Ryanair Says that UK Airports Have a Drinking Problem

Shawn Pogatchnik  / Associated Press

An attendant collects rubbish on a Ryanair media flight from Dublin to Gatwick Airport, London. Ryanair issued a statement Monday, Aug. 14, 2017, calling on British airports to take steps to curb alcohol sales. Shawn Pogatchnik / Associated Press

Skift Take: While it would be easy to point out that Ryanair passengers usually wait to get to their destination to go crazy with booze, it’s also hard to disagree with the position Ryanair is taking here. Cutting morning drinking in most cases is not a bad idea.

— Jason Clampet

Budget airline Ryanair is calling on British airports to curb alcohol sales following sharp increases in the number of incidents involving disruptive passengers.

The carrier issued a statement Monday calling for a ban on alcohol sales before 10 a.m. and for limiting the number of drinks in bars and restaurants to a maximum of two.

The airline cited Civil Aviation Authority statistics showing a 600 percent increase in disruptive incidents between 2012-2016 and said most involved alcohol.

Ryanair’s Kenny Jacobs says it’s unfair “that airports can profit from the unlimited sale of alcohol to passengers and leave the airlines to deal with the safety consequences.”

The airline says it has taken steps to prevent disruptive behavior on its flights, including preventing consumption of duty-free alcohol purchases on board.

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Delta May Take On Southwest and American With New Bombardier Jet


Delta may use Bombardier’s new C Series jet to fly to midsize cities and to steal some share from Southwest and American. Bloomberg

Skift Take: Delta thinks it can steal some business travelers from American and Southwest in New York and Dallas with this midsize jet, which isn’t appropriate for mainline routes. A sleek Delta strategy.

— Dennis Schaal

Delta Air Lines Inc. is eyeing New York and Los Angeles as the main bases for Bombardier Inc.’s new jetliner next year, offering a glimpse of how carriers can add service economically with the midsize aircraft.

Dallas is also likely to get a lot of C Series flights, Delta said in an internal memo to pilots, a copy of which was reviewed by Bloomberg News. That sets up a test of the carrier’s ability to use the single-aisle aircraft to attract customers in the backyard of American Airlines Group Inc. and Southwest Airlines Co.

Delta is the first major U.S. carrier to buy the C Series, a midrange aircraft that offers roomier interiors than regional jets while typically carrying fewer passengers than a plane from the Boeing Co. 737 or Airbus SE A320 families. The Bombardier aircraft, which the Montreal-based company has spent at least $6 billion to develop, should enable airlines to offer comfy rides to midsize cities without flooding the market with too many seats.

“From the standpoint of operating costs, from the standpoint of ownership costs, it’s an ideal aircraft for these not-quite-mainline markets,” said Robert Mann, an aviation consultant and former airline executive. “If it performs as advertised, reliably, it’s going to be a real game-changer.”

Morgan Durrant, a spokesman for Delta, declined to comment on the memo or how the company will use the C Series. The aircraft is scheduled to enter service for the Atlanta-based airline in the second quarter of 2018, according to the Aug. 7 notice to pilots, which described preliminary plans for the planes.

Boeing Complaint

Delta ordered at least 75 of the CS100 models last year in a deal valued at $5.6 billion, before the discounts that are customary for large aircraft purchases. Ordering the C Series was a bit of an anomaly for Delta under former Chief Executive Officer Richard Anderson, who had historically preferred more tested airplanes over new models. He handed over the reins as CEO to Ed Bastian days after the order was announced.

The purchase threw a lifeline to Bombardier after the C Series program came in two and a half years late and more than $2 billion over budget. But the transaction also prompted Boeing to file a trade complaint with the U.S. government, accusing Bombardier of selling Delta the planes at “absurdly low” prices while benefiting from unfair Canadian government subsidies and calling for tariffs. Bombardier has denied the allegations.

Air Baltic Corp., which began flying CS300 planes in December, has seen a 21 percent improvement in fuel economy compared with the Boeing 737-300s that the model is replacing, Chief Executive Officer Martin Gauss has said. Bombardier had promised a 19 percent boost. Passenger feedback has focused on lower noise levels, a brighter interior and bigger spaces for stowing baggage, Gauss added.

Deutsche Lufthansa AG’s Swiss unit, which last year became the first operator of the CS100, has also praised the jet’s performance.

Regional-Jet Replacement

Delta will place the new CS100 planes on popular routes now served by the airline’s largest 76-seat regional jets, which will free up those planes to replace 50-seat aircraft around Delta’s system, President Glen Hauenstein said last month. He said New York would get the first CS100, without providing additional details. The plane has 108 seats in a standard dual-class configuration, according to Bombardier.

In Dallas, Delta may see a chance to poach some business customers from hometown carriers American and Southwest, potentially taking a bite out of their profit margins, said aviation consultant George Hamlin.

“Southwest is very much a thorn in Delta’s side in its home market in Atlanta,” Hamlin said. “The airline business is about margins, so if you can pry a modest amount of business from your competitor, the margin in that market may become problematic for the incumbent.”


©2017 Bloomberg L.P.

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What Operational Excellence Really Means for Business Travel

Skift Take: Airlines need to deliver operational excellence to build long-term relationships with corporate travel managers and their travelers, but it’s often easier said than done. Delta has not only made real efforts to achieve operational excellence, but also provides its customers with full insight into how its performance compares with its competitors.

— Dawn Rzeznikiewicz

High-performing operations are necessary for any airline to build and retain the loyalty of corporate travel managers, travel agents and their travelers. In fact, according to a recent survey conducted by Travizon, one in three business travelers said arriving on time with their luggage was their highest priority when traveling for business.

But consistently delivering reliable operational performance isn’t always simple. Higher passenger capacities and unpredictable events like inclement weather can make the difference between smooth operations and major disruptions. That’s why Delta is making every effort to sustain the best operational performance in the industry—and the numbers tell the story.

Delta ranks No. 1 among U.S. Global Airlines in on-time performance, completion factor and baggage handling1, according to the Department of Transportation’s most recent Air Travel Consumer Report. The airline’s continuous reign atop the rankings is bolstered by its focus on operational stability.

Since 2015, Delta has offered corporate accounts the industry-first Operational Performance Commitment2—a pledge that travelers will arrive on time with their bags in tow, or Delta will compensate their company. In 2016, Delta added even more transparency by implementing the Operational Excellence Calculator, allowing travel decision makers to see exactly how much Delta’s operations are worth to their travelers when compared to U.S. global competitors.

Delta now also offers regionalized operational excellence reporting that provides travel decision makers with key insights for the routes and destinations most important to their travelers, adding another level of clarity to help take the guesswork out of their customers’ work.

To learn more about Delta’s unparalleled operational performance, please visit PRO.DELTA.COM.

This content was created collaboratively by Delta Air Lines and Skift’s branded content studio, SkiftX.

Terms and Conditions

1 Based on DOT July 2017 Air Travel Consumer Report for January-May 2017 on-time arrival for all flights flown, completion rate for flights scheduled, and baggage completion per 100,000 passengers, in each case compared to other U.S. global carriers flying transoceanic routes: United Airlines and American Airlines.

2 GENERAL DESCRIPTION OF OPERATIONAL PERFORMANCE COMMITMENT BENEFIT: The Operational Performance Commitment (“OPC”) is a beyond-contract value benefit available to Eligible Corporate Accounts in good standing that will provide remuneration to such accounts in the event that Delta Air Lines’ (“Delta”) operational performance is not as good as the respective operational performances of American Airlines (“AA”) and United Airlines (“UA”) as measured over a calendar year.

REMUNERATION: To be eligible for any OPC payment, the following conditions must be satisfied: 1. the Eligible Corporate Account is not in breach of its Corporate Incentive Agreement with Delta and one or more of its partner airlines (the “CSA”) during such calendar year; and 2. (a) with respect to each Eligible Corporate Account that is a Global/National CSA Account, such Eligible Corporate Account has achieved at least a Ninety-five Percent (95%) Contract Fulfillment under its CSA during the applicable calendar year and (b) with respect to each Eligible Corporate Account that is a MSA US Account, such Eligible Corporate Account has achieved a flat or positive Revenue Share Gap under its CSA during the applicable calendar year. If a Global/National CSA Account had two CSAs in effect during the applicable calendar year, the weighted average (based on days of the year) Contract Fulfillment under each of the CSAs will be used to determine the Global/National CSA Account’s Contract Fulfillment for purposes of this condition; and 3. the Eligible Corporate Account must have a CSA in effect and in good standing as of December 31st of the applicable calendar year. In addition, an Eligible Corporate Account will be entitled to a passenger experience OPC payment with respect to a particular calendar year if, and only if, each of the following conditions are also satisfied: 1. Delta’s A-0 Rate during such calendar year is lower than each of AA and UA’s A-0 Rate during the same calendar year; and 2. Delta’s Completion Factor is lower than each of AA and UA’s Completion Factor during the same calendar year. An Eligible Corporate Account will be entitled to a baggage experience OPC payment with respect to a particular calendar year if, and only if, the following condition is also satisfied: Delta’s Mishandled Baggage Report rate is higher than each of AA and UA’s Mishandled Baggage Report rate during the same calendar year.

DATA SOURCES: Each of Delta’s, AA’s and UA’s A-0 Rate and Completion Factor will be based on the respective airline’s System Wide operations only during the applicable calendar year. The source for each of Delta’s, AA’s and UA’s A-0 Rate and Completion Factor will be based on the statistics reported by FlightStats, a leading independent aggregator of global aviation flight information. Each of Delta’s, AA’s and UA’s Mishandled Baggage Reports Rate will be based on the statistics published by the DOT’s Bureau of Transportation Statistics.

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Albania Tourism Cautiously Invites Visitors But Is Mindful About Overtourism

Geo Delveroudis  / Associated Press

Goats in the village of Nivica in southern Albania where an ambitious project is aiming to open up remote villages in the highlands of southern Albania to tourists. Geo Delveroudis / Associated Press

Skift Take: Eager to welcome tourists but mindful of the perils of overtourism, Albania hopes it can attract tourists to its more remote villages.

— Deanna Ting

High in the mountains of southern Albania, a bone-jarring drive along a rough track with switchbacks frequented more by goats than by cars leads to a cluster of small villages where time appears to have stood still for decades.

Sheep’s milk is still carried to the local cheesemaker by donkey. Elderly villagers hike into the mountains to collect fistfuls of wild oregano and other herbs. Old rituals of lighting candles to honor ancient, gnarled, sacred oaks are kept alive, although no one who practices them seems to know why or how they came about.

Strung out along a sheer cliff behind an old, crumbled fortress, the village of Nivica is unknown to many even in Albania. But an ambitious project is aiming to open it up to the outside world and to tourists wanting to discover the spectacular natural beauty and rural way of life of the more isolated parts of the country.

“We are doing a pilot project on the concept of how to connect rural communities very close to the coastline but (which have) never been helped by coastline tourism,” said Auron Tare, who heads Albania’s National Coastline Agency and is leading the project in Nivica.

The area’s attractions are many. Crystal-clear streams run through sheer canyons and gorges slicing through the landscape. Small stone Ottoman-era bridges still arch over gullies, untouched for centuries. At sunset, shepherds drive their flocks through the fields to small corrals for milking.

And like everything in the Balkans, the region is steeped in history.

“Apart from the landscape, the reason to come here is because of the stories. This is a place where Roman troops traveled, this is a place where Normans traveled, this is a place where Ottomans traveled. World War I, World War II. There are many stories to be connected to this area,” Tare said.

“Plus the wonderful landscape, and also the untouched life. Here you see people milking their sheep and their goats as they did 4,000 years ago. You see people in their pastoral daily life, which is extremely attractive to people who have lost that heritage, and you would come here and find that spiritual enrichment in your life.”

For now, visitors are mainly young backpackers from European countries hiking along Albania’s ancient trails and camping in a field just outside the village. Tare says about 150 tourists visited the village over the past month, mainly from the Czech Republic, drawn by comments on social media from a team of Czechs who have been working on marking centuries-old paths as hiking trails.

The area is still far off the beaten track; many of those living on the coast just over the other side of the mountains have never even heard of Nivica.

“This village, we can say that it is deeply (hidden) in the mountain,” said Lorena Sinatrakaj, a 29-year-old archaeologist working on the project. Even she herself had never heard of it, she admits.

When the project leaders arrived, they found a village based on agriculture and animal rearing, she said. Tourism was an alien concept, and the village was in a general state of dilapidation.

Many of the locals had moved away to towns and cities elsewhere in the country. With little state infrastructure or services, waste management consisted largely of throwing garbage down the ravines or tossing it in the street.

“When we came here last year, there was 30 years’ worth of garbage in the village square,” Tare said.

The project’s first task was to clear up the trash, both inside the village and in the nearby ravine. Now the village square has been cleared, and villagers drive their sheep past stonemasons chipping at rocks, the sound of chisels striking stone echoing through the sultry summer heat as they work on the village’s biggest single project: a new guesthouse, scheduled for completion next spring.

The overall project includes restoring old buildings to be used as guesthouses, and helping locals start grass-roots bed-and-breakfast businesses in their homes. Sinatrakaj says locals quickly embraced the project once they saw the potential for tourism.

For Dallandyshe Merio, a local woman who left the village two decades ago and moved to the southern port town of Vlora, the project has brought such hope to the village that she is considering moving back.

“I’m happy that the village has come back to life again. Before, everyone was gone,” said Merio, who initially converted one of the rooms in her house in the village for paying guests. When she saw how well the system worked with her first guest, a German, she renovated a second room and now runs a small bed-and-breakfast.

“People are coming back and rebuilding,” she said.

Crucially, part of the project includes turning the dirt track leading to the village from the nearest town of Tepelene into a road, to ease access.

But the danger of opening up too fast to too much tourism is a real one, and something Tare and Sinatrakaj are well aware of. The aim, they say, is not to turn Nivica into a place where tour buses disgorge thousands of tourists, something that would shatter the tranquility of the area and endanger the local way of life.

“As we know, tourism has a lot of good benefits but also negative effects, such as destroying local culture and destroying (the) environment. And that’s a very good point to take into consideration,” Tare said.

“And as we go slow, we’re trying to convert the traditional hospitality to a more welcoming feeling and place for visitors to come, without disturbing the local culture. It is a challenging aspect, of course, and time will tell if we are right or not.”

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Cathay Pacific Needs to Do Something Drastic to Win Back Customers

Cathay Pacific

A Cathay Pacific Airbus A350. The airline is expected to report a loss this week. Cathay Pacific

Skift Take: Competition from mainland China means that Cathay Pacific’s Hong Kong location is no longer a major asset. If its fortunes continue to decline it will surely emerge as a takeover target for shareholder Air China.

— Patrick Whyte

It’s time for Cathay Pacific boss Rupert Hogg to go to the back of the plane.

With the company expected to announce another loss this week, Cathay Pacific Airways Ltd. needs to shift strategy from being the region’s top airline for premium fliers and make a bigger effort to woo some of the millions of mainland leisure travelers who have enriched its state-owned rivals in China, analysts say.

On Wednesday, Chief Executive Officer Hogg may report a loss of HK$1.2 billion ($153 million) for the six months through June, the median in a Bloomberg survey of three analysts showed. That would potentially put Cathay on course for the first back-to-back annual losses in its 70-year history. The Hong Kong company last month warned of a “disappointing” first-half.

Cathay is caught between budget carriers luring regional tourists and deep-pocketed, state-owned competitors on the mainland that offer cheaper, long-haul flights from cities like Shanghai, Guangzhou and Shenzhen, without the need to fly via Hong Kong. The airline’s fortunes are entwined with the former British colony’s declining prominence relative to the burgeoning wealth of the surrounding cities in southern China.

Key to winning back a bigger slice of the market from state-owned China Eastern Airlines Corp. and China Southern Airlines Co., is Cathay’s partnership with flag carrier Air China Ltd., said John Hu, an analyst at Morningstar Investment Services LLC in Shenzhen.

“Cathay is begging with a golden bowl,” Hu said. “It has Air China on its back in the mainland but it has yet to fully exploit that tie-up.”

Air China is Cathay’s second-largest shareholder with a 30 percent stake, but their cooperation is hampered by the fact that they belong to rival aviation alliances, limiting codeshare agreements, said Corrine Png, chief executive officer of Crucial Perspective Pte., which focuses on equity research in Asia’s transport sector. Cathay is part of Oneworld, while Air China is a member of Star Alliance.

A spokeswoman for Cathay declined to comment.

Investors so far have been unimpressed after Cathay in May said it would cut 600 jobs as part of a three-year corporate revamp, its biggest in two decades. That’s partly because the airline has revealed little else about the transformation. Cathay’s shares have risen 1 percent since the announcement, compared with a 7.3 percent gain in Hong Kong’s benchmark index. On Monday, the stock fell 0.9 percent to its lowest close in more than two months.

Only two of 20 analysts tracked by Bloomberg recommend buying the stock, with 11 advising holders to sell.

“It’s a good cost initiative, but not a profit initiative,” said Mohshin Aziz, an analyst at Maybank Investment Bank Bhd. in Kuala Lumpur.

Teaming Up

Meanwhile, Shanghai-based China Eastern and China Southern, with its headquarters in Guangzhou, near Hong Kong, have teamed up with peers in the U.S. and Europe through ventures and equity investments to extend their global network. Delta Air Lines Inc. took a minority stake in China Eastern in 2015 and American Airlines Group Inc. announced a similar deal with China Southern earlier this year.

While Cathay bet on its hub in Hong Kong to build a clientele of wealthy business passengers prepared to pay premium fares, the mainland players became rich — China Southern flew about 38 million more passengers since 2010 — tapping into the boom in tourists and first-time fliers spawned by China’s economic boom. During the same period Cathay added over 7 million fliers.

Last year, 122 million tourists ventured out of China, a number that’s more than doubled in seven years, according to data from the China National Tourism Administration.

Cathay said last year that premium travel was slumping, and has offered seasonal discounts for the front seats.

“While Cathay has a strong premium product that is well-suited for the first and business travel market, its cost structure is less competitive when vying for leisure traffic,” said Crucial Perspective’s Png. Cathay needs to take a leaf out of Singapore Airlines Ltd.’s playbook and start a low-cost carrier to target the budget travel market, which has good growth potential in North Asia, Morningstar’s Hu said.

One way to do that would be through Cathay’s affiliate Hong Kong Dragon Airlines Ltd., said Hu.

“There’s already a perception among customers that Cathay Dragon fares are lower than Cathay Pacific,” he said. “The company should reduce costs for Cathay Dragon and play to that popular perception.”

Cathay merged the two carriers’ websites in March.

A more radical path has been popping up with increasing frequency in speculation on mainland Chinese social media: Air China should acquire or merge with Cathay, a move Png says would create the world’s largest cargo airline and second-largest passenger carrier.

“The reality is that we are getting into a congested market,” said Mohshin at Maybank. “The superior quality proposition is diminishing by the day because competitors are getting better. The glory days of Cathay are ancient history.”

©2017 Bloomberg L.P.

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Hilton CEO Looks to Airbnb as Hedge Against Power of Expedia and Booking.com


Hilton CEO Christopher Nassetta believes competition from Airbnb could indirectly help his company and other hotels negotiate better rates with online travel agencies. Skift

Skift Take: In some cases, the hotel-online travel agency relationship is still a tense situation, but for most big hotel companies, it’s still business as usual.

— Deanna Ting

Most major hotel company CEOs are still insistent that their direct booking pushes are working, but they’re candid about also maintaining ties with major online travel agencies like Expedia and Booking.com.

Hilton CEO Christopher Nassetta, when asked about the looming threat of Airbnb and short-term rentals recently, said he actually thinks Airbnb appears to be becoming more like an online travel agency (OTA) and that’s actually a “good thing” for hotels because it forces the other companies like Expedia and Booking.com to be more competitive.

“Competition is a good thing,” Nassetta said during Hilton’s second quarter earnings call last month. “And there being more competition in the home-sharing business and more – by the way, you know my fundamental belief, is it’s just a different travel occasion, trip occasion. We are not directly competitive with what they’re doing. So, more competition, I think is good there.

“More competition – them morphing in whatever ways to feeling more like an OTA is a good – whether they do that or not, I don’t know, not for me to say. But the more competition there is in any space, the better off we are, I think, because more competition in theory would help have the impact of driving pricing down and distribution costs down. So, I view that as a long game. Lots is going to go on over the next two years, five years, 10 years, 20 years. But as the competitive environment heats up, I think, the net result is good.”

We’re already seeing some signs of that transformation into a new breed of online travel agency from Airbnb. Last week, the company announced it now has 4 million listings on its platform, and that nearly half of those listings are instantly bookable, just like a hotel would be.

Nassetta’s comments about competition aren’t necessarily new. Hotel executives had previously expressed similar high hopes for TripAdvisor to compete with the online travel agencies and thereby lower the hotels’ distribution costs. Whether that will actually be the case has yet to be proven, but it doesn’t seem likely to occur anytime soon.

And while competition can be a good thing, in some cases, hoteliers themselves are also facing stiff competition from one another as well, especially as oversupply looms in many major markets such as New York City.

The latest round of second quarter earnings calls demonstrated a variety of hotel CEOs’ viewpoints on the current hotel landscape, and the hotels’ relationships with Expedia and Booking.com. Here’s what a few others had to say about working with the online travel agencies, and how the hotels’ direct booking campaigns are faring.

Hyatt: We’re Not Leaving Expedia or Giving Up on Direct Bookings

Hyatt, of the major hotel companies, had been making headlines thanks to its somewhat dramatic contract negotiations process with Expedia, so CEO Mark Hoplamazian wanted to put any rumors to rest and address the issue head on:

“I wanted to address our distribution channel strategy,” he said. “This strategy includes a focus on driving bookings through Hyatt channels so that we can build stronger relationships with our guests. For example, we recently extended My Hyatt Rate, our member discount, to new markets, optimized the hyatt.com booking path, and added new features to the World of Hyatt mobile app. At the same time, we recognize the value OTAs [online travel agencies] play in keeping Hyatt top of mind for guests who might not be frequent travelers or who otherwise have a reason to book through OTA sites.

“As such I want to share an update on the status of our approach to positioning Hyatt to utilize third-party distribution channels effectively and efficiently. We recently agreed to build on our existing relationship with Booking.com by implementing new initiatives intended to increase efficiency and flexibility, while driving demand. Additionally, we’ve had very productive discussions with Expedia and have agreed in principle on terms that optimize how we go to market and enhance our partnership. We expect that Hyatt Hotels will continue to be distributed on Expedia platforms without disruption while we finalize our agreement. We value these key partnerships with Expedia and Booking.com, and we remain focused on providing the best guest experience while we optimize outcomes for our hotel owners.”

Hoplamazian also talked about Hyatt’s new World of Hyatt loyalty program, which debuted in March to a somewhat lukewarm reception. The program, however, was ranked fourth as a top loyalty program in the latest U.S. News & World Report rankings.

“Overall,” Hoplamazian said, “we’re really pleased with how World of Hyatt is evolving and how customers are responding to it. Enrollments year-to-date are up significantly over the last year and program awareness has been trending more positively than we expected since the launch of the program. So, we’ve seen very positive member responses, both in terms of acquisition of new members, but also retention of members and their spend.”

He also said Hyatt has seen “an increase in our My Hyatt rate or member discount rate” and that more than 70 percent of bookings made through the discounted member rate are from new or previously inactive World of Hyatt members.

“And since the launch of the program, about half of those new and previously inactive members have booked more than once, so we’re seeing repeat business come from them,” Hoplamazian added.

Of those hotels that have agreed to offer discounted room rates to loyalty members, he said they are also seeing an “improved RevPAR [revenue per available room] index.”

Marriott: It’s Easy to Click Around

Marriott CEO Arne Sorenson didn’t directly address online travel agencies or Airbnb, but he did note that given the current distribution climate, it’s becoming harder for hotels to keep rates high, just in a general sense, and that’s not just because of Airbnb or the many booking sites out there.

“It’s not particularly focused on home sharing or the disruptors in the space,” he said. “It’s much more about just the ubiquity of information. And I think with each passing year, it becomes simpler and simpler to know the rates at every single hotel, quite simply, within our own system. So, you’ve got that transparency on Marriott.com just as you do through other platforms. And with an increasing participation in the industry of the franchise community with individual pricing decisions that are being made by individual hotels, I think that’s the world we live in. It does not mean that there won’t be ability to drive rate in the future. We do have the ability to drive rate, certainly on midweek nights and others where the hotels are effectively full. But I don’t think it’s quite the environment we might have had in years past where probably there’s a little bit more flexibility to do that.”

Choice: Direct Booking Is Working for Us

Choice Hotels’ incoming CEO Pat Pacious said that the company’s loyalty program and Choice Privileges member rates are giving the company record numbers of direct business.

“The [loyalty] program recently surpassed 32 million members and has added more than 2.5 million new members already this year,” he said. “Specifically, the Choice Privileges exclusive member rates booked directly on our website or mobile app provide the highest profitability to our franchisees and our increasing contributions generated by our proprietary reservation channels. Revenue from proprietary channels was 58.1 percent in the second quarter, that’s up 360 basis points compared to the same period last year and is a new record for a second quarter.”

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Hertz and Avis Prep for Future With Self-Driving Car Partnerships

Waymo  / Facebook

Rental car companies are preparing for the future by partnering with self-driving car pioneers. Pictured is a Waymo minivan in a promotional photo. Avis is providing fleet management services for Waymo’s vehicles. Waymo / Facebook

Skift Take: Car rental giants are looking to the future, with the goal of handling logistics for whatever company ends up winning the automated car arms race. If you can’t beat them, join them.

— Andrew Sheivachman

Car rental companies have had a rough couple years. The popularity of ridesharing has led to a decline in car rentals, and the industry has struggled to adapt. Recently, this has taken the form of companies reducing the size of their fleets to compensate for decreased demand.

Hertz Global Holdings and Avis Budget Group held their second quarter 2017 earnings calls in early August, detailing an emerging focus on fleet management services with the promise of self-driving vehicles entering the mainstream.

Hertz has partnered with Apple to provide the tech giant with cars to test its automated driving technology through its Donlen fleet leasing and management division, while Avis has entered a partnership with Alphabet’s Waymo division to provide similar services.

The true promise of these partnerships, however, will likely appear sometime in the next decade.

“If you look into the future of autonomous driving, which I do think is eight to 10 years out…no matter what, you have to be really great at managing a fleet and you have to have the assets that make you really great at managing a fleet,” said Kathryn V. Marinello, CEO of Hertz. “And the good news for us is, the better we are around doing that and the more time and money we spend to invest in that, not only do we create enormous goodness within our current business, but it really does position you for winning down in the future.”

Hertz’s previous CEO stepped down late last year after several weak earnings reports, and the company — which includes the Dollar and Thrifty rental car brands — still doesn’t expect to be profitable for more than a year. Revenue in the second quarter was $1.5 billion, down 4 percent year-over-year, and the company’s stock has tanked since 2014.

Working with automated vehicle companies won’t exactly save car rentals, but it shows a renewed focus on preparing for the future. Car rental companies have decades of experience servicing and managing their fleets of cars, so these partnerships make sense at this early stage when Apple and Google are experimenting with their technology.

Since automated cars will be on the road much more than your average vehicle today, they’ll likely need more service. Hertz and Avis also have customers and locations around the world, which could one day help quickly scale the deployment of automated vehicles.

Larry De Shon, Avis Budget Group’s CEO and chief operating officer, said that while the company is just starting its partnership with Waymo, the company is thinking about how that part of its business could grow in the future.

“We’ll be doing interior cleaning, exterior cleaning, oil changes, managing defective parts for them, replacing parts and so forth, storage of the vehicles, protecting the vehicles, and a host of other things,” he said. “And as that partnership hopefully grows, we’re certainly open to discuss anything else from a fleet management perspective that they would like for us to do. And we’re also taking a look at other opportunities to provide fleet management as a service going forward.”

De Shon continued: “This is a true core competency of this organization, something we’re going to look to leverage as we go forward… and as we get more opportunities to do this for more companies going forward, then we’ll have a better feel for its overall contribution to the company.”

Avis, which has a portfolio that includes Budget Car Rental, Apex Car Rentals, and Payless Car Rental, also posted weak returns in the second quarter after missing its forecasts. The company earned $2.2 billion in revenue, flat year-over-year, and just $3 million in profit, a 90 percent decrease year-over-year. As these companies have moved to sell off cars they don’t need, the glut of available vehicles have dropped the prices they sell for, essentially increasing costs. Pricing seems to have turned around and is now creeping higher, according to De Shon, although it declined 5 percent year-over-year in the quarter.

Now that they’ve sold off their excess vehicles, both companies are looking to stage a big turnaround. In a competitive ground transportation market, however, it’s unclear they’ll be able to pull it off. With automated cars still a decade away from being widely deployed, and ridesharing usage continuing to grow, the future for car rentals remains uncertain.

Ryan Wolkov

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Hotels May Try to Counter Airbnb’s Rise With Bets on Tech

Hoteliers may try to counter the growth of Airbnb with enhanced digital services. Pictured is keyless entry with a mobile phone at an Aloft property.

Skift Take: No one knows what Airbnb’s impact is. But our contrarian take is that it’s greater than what most hoteliers think — and accelerating by the day. Yet it’s manageable if hotels act strategically.

— Sean O’Neill

Airbnb isn’t hurting hotels today in most markets. Unless it is.

STR, the market research firm, confronts that conundrum — as does the entire hotel industry.

STR says Airbnb’s precise impact won’t be clear until the home-rental booking startup shares more of its transaction data with third-party researchers. The firm’s researchers spoke on the issue Thursday and Friday in Nashville at the Hotel Data Conference, which is STR’s annual event for trade executives.

Real or Imagined Threat?

In the absence of data, STR said it might be missing some of the impact.

Amanda Hite, STR chief executive, noted that when her firm has looked at hotel rate growth in the U.S. it has had to, in recent quarters, repeatedly revise rate growth estimates downward.

For instance, the projection it made in January for 2017 overall U.S. hotel rate growth was 2.8 percent. STR has since revised the forecast down to 2.3 percent.

“There were lots of contributing factors to that,” Hite said, “But traction from alternative accommodation has to be one of them, at least in some markets.”

Although Airbnb’s direct financial impact on hotels may be unclear, what is certain is that the company is already altering hotels’ decision-making when considering new brand initiatives, for example.

Divided opinions

This reporter’s anecdotal guess was that only a minority of hotel executives at the STR event believe Airbnb is an imminent threat. Statements from top hotel chain executives that Airbnb isn’t having an impact seemed to have reassured most of the 626 attendees, who represented hotel ownership groups, management companies, investors, revenue managers, and brands large and small.

Yet during several panel talks, a vocal minority said they were alarmed about the long-term.

“I can’t stop thinking about Airbnb,” said Mitch Patel, CEO of Vision Hospitality Growth, a firm that owns 33 hotels.

Patel noted that Airbnb had generated as many stays last year as it had generated between 2008 and 2015 combined. Last week the company confirmed that it has notched 200 million guest stays since its founding.

“At every conference year after year you hear that Airbnb is not really impacting us and is just activating incremental demand,” said Suril Shah, a managing director and head of U.S. hotels at Starwood Capital Group. “That’s a bunch of baloney.”

Yet Hilton’s global head of All Suites Brands, Bill Duncan, said there’s no Airbnb impact for his company.

His concern was that the playing field isn’t level when it comes to pricing — a popular critique by executives.

Duncan cited studies that find up to one-third of Airbnb’s average discounted price compared with hotel rooms is due to hosts evading regulations and avoiding hotel-equivalent taxes. He urged all event attendees to join lobbying groups coordinated by the American Hotel and Lodging Association to force local efforts to constrain Airbnb.

Shah dismissed the idea that regulation is the only problem with Airbnb. “Even when it becomes regulated, it will continue to impact our business.”

“Wait until property developers start branding sets of rooms on Airbnb,” added Shah. “That will hit the industry beyond the primary market cities of New York.”

Tech Might Give Hotels an Edge

“The hospitality industry is data-rich but information-poor,” said John Fareed, managing director of the consultancy Horwath. He explained that if the industry just made better use of the data it already has it could make big gains.

On Thursday, Airbnb said it has 4 million listings worldwide. Some experts believe that means it has more active listings (or units rented at least once a month) than any of the five largest hotel brands have rooms.

Benjamin Habbel, the CEO of Voyat a guest retention software platform for travel companies, said: “From a technology standpoint, the number-one way to compete with Airbnb is for hotels to get their act together on design and e-commerce.”

“Nothing beats the logged in experience of using the Airbnb app,” Habbel said. “You get personalized recommendations. Pages on the app load quickly.”

“Hotels need to steal basic things out of the Airbnb and online travel agency playbooks, like making their webpages load quickly on mobile devices and reducing the number of clicks it takes to finalize a transaction,” said Habbel.

Solving a lot of basic pain points could also make hotels more attractive to the Airbnb generation, said Mark Morrison, vice president of owner strategy and services at Expedia.

Morrison gave an example of hotels being unable today to offer connected rooms via their booking sites in advance. “Families and other groups sometimes like to have rooms side-by-side. But because most hotels don’t have the technology to make it easy to book guaranteed connected room, consumers turn to Airbnb.”

Habbel said hotels also need to invest in the digital guest experience as much as the real-world one.

“The overall strategy for an independent hotel or a brand is to make the most of the thing that they have that Airbnb doesn’t have, which is they actually interact with the guest in real life,” said Habbel. “They have the opportunity to extend and amplify that interaction by using chat-based or other tools before or after a stay to communicate with a guest, for example.”

New Role for Brands

Frits van Paasschen, who was CEO of Starwood Hotels and Resorts from 2007 to 2015, told the crowd that hotels need to invest in predictive analytics to take advantage of all the data they collect based on their frequent touch points with consumers. Then they need to use that information to offer more personalized service.

People will be loyal to a brand that proves it makes an effort to offer relevant, personal services and choices to them.

He said that TripAdvisor had ruined the “signaling power to consumers” of a hotel’s quality. Consumers no longer look to whether a hotel is a, say, LaQuinta, to feel confident in its quality and instead rely on reviews. So brands have to change their purpose, he said.

“Brands are more than signs on buildings and loyalty programs. Brands are about making people make choices emotionally instead of some by-the-numbers approach.”

“Brands have made a lot of catching up to do,” Van Paasschen added. “Maybe we’re at 2005-level tech innovation now, while retail and other verticals and even airlines are in 2017. Hotels need to catch up.”

He gave as an example getting room keys on smartphones that work with keyless entry room doors.

Hotel executives are traditionally reluctant to make tech investment. When tough budget decisions have to be made in every typical September budgeting season, data investments often get short shrift.

Dustin Bomar, Google’s Atlanta regional head of travel, and previously Hilton Worldwide’s vice president and global head of digital marketing, said: “With a few exceptions when I worked at hotels, I never heard hotel owners say to brands, ‘We need to invest in a data strategy.’ But I absolutely heard hotel owners complain about brands telling them to install new locks without paying or subsidizing them.”

“That’s why the burden should be on the chains — who can afford to take a different, big-picture perspective and can look up from day-to-day for the long-term potential benefits of a decision.”

Soft Brands as Soft Power

Rather than talk tech as the answer to Airbnb, many hotel executives would rather talk about so-called soft brands.

Conventional wisdom at the STR event seemed to be that Airbnb has succeeded by offering unique and semi-unpredictable “experiences” and that hotels need to respond by making their properties more interesting.

For chains, the recent spread of soft brands is an answer to Airbnb’s “experience” edge — though it’s not the only explanation for soft brands.

At soft brands, such as Preferred Hotels & Resorts, lobbies and guest rooms differ widely to appeal to niche tastes while otherwise maintaining standardized service, booking tools, and loyalty programs.

Hilton’s Duncan, said his company had done an analysis and broke up its guest segments into about 60 types of travel occasions.

“Not that we’re going to go after them with 60 brands,” he added in a joking tone. But he implied that the market might support that many soft brands from all the hotel players.

For owners of small hotel portfolios, the equivalent strategy to soft brands is to invest in independent hotels that have some of the quirky decor of boutiques but that are priced less expensively.

Patel, whose Vision Hospitality Group owns 33 properties, said Airbnb’s rise has prompted him to move into this type of property which he wouldn’t have otherwise for a significant share of the 16 properties his firm has in the pipeline.

Manageable Costs?

Tech is also a turn-off for many executives because of the potential costs.

The calls to invest more in tech may prompt the common retort that hotels ought to stick to their competency, which is creating good experiences for guests on their physical properties.

Yet new tech could also level the playing field when it comes to many activities directly driving the bottom line, such as revenue management.

Already, Airbnb may have an impact in “surge pricing” situations.

For example, the hotel real estate consultancy CBRE tracked rates in Austin during the annual South by Southwest festival for the past decade. Since 2014 rates hotels have charged have come down. Competitions from Airbnb units may have been a factor.

Forecasting tools and revenue management software would cost less than one-tenth of one percent of annual revenue for the typical hotel, said Apo Demirtas, owner of a software vendor that sells such tools, Intelligent Hospitality. “You probably pay more on toilet paper for your guests every year.”

But some executives said that many independent hotels don’t have spare money to invest more in technology despite record high occupancy rates.

Wendy Ferrill, vice president of worldwide sales for Best Western Hotels & Resorts, said that hotels will have to be creative to find the money to invest more in technology right now because costs — such as rising labor expenses due to record-low unemployment — are eating their budgets.

Hug Your Frenemies Closer

If hotels can’t afford to ramp up their tech spending to compete with Airbnb, they may be able to lean on solutions from tech companies like Expedia and Priceline to fill the gap.

Besides acquiring HomeAway, a vacation rental booking marketplace, Expedia has attempted to move closer to hotels by offering more services to help them grow their businesses.

On Thursday, for instance, Expedia officially began to market a series of new tools for hoteliers that it has been adding to its extranet for hotels in the past couple of years.

The suite of data analytics tools, called Expedia Powered Technology, includes a free tool that aims to help hotels set their rates to command the most revenue and Expedia’s first meetings-and-events booking tool to help hotels automate requests for proposals — which today is still largely a manual process.

For its part, Priceline’s BookingSuite division has also been rolling out tools for hoteliers.

The online travel giants are not making such moves out of selflessness. They may want to outmaneuver Airbnb’s likely switch into being a full online travel agency, said Jan Freitag, a senior vice president for STR.

“If I were an Expedia, I’d be very worried about Airbnb,” he said. Coincidentally, late last week, Hilton’s CEO welcomed the prospect of Airbnb challenging the two online travel giants.

Tough Choices

In short, opinions are split.

Earlier this year, Skift covered the conflicting analyses about Airbnb’s impact, such as Morgan Stanley’s analysis (“Watch out!”) and Goldman Sachs’s one (“Watch out!”). Earlier this month we covered why investors think Airbnb is a $31 billion company — worth more than Hilton or Expedia.

On the other side, we also covered STR’s parsing of the the smattering of transactional data that Airbnb has selectively released to it (“Chill out!”) and the statements of major hotel chains (“Chill out!”)

Perhaps the best sign of whether hoteliers decide Airbnb is dangerous will be if they boost their tech spending during budget season next month. Or if they don’t.

Ryan Wolkov

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Lastminute.com’s Growing Pains Show Change in Online Travel Retail

Lastminute.com Group

A still from Lastminute.com’s recent Game of Thrones-inspired commercial. The parent company is seeing a shift in its business model. Lastminute.com Group

Skift Take: Being a pure play flight seller is a business approach that has probably had its day (unless you can guarantee huge volumes). Lastminute.com Group’s diversification strategy over the last few years makes sense but if it is going to work it will take time.

— Patrick Whyte

Moving from a flight-centric business model to that of a diversified online travel seller is proving to be a tough transition for Lastminute.com Group.

Pre-tax profit for the first half of its financial year (January to June) fell by 68 percent to $2.1 million (€1.8 million) on the back of an 2.2 percent decline in revenue.

What is interesting is the shifting shape of the Lastminute.com business. The company started out as a flight-centric online travel agency but through a series of acquisitions moved into metasearch and content.

Revenue from flight is still the biggest money maker for the company but in the first six months of 2017 it fell from $96.9 million (€81.9 million) to $86.3 million (€73 million) and as a proportion of overall business went from 61.5 percent to 56 percent.

Non-flight revenue on the other hand increased by 11.8 percent to $67.8 million (€57.3 million) through a growth in dynamic packaging and tour operating.

For Lastminute.com the problem is that agency fees for selling flights just aren’t at the same level they were at before. To make up there’s a need to add on ancillary products to improve margins.

“It’s true that bookings are becoming more commoditized and prices more uniform for stand-alone products. What matters is to differentiate and provide a balanced combination of bundled products, services and content,” said Chief Executive Fabio Cannavale.

Lastminute.com has realized that dynamic packages – where customers combine flights, and hotels together – is a much better bet.

“Our investment in dynamic packaging technology is well-established, based on the strong belief that sooner or later this would become the most attractive proposition for our business.

“As a result, we’re positioned ahead of most of our competitors and achieving great returns. Dynamic packages are growing double digits across all countries and today they represent the most successful category within the OTA [online travel agency] business. In the UK it’s our leading product sold ahead of our historical flights business.”

Meta Success

One of the ironies of the travel retail business is that sometimes one of your products can cannibalize another and as Lastminute’s flight revenue has fallen its earnings from metasearch have increased.

There’s a belief among some that in the not-to-distant future metasearch sites will actually start to facilitate more bookings than they currently are rather than simply redirecting them. This will cause further changes to the Lastminute.com business model.

The company’s in-house metasearch engine Jetcost has been growing pretty fast over the last couple of years. Revenue during the period increased by 21.7 percent to $33 million (€27.9 million).

“On the metasearch side, we are pushing to sustain the topline growth in order to gain size and market share against our competitors. Thanks to the excellent job of our Jetcost team, we are managing to do all of that as well as preserving high profitability,” said chief operating officer Marco Corradino.

A Different Company

Lastminute.com is a totally different business to the former dotcom darling of the same name. Bravofly Rumbo Group bought what was left of the company started by Martha Lane Fox and Brent Hoberman for a knockdown price from Sabre in 2015.

The newly combined company was renamed Lastminute.com Group.

On the same day as its results, Lastminute.com also announced its intention to investigate the possibility of buying back some of its stock. This is not believed to to be a precursor to delisting itself from the SIX Swiss stock exchange; instead many companies buy back stock to reward investors by boosting their stock prices.

Ryan Wolkov

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Companies Attending Skift Global Forum

Skift Take: We’re giving you the chance to check out which companies you’ll get to network with at Skift Global Forum. Is your company missing from the list? There is still time to register!

— Rafat Ali

Here at Skift we know that sending your team to any conference is a nerve-racking investment. That’s why we make every session, interaction, and minute of Skift Global Forum as valuable as possible for each and every attendee.

A huge part of deciding whether or not to attend is being able to figure out who else will be there and what the opportunities for networking are.

For the second year in a row we want to take some of that guess-work off your plate. That’s why today we’re excited to publish the (growing) list of companies that will be at this year’s Skift Global Forum! We’re barely 6 weeks out and we already have representatives from nearly 300 companies registered.

Check Out the List

During the two and half days spent in New York City, attendees will have incredible opportunities to mix and mingle with the smartest minds from these leading companies during:

  • An evening, opening event party on the 25th
  • Four dedicated networking breaks
  • Breakfast and Lunch on the 26th and 27th
  • Via the messaging feature in the mobile app
  • And more!

So don’t miss out! We are expecting at least 550+ companies and more than 1000 attendees to be there. Secure your spot in this mix while you can.

Register Before it’s too late

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

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

Ryan Wolkov

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