Standard Hotels CEO Talks Up Same-Day Booking Apps But Thinks HotelTonight Has Lost Its Value

Standard International

Amar Lalvani, CEO of Standard International, thinks the company’s same-day hotel booking app has staying power. Standard International

Skift Take: The kind of curation the One Night app provides its users really does set it apart from other booking channels. The bigger question, though, is how many people actually know about it?

— Deanna Ting

It’s been just a little more than a year since Standard International debuted its One Night same-day booking app for independent hotels and CEO and managing partner Amar Lalvani is more convinced than ever that the same-day booking model is one with staying power.

This, despite the fact that same-day booking pioneer HotelTonight recently announced its pivot to becoming more like a “Hotel Whenever,” as it opened its booking window to 100 days. “I think the premise for hotel companies is less valuable for HotelTonight now,” Lalvani told Skift.

The One Night app allows users to book a stay at more than 130 independent and boutique hotels in 11 cities beginning at 3 p.m. local time. Those hotels include such properties as all of The Standard Hotels, as well as the Gramercy Park Hotel in New York, the Thompson Chicago, and The Line in Los Angeles. Although Lalvani said the app was primarily designed for boutique, independent, and lifestyle hotels, a quick glance at the hotels listed on the app also found properties like the Rosewood London and The Langham, London, both of which are part of larger hotel companies.

The model One Night uses is commission-based, similar to how an online travel agency such as Expedia or would have with their hotel partners, but the Standard, unlike most of those companies, will share guest information with its hotel partners.

“It’s essentially a commission, the same way an OTA would do, but we have a friendlier approach as it relates to what our commission is and how we structure the contracts,” Lalvani said.

Lalvani said the company also pays close attention to curation — which hotel partners are allowed to be a part of the app — and includes additional experience-related, in-destination information on the One Night app for its users. The app also doesn’t make price a focal point.

“We also don’t rank hotels based on the price of the hotel,” he said. “In fact, we think that comes secondary to the experience of the hotel, so if you look at the home screen, it’s very different, again, from any other booking channels. In fact, on our home screen the price is hidden; it’s certainly available, but you know with One Night you’re automatically getting the best deal out there.”

He also said that from June to August of this year, sales on the app grew 152 percent, and average daily bookings grew by 331 percent. Downloads also grew 53 percent, and active users grew to 48 percent of downloads, representing a growth of 97 percent versus the prior period.

Standard Hotels would not disclose exactly how many downloads of the app have been made since its debut, or exactly how many users it has, or how many bookings have been made. However, given the fact that it has only been on the market for about a year, it’s likely that its user base is smaller than that of a competitor like HotelTonight.

A majority of users of the One Night app are locals — 65 percent, according to Lalvani — and of those who book Standard Hotels properties through the app, Lalvani said they are spending, on average, $55 per person on food-and-beverage-related experiences at their hotels.

Skift spoke to Lalvani about the company’s progress with the One Night app, which recently expanded its bookings to hotels in London, as well as the company’s larger plans for further growth and expansion.

What follows is an edited version of that conversation, which took place on October 5.

Standard International launched the One Night last September. Source: Standard International

Skift: It’s been a year since One Night launched. Can you give us an update?

Amar Lalvani: It’s been a very exciting year for us at One Night. One year in, we’re about to launch our first international city, which is London, which obviously has all the dynamics that we look for in a 24/7, compelling, interesting city with a great stock of independent hotels that we have a great deal of respect for. So, it’s nice to mark the one-year anniversary with our first international opening.

Skift: Why pick London as the first international city to expand to and what other international destinations are on the horizon for One Night?

Lalvani: London is a natural extension for what we do. The first two markets we launched were New York and LA. The most crossover traffic of any international city we find in our hotels to both of those cities is London. So, it’s a very natural extension.

I would say we are as a team spending a lot of time in London as well, because we will be opening the Standard London about a year from now, and so we’re very familiar with the market. I would also say the dynamics of London are exciting for One Night because it’s a 24-hour city. People interact and behave on a very spontaneous basis because of the nightlife that exists there, because of the culture that exists there, because of the transportation in and out of London from people arriving at all times of the day into the airports, because of the Eurostar going back and forth. It’s got the dynamic lifestyle and social aspect, and it’s also got the travel patterns that make it conducive to what we would think about as a One Night city. It’s also got a great group of independent, boutique, lifestyle, fun, differentiated, experiential hotels, so there’s a good stock of hotels that we’d be proud to put on One Night.

I think from there, London will be the hub of the expansion of One Night. I think you can imagine the usual suspects. I think the obvious candidates coming out of London as a hub are places that resonate with that kind of lifestyle, whether it’s Paris or Berlin, or Amsterdam or Milan. I think you can imagine London being the hub and then the spokes out of that from a use perspective are quite logical — places that have the type of guests that appreciate these hotels and the types of guests that have the dynamic lifestyle that would use it.

Skift: What are your thoughts on HotelTonight’s pivot to “Hotel Whenever,” and would you ever do that with One Night?

Lalvani: Obviously, when people see what we do, their first thought is to compare us to HotelTonight. I think from the beginning we’ve been quite different in a couple ways.

One is we’ve been exclusively after 3 p.m., so while that may seem the same or similar even when they had a 24-hour booking window or a seven-day booking window, or now a 100-day booking window, we’ve always been after 3 p.m. [on the same day.] And the reason we did that, from a hotel partners’ perspective, is that after 3 p.m. there’s very little booking that happens on your direct channels, so it really is excess inventory. So, it was very important for us not to be cannibalizing the hotel direct booking channels, so we were very conscious of that, and we learned that through our own data. We’ve been very tight and focused on that.

I can say, definitively, we won’t move in that direction because our premise is to make sure that it relates to the spontaneity of travel, that it’s a new way of booking, that the immediacy is very, very important to us. Now I can’t speak, obviously, for HotelTonight, but I think from a hotel company’s perspective looking at it, the value of utilizing HotelTonight for the excess inventory does get diminished in some fashion because now it’s similar to the other OTAs.

Where they had a tighter premise, that really worked for the hotels. It’s diluted in some standpoint because it really does compete with other OTAs, it competes with their existing channels. As I say, since we’re formed out of a hotel company, so we’re very conscious of what works for hotels companies and brands on an incremental basis. That’s been a very important premise to us, and I don’t think we will deviate from that.

The second thing is that I think HotelTonight started with a premise of curation and certainly, there’s still some element of that, but we’re very fixated on that curation. It’s done by The Standard team and, this is no disrespect to hotels that I mentioned, but you know you may find yourself on HotelTonight next to a limited-service hotel of a more generic brand. We will not do that because it comes from The Standard, it comes from our philosophy that we will always maintain the tight curation and the tight time period.

I think the premise for hotel companies is less valuable for HotelTonight now. But that does not mean it’s a bad decision for HotelTonight, from a business perspective. It can certainly allow them to have more bookings and certainly allow them to grow. I know they’re venture-capital backed and that growth is important, but I think those are business reasons for them, which may be very valid, but I think the premise for a hotel company working with them has changed.

Skift: Do you think another online travel agency will want to acquire HotelTonight soon?

Lalvani: I don’t know. I obviously can’t say, but I’ve certainly seen, in the past, the OTAs being highly acquisitive, there’s no question about it. So, who knows if they will or not, but they’re big boys and they like to buy things.

Skift: It’s also been more than a year since the major hotel chains pushed out massive direct booking campaigns to incentivize consumers to book direct instead of booking on an Expedia or a Priceline. Where do you see the industry at right now in terms of what some people referred to as the “direct booking wars” last year?

Lalvani: I think what happened was, and this is sort of my commentary on the industry, but I think the hotel companies woke up after a period of slumber about this issue, and suddenly realized that the OTAs had grown bigger and they were a marketing partner and they offer a lot of value, but all of a sudden, they looked at it and said, “Wow, such a meaningful portion of my bookings are coming through OTAs,” and “Wow, these guys charge a lot for those commissions.”

And I think there was, in my view, the [fact that the] hotel business tends to move very slowly, and there was a collective wake up and they said, “We gotta do something about this.” And so you had a whole bunch of energy. “Oh my gosh, what happened? How do we do something about this?” And you saw everybody doing it.

Now when they first realized it became part of everything, that they had to talk about everything they had to do, now they’ve put in place strategies and they’ve put in place mission and ideas to do that, and now they’re in kind of implementation phase about that. But I think what you saw was this big energy of a wake up and a push back.

I think you also saw things going on with consolidation in the industry with Marriott buying Starwood, and InterContinental [Hotels Group] buying Kimpton, so I think, in those some of the consolidations, even Marriott-Starwood as you guys have written very well about, was in response to that wake up of how to pull back and push back on the OTAs in terms of their commission structures or the power that they generate. So I think that collective wake up in the industry is what you saw going back a couple of years, and now it’s kind of a fact of life — that you need to do your best to have your channels be the strongest.

I think you see a couple different reactions to it by hotel companies, some of which I think are a little, from my view, misguided. For example, if you book direct, you get certain benefits like free Wi-Fi. To me that’s a very negative marketing strategy because if you’re in the hotel and you happen not to book direct, why would you be offered a second-class experience? So, I think there are some odd marketing strategies that they’ve incurred. It’s almost like you get a slap on the wrist for not booking direct. So, I think it’s interesting to watch how certain companies react to that.

Our approach is obviously very different to that. One is continuing to ramp the experience within our hotels for everybody, making our hotels more intriguing and interesting every day from both an offline and an online perspective. If you look at what we do, there’s a culture that we’ve built, there are relationships that we’ve built, so it’s a very positive reason to be engaged with us and not go through a third-party channel, as opposed to a slap on the wrist for doing so.

And I think we’re the only company out there that said, “You know what? We should create a distribution platform for independent hotels, so let’s understand that model and let’s find a way to actually get into that business and do it on behalf of the independent hotels.”

Skift: As opposed to Room Key?

Lalvani: I would think that’s fair to say. Certainly, we’re the only independent company to have jumped into that space.

And I would say we also … I think [the major hotel companies that got together to form Room Key] did that in a very, sort of, defensive posture of how to take it back. I think we did [One Night] from a very proactive perch, trying to empower the independent hotels really to market themselves, to capitalize on excess inventory.

We’re offering a different product in terms of the curation and the after 3 p.m. booking window. This wasn’t to say, “We need to be an OTA to compete with them.” We said, “No, we need to build a product that is good for the hotels.”

Skift: How are you marketing One Night and are you assuring your hotel partners that they’re getting access to enough users?

Lalvani: I think they are happy with what they’re seeing for sure. And One Night is a startup, and it’s small. It’s incubated by Standard International, but what they like about it, I would say, is not that we’re screaming loud out there and trying to get people onto One Night, but that we’re supporting the marketing efforts that they have.

And so, again, to the point of not trying to compete with them, we’re actually just positioning them in a different way. If you look at our social media following with One Night, how it’s put together, we really feel like we’re augmenting their marketing as opposed to competing with their marketing. And I think to the standpoint of whether they think it’s worthwhile, I think the answer is absolutely yes because, not just because of how we market them, but of who and how people are using it.

Skift: When One Night launched, I asked you about the possibilities of developing the app into a potential platform for data sharing among independents, or for loyalty opportunities, or incorporating messaging or other sorts of mobile services. Have you been working on that and are those features sort on the horizon for One Night?

Lalvani: We’ve definitely been working on it and product development and evolution is going to be a big part of what we do. I think if you look at technology, and I think even if you look at probably things that you have on your phone, simplicity is very difficult to achieve, and so something that’s simply designed and beautiful, especially in a spontaneous area I think is very important. So, we’re very conscious of keeping the beauty and the simplicity of what we do.

We’ve had our hotel partners say, “Hey, can we do this, can we do that?” We’ve had guests say things like that. We are conscious of the simplicity of what we do, but I think going forward you will see some product enhancements.

Skift: A few years back, there was a lot of talk about rapid growth and expansion for Standard Hotels but, with the exception of the upcoming London hotel, there hasn’t been news of any new projects for a while. Are more hotels on the way?

Lalvani: There’s definitely more. You’ll be hearing more in the future, but I will tell you we are entering into a very, very exciting new phase for the company with a lot of really, really interesting projects that we have not announced yet. There will be some announcements in the future and you’ll start to see a lot more. But London is the next one on the way.

London’s going to be an absolutely fantastic hotel, a great representation for Standard and a perfect location for us, so that’s the one that, even if we haven’t formally announced iy, it’s gotten too much coverage and is a building that’s being renovated in too prominent an area to be ignored. So that’s coming. But I promise you you’ll see some really exciting new openings from us in the coming years.

Skift: Has anything changed much since André Balazs [founder and former chairman of Standard International] left the company as chairman in March?

Lalvani: No, you know, I would say a couple of things. I worked with André for a long time and the team that remains here has worked with André for a long time too, so there’s no question that he was the founder and visionary and we’re carrying on that legacy. But the reality is that for the last few years he hasn’t been actively involved day to day, so it’s been a very seamless transition. And so, we’ve got a great team, we’ve got great potential, a great future, but things have been running very well, and it’s a natural transition over the last several years that’s occurred.

Skift: Any other thoughts you’d like to share about where you see the hotel industry headed?

Lalvani: The hotel business moves very slowly and the customers tend to move faster than most hotel companies, and I think hotel operators, over the years, have drawn too many narrow distinctions about what their business is. “We’re a hotel company, we’re not good at restaurants.” “We’re a hotel company, we’re not good at running bars.” “We’re a hotel company, we don’t know what we’re doing in the world of music or fashion.”

We were early days on breaking down those barriers and I think what needs to happen is to realize that guests don’t have those barriers in their mind’ they’re just living their lives. Whether they want to go on a cooking tour or have a massage in their room, or go to a nightclub, or listen to music — whatever those things are — that’s what they’re thinking about. They’re not thinking about I want to go to this hotel to do that, I need to go somewhere else to do this, they don’t care who’s running it. They care about the lifestyle that they’re living and what they’re doing.

I think we woke up to that very early. I think the innovative companies like Airbnb understand that, and I think the bigger companies are playing catch up to that, but it’s really that they’re playing catch up to the customers’, the guests’ lifestyles, where we’ve always been integrated with how they’re living, and have always been bringing those experiences. And of course, with examples like the Trans-Pecos Festival [an annual festival Standard International’s Bunkhouse division helps host in Marfa, Texas], we need to get better and better at that, but I think that’s where the world is headed, only because that’s how people live their lives.

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Red Lion Is Going Asset Light to Buy Up More Hotel Companies You Haven’t Heard Of

Red Lion Hotels Corp.

The lobby of the Hotel RL Spokane at the Park in Spokane, Washington. Parent company Red Lion Hotels Corp. is looking to sell the property along with 10 others in pursuit of an asset-light hotel strategy. Red Lion Hotels Corp.

Skift Take: Last year, Red Lion bought Vantage Hospitality. So, who’s next?

— Deanna Ting

As the hospitality industry gets more consolidated than ever, Red Lion Hotels Corp. is pursuing a crucial strategy to enable it to get bigger.

The Denver-based chain’s board of directors said October 5 it approved the sale of 11 of the company’s remaining 18 owned-hotel properties.

The decision to sell those properties marks yet one more step in the company’s pursuit of an asset-light strategy, which RLH began about four years ago, said Red Lion chief financial officer Doug Ludwig.

It’s a strategy the company is pursuing not only because it makes good business sense, but because it can help the company get event bigger by helping RLH “acquire franchise businesses similar to Vantage [Hospitality],” which Red Lion bought last year.

So, who would might Red Lion buy? Ludwig wouldn’t name names, but he did give some hints.

“I think the difference, for our next few acquisitions, would be to go after upscale and midscale properties,” he said. “Whereas Vantage was more dominated by economy properties, the benefit of going upscale is that the fee income is more significant — the royalty and marketing fees are based as a percentage of rooms revenue. And the contracts are typically longer-term contracts, too. Instead of a five- to 10-year contract, those are usually 20 to 30 years.”

He said that potential acquisition targets would most likely be private companies that aren’t “big enough to attract the attention of the Marriotts, Hyatts, or Hiltons in the world.”

Ludwig added, “We’re in the top 10 in the franchise space, and in many ways, we’re a logical and capable accumulator of these kinds of [hotel] groups. They tend to be regional, they tend to be smaller. They can be anything from 30 to 40 properties to something similar to Vantage. I think it will be, again, similar to Vantage — I don’t think anyone had heard of them until we bought them. There are other opportunities across the U.S. I’d put Canada in the same category. There are interesting opportunities out there that we would like to accumulate.”

While Red Lion isn’t necessarily known for its upscale business, Ludwig said the company is gaining buzz for its upscale Hotel RL brand, and that’s all a part of the company’s plan to better “refine” its brand portfolio and attract new franchise owners.

“We’re refining our approach to property owners, and trying to convince them to come to one of the Red Lion brands,” Ludwig noted. “For instance, our Hotel RL hotels — our upscale product — has had very good market reaction.”

He also said there are “some updates” with regard to Red Lion’s lawsuit against Hard Rock Hotels for intellectual-property infringement related to Hard Rock’s new Reverb hotel brand, but details wouldn’t be announced until next week or later.

Ludwig said that with the addition of Vantage, Red Lion now has nine brands — three in the economy space, three midscale, and three upscale — and the company is working hard to ensure the “brands are better understood, promoted, and marketed. It makes us better known faster than has been historically the case because we’re just doing a better job on the awareness side of things. We’re making sure customers and intermediaries understand who we are and what each of the brands mean. We’re now in 50 states, and we have 40 properties in Canada, with some properties in South Korea and in India, too.”

Red Lion’s relationship to distributors like Expedia is also much different than its hotel peers. In 2016, the company announced it would allow and to sell its members-only rates in exchange for the ability to automatically enroll any guests who book through those channels into the Red Lion Hello Rewards loyalty program. Should Red Lion continues to grow and become even bigger, however, it’ll be interesting to see if the company retains this online travel agency-friendly approach to distribution.

Why Everyone Goes Asset Light

Pursuing an asset-light strategy is not a new hospitality trend. Just look at the recent spin-off that Hilton completed earlier this year, or Marriott, which has pursued an asset-light strategy for many years. And that process continues for Marriott at it looks to sell off Starwood-owned hotels inherited after purchasing the chain for $13.3 billion last year.

“The shift to an asset-light strategy continues to accelerate across the industry, especially as shares of Marriott and Hilton now trade at premium valuation multiples,” Michael Bellisario, senior research analyst for Baird Equity Research wrote in an investors’ note.  “Hyatt is one of the remaining global brands with an owned real estate strategy; however, even Hyatt’s tone appeared to subtly shift recently with management noting that the company’s future growth was expected to be driven primarily by its management and franchise business.”

For a smaller company like Red Lion, it’s extremely important in helping it compete with the larger hotel companies and to continue to grow.

Four years ago, the company began disposing of other owned assets and it created multiple joint ventures that helped the company transition from a 100 percent owner hotel company to 55 percent owned, Ludwig said.

With the addition of Vantage, Red Lion added approximately 1,000 new properties — all of them with franchise agreements — to its portfolio. “We acquire those franchise rights at a very favorable valuation to us, so it meant the purchase price was very manageable, and we are seeing very good returns on that investment in the first year of operation,” said Ludwig.

He added, “We’ll recover our investment in Vantage over a two- to three-year period. It’s a benefit of being asset light. Rather than an ownership position that takes on a lot more debt and usually takes three or five years or more to recover the investment, the franchise business turns over faster. We didn’t need any debt to complete that acquisition. We did that out of our cash reserves. That worked well.”

Another benefit of going asset light, Ludwig noted, is that it makes business “more stable and less susceptible to economic changes and it’s also a much higher profit margin business.”

“On the ownership side, you’re operating margins that are 18 to 20 percent, maybe a high of 22 percent. On the franchise side, we completed the second quarter at almost 30 percent and we see that increasing further,” Ludwig noted.

“That’s the secret of why the industry is going toward this asset-light model: You don’t need a lot of capital to add franchise agreements and they are immediately profitable; there are no startup losses. You’re not exposed to capital requirements of real estate assets themselves. It’s a low capital, stable, high-margin business — the investment community is willing to pay a higher valuation or higher multiple because of those characteristics.”

Ludwig believes that within two to three years, Red Lion’s profit margins may rise to the 40s and mid-50s percentages. “It’s a very scalable growth model.”

The hotels that Red Lion is currently listing for sale are as follows:

Hotel RL Salt Lake City, Utah
Hotel RL Spokane at the Park, Washington
Hotel RL Olympia, Washington
Red Lion Hotel Pasco, Washington
Red Lion Hotel Richland Hanford House, Washington
Red Lion Hotel Port Angeles, Washington
Red Lion Hotel Redding, California
Red Lion Hotel Eureka, California
Red Lion Hotel Boise Downtowner, Idaho
Red Lion Hotel Templin’s on the River, Post Falls, Idaho
Red Lion Inn & Suites Bend, Oregon

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Lola Pivot to Business Travel Is All About the App


Lola’s app is being further refined. The company says its AI-enabled app has the potential to gain serious traction with business travelers. Skift

Skift Take: Lola’s push into business travel makes sense given the needs and booking frequency of experienced road warriors. But as Upside has experienced, attracting the right kind of users is a big challenge when travelers can just book trips themselves.

— Andrew Sheivachman

When Lola launched last year, founder Paul English thought a combination of deep-learning artificial intelligence and travel agents would represent a transformative tool for both leisure and business travelers.

English, best known for co-founding metasearch site Kayak, says Lola’s current pivot to attract business travelers is based on a series of realizations soon after the company launched its app for consumers.

“Two-thirds of our users were business travelers,” said English. “I didn’t think after Kayak that I would start a travel company, I thought I would start something in chat….

“I thought I was building a consumer company like Kayak and and discovered it was business travelers that wanted chat. The second thing is that I thought we were building for chat, email, and phone. We found that people almost never want to talk on the phone. The older road warriors are almost more expert than younger ones, and they’re really interested in efficiency. They like sending a command and going off to do something while we do something for them.”

Lola now has 53 full-time employees, with 15 travel agents still on staff, and the company is sitting on much of the $44.7 million it has raised since its inception as Blade Travel to use for marketing efforts early next year. The quest to woo business travelers and their companies will likely be a costly undertaking, so for now Lola is focused on improving its app.

If the company wants to scale its travel agent operations, as hinted by English in an interview last year, it will likely do so by outsourcing the workers instead of hiring internally as originally planned.

At first, English hoped that the back-of-the-house technology his team was developing for travel agents to more easily book travel and service travelers would turn out to be a moneymaker for the company. That, too, has shifted over the last 18 months.

“My thoughts have changed on that,” said English. “Because we spent a lot of time building software for managing the travel agent, we thought that would be [intellectual property] we would license to other big companies. We really decided [we needed to focus on the app]. Most of our engineers are focused on the app for the end user, at the moment the focus for the next year is to perfect the app for road warriors and maybe for their companies as well.”

A New Focus

Lola’s new tagline “business travel buttery smooth” tells you all about the company’s goal: further refining its app to provide a seamless, responsive tool for business travelers. English solicited business travel policies on Twitter over the summer, and his colleagues have been looking them over to learn the most pressing pain points of frequent travelers.

A series of focus groups earlier this year, however, have guided Lola’s strategic shift.

“In January I thought small business travel was going to be one focus for us and we brought in a bunch of travelers, younger road warriors and older road warriors,” said English. “That alone was quite interesting to us. Younger road warriors just love business travel and spend an extra day in destination. Older travelers are lightning efficient and do meetings, get out, and get home.”

There’s also the matter of allowing business travelers to book hotel stays and flights that earn them valuable loyalty points they wouldn’t earn using traditional online booking sites like Expedia. English envisions these frequent business travelers flocking to Lola for the ease of service and perks more closely associated with a traditional travel agent.

“We built an integration with Sabre so you get the direct booking benefits; booking through Lola is as if it’s a direct booking,” said English. “The sweet spot are people who travel ten to twenty times a year because the more you travel, the better the AI personalization works and the more you want service.”

Algorithmic Service

While things may not have gone exactly according to plan, the company’s artificial intelligence technology has enabled it to provide automated personalization to users that outstrips the efforts of more popular online booking apps.

“The biggest thing on the tech side is the artificial intelligence,” said English. “We have this thing called a personal travel algorithm. It goes so far that when you and I are looking at hotel results when side by side, you may see different descriptions because we’re trying to cheese out what’s important to you. The descriptions of our hotels are written by the artificial intelligence, not the humans.”

Photos on the app remain those supplied by hotels, but the plan in the future is to use machine learning to present personalized images depending on traveler preferences.

English also weighed in on the other major player that has emerged in the unmanaged business travel space, Priceline co-founder Jay Walker’s Upside. He’s not a fan.

“It’s crazy what they’re spending to get people, to bribe people, to use that service,” said English. “The idea you can suddenly get people to use packages is stupid. Travelers are really busy and need every minute of their time, they need a service to work for them… I don’t think they have a good app, but they have very impressive marketing.”

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First Class Is Shrinking but Here’s Why It Remains Important

Singapore Airlines

A Singapore Airlines first class seat is pictured. Business class has become a bigger focus for airlines, but first class still fills a need for some travelers. Singapore Airlines

Skift Take: First class is becoming more rarified as carriers emphasize dense business class configurations. But the most exclusive product does still play a role for well-heeled customers and the marketing departments of top carriers.

— Colin Nagy

First class cabins might be soon becoming an even more rarified luxury item.

Eager to monetize the front of the plane, carriers are opting to put in more dense business class seat configurations, focusing on improving that product in a hope that customers (or those paying the bills) don’t care about the difference.

The trend line runs through the industry: United recently launched its new business class product, Polaris, and is phasing out first; Qatar only runs first on a few Airbus A380 routes; Qantas is running only business, premium economy, and economy on its new Boeing 787 Dreamliners and airlines like Cathay Pacific are phasing out the service on their new order of Airbus A350 planes.

The logic is simple: more passengers up front, more money per route for the airline. And in an unpredictable economy, when you look to your left and right in first, many of the passengers are either mileage redemption warriors or people traveling on a staff ticket.

The market for first class is growing more and more limited. Business seats have been getting continually better year over year, and large companies with slashed travel budgets can’t justify the spend. Business class used to be a reclining seat, with first the only flat bed option. Now that both exist, the differentiation is somewhat lacking except with the best brands that are focused deeply on the first class product.

Air Canada CEO Ben Smith told Skift in an earlier interview: “There’s a very small market that sits between business class and a private jet that wants to fly in first class. From the biggest financial centers, perhaps.”

Of course, in some echelons of business like hedge funds and private equity, first is the “cheaper” decision just under flying private. And what many fail to acknowledge is that sleeping situations, even on a private jet, are less than comfortable. There’s a famous anecdote about the head of a noted media investment bank who would fly British Airways first, having the private jet follow, when flying from the East Coast to London because he got a better night of sleep.

Even with airlines doubling down on innovation in business cabins, what strategic role does first have to play for carriers? Why would anyone keep it?

1. Actual Privacy

First class products offer actual privacy when you’re sleeping. La Premiere on Air France closes with a curtain, the only product in the sky of its kind to offer complete privacy. Of course, some other products have sliding doors, creating a cabin feel, but the Air France version is differentiated, smartly, through the use of a simple curtain rather than unwieldy hard product. The cabin is also beautifully designed, completely different from the business class aesthetic, and is discreet and residential feeling.

2. A proper bed and better sleep

Business class can often feel like sleeping on an awkward camp cot, while first elevates the quality of sleep significantly. Japan Airlines’ first class is large, and also comes with a Japanese-designed Airweave brand mattress, which can be flipped to one side for hard, and to the other for soft. In addition, there is a liner for the bed, and high quality linens. More details are considered when it comes to shut-eye.

3. Super personalized service 

Due to the smaller cabin and top-tier staff, service is very highly personalized. You can dine when you want, and flight attendants know your name and preferences. Some business products with a lot of seats feel like a mechanized assembly line when it comes to meal service, BA being an egregious example.

4. The halo effect 

Importantly, first class serves as a marketing halo for the brand. Many people will never even set foot in the cabin, but it shows the attention to detail, approach, and luxury that is associated with the airline. This is why Etihad has made so much hay with its private suite, The Residence, and its First Class “Apartments” cleverly using semantics to connote space versus a simple chair or even a suite. In the arms race to be more decadent, the PR and earned media factor is hugely important for carriers, and the hype cycle of aviation bloggers, luxury sites, and business publications are always looking for a compelling new hook.

And in general, having first class plays to the most primal mode of luxury: desire for scarcity and exclusivity. Having something that doesn’t make any rational sense, but exists. Perhaps the future of first is not unlike a concept car, or couture gowns. Not especially pragmatic but important for a brand to show what it are capable of.

So who is still doing first class particularly well? The aforementioned Air France product stands out as leading the pack, alongside Etihad’s “First Apartment,” as well as Singapore, Cathay Pacific, Emirates and Japan Airlines. Qatar’s launch of Q Suites will undoubtedly shake up the industry as well, as it is a business product that feels like first in terms of space and comfort.

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U.S. and Turkey Suspend Visa Services After Istanbul Arrest of Consulate Employee


The U.S. and Turkey suspended visas to each others’ countries as the fallout of the failed Turkey coup intensifies. Bloomberg

Skift Take: The United States and Turkey are NATO allies — in theory. The reality shows that notion is increasingly out of date.

— Dennis Schaal

The U.S. and Turkey each suspended visa services for citizens looking to visit the other country, a sharp escalation of tensions that sent the lira down more than 6 percent against the U.S. dollar.

President Recep Tayyip Erdogan’s government responded in kind, hours after a U.S. move on Sunday to suspend visa services in Turkey. Turkey even repeated verbatim much of the wording of a  statement issued by the U.S. in announcing its decision. Both sides said “recent events” had forced them to “reassess the commitment” of the other to the security of mission facilities and personnel.

The moves followed the arrest of a Turkish national who works at the U.S. consulate in Istanbul for alleged involvement in the July 2016 coup attempt against Erdogan.

Only two weeks ago, U.S. President Donald Trump had heaped praise on Erdogan when they met on the sidelines of the United Nations General Assembly in New York, saying the Turkish leader “is becoming a friend of mine” and “frankly, he’s getting high marks.”

The U.S. said Thursday the government was “deeply disturbed” by the arrest, terming charges against the man “wholly without merit,” and by leaks from Turkish government sources seemingly aimed at “trying the employee in the media rather than a court of law.” Turkey responded by saying the arrested Turkish citizen wasn’t part of the U.S. Consulate’s staff but was a “local employee.”

The lira was at 3.7130 per dollar as of 7:15 a.m. in Singapore on Monday, down 2.7 percent from Friday’s close, and touched as low as 3.8533. The currency is heading for a seventh day of declines, the longest stretch since May 2016.

Extradition Request

Relations between Turkey, which is a member of NATO, and some Western countries soured after the failed 2016 coup. Erdogan has accused U.S.-based Turkish preacher Fethullah Gulen of organizing the attempted overthrow, and has become increasingly impatient with the U.S. for not turning him over. The lira has lost more than 7 percent against the dollar since reaching a high last month.

In a briefing on Sept. 27, State Department spokeswoman Heather Nauert said the U.S. had received “several requests” for Gulen’s extradition but “haven’t talked about this in a while.”

“We continue to evaluate it, take a look at the materials that the Turkish government has provided us,” Nauert said.

Erdogan in July accused foreigners of attempting to break Turkey apart and vowed to continue to crush “agents” acting against the country. He gained sweeping powers in April after a tight referendum that critics said was fraudulent. A Council of Europe agency has since put Turkey on its watchlist, saying crackdowns on opponents have compromised human rights and the rule of law.

–With assistance from Jordan Yadoo Adam Haigh and Garfield Reynolds


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Czech Airlines Faces Likely Takeover by Rival Carrier


Czech Airlines, known as CSA, debuted service between Prague and Verona earlier this year. Rival carrier Travel Service made a takeover bid. CSA

Skift Take: The likely takeover of Czech national carrier CSA echoes the recent flatlining of Air Berlin, Alitalia, and Monarch. A side note: When airlines become insolvent, their airport slots should be awarded to new entrants or smaller players — not Europe’s richest carriers.

— Sean O’Neill

Czech airline Travel Service says it has acquired a majority stake in the national carrier, Czech Airlines, known as CSA.

Travel Service, the Czech Republic’s biggest carrier, says it has reached a deal with the Czech state and Korean Air to buy their CSA stakes.

Travel Service had a 34 percent stake, while Korean Air acquired a 44 percent share from the government in 2013. The government still had almost 20 percent.

The sale of the state’s stake still depends on approval by an anti-monopoly office.

The transaction gives Travel Service a 97.74 percent stake.

Travel Service operates regular flights under the name Smart Wings, as well as charter flights and private flights.

The CEFC China Energy Company has almost a 50 percent stake in the airline.

Copyright (2017) Associated Press. All rights reserved.

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Short-Term Rental Fight Sees Hotels and Realtors Lining Up on Different Sides

David Eggert  / Associated Press

In this October 4, 2017 photo Deanna Richeson, president and CEO of the Michigan Lodging and Tourism Association, speaks at a news conference in the Anderson House Office Building, in Lansing, Michigan. She is among the opponents of legislation that would restrict local governments’ crackdown on short-term vacation rentals.
David Eggert / Associated Press

Skift Take: The short-term rental fight in Michigan, as in many places, is a clash among real estate, hotel and consumer interests. These sorts of conflicts are playing out all over the world, and there won’t be uniform outcomes.

— Dennis Schaal

Local crackdowns on short-term housing rentals have ignited a fight in Michigan’s Capitol, with homeowners and lobbyists lining up for and against legislation that would allow the rentals in all residential zones and prohibit treating them differently through zoning.

The bills are being pushed by the Michigan Realtors group, which accuses municipalities of trampling on property rights with overly restrictive and unfair rules. On the other side are lodging, tourism and local officials who worry about the unrestrained growth of short-term vacation rentals through online platforms such as Airbnb and HomeAway. Each community, they contend, should be free to regulate the rentals as they see fit without state interference.

Short-term rentals have become an increasingly contentious issue at the local level, especially in summer tourist destinations along Lake Michigan. Grand Rapids, Traverse City, Holland and Grand Haven are among communities with regulations such as requiring owner occupancy or special use permits.

The legislation would define a short-term rental as any rental of a single-family residence, one- to four-family house or any condo lasting under 28 days at a time. The rental of a dwelling would be deemed a residential and permitted use in all residential zones statewide. It could not be deemed a commercial use of property. Local regulations for noise, advertising, traffic and “other conditions” would be allowed if applied consistently.

Supporters and opponents are mobilizing ahead of potential legislative hearings on the House and Senate bills this fall. The Realtors association — whose political action committee is among the most prolific fundraisers of cash that can be spent on candidates and elections, according to the Michigan Campaign Finance Network — has run one-minute radio ads across the state. Tourism and local leaders held a news conference with some frustrated lakeside homeowners in recent days to express their “deep concerns” with the legislation.

“This is a one-size-fits-all solution being imposed out of Lansing and it isn’t the right way to go,” said Deanna Richeson, president and CEO of the Michigan Lodging and Tourism Association, which says the bills would silence the concerns of year-round residents. It worries that unregulated short-term rentals undercut hotels and the tax base.

Suzanne Schulz, managing director of design, development and community engagement for the city of Grand Rapids, said homes in residential neighborhoods are increasingly being “converted into hotels” by people who own multiple properties — making it even tougher for families to find affordable housing in tight markets particularly in Grand Rapids, Ann Arbor and Traverse City.

But the bills’ backers say cities and townships have overstepped and should instead address nuisance and occupancy complaints through enforcement actions. Real estate agents report uncertainty by potential homebuyers who are anxious about being unable to rent out their second home to help cover the taxes and other expenses.

One of the bill sponsors, Republican Rep. Jason Sheppard of Temperance, said there are “a lot of misconceptions” about the legislation. The intent is to pre-empt local governments from banning short-term rentals through zoning while still allowing them to have registration and other policies, he said.

“If it’s your property and you own it, I think you should be allowed to do with it what you want to do with it — following guidelines. What those guidelines would be is occupancy guidelines, making sure you’re not being bad neighbors just like any other rental of a home,” Sheppard said.

Brian Westrin, public policy and legal affairs director for the Michigan Realtors, said communities have been reinterpreting their zoning laws, allowing short-term rentals in some zones but not others, or banning them as a commercial use.

“The bills are intended to do that one thing — prevent outright bans of this longstanding practice through zoning,” he said.

The issue is not just significant in western and northern Michigan. Two of Airbnb’s top four Michigan markets are Detroit and Ann Arbor.

Though the fate of the legislation is uncertain, it could receive a friendly reception from majority Republicans who have disregarded “local control” arguments when passing business-backed laws that overrode local wage requirements and plastic bag limits. Other pre-emption bills, such as a proposed ban on potential local food and beverage taxes, may be enacted soon.



House Bill 4503

Senate Bill 329

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Turkey and Venezuela Agree to Increased Flights and Tourism

Associated Press

Turkish President Recep Tayyip Erdogan (right) speaks with his Venezuelan counterpart Nicolas Maduro October 6, 2017 about enhanced tourism and economic ties. Associated Press

Skift Take: We see it all over the world these days: When countries have difficulties with their traditional allies, they turn elsewhere. It’s a smart move by Turkey and Venezuela to seek closer ties, although both governments are pariahs right now.

— Dennis Schaal

Turkish President Recep Tayyip Erdogan said Friday that his country does not support any external interventions in South America, speaking after meeting with Venezuelan counterpart Nicolas Maduro.

Maduro and Erdogan oversaw the signing of five agreements for cooperation on air travel, tourism, culture, agriculture, and international crime. They discussed ways to deepen economic and energy ties and explored opportunities for military industry cooperation, the Turkish leader said.

Maduro’s visit to Turkey, the first by a Venezuelan head of state, comes amid stringent U.S. sanctions on the South American nation and a deepening political crisis in Venezuela as the country struggles with triple-digit inflation and widespread shortages.

In August, U.S. President Donald Trump said he wouldn’t rule out military action against Venezuela in response to the country’s descent into political chaos.

“I believe there is no force above that of the will of the people and we think that most of the time, foreign interventions deepen the problems,” Erdogan said, with Maduro standing by his side.

He added that he hoped to see Venezuela’s “difficult period” end as soon as possible, with “ease, dialogue and compromise.”

Maduro said he hoped to open a “new era” in relations with Turkey, and welcomed plans for the expansion of direct flights between Istanbul and Caracas.

At the request of Maduro, Turkey will also construct a mosque in Caracas, the Venezuelan capital, as well as a cultural center, Erdogan said.

Maduro’s visit follows a tour to Russia and to Belarus, where he discussed expanding military ties with the ex-Soviet nation.

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Hotel Safety and 8 Other Hospitality Trends This Week


Hotels are thinking more about security. A hotel key card at a hotel in Singapore. Skift

Skift Take: This week in hospitality, reeling from the tragedy in Las Vegas, we put serious thought into what we call Permanxiety: a near-constant state of worry afflicting travelers today.

— Sarah Enelow

Throughout the week we post dozens of original stories, connecting the dots across the travel industry, and every weekend we sum it all up. This weekend roundup examines hospitality.

For all of our weekend roundups, go here.

>>Given the industry’s increasing focus on sustainability, these hotel ideas could soon become a reality. That’s especially so for developers looking to build projects that are not only eco-friendly, but are increasingly design forward: Hotel Design of the Future Emphasizes Sustainability

>>Keith Barr has a clean slate to build off his tenure in China and implement new technology for IHG employees that will help shape and improve the guest experience. We’ll be watching to see if his vision of more seamless technology integration is realized this year: IHG CEO Sees Better Tech as Making Things Smoother Behind the Scenes

>>Short story: Hotels are just as fine as other businesses. It’s guns in the U.S. that are the problem: 8 Questions About Hotel Safety and Security Raised by the Las Vegas Shooting

>>Europe’s largest hotelier continues to pursue CEO Sébastien Bazin’s goal of diversification. Valued at about $117 million, Gekko Group will help AccorHotels grow its business-to-business services: AccorHotels Makes Acquisition to Deliver Other Hotel Brands to Travel Agencies

>>You may have missed out on this year’s Skift Global Forum, but you don’t have to miss out on one of the key parts of the conversation at the event and within the industry: Travel in an Age of Permanxiety: Download the New Magazine

>>We all understand why hotels are collecting more fees but the types of fees and surcharges they’re collecting seem to be changing in interesting ways. More stringent cancellation fees are a trend while totals for Internet-access fees declined: U.S. Hotel Fees Forecast to Reach $2.7 Billion in 2017 as Stricter Cancellation Policies Take Hold

>>While some of the deals done by AccorHotels have raised eyebrows, this one seems like a good strategic fit. The Orient Express brand is known the world over and will give AccorHotels a greater presence in the luxury space: AccorHotels Buys Into Orient Express to Remake an Iconic Brand

>>As much of the talk around Airbnb right now relates to a possible IPO, it’s odd to see a C-level exec depart at this stage in the company’s lifespan: Airbnb CMO Jonathan Mildenhall to Leave Company

>>While it’s fairly straightforward to quantify the value of a loyalty program in terms of “payback,” that doesn’t account for all the other special perks and experiences that travelers may value: Wyndham Rewards Loyalty Program Provides the Most Payback on Guest Spending

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U.S. Hits Bombardier With Another Tariff Despite Delta Aircraft Order

Jasper Juinen  / Bloomberg

The U.S. Commerce Department proposed a new tariff on Bombardier jets. This is potentially a problem for Delta Air Lines, which ordered 75 of them last year. Jasper Juinen / Bloomberg

Skift Take: There’s little doubt Bombardier needed a lot of government assistance to finish the C Series. What’s less clear is how much Boeing was harmed. Boeing’s smallest 737s have some overlap with Bombardier’s new plane, but they’re not direct competitors.

— Brian Sumers

The U.S. slapped duties on Bombardier Inc.’s showcase commercial jet for the second time in as many weeks, upholding Boeing Co.’s case that its Canadian competitor sold planes at less than fair value.

The Commerce Department imposed a preliminary import duty of 80 percent on Bombardier C Series aircraft based on its finding, according to an emailed statement Friday. The agency ruled last week that the Montreal-based planemaker, which invested more than $6 billion to develop the all-new C Series, benefited from unfair subsidies.

The second round of import duties marks the latest blow for Bombardier, which received financial support from Quebec and Canada as its biggest jet came in two years late and about $2 billion over budget. The ruling is also bound to stoke tensions between the U.S. and two key allies, Canada and the U.K., which have expressed dismay with the Commerce Department.

Both charges — last week’s 220 percent countervailing duties and Friday’s anti-dumping restrictions — could be reversed by the U.S. International Trade Commission if the tribunal concludes that Boeing wasn’t injured by Bombardier’s jet program, a decision expected to be made next year. The Commerce Department also still needs to issue a final ruling in both cases.

Bombardier rose less than 1 percent to C$2.21 at the close in Toronto. The shares are 2.6 percent lower than their level before the initial Commerce Department ruling last week.

‘Protectionist’ Measures

Canadian Foreign Affairs Minister Chrystia Freeland said she was “extremely disappointed” in the latest U.S. decision, vowing to defend the country’s aerospace industry against “irresponsible and protectionist trade measures” that also hurt some U.S. workers.

“These anti-dumping duties on Bombardier’s C Series aircraft unfairly target Canada’s highly innovative aerospace sector and its more than 200,000 workers,” Freeland said in a statement. The measures also “put at risk the almost 23,000 U.S. jobs that depend on Bombardier and its suppliers.”

The controversy is likely to hang over Prime Minister Justin Trudeau’s trip to Washington next week, where he is scheduled to discuss trade with President Donald Trump just as negotiators hold the fourth round of talks to amend the North American Free Trade Agreement. Trudeau has warned that his government won’t buy Boeing military jets unless the company drops the case.

‘Bitterly Disappointed’

British Prime Minister Theresa May said she was “bitterly disappointed” by last week’s decision, considering Bombardier employs more than 4,000 people in Northern Ireland. U.K. Trade Secretary Liam Fox and Irish Foreign Minister Simon Coveney have discussed the matter with U.S. Commerce Secretary Wilbur Ross this week.

The U.S. will begin collecting preliminary duties to offset the difference between the sales price and fair value, the Commerce Department said in its latest decision. The ruling applies to exports of 100- to 150-seat Canadian aircraft.

“This determination confirms that, as Boeing alleged in its petition, Bombardier dumped its aircraft into the U.S. market at absurdly low prices,” the U.S. planemaker said in an emailed statement. The C Series wouldn’t exist without the assistance of the Canadian and Quebec governments, according to Chicago-based Boeing.

Delta Order

Delta Air Lines Inc. placed an order last year for at least 75 of the CS100 jets, the smaller C Series variant, in a deal with a list value of more than $5 billion. Deliveries are expected to begin next year.

Bombardier called the Commerce Department’s ruling “an egregious overreach” that ignored the need in the aerospace industry to invest billions in hopes of a long-term payoff.

“Boeing’s own program cost-accounting practices — selling aircraft below production costs for years after launching a program — would fail under Commerce’s approach,” Bombardier said in a statement. “This hypocrisy is appalling.”

The Canadian manufacturer said it was confident the International Trade Commission would find that Boeing suffered no injury from the C Series. It has argued that Boeing doesn’t make planes that compete with the aircraft — an assertion backed up by Delta.

“Boeing had the chance to compete with Bombardier for Delta’s purchase of aircraft in this size range, but Boeing’s only proposed alternative to the CS100 was to offer Delta used Brazilian-made regional jets,” the Atlanta-based airline said in an emailed statement, reaffirming its view from last week. “Boeing has no American-made product to offer because it canceled production of its only aircraft in this size range – the 717 – more than 10 years ago.”

WTO Case

The typical capacity of the CS100 ranges from 108 to 133 seats, according to Bombardier. The larger C Series version, the CS300, can hold as many as 160 seats. The smallest of Boeing’s upgraded 737 Max planes will have between 138 and 153 seats, or as many as 172 in a dense configuration, according to Boeing’s website. The 737 is the biggest source of profit for the U.S. company.

In a separate case, the World Trade Organization last week approved Brazil’s request to investigate Canada’s alleged use of more than $3 billion in government subsidies to produce Bombardier aircraft.

The South American nation began WTO consultations in February, saying Canada ran afoul of trade rules because its policies unfairly bolstered the domestic aerospace industry to the detriment of Embraer SA, an airplane producer based in Sao Jose dos Campos, Brazil.

Bombardier said it was “confident that the investments and contribution programs mentioned in Brazil’s petition are in full compliance with all WTO and international trade rules.”

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