled in multiple legal proceedings in Dubai. There’s one before an English-language court at the Dubai International Financial Centre that has limited jurisdiction in the emirate’s autonomous financial free zone; another in the emirate’s sovereign court; and a third in a joint tribunal that handles conflicts of jurisdiction between the first two.

Five Holdings argues that the DIFC court’s order granting Viceroy authority to operate the hotel is invalid because the dispute should have been put on hold when the joint tribunal got involved. In addition, the order is flawed because it only addresses the hotel’s operating affiliate, not the owner, according to Five Holdings.

Los Angeles-based Viceroy Hotel Group operates hotels around the world, including in Beverly Hills, New York, Saint Lucia and Abu Dhabi. The company signed a long-term contract to brand and manage the yet-to-be-built Dubai hotel in 2013.

Five Holdings was formerly SKAI Holdings, the real estate development business of India-born Mulchandani. In 2009, the businessman spent 140 days in jail before the Dubai Land Department cleared him of fraud and embezzlement charges brought in the wake of the collapse of the local real estate market.

As Dubai’s realmarket recovered and millions of tourists visited the emirate, Mulchandani snatched up a plot of land on the Palm Jumeirah artificial island and persuaded China State Construction Engineering to invest $1 billion in a joint venture with his company. The hotel is valued at $1.17 billion, according to Five Holdings.

The case is Assas Development Ltd. v. Viceroy Hotel Management Inc., BC674956, California Superior Court, Los Angeles County.

©2017 Bloomberg L.P. This article was written by Edvard Pettersson from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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Budget Airlines Lead Fare Wars in the U.S. That Are ‘Painful’ to Legacy Rivals

Bloomberg

A price battle between United Airlines and Spirit Airlines is spreading to other U.S. carriers, like Southwest, threatening to derail the industry’s nascent recovery in pricing power. Bloomberg

Skift Take: So much for “price discipline.” United may lose money before Spirit loses money but big airlines may be better-situated to deal with the hit. At any rate, the battle is great news for consumers.

— Sean O’Neill

For travelers, it’s been an airfare party this summer with many domestic flights cheaper than a nice bottle of wine. Chicago to Los Angeles can be had for $49, Dallas to San Francisco is just $40, and Denver to Dallas goes for only $25—barely enough for a quality pinot.

Airlines and their investors despise these fares, the result of a fierce pricing skirmish that has bickering carriers behaving like quarrelsome 3-year-olds: It wasn’t me, he started it!

The fare fight reprises a similar battle that erupted two years ago, one that dented industry revenues for more than 18 months. Only this past spring did carriers begin to feel confident that their pricing power was gradually returning.

Now there’s a new war, and no clear end—or winner—in sight.

The renewed conflict pits the industry’s deep-pocketed behemoths, led by United Continental Holdings Inc. and American Airlines Group Inc., against a trio of ultra low-cost carriers [ULCC] possessing cost advantages the big guys can’t replicate. Financially, the Big Three “are better positioned now than they’ve ever been,” said Seth Kaplan, managing partner for trade journal Airline Weekly. “On the other hand, lowest cost historically has won.”

Fares and shares are dropping while investor anger rises

Two things undergird the fare war of 2017: fuel and money. Jet fuel costs, while rising, remain inexpensive relative to what the industry paid in the past and, equally important, all the major U.S. airlines remain solidly profitable.

Because of these dynamics, neither side has blinked, just as almost every airline has used the fuel reprieve as an opportunity to increase domestic flying.

Fares—and airline stock prices—have shrunk accordingly. United shares have lost 28 percent over the past three months, given the zeal with which the Chicago-based carrier has taken the pricing battle to Spirit, where the share loss has been 41 percent. American and Southwest shares have declined 15 and 13 percent in the same period, respectively, while Delta has lost 10 percent and Allegiant 17 percent.

“At the end of the day, market share battles always get you into trouble,” said George Ferguson, a senior aviation analyst with Bloomberg Intelligence. As the fares drop, shareholder anger grows—and that wrath is likely to spur higher fares faster than any future jet fuel spike, Ferguson said.

United President Scott Kirby is, arguably, the primary U.S. fare setter today, given his role as architect of a “price-matching” strategy when he was American’s president. Kirby said Spirit has led the most recent ticket battles, with a 50 percent cut to walk-up fares on July 28, followed by a further cut in the following weeks.

Last month, Evercore ISI analyst Duane Pfennigwerth published a client note titled “It’s Not Business, It’s Strictly Personal” that was both a rant and plea to United’s board to curb Kirby’s price-matching. “We remain very surprised that the new board at United is giving this one, big personality the freedom to … roll the dice on industry discipline,” and start fare wars, Pfennigwerth wrote. “Investors and board should know that none of this had to happen.”

Low costs are certainly a ULCC advantage. In the second quarter, Spirit Airlines Inc. had a cost per seat-mile, excluding fuel, of 5.83 cents, compared with 10.28 cents at United, which has a cost structure comparable to those of American and Delta Air Lines Inc. Privately-held Frontier Airlines Inc., a ULCC modeled on Spirit, was at 5.43 cents as of Dec. 31, the company has said. By the same measure, Allegiant Travel Co.’s cost was 6.42 cents in the second quarter.

The price battle is one “the full-service guys can’t win,” said Ferguson, who predicts that deteriorating profits on many routes will compel directors at United, which has a broader shareholder base than the ULCCs, to demand a change. “United is going to lose money before Spirit loses money,” he said.

A full-service global carrier must “fill a good portion of your jet with someone who’s willing to pay a close-in fare at a big price.”

American executives have defended their price matching because half of the airline’s revenue comes from the 87 percent of people who fly the carrier only once a year. This situation has prompted some of the biggest U.S. airlines to fight for every passenger in each of its hubs.

In years past, airlines often ignored the most price-sensitive customers, choosing to keep the higher fares. In many markets that have little or no competition, that is still their position.

Yet the big hubs—like Atlanta, Charlotte, Chicago, Dallas, Denver, and Detroit—are markedly different, and with the incursion of low-cost rivals, the Big Three perceive an existential threat that must be attacked, if not eradicated.

The hubs are where legacy carriers dominate, and in doing so exploit the financial power of their connecting traffic by goosing fares from different markets.

Delta, for example, holds roughly 75 percent market share at its four largest hubs, while American is at 91 percent in Charlotte, according to data compiled by Morgan Stanley.

When Spirit or Frontier entered with daily service, according to an analysis of fares in 2014-15 by consulting firm ICF International Inc., fares at eight U.S. legacy hubs dropped an average of 20 percent.

How the Big Three Could Win

The low-cost carriers do have a soft underbelly, though. Spirit and Frontier have labor contracts pending with their pilots and are likely to assume higher costs as part of the new pacts, a process Allegiant completed last summer.

Spirit’s pilots say they earn about 40 percent less than their U.S. peers flying the same Airbus planes and want to narrow that gap with their new contract.

Frontier delayed its plans to go public this summer, likely due to the increased financial pressure expected from the competitive threats. In a securities filing, Denver-based Frontier also specifically warned future investors about sharper competition targeting its part of the low-fare market.

United’s Kirby was particularly blunt in an Aug. 28 interview. Carriers like Spirit, Allegiant, and Frontier “have created a product that no one wants to buy” if the fare is the same on another airline. “I won’t predict what happens, but I think the U.S. ULCC model is not viable when an airline chooses to compete with them,” he said.

Spirit executives counter that such pricing battles won’t end well for the company with higher costs. “Rumors of the death of the ULCC model are clearly overstated,” Spirit Chief Commercial Officer Matt Klein told investors Wednesday at a conference. “People like low fares,” he said, and “low costs are going to deliver those low fares better than anyone else.”

Spirit is profitable both with paltry fares, which drive more people onto its planes, and with higher fares, which cause load factors to drop and ticket yields to rise, executives say.

Because of costs, a base fare of $25 between Denver and Dallas is generally more acute for American and United than for Frontier, Spirit, or Southwest, although none of the carriers sells a majority of their seats on the nonstop flights at that price. (The big carriers also don’t match the lowest fares on every route.)

The counter-argument is that the legacy airlines’ connecting traffic negates the ULCC financial advantage, since American and United may have equally low costs at their hubs. “In our hubs markets, because we can put so many connecting passengers on a plane, our marginal costs for local traffic is really, really low,” Kirby said. “We can absolutely be profitable in all of the markets where we compete in our hubs with anyone. We couldn’t if we sold the whole airplane at $20 a seat.”

Still, the prevalence of low fares is taking a toll financially, with United Chief Financial Officer Andrew Levy describing the situation as “painful” and “difficult” in his comments this week even as he reiterated the airline’s commitment to its competitive strategy.

If low fares and weak stock performance persists, said Ferguson, that approach may change: “The more pain that the shareholders feel, they’ll be clamoring for the board to do something about it.”

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

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Emirates Considers Adding Budget Economy Section to Lure Frugal Flyers

Emirates

Emirates has a single large economy class cabin today on its Airbus A380s. But that could change — and Emirates President Tim Clark said passenger preference for cheap fares is the driving force. Emirates

Skift Take: Consumer groups may criticize Clark for even considering adding a “budget economy” section on the Airbus A380. But a sizable segment of passengers continue to demonstrate they want only one thing — cheap fares. Why shouldn’t Emirates create a cabin that will allow it to compete for these customers?

— Brian Sumers

Emirates, long known for its high service standards and comfortable seating, even in economy class, is studying whether to create a “budget economy” cabin with narrower seating and fewer perks to satisfy frugal customers who always book the lowest price, airline president Tim Clark told Skift on Thursday in London.

“The fact of the matter is there is a whole stream of new market segments coming in that are budget conscious,” Clark said in an interview at the Aviation Festival, an annual conference. “I think we can adapt what we do to be able to accommodate not all of it, but some of it.”

Emirates generally does not not compete directly with major long-haul low-cost carriers, such as Air Asia X, Norwegian Air, and Wow Air. But it is still often undercut on price on popular international routes, both by major legacy airlines with strategic goals or excess capacity and by carriers with lower costs.

Clark acknowledged Emirates is generally considered a premium carrier, but said it faces the same issues as many others. Often, travelers go to a search engine, choose their origin and destination, and look for the lowest base fares. “The gaming going on at the moment in these booking engines is affecting what we do,” Clark said.

Emirates recently started addressing the issue by adding fees on cheap fares, including a new charge implemented last year for advance seat assignments. And on Wednesday, Clark said Emirates could start selling fares that do not include free checked bags.

But Emirates is thinking bigger, Clark said, asking how it can give frugal customers prices they demand and still make money. One option, Clark said, is to slice economy class into three or four sections, all with different amenities and prices. Now, Emirates has one economy class section — a one-size-fits-all product.

Perhaps, Clark said, Emirates will have tiers like “economy plus,” — a version of premium economy — followed by “normal economy,” followed by “budget economy.”

Customers in budget economy probably would still get free meals, Clark said, but might pay for other extras, including luggage and advance seat assignments. A budget customer seeking a better experience — or one who brought more luggage than expected — might trade up to “normal economy” before the flight, he said.

“I’ve got to find sections in the airplane, which we could almost curtain off, that have their own restrooms and galleys unique for the product,” Clark said. “And they’ll have a set of crew dealing with them.”

Clark said budget economy, if implemented, likely would have similar seat pitch to economy class today, because even thrifty passengers value legroom. But he said width is less important to frugal customers, and noted it’s now possible to squeeze in an 11th seat per row on new A380s.

“If you do go for a budget, you want to create the appearance of sameness, even though it’s not,” Clark said. “The trick is to get the seat design right. You get the ergonomics right, and make it slightly smaller and nobody notices the difference.”

The budget product, he said, might help Emirates attract customers who do not fly it because it might be slightly more expensive than the competition. He said he suspects they would prefer a budget version of Emirates over some other airlines.

“What we find is that people want the cheapest price but they also want our brand,” he said. “They trust us, they want us, and they like us — especially the 380.”

But budget travelers aren’t the only people Emirates might attract. Clark said budget economy might be popular among people who rarely or never travel. That market segment, he said, “would be ready to move because you’ve just gone down to the price point they’ll pay.”

An unusual product

What Clark is proposing is unusual, because most airlines still have at most two economy class cabins — premium economy and regular economy.

But his goal —  ensuring Emirates can retain and attract value-oriented customers — is not abnormal.

Clark noted that several airline companies, including Lufthansa Group, own low-cost carriers that market to frugal travelers and keep them from defecting to an airline like Norwegian. Lufthansa’s Eurowings brand, Clark said, is a essentially a “budget” economy offering — perhaps a step below Lufthansa’s usual service, but still a quality product.

Meanwhile, three of the largest U.S. airlines — United Airlines, American Airlines, and Delta Air Lines — all offer what they call Basic Economy, a no-frills fare designed to keep customers from flying discounters like Spirit Airlines and Frontier Airlines. Unlike what Emirates proposes, American, Delta, and United have not created a separate physical cabin, though they generally assign Basic Economy customers the worst seats.

For Emirates, there’s little incentive to start a new discount airline, like Eurowings. But Clark noted Emirates has a huge fleet of double-decker A380s, with a “fabulous bit of real estate,” giving Emirates plenty of room to experiment.

“Yes, we are a full-service carrier,” he said. “We have some very big airplanes. We have the capability of slicing and dicing our product offering, and technology allows us to put in all processes to make that work. Is it doable? It’s doable now — if I wanted to.”

He said he knows some will be surprised Emirates is considering a budget product, but he said airlines must adapt to customers’ preferences.

“With the full-service [airlines] and the long-haul low-cost, the notion that there wouldn’t be a hybrid — that’s Jurassic thinking,” he said.

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HotelTonight Essentially Pivots to Become Hotel Whenever

Skift

Hotel Tonight is advertising in places it hopes to find spontaneous travelers, such as New York City’s Madison Square Garden. Skift

Skift Take: HotelTonight’s pivot into a 100-day booking window is a concession that the last-minute market was too small. Yet the company’s swing to profitability is remarkable.

— Sean O’Neill

Beginning in October, mobile-only hotel booking site HotelTonight will expand from having a seven-day booking window to a 100-day booking window.

The move puts the San Francisco-based company in more direct competition with the brands owned by the large travel conglomerates that dominate online travel sales in many parts of the world: Expedia Inc., Priceline Group, and Ctrip.

HotelTonight has raised $115 million in funding. This spring, it had a Series E round of $37 million, led by venture capital firm Accel Partners.

In 2015, HotelTonight was losing about $2.5 million a month on revenue of about $33 million, as first reported by The Information.

Since then, the company has become profitable by the measure of earnings before interest, taxes, depreciation, and amortization —a standard industry figure that excludes such things as expenses related to hotel occupancy taxes.

A recurring critique of HotelTonight from scattered industry skeptics is how it can compete against the behemoths of travel. Investors like Coatue Management and Battery Ventures may expect a return on their investment that is a multiple of, say, two to four times their $115 million.

Yet HotelTonight may not be able to grow fast enough to achieve that in the face of competition. The company doesn’t disclose earnings but is estimated to have booked about $60 million in revenue last year, an approximate doubling from the previous year.

Sam Shank, HotelTonight’s chief executive and co-founder, spoke with Skift about some of the arguments from skeptics.

One question we had: How can HotelTonight compete as an online travel agency against the behemoths of the industry?

Shank said that when he and his co-founders were starting out seven years ago, they were told that the competition would crush them. Today they have 260 employees and are profitable and growing enough to impress venture capitalists at firms like Accel Partners earlier this year. That reality is a sign that there is a path forward, he said.

Skift wondered about a perceived inventory imbalance among the company’s competitors. HotelTonight has only about 25,000 hotels participating in only about 1,700 cities, while Priceline’s Booking.com has 1.2 million hotels that are widely dispersed.

Shank countered that consumers shopping on mobile often prefer not to be overwhelmed by choice. On the small interface of a screen, they often prefer to have only about 15 well-curated options for any given night and destination. Repeat customers like how HotelTonight personalizes offers they can get, he said.

On the supplier side, Shank said that hotels like how HotelTonight has a rare set of tools for them for distributing. He said his company lets properties opt in and out flexibly, whereas larger competitors often have strict conditions on distributing inventory. For example, he noted that hoteliers do not have to offer inventory for 100 days out on HotelTonight if they only want to sell rooms in a tighter window, but many contracts at the big online travel agencies require rate parity or other onerous content agreements.

Shank said that his company’s ability to offer rates only to customers whose phones identify themselves as being in specific areas enables properties to activate incremental demand without starting price wars with neighboring properties.

Hotels also like how the company’s concierge program and loyalty program help draw more business out of high-spending customers, Shank said.

When Skift last looked in-depth at HotelTonight’s model by surveying hotel executives, we found that some hoteliers liked how the startup was pre-buying rooms during peak periods on a wholesale model. Shank declined to comment on whether his company is continuing with that practice or if it was one of the growth-seeking efforts — in a practice similar to one done by OYO Rooms in India — that has been stopped.

Skift also wondered about the digital marketing prowess of the behemoths and whether tiny HotelTonight is at a disadvantage in comparison to them.

Again, Shank said that the best proof is in what his company had accomplished recently, as opposed to any arguments that he might make. He said his company was able to grow profitably last year without having to spend enormously on marketing.

Looking ahead, HotelTonight plans to do more brand awareness marketing that’s different than what other travel companies typically spend on, such as outdoor advertisements on billboards in urban locations where incremental demand is the most likely. For example, the company recently ran an advertising campaign at Madison Square Garden in New York City.

Some critics have questioned the total addressable market for HotelTonight. The critique is that the company is focused on capturing travelers in limited use cases, such as those who otherwise would have gone home for the night during a spontaneous trip. Shank retorted that the new 100-day booking window would let many loyal fans of the app use it more regularly for booking trips instead of using competitors, making it more of a routine use case.

Shank noted that, a year ago, HotelTonight debuted on the mobile Web after years of being app-only. It is committed to being mobile-only overall, as that is where total travel bookings will be done by the majority of shoppers soon. And that is where his company has a competitive user experience edge over its larger rivals, he said.

Despite the bold talk, HotelTonight faces stiff competition. All of the major players implicitly offer last-minute hotels via their mobile apps and mobile web.

HotelTonight — while an elegant, slick product — faces obstacles such as a rising cost of customer acquisition. It remains unclear if it can scale at a pace that provides a meaningful return to investors.

On the other hand, there are more models of business success than rapidly scaling at the pace of an Airbnb or an Uber. Some online travel companies have grown to be solid businesses by presenting themselves as cost-effective alternative distribution channels for suppliers to the duopoly of Priceline and Expedia.

A case in point: HostelWorld, for one, had revenues of about $67 million a year when it was sold for about $250 million (€200 million) at the time, to an owner who soon after listed it on the public markets in a $230 million (€180 million) IPO. To be sure, HostelWorld didn’t have investors seeking a premium based on a $115 million investment, but it still shows a profitable, if ordinary and non-unicorn path.

We asked Shank about what companies have inspired him. He cited Zillow, an online real estate database company, which took on the incumbent Realtor.com. He also name-checked Yelp, the reviews platform that took on YellowPages.com and CitySearch, as success stories.

Critics might counter that if HotelTonight were as great as those companies, Priceline Group, Ctrip, or Expedia would have bought it by now — if for no other reason than to keep it out of the hands of their competitors.

Shank wouldn’t comment on those scenarios, saying that he has always hoped for an IPO.

“Overall, the growth rate is important, but there are other factors,” he said. “If you look at companies that are growing fast and executing well and are differentiated and have a massive addressable market, you’re looking at winners. We fit that description.”

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10 Biggest Tourism Headlines of the Summer Travel Season

James Carnes  / Flickr

Pictured are travelers checking out Pier 39 at Fisherman’s Wharf in San Francisco in March. James Carnes / Flickr

Skift Take: This was anything but a sleepy summer. The Trump administration, Brexit, and overtourism — to name a few tourism topics — definitely kept us on our toes during the past few months and we expect more news on these fronts in the months ahead.

— Dan Peltier

Summer is the busiest tourism season for many destinations in the northern hemisphere, and the warmer weather brought some heat to an array of areas besides beaches, boardwalks, and backyards.

But before the temperatures began to rise, many regions in the northern hemisphere and elsewhere were already experiencing some of the strongest tourism growth they’ve had in seven years.

The United Nations World Tourism Organization (UNWTO) released data this week showing 598 million travelers crossed international borders in the first six months of 2017, a six percent increase in the same period last year. The January-through-June stretch was also the strongest such period since 2010 for global tourism growth as the average year-over-year growth for those months has been four percent during the past seven years.

UNWTO data show that Europe and Africa had the strongest tourism growth for January through June (eight percent year-over-year) while Asia-Pacific was six percent and North and Latin America was three percent.

Data show robust results for Mexico and Canada were partially offset by a decrease in arrivals to the United States, the region’s largest destination and a topic we explore below. Within the Americas, South America, Central America, and the Caribbean led the way with six, five and four percent growth in international arrivals year-over-year, respectively.

Because UNWTO’s data doesn’t account for domestic tourist arrivals in destinations —which often far outnumber international arrivals — global tourism growth for the first six months of the year was likely larger for some regions.

This summer, beginning in June and lasting through Labor Day, there was plenty of activity and announcements, whether in the form of White House policy changes, tourism board funding challenges, Brexit backlash, or anti-tourism movements.

Here’s a summary of the biggest tourism stories to emerge this summer, and hints of what to expect as we enter fall.

1. Visit Florida’s Funding Was Saved But Other Destinations Face Uncertainty

Visit Florida will survive another year to market the state’s destinations, from the Florida panhandle to Key West, after one of the most high-profile destination marketing funding battles in recent memory came to close in June.

The Florida Legislature on June 9 approved a $76 million budget for Visit Florida for fiscal 2018 after a three-day special session in the Florida House and Senate. The special session followed six months of controversy for the organization that grew out of Miami rapper Pitbull’s controversial $1 million contract with Visit Florida last year, and criticism that the organization operated with a lack of transparency. Three C-suite executives, including ex-CEO Will Seccombe, left Visit Florida last December as a result.

Destinations the world over have always had to advocate to save their funding, but challenges to tourism board coffers seem much more apparent this year. Tourism boards in every corner of the world are facing funding challenges and that’s a symbol of how tourism marketing is often misunderstood by elected officials.

But after a dozen Florida tourism boards ended their relationships with Visit Florida this summer due, in part, to uncertainty how their own practices will be scrutinized by state politicians, Visit Florida is a cautionary tale of confusion that funding battles can bring. Expect more tourism board budget battles to play out as communities look for more ways to cut spending – and create uncertainty among tourism board members and partners in the process.

2. The Trump Administration Proposed to Eliminate Brand USA in Its 2018 Budget

Brand USA, the national destination marketing organization of the U.S. that’s funded by a mix of donations from more than 700 partner organizations and matching funds from the Electronic System for Travel Authorization (ESTA) program, wouldn’t be marketing the U.S. to international travelers if the administration of President Donald Trump has its way.

President Trump’s proposed fiscal 2018 budget called for the elimination of Brand USA’s funding; instead, the spending plan would allocate revenue from the ESTA program to the U.S. Customs and Border Protection organization.

Research has shown that visitation to a destination often declines when tourism board marketing efforts are curtailed. Aside from whatever politics may be going on, the White House should understand the value of tourism marketing and how that leads to job creation and economic development. Proposing to cut the national destination marketing organization doesn’t send a positive vibe to destinations, even if Brand USA’s funding is part of political maneuvering.

Skift reported in July that Brand USA’s partner contributions, however, were down for the first quarter year-over-year. It’s clear that the organization has other concerns besides its status in the budget, and more board meetings this fall will give a better sense of the health of the organization this year.

3. The Trump Slump Is Real

After months of telling the U.S. travel industry that there didn’t appear to be any decrease in international arrivals due to the Trump Administration’s controversial rhetoric, the U.S. Travel Association revised its data this week to present a “substantially more pessimistic assessment” of travel to the U.S., warning of “major storm clouds for the inbound international travel market.”

That’s despite international tourist spending in the U.S. hitting record levels heading into the summer months of June, July and August.

The U.S. Department of Commerce’s data for international visitor arrivals for January through March also show arrivals from overseas and Mexico have been falling since the presidential election last November and continued into 2017. Though it’s difficult to understand where U.S. Travel initially went wrong, having useful information from a travel organization that many travel brands take cues from is better late than never.

4. International Tourism to the United States Dropped in 2016

International tourism growth in the U.S. had been a story of comebacks and records in the years since the end of the global recession in 2009. That all changed last year when nearly two million fewer international travelers visited the U.S., a 2.4 percent decline compared to 2015.

Data show that foreign arrivals didn’t start dropping off until November 2016, and that most of the last year was a growth story for international visitation to the U.S. Many travel brands have chalked up the drop in visitors to the U.S. political climate and the 2016 election, and since divisive politics have continued into 2017, along with an increasingly stronger dollar that makes U.S. trips more expensive, some destinations probably aren’t expecting any records this year.

5. Trump’s Commerce Secretary Tried to Reassure The Travel Industry

“Let me be clear — America is open for business, America is open for travel and open to the millions of international visitors who wish us well,” said United States Secretary of Commerce Wilbur Ross in June at The U.S. Travel Association’s IPW conference in Washington, D.C.

But before and since Ross’ speech three months ago, the Trump Administration hasn’t taken a single step to make it easier for international travelers to visit the U.S. or make them feel welcome.

Ross said that the administration holds the travel industry in high regard. But when a president continuously publishes negative tweets about some of the largest inbound markets for tourism to the U.S., such as China, Mexico, and Canada, it’s clear that the White House is not taking pleas from the travel industry seriously.

6. President Trump Took a Step Back on the U.S.-Cuba Tourism Detente

Back in June, President Donald Trump announced that he wouldn’t entirely reverse former President Obama’s liberalized policies on Americans traveling to Cuba, but he would tighten Treasury Department audits of trips to ensure they fall within the 12 approved categories and that money does not go to the Cuban government or military.

Trump’s announcement wasn’t the worse-case scenario that many had feared, but it was a step backward and didn’t offer any glimpse of a path forward for tourism to and from two countries only 90 miles apart.

Trump said that the U.S. Treasury Department would have 90 days to implement these changes and the 90-day mark is on or around September 15. Given everything happening with hurricane relief, North Korea, immigration, and the Russia investigation, etc, it’s unlikely that Cuba is currently high on the list of the White House’s priorities. But it’s still something that many brands such as cruise lines are watching.

7. The Brexit Impact on the travel industry got a lot more complicated

UK citizens went back to the polls in June, nearly one year after the country voted to leave the European Union. UK Prime Minister Theresa May’s Conservative party didn’t do as well as expected in the snap June election, but May and her party retained leadership and forged ahead with Brexit negotiations.

Skift’s Europe Editor Patrick Whyte reported in June that because of election results, May will have to rely on Northern Ireland’s Democratic Unionist Party (DUP) to get anything done. While tourism merited precisely zero mentions in the Conservative manifesto, it is a big economic driver in Northern Ireland and leaders are concerned in both the Republic of Ireland and Northern Ireland that a hard border between both countries, for example, could severely damage tourism. Perhaps a softer Brexit, which would benefit the travel industry, will play out because of the election.

8. Anti-Tourism Movements Take Root

While Europe isn’t the only region with destinations experiencing overtourism, it certainly has some of the most high-profile examples of how residents are banding together to speak out against what they perceive as harmful effects on their lives from too many visitors.

Cities such as Amsterdam, Venice and Dubrovnik, Croatia are beginning to address overcrowding in popular city centers, and Barcelona, which is also working on managing visitor growth, has seen protests and violence break out over residents objections to tourists.

The high season is winding down in many European destinations — and Barcelona had to grapple with a terror attack in a popular area for visitors — but overtourism as a story isn’t going away. More cities will take steps to address crowds and visitor growth in popular areas in the next few months that could impact how and when people choose to travel.

9. WTTC Appoints Its First Female and Latin American CEO

Gloria Guevara has a lot to tackle at the start of her tenure at the World Travel & Tourism Council, one of the world’s largest travel industry organizations. At top of mind for Guevara is the issue of overtourism and how to work with destinations on better managing visitor growth and being more proactive rather than reactive in this area. Guevara also brings her background of travel distribution systems to her new post and she has a lot to teach the travel industry about female leadership and Latin America – two topics that many brands are working on.

10. Destinations Still Struggle With Using Data – and residents – to Manage Growth

Many destinations know the drill when it comes to using data to target travelers and find out how they booked their trip, why they want to come to a destination, or figuring out where to spend most of their marketing dollars.

It’s tying together that data with destination management planning where many tourism boards and destinations still come up short. Many destinations like Lisbon have destination management plans in place or have created ones in recent years, but those probably don’t reach the average, everyday resident who lives in a popular tourist district or area. That’s a challenge facing tourism boards around the world. Vienna, for example, has already been talking to its residents about their thoughts on tourism. Similar dialogues will take place in the months ahead as more destinations realize they can’t solve any problems if residents aren’t on board.

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Certify Buys Booking Tool in Latest Travel and Expense Tie-Up

Nam Y. Huh  / Associated Press

Certify is looking to push deeper into business travel booking. In this photo, travelers walk to their gates at O’Hare International Airport in Chicago. Nam Y. Huh / Associated Press

Skift Take: Expense providers, which have typically connected with clients and their travel management companies, are moving deeper into the business travel booking arena.

— Andrew Sheivachman

Expense solution providers are looking to diversify their product offerings, and that includes a more significant move into providing online booking tools for business travelers. To a certain extent many already do this, and Concur looms large over the sector.

Certify has acquired a travel booking tool from nuTravel that will give its larger clients the ability to book travel through Certify’s platform. Its current offering, Certify Travel, is aimed mainly at small businesses.

Certify, which is now a part of a larger group of expense service providers including Nexonia, Tallie, and ExpenseWatch, is looking to go after Concur, which just announced its own offering geared towards small businesses. The integration of travel and expenses is a big part of that. Deem has a similar solution, as does KDS, which was acquired last year by American Express Global Business Travel.

“Acquiring the booking tool from nuTravel gives Certify complete ownership and control over the platform, including development, product lifecycle, pricing and distribution,” said Certify CEO Bob Neveu. “It also means that Certify’s leading customer support team will also be responsible for our enterprise travel customers. And Certify Enterprise Travel also complements our current Certify Travel offering, giving us the ability to meet the needs of small businesses up to global enterprise companies.”

Basically, this sort of end-to-end solution lets all aspects of a trip sit on Certify’s platform for connection to a company’s given travel management partner. The deal involves a team of developers and the booking tool from nuTravel, which will continue to offer its own airline solutions. The price of the acquisition was not disclosed.

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Battle for Unmanaged Travelers Heats Up — Corporate Travel Innovation Report

Hipmunk

Concur, which acquired Hipmunk last year, on Thursday announced the launch of a new service called Concur Hipmunk geared to small businesses. Hipmunk

Skift Take: Employees of smaller companies are business travelers too. Concur’s latest strategy to go after unmanaged travelers shows how much potential exists for that segment.

— Hannah Sampson

The Skift Corporate Travel Innovation Report is our weekly newsletter focused on the future of corporate travel, the big fault lines of disruption for travel managers and buyers, the innovations emerging from the sector, and the changing business traveler habits that are upending how corporate travel is packaged, bought, and sold.

We finally know what Concur is planning for Hipmunk, the travel search company that it acquired last year.

On Thursday, the company announced that it was launching Concur Hipmunk to provide solutions for small businesses without managed travel programs. That’s the fastest-growing segment for Concur, chief product officer Tim MacDonald told Skift.

Users of the new service will be able to get discounts from Concur partners, have their bookings tracked through Concur, and automatically send travel information to expense and itinerary management tools.

As senior writer Andrew Sheivachman points out, several companies have been angling to cater to workers without managed travel programs at small businesses. The fight for those customers is getting fierce.

We also had word this week that domestic business travel in the U.S. dipped in July after a couple of positive months. With wildfires, hurricane-related floods, and a new record hurricane approaching the coast, we fear August and September will not be much better.

— Hannah Sampson, News Editor 

Business of Buying

Trump Slump Fears Are Realized as Revised Findings Show Tourism Drop: U.S. Travel’s initial forward-looking travel projections seemed too optimistic, and now domestic business travel is trending down after a couple of up months. Hopefully the industry can have a more serious conversation about averting a prolonged slowdown instead of hoping for the best and staying the course. Read more at Skift

Southwest and JetBlue Offer the Most Generous Airline Reward Programs in the U.S.: United MileagePlus has been making it harder for members to earn additional flights based on loyalty points. Delta SkyMiles, meanwhile, is making them more affordable. Read more at Skift

United Blames Hurricane Harvey for Major Revenue Decline: There’s a reason they call it an act of God. Every airline in the world is going to lose money when a massive hurricane hits one of its largest hubs. United will be fine. It’ll just take some time. Read more at Skift 

What It Takes to Build the Perfect Premium Airport Lounge: Here are the brands that are innovating and getting the lounge experience right. Read more at Skift 

Safety + Security

Record Heat and Wildfires Scorch U.S. West Over Holiday Weekend: A hurricane (Harvey) that dumps 24 to 30 inches on towns and cities within 24 hours, and rail-melting heat in San Francisco raise questions about whether these bizarre weather events are related to global warming. There’s no proof but the issue has to be raised. Read more at Skift 

Travel Rollback for U.S-Russia Trips Leads to Further Isolation: Isolation breeds ignorance and fear of the unknown. Ending Russian visas to the United States is shooting ourselves in the foot on so many levels. Read more at Skift 

Disruption + Innovation

Hipmunk Goes After Unmanaged Business Travel Market: Despite the initial denials, we always knew Concur would bring Hipmunk into business travel. It’ll be interesting to see how the Hipmunk brand changes once it becomes known for more than just leisure travel. Read more at Skift

Artificial Intelligence Is Becoming a Priority for Airline IT Chiefs: Airline chiefs are more likely to moan than talk optimistically about leaps in artificial intelligence. But a new SITA survey suggests they’re realizing that it can be the bedrock of their futures. Read more at Skift 

Lyft Has Been Taking Advantage of Uber’s Troubles to Gain Ground: Lyft would be silly not to take advantage of Uber’s self-inflicted errors in order to boost its own business. Read more at Skift

Changi Airport’s New Terminal Will Feature a High-Tech Check-In Experience: As a major business hub, the check-in experience at Changi Airport’s new terminal can’t miss any marks. And given the volume of connecting traffic that flows through the airport travelers will also care about how easy it is to reach connecting flights. Read more at Skift

COMMENTS

Skift editors Hannah Sampson [hs@skift.com] and Andrew Sheivachman [as@skift.com] curate the Skift Corporate Travel Innovation Report. Skift emails the newsletter every Thursday.

Subscribe to Skift’s Free Corporate Travel Innovation Report

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Package Vacation Platform GoFro Raises $10 Million: Travel Startup Funding This Week

GoFro

GoFro is an India-based, three-way online marketplace for holiday packages. It connects travelers with suppliers and destination experts. GoFro

Skift Take: Startups in India and Turkey have benefited from investment by venture capital firms located outside those countries. That’s a trend that’s a mixed blessing.

— Sean O’Neill

Each week we round up travel startups that have recently received or announced funding. The total raised this week was more than $22 million.

That $22 million figure doesn’t include the $250 million that the India-based hotel network OYO Rooms said it raised in a round led by Softbank — news that Skift will cover separately.

>>GoFro, an India-based platform for customers to book vacation packages and pay agents to plan itineraries, said it had raised $10 million in Series B funding led by HIS, a Japanese travel agency.

MakeMyTrip, the online travel giant of India that is a majority investor in GoFro, also participated in the round.

HIS, an agency based in Japan with 460 retail outlets across Asia, will become a strategic partner of GoFro and will help to launch the GoFro marketplace in Japan.

Amitabh Misra, the current chief executive, launched GoFro only about a year ago. He said his company had seen rapid traction with package-loving customers in India.

Deep Kalra, founder, group chairman and group CEO of MakeMyTrip, said in a statement that the appeal of GoFro was that it brought hundreds of branded vacation package products from online and brick-and-mortar agents for 70 destinations worldwide into one marketplace. Until now, the market had been fragmented for Indian travelers shopping online.

>>Otelz, which calls itself Turkey’s largest hotel reservation website, said it has raised a $3.8 million investment round, led by Sankoline.

Howzat Partners, the investment fund co-founded by former Momondo chief executive Hugo Burge, also participated in the round.

Founded in 2013, the company has struggled along with other players as political and economic strains have buffeted Turkish tourism.

On the bright side, the company is facing somewhat reduced competition as operations of Booking.com have been suspended in Turkey. There are some new markets expanding, too, as Arab visitors are increasingly turning to the country as a destination.

Otelz said it works with 7,500 properties in Turkey and plans to use the funding to help grow its inventory.

>>Ski Solutions, a sports travel agency with a concierge client service, has received a $7.85 million, or £6 million, investment from Mobeus Equity Partners, a British buyout firm.

Founded in 2010 as an outgrowth of a winter sports travel agency, Ski Solutions has offered customized itineraries and bookings for ski holidays. With the investment, Ski Solutions will aim to expand into the summer activities market.

Ski Solutions has claimed it has had 20 percent a year growth over the last three years. It currently has 34 employees but will add more staff soon.

Mobeus promises to provide additional funding for add-on acquisitions related to the activities and adventure segment.

Check out our previous startup funding roundups, here.

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Thai Investors Are Cautiously Optimistic About New Mall Aimed at Chinese Tourists

Dan Peltier  / Skift

A new shopping mall in Bangkok is betting big on Chinese travelers’ spending power. Pictured is a Chinese tour group at the Grand Palace in Bangkok, Thailand in April 2017. Dan Peltier / Skift

Skift Take: Thailand’s tourism officials have had a love-hate relationship with Chinese travelers in recent years and they mainly have their sights set on marketing the country to the wealthiest segment of that market.

— Dan Peltier

The Platinum Group Pcl, whose wholesale fashion mall in Bangkok attracts about 15 million people yearly, expects booming Chinese tourism to support its retail shopping center due to open next year.

The firm is investing about six billion baht ($180 million) in the project and is banking on the deep pockets of Chinese visitors to woo retailers, according to President Chanchai Phansopha. Platinum’s shares have lagged behind peers this year amid concern the new mall may take time to succeed.

“We want to transform the company from an operator of a wholesale fashion mall into a commercial property developer,” Chanchai said in an interview Tuesday. The Bangkok project is part of a wider, 11-billion-baht investment plan that will also add hotel and office space over five years, he said.

Tourist arrivals in Thailand have surged in the past decade, powered by Chinese visitors who last year numbered almost nine million and shelled out an above-average $176 per head daily. While their spending power offers hope, the domestic outlook is darker – consumers are burdened by elevated household debt and economic expansion lags behind Southeast Asian neighbors.

The mall may take longer to be successful than Platinum expects as it has a retail focus, unlike the popular wholesale center, Chaiyatorn Sricharoen, an analyst at Bualuang Securities Pcl, said in a note. Chaiyatorn rates the stock a sell with a 6.65 baht target price, about 15 percent below Thursday’s close.

Platinum’s Chanchai said he foresees double-digit percentage growth in 2017 sales and profit, adding the new mall – called The Market – will boost revenue at least 30 percent in 2019.

The stock advanced 2.6 percent on Thursday in Bangkok to a record 7.8 baht. It has climbed 7.6 percent this year, less than the 10.8 percent rise in the SET Property Development Index. The shares trade at 26.6 times estimated 12-month earnings, higher than a five-year average of 24.9.

 

 

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

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Trump Travel Ban No Longer Includes Grandparents and Cousins

Caleb Jones  / Associated Press

In this June 30 photo, Hawaii Attorney General Douglas Chin speaks at a news conference about President Donald Donald Trump’s travel ban in Honolulu. After today’s ruling, grandparents and cousins from targeted countries with U.S. relatives will be able to enter the U.S. Caleb Jones / Associated Press

Skift Take: This ruling represents a major win for families affected by the travel ban. With Supreme Court arguments set for October, the fate of the entire policy is now at stake.

— Andrew Sheivachman

A federal appeals court on Thursday rejected the Trump administration’s limited view of who is allowed into the United States under the president’s travel ban, saying grandparents, cousins, and similarly close relations of people in the U.S. should not be prevented from coming to the country.

The unanimous ruling from three judges on the 9th U.S. Circuit Court of Appeals also said refugees accepted by a resettlement agency should not be banned. The decision upheld a ruling by a federal judge in Hawaii who found the administration’s view too strict.

“Stated simply, the government does not offer a persuasive explanation for why a mother-in-law is clearly a bona fide relationship, in the Supreme Court’s prior reasoning, but a grandparent, grandchild, aunt, uncle, niece, nephew, or cousin is not,” the ruling said.

The U.S. Supreme Court said in June that President Donald Trump’s 90-day ban on visitors from Iran, Libya, Somalia, Sudan, Syria, and Yemen can be enforced pending arguments scheduled for October. But the justices said it should not apply to visitors who have a “bona fide relationship” with people or organizations in the U.S., such as close family ties or a job offer.

The government interpreted such family relations to include immediate family members and in-laws, but not grandparents, cousins, aunts, and uncles. The judge in Hawaii overruled that interpretation, expanding the definition of who can enter the country to the other categories of relatives.

The Hawaii judge also overruled the government’s assertion that refugees from those countries should be banned even if a resettlement agency in the U.S. had agreed to take them in.

Lawyers for the government and the state of Hawaii, which challenged the travel ban, argued the case in Seattle last week.

Deputy assistant attorney general Hashim Mooppan ran into tough questions as soon as he began arguing the government’s case, with Judge Ronald Gould asking him from “what universe” the administration took its position that grandparents don’t constitute a close family relationship.

Judge Richard Paez similarly questioned why an in-law would be allowed in, but not a grandparent.

“Could you explain to me what’s significantly different between a grandparent and a mother-in-law, father-in-law?” Paez asked. “What is so different about those two categories? One is in and one is out.”

Mooppan conceded that people can have a profound connection to their grandparents and other extended relatives, but from a legal perspective, the administration had to draw the line somewhere to have a workable ban based largely on definitions used in other aspects of immigration law, he said.

This article was written by Gene Johnson 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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