Clever Way Basic Economy Fares Force Flyers To Pay Extra

Nam Y. Huh  / Associated Press

Basic economy fares aren’t quite the bargain they seem to be. In this November 25, 2015 photo, passengers walk in Terminal 3 at O’Hare International Airport in Chicago. Nam Y. Huh / Associated Press

Skift Take: Airlines are using cheap basic economy fares, and more expensive traditional economy fares, to drive revenue. And the worse the basic economy experience becomes, the more likely flyers are to choose more expensive fares.

— Andrew Sheivachman

As Americans hop online to book flights for this summer’s weddings and weekend getaways, many will have their first encounter with basic economy, a new breed of airfare being offered by the three largest U.S. airlines.

Typically $15 to $30 lower than traditional economy, these tickets are designed to allow American, Delta, and United to better compete with ultra-low-cost carriers such as Frontier Airlines Holdings Inc and Spirit Airlines Inc. They target travelers for whom price is more important than convenience, since they carry a pile of additional restrictions—no advance seat assignments, last to board, no changes or upgrades. (And, on United Continental Holdings Inc., no access to overhead bin space.)

Predictably, basic economy has been condemned as yet another step in the industry’s relentless drive to strip all comfort and grace from steerage class. But there’s a shell game going on here—this consternation overlooks a far more insidious change: While adding these new bargain-basement fares, carriers also raised prices on traditional economy seats. The strategy? If a consumer sees that there’s an even lower class, they’ll pay a little more for the next level up.

In other words, this is where basic retailing goes airborne.

As restaurant wine lists have demonstrated for decades, most people shy away from price extremes. The cheapest bottles are automatically suspect—Is this swill? What will my dining companions think?—while the most expensive vintages are often obscenely unaffordable, obvious cases of extreme markup.

The same thing is now happening with airfares. American Airlines Group Inc. has said that roughly half of buyers in its initial test markets trade up from the lowest basic fare to the more expensive economy counterpart, while United said 60 percent to 70 percent of its buyers choose standard economy over basic. (It’s worth noting that United’s basic fare has more onerous restrictions than those at American and Delta.)

This pricing shift represents a structural change for an industry that’s struggled to make fare increases stick. Network carrier efforts to boost airfares are often undone by a variety of factors: JetBlue Airways Corp. or Southwest Airlines Co. may decline to join in the hike, a growth airline might offer even lower fares, and a market swoon or terrorist attack might dent demand.

Airlines, naturally, are touting the new basic fares as a victory for consumer choice. But it’s more complicated than that.

Merchandising

As they become more savvy merchants, the Big Three carriers consider basic economy fares and increased sales of “premium economy” sections—with more legroom and amenities—to be worth at least $1 billion in additional revenue. “Customer segmentation, to me, is one of the hallmarks of what’s different about the industry this time,” Paul Jacobson, chief financial officer at Delta Air Lines Inc., said Wednesday at a Deutsche Bank AG investor conference.

Delta began studying basic economy fares five years ago, and launched its current version of the fare in 2014. American began its first basic economy markets in February, with only a modest expansion thus far. Its basic economy fares aren’t yet offered in several major markets, including Chicago, New York, Denver, Los Angeles and San Francisco. Over time, however, airlines expect to expand basic economy to their entire networks.

Basic economy fares are often unavailable on corporate-travel booking systems because business travelers require more flexibility. As a result, the new class is “a corporate fare increase by another name” JPMorgan Chase & Co. analyst Jamie Baker said in a December client note. (He’s a fan of the strategy, though.)

United has been particularly aggressive in its embrace of basic economy since launching the fares in February from Minneapolis to its seven U.S. hubs. Late last month, the airline expanded the fare on all flights in the continental U.S. and Alaska and has “been positively inclined with the level of upsell and the customer response to it,” President Scott Kirby said at the investor conference.

United also sells a basic and an economy fare for every seat on a flight, he said, unlike current practice at American and Delta, which appear to have fewer of the rock-bottom fares available.

The basic economy baggage stricture does carry a bonus for everyone on board, though: It increases the ability to turn airplanes around faster and depart on-time.

“We are really quite excited about basic economy,” Kirby said, noting that the airline has forecast $1 billion in new revenue from its new cabin merchandising efforts. “I’m not going to change the forecast. In fact, we feel really confident that we’re going to make $1 billion in segmentation.”

His confidence may be well placed. When United expanded basic economy to 49 states last month, JPMorgan’s Baker—because of the new fare structure in traditional economy classes—classified the move as a $15 to $25 fare increase.

©2017 Bloomberg L.P.

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

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Airbnb Can Operate Legally in Japan With New Law’s Passage

Airbnb

The Konohanu-ku neighborhood of Osaka, Japan. Japan’s government has legalized homesharing and short-term rentals throughout the country. Airbnb

Skift Take: Good news for Airbnb but the bigger question is what happens in a year or two? What kind of an impact will this have on the housing markets in Japan? And will this inevitably lead to overtourism?

— Deanna Ting

Airbnb Inc. will now be able to operate in Japan without the risk of running into regulatory hurdles after the government passed a law that sets out rules for home sharing.

Japan’s upper house passed a legislative bill on Friday that lets private homes rent out space to paying guests, while limiting total stays to 180 nights a year. The law requires providers of such accommodation to register with local governments and lets local authorities impose their own restrictions.

Airbnb, valued at $31 billion, has found a more receptive audience in Japan, compared with the clashes it had with municipal governments in New York, Barcelona and its home town of San Francisco. A tourism boom has cut into Japan’s supply of available hotel rooms and helped make the archipelago Airbnb’s fastest-growing market. The number of visitors from overseas will probably continue to reach records as Japan prepares to host the World Rugby Cup in 2019 and the Olympic games the following year.

“We welcome the legislation,” said Yasuyuki Tanabe, Airbnb’s country manager for Japan. “It is clear, simple and easy to understand, while reflecting Japan’s unique needs.”

Airbnb, like its ride-sharing counterpart Uber Technologies Inc., has faced resistance from local authorities. Still, Japan’s home-sharing limits are relatively lenient, compared with 90 days in London and 60 days in Amsterdam. The new law also distinguishes between those who share their own dwellings and absentee landlords, anticipating that the latter are more likely to be a source of friction in neighborhoods.

For some hosts in Tokyo, the new rules may force them to choose between giving up a second source of income and committing to becoming a full-time rental property operator. Airbnb doesn’t break down the 52,000 listings it has in Japan by type. About 70 percent of them are for entire homes, according to Airdna, a company that sells consulting services to hosts.

For those hosts that decide to stick with it, the good news is that demand will only continue to grow. More than 24 million tourists visited Japan in 2016, topping the record for a fourth straight year, according to the nation’s tourism organization. Airbnb accommodated 3.7 million of those visitors, according to the company. The government aims to raise the number of visitors to 40 million by 2020.

“Just because our mere 50,000 listings are rented out a certain way right now, it doesn’t mean that’s all that is possible in the future,” Tanabe said. “We see a whole new magnitude of opportunities for unlocking untapped real-estate resources in this country.”

The new law will also let corporations offer services to Airbnb’s hosts and guests, going beyond the company’s roots of micro-entrepreneurs renting out spare rooms and couches, Tanabe said. He said Airbnb is already in talks with multiple providers in Japan, declining to give specific names.

Airbnb is already looking to be more than just a home-sharing platform, setting targets in luxury tourism, airfare aggregation, group payments and guest management. In November, the company announced it had a flight-booking tool and an itinerary-planning feature in the works. In February, it bought Luxury Retreats, a Canadian manager of high-end rentals and services. The company began offering unique travel experiences last year. Among the packages offered in Tokyo, renters can take a tour of anime shops, do sake tasting or learn to make sushi.

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

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Trump Administration’s Air-Traffic Privatization Plan Faces Headwinds

Associated Press

The White House effort to privatize the U.S. air-traffic control system is facing opposition from a divided industry, an opposition Democratic Party, and some Republican Congresspeople fretting about airports in less populous areas. Associated Press

Skift Take: The Federal Aviation Administration’s unpredictable finances have slowed the modernization of U.S. air-traffic control. That’s why most major U.S. carriers and unions representing airline pilots support the White House proposal. But can this Administration do the hard work to get a bill through Congress?

— Sean O’Neill

President Donald Trump’s plan to privatize the nation’s air traffic control system is running into bipartisan opposition in Congress, where Republicans fret that it could raise costs for air travelers and hurt small airports.

Sen. Roger Wicker, R-Miss., called the proposal “a tough sell” in states like his, where small airports are common. At a hearing Wednesday, Wicker told Transportation Secretary Elaine Chao that “the sale needs to be made, and it needs to be made convincingly” if the administration hopes to move forward with a plan that U.S. airlines and some House Republicans have long advocated.

Sen. Jerry Moran, R-Kan., said privatization would hurt “all but our largest airports nationwide,” while removing needed congressional oversight and raise costs for consumers.

Democrats also opposed the changes, warning that airline interests would dominate a proposed board that would oversee an estimated 300 air traffic facilities and around 30,000 employees.

Lawmakers from both parties also pointed to the unprecedented safety under the current system, noting the last fatal crash of a domestic passenger airliner was eight years ago.

“We currently have the safest air-traffic control system in the world. Why risk that by handing the whole thing over to an untested, unproved entity?” asked Florida Sen. Bill Nelson, the senior Democrat on the Senate Transportation committee.

While the U.S. “remains the gold standard in aviation,” the president’s plan would spur innovation and modernization, Chao said.

“Our skies are becoming increasingly congested,” she said, noting that some domestic flights take longer now than they did decades ago because of congestion and indirect routing.

“Our air traffic organization must be more nimble,” Chao said, calling the current system “bulky” and unable to “move fast enough to keep pace with new technologies and new demands.”

But Nelson and other Democrats noted repeated computer system failures in recent years by U.S. airlines, questioning whether they are ready to handle complex technology modernizations.

Business aircraft operators, private pilots and nonhub airports have also expressed concerns that they may pay more and receive less service under a private corporation.

U.S. airlines have lobbied to separate air traffic control from the Federal Aviation Administration for two decades, and Trump’s budget plan released earlier this year called for the changes, placing air traffic operations under an “independent, nongovernmental organization.”

Copyright (2017) Associated Press. All rights reserved.

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

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Time-Starved Business Travelers Are Missing the Bleisure Trend

Thomas Hawk  / Flickr

Nearly 40 percent of business travelers in North America added a leisure stay to their work trip, a new study says. Shown here is Nashville, a popular destination for both business and leisure travel.
Thomas Hawk / Flickr

Skift Take: While bleisure travel isn’t growing in a huge way, this study shows nearly half of millennial business travelers add leisure to business trips. Those young travelers could cut back as they get older — or employers might need to better adjust to a rise in bleisure down the road.

— Hannah Sampson

Nearly four in 10 business travelers in North America added a leisure leg to their work trip in the past year, according to a new study.

The report, by the education and research branch of the Global Business Travel Association, shows that there hasn’t been much change in the number of workers who mix leisure with business travel. While 37 percent of those surveyed said they took a so-called “bleisure” trip over the past year, a similar report last year indicated that 36 percent of business travelers based in the U.S. had added leisure to at least one work trip in the prior year.

Younger employees are more likely to add vacation to their work travel; 48 percent of millennials said they extended a business trip for that reason. Only 23 percent of baby boomers took a bleisure trip, while 33 percent of those age 36 to 54 did so, the study says.

Of those who didn’t take a bleisure trip, 58 percent said the reason was simple: They didn’t have enough time. Another 18 percent said company policy didn’t allow it.

“For business travelers who have chosen not to take bleisure trips, it is rarely because they cannot afford to or do not want to explore the destination they are visiting for work,” the study says.

At 43 percent, the top reason respondents gave for taking bleisure trips was that they wanted to visit a place where they like to spend time. Nearly as many, 38 percent, said they wanted to visit a new destination. Slightly more than a third said bleisure was a cost-effective way to take a vacation and gave them needed time away from home and work.

Less than half of respondents — 44 percent — traveled with another person during the leisure part of the trip.

The online survey of 675 business travelers from the U.S. and Canada was conducted from late February to early March. The GBTA Foundation did the study in partnership with Hilton Hotels & Resorts, which has a vested interest in the hotel booking behavior of bleisure travelers.

According to the study, 91 percent of people who combined business and leisure stayed in a traditional or extended stay hotel for the business part of their trip and 81 percent stayed at a hotel for the leisure segment. Most did not move when the work ended: 82 percent of business travelers said they stayed at the same place for the entire trip.

“Business travel is a lifestyle for many of our guests,” Kelly Phillips, Hilton’s senior vice president of global engagement and strategic accounts, said in a statement. “And we’re seeing a growing desire by these travelers to add a leisure component to their trip and experience the destination beyond the meeting room.”

The study considers some of the ramifications bleisure travel could have on travel programs: added cost of transportation, the responsibility to take care of employees when they’re on the road, and the way travelers book accommodations.

“This study highlights a variety of ways in which companies can improve the bleisure travel experience for their employees, while also aligning bleisure travel with their own goals,” Monica Sanchez, director of research at GBTA Foundation, said in a statement. “Some of these ways include establishing clear rules for reimbursing expenses incurred by non-employees, helping travelers understand the resources available to them on the leisure portion of their trip and developing a policy regarding preferred suppliers and booking channels.”

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Interview: Brand USA CEO Counts on Congress to Reverse Trump’s Plan to Kill It

WTTC  / Flickr.com

Christopher Thompson, CEO of Brand USA, at a World Travel & Tourism Council event in 2016.
WTTC / Flickr.com

Skift Take: Brand USA has reported positive returns on investment and built the U.S.’ national tourism marketing operations from the ground up over the past six years. But now one of its most important tasks is ensuring the President — and his Twitter handle — don’t derail its momentum.

— Dan Peltier

Just as Brand USA officials were getting familiar with the Trump administration and its new Commerce secretary, Wilbur Ross, the hammer dropped without notice.

Six years into its existence, Brand USA — the national destination marketing arm of the United States — became latest travel-related target in the White House’s line of fire after President Donald Trump’s proposed fiscal 2018 budget last month called for its elimination.

One immediate challenge: getting on the Trump administration’s good side.

Earlier this week, Skift sat down with Brand USA CEO Christopher Thompson at the U.S. Travel Association’s IPW Conference in Washington, D.C. to talk about the organization’s first six years of operations and the challenges and opportunities on the horizon.

Speaking at IPW on Monday, U.S. Secretary of Commerce Wilbur Ross tried to convey the message that the Trump administration wants to support the U.S. travel industry despite conflicting and controversial rhetoric about travel and laptop bans, as well as building a border wall along the U.S.-Mexico border consuming much of the president’s first five months in office.

Brand USA is just getting to know Ross, Thompson said, adding that his message seems sincere.

“Don’t think that his (Ross’) remarks weren’t vetted through the White House,” Thompson said. “What I’ve also been told by people that have had some interaction with him is he doesn’t say things unless he believes in them. You think that he said all the things that you would want him to say, and that we really have been wanting someone in the administration to say, and he’s the appropriate person.”

Ross told more than 6,400 travel industry attendees that the Trump administration is prioritizing travel and tourism, and he offered a supportive message — although there is ample reason to be skeptical given the White House’s actions to date.

While Ross spoke, the specter of Brand USA’s proposed elimination hung over the audience. The smart money says that Congress is unlikely to eliminate Brand USA despite Trump’s proposal, but how it will all shake out is unclear.

What is clear is that the White House and travel industry aren’t yet on the same page.

Brand USA representatives earlier told Skift that it’s proposed elimination came as a surprise; the White House hadn’t given the organization notice before the President’s budget was publicized.

Adding to the angst, President Trump tweeted six times between June 3 and Ross’ speech on Monday advocating for the travel ban and taking a hard-line and vague approach on international arrivals to the U.S.

As head of the Department of Commerce, Ross is the White House’s de facto travel and tourism leader. “He is responsible for travel and tourism, so the fact that he got up in front of our stakeholders and said what he said, I think it reflects what we’ve always thought, which is that the administration gets tourism,” said Thompson.

Thompson was previously CEO of Visit Florida and came on as Brand USA’s CEO in November 2012, more than a year after the organization began operations in May 2011. Like Brand USA, Visit Florida this year has had its funding challenges, too.

One difference between the Obama administration and Trump, Thompson said, is that the current president is addressing things early on that could potentially have a direct impact on travel, Thompson said.

Despite travel ban headlines over the past five months, most travel policies for international travelers remain unchanged, Thompson said.

“It’s mostly a perception problem than it is the reality, because we have two legal responsibilities, promote the entirety of the country and then communicate accurate and timely visa and entry policy,” he said.

Brand USA needs to play a political game in Washington and Thompson may be downplaying some of the changes in travel and visa policies, including much tougher vetting and the use of social media to inform application decisions, for example.

“Nothing has changed about how anybody gets a visa in the world who wants to come to the United States, and there’s only been one change, one policy change as it relates to entry and that’s the electronics policy with eight countries and ten gateways in those eight countries,” Thompson said.

Brand USA’s funding fate largely lies with Congress. The organization has had bipartisan support from its beginnings when passage of the Travel Promotion Act in 2009 created it. In December 2014, Congress reauthorized Brand USA.

Brand USA is a non-profit organization and its funding comes from a mix of donations from more than 700 partner organizations, and matching funds generated by the fees international travelers pay to the Electronic System for Travel Authorization. So Brand USA’s funding doesn’t come out of taxpayer coffers.

WORKING WITH THE TRUMP ADMINISTRATION

Brand USA can’t lobby Congress on its own behalf, per the Travel Promotion Act, but Thompson said he still meets with politicians to explain the value of travel marketing.

Working with politicians is one of the best parts of the job, Thompson said. “However long they’ll give me, I give them as much as I can give them, and they pretty much say this [funding Brand USA anew] seems to be a no brainer,” he said.

“With members of Congress, I haven’t had one single meeting where I haven’t been invited to go provide information,” said Thompson. “I’ve never walked out of there and everybody’s not going ‘wow, we haven’t had this before?’”

Most members of Congress want to create economic opportunity in their districts and understand travel is a vehicle for that, said Thompson. “When they can support something like Brand USA, that literally brings benefit to every corner of the country in rural and urban areas, in up to five territories and in the District of Columbia,” he said.

Being America’s National Tourism Board

U.S. national tourism marketing efforts have faced challenges long before Trump took the oath of office earlier this year.

When Brand USA was created, the commerce department also created the National Travel and Tourism Office and appointed Kelly Craighead as its first head. Thompson said the Trump administration hasn’t yet appointed someone new to head the office.

That position, however, isn’t a cabinet level one. Unlike many other countries, the U.S. lacks a dedicated travel and tourism cabinet position as that’s only one part of Ross’ responsibilities.

“That position is responsible for activating the national travel and tourism strategy across nine federal agencies,” said Thompson. “That’s the closest thing we’re going to get. It is appointed, but it’s not the level of a cabinet position. Everybody out there would suggest to you that we need that level, but Kelly being the first, and the role that she defined was tremendously beneficial.”

Brand USA’s role is even more important as a result, said Thompson. “We’re always asking ourselves how we can figure out how do we add value?” he said. “That’s one of the pillars of our statement or purpose, the fourth one which I kind of brought with me from Florida, was how do we add value to what’s been there for decades?”

“We’re the new guys on the block and shame on us if we think we’re coming in to save the day because that’s not the case…That is also something that drives us significantly right now,” he said.

Moving Past Startup Mode

Brand USA is “in the very early stages of being a more mature organization,” according to Thompson, and the president’s proposal to take away its funding will test the organization’s mettle.

Thompson said there were 18 employees when he started in 2012 and the most recent headcount is 76 staff.

Brand USA has mostly enjoyed bipartisan support in Congress but has also taken some hits from budget hawks in the legislative body. Thompson is looking ahead to the organization’s next five years of operations despite the Trump proposal.

He said Brand USA’s partners are still as enthusiastic about its work as they were on day one. “Who has the environment and the landscape like that to operate in?” said Thompson.

“In the office we always talk about what keeps you up at night,” he said. “Other than just the craziness in the world…I worry about us getting complacent, I worry about us not pushing ourselves, I worry about us not being hungry and realizing first and foremost the unbelievable privilege we have to be doing what we’re doing.”

Brand USA’s National Parks movie has been one of its biggest successes, said Thompson. “This movie is in 100 theaters and science centers around the world. It’s going to have been seen by up to five million people and we’ve won nearly every award you can win for this kind of film,” he said.

Largely driven to counter the White House’s controversial and xenophobic messaging, Brand USA recently launched its “One Big Welcome” campaign (see video below), which features locals in destinations across the U.S. showcasing why they think their hometowns are special places to visit.

Launching these kind of campaigns, of course, requires a big budget and Thompson said Brand USA’s current $165 million budget “doesn’t go very far” with its work in 40 markets.

Still, that amount is within the world’s top five-highest national tourism market budgets, he said. “People even think we went from zero to $165 million and they think that’s huge,” said Thompson. “But you definitely need to make sure that you’re getting the most out of every dollar you’re trying to deploy.”

“One Big Welcome” might seem reassuring and convincing to many international travelers. But foreign airlines and analysts have said that international travelers have expressed dismay and concerns about the arrivals process in the U.S.

Despite Brand USA’s efforts, perhaps the most potent U.S. tourism marketing force in the weeks and months ahead will be the man in the Oval Office and his Twitter account.

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The EU Wants to Make it Easier to Deal With Unfair Aviation Competition

Jennifer Jacquemart  / EC - Audiovisual Service

European Commissioner for Transport Violeta Bulc. The EU wants to bring in rules allowing it to target anti-competitive practices by foreign airlines. Jennifer Jacquemart / EC – Audiovisual Service

Skift Take: While there is no specific mention of the big Gulf airlines, they would likely be a target for any new measure designed to rein in supposed anti-competitive practices. European airlines, alongside those in the U.S., have long said the likes of Emirates and Etihad have an unfair advantage. European airlines surely welcome any new rule that attempts to level the playing field.

— Patrick Whyte

The European Union has unveiled plans to make it easier for airlines in member states to take action against what they consider to be unfair competition.

Growth in aviation has been one of the most successful aspects of the EU with liberalization helping to increase competition and drive down prices. This freedom is also granted to any airline flying in from outside the EU flying in – but is not always reciprocated.

The European Commission – the organization’s executive arm – refrained from giving any specific examples but the implied threat is likely aimed at carriers in the Gulf, who have long faced criticism for their supposed unfair tactics.

Earlier this year Lufthansa and Air France-KLM wrote to the EU asking for it to intervene to avoid long-term damage because of “incredibly fast parallel expansion of the Gulf carriers in Europe.”

Under the new rules, should the EU investigate a matter brought to its attention by an airline and find wrongdoing “it could propose compensatory measures to offset the injury.”

“The Commission is proposing a new regulation to ensure that EU airlines can compete on the basis of equal opportunities and connectivity can be safeguarded. It will allow the EU to take appropriate action should certain practices put EU connectivity at risk,” said Commissioner for Transport, Violeta Bulc at a press conference.

European airlines aren’t the only ones worried about competition from the Gulf carriers. Some U.S. airlines are also getting increasingly furious with the practices of Emirates, Etihad and Qatar, and have put pressure on President Trump to act.

Foreign ownership

As part of its Aviation Strategy for Europe initiative, the Commission also wants to create new guidelines to bring “more clarity and certainty to investors” on the subject of airline shareholding.

Currently, non-EU nationals can only own a maximum of 49.9 percent of any airline entity. Gulf carrier Etihad Aiways has minority stakes in Alitalia and Air Berlin, Qatar Airways has built up a 20 percent holding in IAG, and Delta Air lines owns 49 percent of Virgin Atlantic.

Bulc said the ownership rules would not be relaxed “at this point,” hinting that it would be something the Commission might address again in the future.

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CEO Interview: Distribution Firm DHISCO Tries to Bounce Back for the Post-Hotel Era

DHISCO

Similar to her tablet cover, CEO Toni Portmann is a colorful personality who is stepping up the energy level of DHISCO after years of stasis. DHISCO

Skift Take: DHISCO boss Toni Portmann said the hotel distribution tech company has completely modernized its formerly limited and failure-prone system. But we’re still waiting to see a wave of new contract announcements, including for alternative lodging providers.

— Sean O’Neill

If you’ve ever searched for hotels through one of the major U.S.-headquartered online travel agencies, the results you saw were most likely provided with back-end technology assistance from a small Dallas-based company, DHISCO, which stands for the Distribution Hospitality Intelligent Systems Co.

DHISCO is known to many hoteliers simply as “the switch,” an outsourced partner that helps hotels distribute their inventory and process transactions across various platforms worldwide.

Today, it makes 107,241 properties available for distribution via 127 travel agencies and online travel sites.

In other words, it makes the rates, availability, photos and descriptions of more than 11 million rooms at 453 hotel chains, including AccorHotels, InterContinental Hotels Group, Hilton, Hyatt, Marriott, and Scandic, easy to distribute technologically to online travel companies such as the ones owned by Expedia Inc. and the Priceline Group.

For example, if you search for a New York City hotel on Priceline.com and Marriott and Best Western properties get displayed, DHISCO is the company that enabled Priceline to search that room inventory for both chains. It fetched the rates, the inventory, the descriptive content, and the pictures.

DHISCO also works with Expedia and other companies, such as Cathay Pacific Holidays, which uses the back-end tech company to offer hotels to consumers.

A case in point: DHISCO is a significant tech partner for companies like InterContinental Hotels Group.

While it doesn’t touch IHG’s transactions that come through its “brand.com” direct channels, DHISCO does facilitate more than half of IHG’s transactions that come through online travel agents, packagers, and wholesalers.

Since late 2014, the 85-employee business has been undergoing a turnaround under new CEO Toni Portmann.

DHISCO, which launched in 2014, traces its roots to Pegasus Solutions, which was founded in 1989. DHISCO was essentially the distribution division of Pegasus.

Pegasus fell on tough times during the 2008 recession. It had fallen behind on investing in its systems, resulting in those systems becoming brittle and prone to breaking.

The company was also distracted by trying to provide too many services to hotels and saw its various business face competition from rival hotel technology companies, such as DerbySoft, eRevMax, RateGain, SiteMinder, and TravelClick.

Some hotel groups began switching to other providers, or creating in-house solutions to distribute their content instead.

Portmann says now that, after two years of retooling and a $10 migration over to new technology platform, DHISCO is becoming competitive again.

Portmann says the long-term trend that DHISCO needs to be prepared for is that consumers are increasingly going to want to shop for lodging of all types, side-by-side, and not think of hotels as being separate from vacation homes, serviced apartments or short-term rentals.

So consumer websites and agency reservation systems need to be able to present that information to compare the lodging products in a like-for-like way, which will require a lot of changes to how hotel content needs to be prepared and presented digitally.

Globalization also means that hotels need to increasingly make sure their room rates and hotel descriptions can appeal to visitors worldwide who have varying expectations and ways of shopping. DHISCO can be a company that helps hotels bridge that gap.

A company record of promises never quite fulfilled

Quickly, some backstory: The company is an outgrowth from Pegasus Solutions, a U.S. hospitality software company created by more than a dozen hotels in 1989. It briefly went public, but then was taken private again in a $275 million takeover.

The takeover didn’t work out well for investors as Pegasus struggled to become a scalable business that could return to the public markets.

In late 2014, new private equity owners HIG Capital re-launched the distribution unit as a standalone company under the name DHISCO.

DHISCO says it sent about $8 billion in hotel revenue through its pipes last year.

Despite its relatively small size, the 85-employee company’s services are important.

Why would a company like IHG need DHISCO?

Well, if a hotelier wants to distribute some rooms via one online travel agency while setting aside other rooms to sell through a distribution system used by an offline travel agency, DHISCO is the outsourced technology behind the scenes to handle it. Rather than try to develop the tech expertise in-house, a hotel group may shop it out.

There is competition for this business. Competition is increasing, as companies like Amadeus Hospitality and Sabre Hospitality Solutions try to get more into the market, with potential market entrants like Shiji waiting in the wings.

As noted, in 2015, DHISCO appointed Toni Portmann as CEO to lead the transformation. We caught up with Portmann to find out how things have been going. We edited the interview for brevity.

Skift: Since the velvet divorce from Pegasus, how have things been?

Portmann: You always worry in these carve-outs about what’s on the other side of the rainbow. Is there a pot of gold?

We’re coming into our own now. It’s been two years, and the brand has taken traction in the industry. Now we don’t have to remind people so often that we’re no longer part of Pegasus.

When we did the carve-out, I would say we couldn’t even find the beans, let alone count the beans. Now we can start prepping sophisticated business intelligence tools.

We just finished a 30,000-person-hours data center migration.

We are on an entirely new technology platform. We went from 20,000 square feet of blinking lights and server racks in Scottsdale, Arizona to 500 square feet in Dallas, and the new setup is double the capacity.

Skift: Huh. How does that translate into functionality?

Portmann: At the time of the carve-out, we were doing about 9 billion transactions through the switch. Now we’re doing, on average, 11 billion transactions a month.

We probably went through the largest, most complex data center migration and transformation that the hospitality industry has ever experienced, and we made it a non-event for customers.

Skift: But you lost Orbitz’s business when that brand was acquired by Expedia Inc. Wasn’t that a blow?

Portmann: No. Although Expedia moved Orbitz onto their platform, we still maintain an important part of their long-ttail business and augment their content.

And our growth is even more amazing given that Orbitz moved to the Expedia platform. If you factor out Orbitz, we have doubled the incremental volume, year over year, through the switch.

Wooing back hotels and travel sites

Skift: When we’ve talked to some hotel groups they say that over recent years they lost confidence in the distribution arm of Pegasus that DHISCO has been an outgrowth of.

We are restoring confidence in hoteliers and alternative lodging specialists in leveraging our distribution solutions.

We’ve restored confidence with data and the efficacy of the infrastructure and the topology and the technology, we’re gonna take this and put it on steroids, and I think that’s what HIG is excited about.

Skift: But no real big new deals with major hotel groups yet. Some hotel groups have built direct connections to companies like Priceline.

Not true. We have now had a very important hotelier decide to switch back from a direct connect to a global distribution system which had connections to agencies and now they’re back going through us.

The company still isn’t ready to publicize this yet out of sensitivity to its other tech provider relationships.

But, yes, I take your broader point. It has been a fad among hotel groups to build direct connects. That’s a real trend.

But we’re hearing from executives, as I’ve gone around North America on a listening tour of customers, that they’re waking up and smelling the coffee about how the true, fully attributed the cost of direct connects is a bigger bill than working with a provider like us.

We hear positive traction on the demand aggregator side, too.

A CEO of a company that is really important on the supplier side said to me recently, “Toni, I wanna outsource you everything that I don’t have to do so that I can free my company up to serve guests and provide the technology that enables bookings. So I want you to handle all this other stuff for us. I can trust outsourcing to you because you are a business partner with aligned interests.”

Skift: What is venture firm HIG Capital’s goal? Is the idea to take DHISCO public again?

Portmann: No, I would not think that going public is a short term strategy. HIG is a wonderful financial partner, and it is investing for growth.

It supported our $10 million investment on this new technology stack, and they are continuing to invest in our product release plan, in our approach to content development, in our topology and go-to-market strategy.

Skift: How about international expansion? Especially in APAC. DHISCO is weak in China etc.

Portmann: Greg Berman, who became chief strategy officer when I became CEO, has been spending a lot of time lately in Asia Pacific, in China in particular.

We’ve got some very exciting new connections that are going to become live that are going to support both the Chinese traveler in country and Europeans and Americans going to the brands that they know and love in China.

So really excited about the add of that area of the region. Latin America has gotten a lot of our focus; we are excited about adding both some content and the opportunity for some new demand into the Latin American environment.

Long-term changes in hotel distribution

Skift: Historically DHISCO has been all about hotels. Still true?

Portmann: I would call it, people who have places where travelers want to stay. And that could include alternative lodging.

For example, we just launched RentalsCombined. They’re a hybrid, where they will partner with hotels for some of their allocation to be offered as rental property, and they also support individual properties for extended stay.

Skift: Back to hotels, still most of your business. Why would hotel groups outsource their tech to DHISCO?

Portmann: A common reason is about handling the crushing volumes of data requests. In the vernacular of our business, we call it “looks-to-books.” Search volume is growing at 60 to 70 percent a year while bookings worldwide, outside of DHISCO, are only growing about something like 7 percent.

So, how many times is a traveler shopping or looking for rates via online travel agencies and metasearch? Every time someone runs a search on, say, Kayak and a hotel’s data needs to be pulled, that represents a call on someone’s server systems.

We have the sophistication to handle the demand. Unlike a hotel, we can invest in the best practices. It’s all about speed, stability, and accurate transactions.

Skift: What’s your tech secret?

Portmann: Well it’s not a secret, but we just do it well. A hotel may have as many as 10,000 calls for data from online and offline travel agency systems for every booking it receives.

So we cache, or store, a copy of the hotel’s data on our systems and answer a portion of the queries with that.

We cache about 65 percent of those shopping transactions, and then deliver from a cache, at a 95 percent accuracy.

That means the rates we show are accurate when the shopper moves from research to purchase mode, so to speak.

We can help protect a hotels’ central reservation system (CRSs) from crashing. Some hotels have legacy systems that cannot stand up to the shopping volume with real-time rates and availability.

We’ve adopted a brand new topology and infrastructure in the way that we shop, book and cache, and protect those big CRSs out there.

Skift: What’s interesting on your product release plan?

We’re working with a travel tech partner, Zumata, on putting alternative lodging and some business rules around, how, if we were to start over in hospitality and think about “places to stay” instead of just hotels, how might we structure data?

Some big, big hoteliers have agreed to lock themselves in a conference room with us and spend some time and money having this conversation and piloting some experiments.

Let’s say there were a dozen suppliers offering rates at a hotel in Beijing.

All of their data points could be different. Zumata maps all these data points to one common name, or identifier, and themes match every one of the suppliers so that the data can be easily read by the Pricelines of the world.

There’s a broader industry issue. Hospitality is changing, and we need all hotels to define things the same way and input their data the same way.

Right now, the way many hotels choose to categorize and classify data isn’t matching the evolutionary nature of the next generation of technology platforms and the next generation of lodging.

Skift: What else in consumer-facing hotel and lodging distribution makes DHISCO well placed to help hotels?

Portmann: Hotel content is a mess. Hotels aren’t presenting their information in standardized ways.

As their content gets syndicated and globalized, their rooms may not be appearing properly in agency computer systems and online travel agency and metasearch sites.

So we’re providing hotels with an audit on how complete their data records are for listing and describing amenities to maximize their searchability by agents and consumers.

We give the hotel scores. For example, if they have a wide range of good images, they get a higher score.

Our research finds that hotels with at least a dozen images of rooms and the property’s general areas and amenities perform much better in search. But many hotels have fewer than 12.

We’re trying to use automation to help with improving hotel content. We did a pilot with five hotel brands — sorry, not allowed to publicize the names right now — and we asked, do these hotels have important attributes that consumers worldwide are searching for and where, they have gaps, can we fill in the gaps automatically?

If the hotel doesn’t make clear it is compliant with Americans with Disabilities Act (ADA) regulations, we will add that because we know some people are searching for that.

Skift: What other hotel tech challenges is DHISCO taking on, Toni?

Portmann: So, we’ve done a lot of data-mining on what gets shopped for. Not necessarily what gets booked, ’cause hotels know what gets booked, but not what gets shopped for.

And we’ve come up with the key attributes, that, if you don’t have that in your content library, and if you don’t have it in your shopping engine, you’re just not gonna get booked.

We can then help hotels update how they describe their products or the kinds of products they sell.

Skift: I have no idea what you’re talking about.

Portmann: Ha! So… we know the most searched for amenities, such as airport shuttles. It turns out some hotels have these amenities, but they don’t properly enter the data or tag their data in a way so that the computers can find it.

A classic example is that, at some U.S. hotels, when they give us their rooms to distribute, don’t even fill out “non-smoking” as attributes for their rooms because it’s assumed their rooms would be non-smoking in the U.S.

But a lot of European and Chinese travelers search for smoking. If you did had smoking rooms but don’t include them, your hotel won’t get returned in their search results.

Pool – what we’re learning is a pool’s not a pool anymore. Is it heated or not? Is it indoor or outdoor? Is it a lap pool?

Is parking free or valet? Is wifi-free? Are pets allowed?

Free parking, free wi-fi, pool, and are pets allowed.

We’re telling hotels, “Hey, you better have not only descriptive content to appear on online travel sites, but you better also have coded in the content database whether or not you have these features.”

Skift: Now I get it. But hotels won’t bother unless they’re sure that bookings will increase and that the effort will be worth it, right?

Portmann: But we are boosting conversion!

I’ll give you project that we did with Amadeus, which distributes hotels to travel agencies. We call it content connect. We did this data transformation.

We are now feeding Amadeus’ front end, and we show that just through DHISCO improving the quality of the content, bookings are up 23 percent for one brand, up 8 percent for another and nothing changed otherwise.

The only thing that changed is we’re giving Amadeus better content, and it is distributing it so that people can read it.

Skift: Let’s talk competition. Amadeus Hospitality has its tools. Sabre Hospitality Solutions has the SynXis product and other software. Aren’t these the middlemen that are connecting the hotels to the Pricelines of the world? How does DHISCO fit in?

Portmann: The beauty is, those distributor tech companies outsource to us the stuff they don’t want to do.

So Sabre and Amadeus and Travelport are all really big parts of our ecosystem. They use us as a switch.

If you’re Amadeus or its peer, we make it easier to get access to demand partners like Priceline and easier to get access to hotel inventory.

Skift: OK but hotels are still the bulk of your business. Aren’t they all trying to have direct connections with demand partners like Priceline and the global distribution systems?

There was a craze for direct-connecting. But now hotels see that, when they have to make one change, they have to push that change through all of their various direct connections instead of saying, “DHISCO, we’re connected once to you.

These 12 partners that you’re connected to — will you just modify and map and transform our data to get to all of this search engine?”

Skift: Don’t travel management companies also do what you do?

Portmann: Think about all the chains, all of the properties, all of the images of rooms and lobbies, all of the different types of rates.

When a travel manager goes property by property and creates direct connections with demand platforms, it’s not as robust of a connection.

You don’t have as much of the functionality. You certainly don’t have the leverage of our speed and the protection to surges of calls on your system.

And again, one change gets made, and now a travel manager has to change it through all of those individual direct connections, versus that one DHISCO feed.

Skift: Since you took over the business at the end of 2014, has anything changed in the commercial model for DHISCO and what is the commercial model?

Portmann: We needed to align interests with both the supply side and the demand side. We inherited some pricing and some contracts that were counterintuitive and counterproductive to driving a partnership with a win-win goal.

If the hotels aren’t making money, we are not making money. If the demand partners aren’t making money, we are not making money.

So we’ve commercially changed to align all of our commercials with the success of our partners making money.

Skift: How expensive is DHISCO?

Portmann: We are less than one-half of a percent of the cost of distribution, on average. So we are a very very efficient and very, very cost conscious channel for switching.

Sometimes, we make money largely from a transaction-based model, which aligns us with helping boost conversions, but we also are making money in content distribution.

Some brands use us for content distribution even if they have direct connections because they like the fact that we have, for example, 175,000 images in our hotel contact database.

Skift: Still not getting why hotels would prefer to distribute via DHISCO if they can have direct connections.

Portmann: Lots of ways we enhance the data and simplify the distribution.

One example: We can translate the descriptions of their rooms and amenities, and we pass that translated content over, to help hotels to appeal to global audiences.

We are going to our hotel chains and saying, we will translate your content in up to nine languages. We’re doing the translations with a partner, SDL, that has talent in market — real people that speak the language.

We will monetize that translation, and then charge a very small fee per property per month for maintaining that. So if a hotel changes the franchising company it works with, that translated content follows that hotel.

We then feed that translated content into our hotel content repository, and we distribute that anywhere that that hotel wants it distributed.

So all the distribution systems like Amadeus, Sabre, and Travelport, and all of the online travel agencies, would have access to it that are connected to us for that content.

If you put in a different pool or you add a new restaurant with a fancy chef, and you want that translated, we just add that in, as and when.

Skift: You mention caching the data. Why only cache about 65 percent of it?

Portmann: The problem today is that rates aren’t always static. Hotels are becoming more sophisticated, as airlines have long been about revenue and yield management.

It is vital that not every room under every situation get cached. There isn’t a lot of variability with a standard extended stay property.

But a high-end property in a major urban destination might see lots of swings in demand depending on business events that happen in town.

If I am a hotelier, I want to cache the stuff that’s unlikely to change from a revenue management standpoint. That takes care of the majority of bookings.

Skift: So the service that DHISCO provides for the lodging supplier is, it protects the CRS (computerized reservation system) from buckling under the pressure of too many calls, and it does this with caching, among other techniques…

Portman: Yes.

Skift: But what do you do for the demand aggregators, like the Booking.com’s of the world?

Portmann: We optimize to make sure data is accurate and fast.

The last thing that the Pricelines of this world want is to have a customer show up, and the rate or room isn’t accurate.

The number one worst thing is, you cannot walk a guest. If a guest arrives with, say, a Delta Vacations confirmation number, the resort has got to have that suite available at the rate booked on the website, with the resort fees and the taxes delineated and accurate.

That’s why the Pricelines of this world say they use DHISCO: Because we return to them a reliable rate and inventory no matter where that guest is traveling to.

We’ve cleaned the data, so to speak, and we’re fast so our cached, or saved and copied data, is still accurate.

Skift: What are your goals in the next year or two?

Portmann: So, beyond shopping connectivity between lodging supply and demand partners, we’re working on our access strategy.

We’re coming up with management consoles and portals that will be quicker and more intuitive for hospitality pros to use.

Today, unfortunately, it takes days and weeks to load what’s called a property build. We have a strategy that will get that time down to mere seconds to get a property loaded with rates and availability and ready for distribution to all of the online travel players.

We also want to get into business intelligence.

For example, we might show a Marriott all of their online travel agents and show them the look-to-book ratio for each of those shoppers — which agents books Marriotts most often.

Marriott then can see who’s the most productive at booking their rooms. Its commercial teams then can pitch those agents more effectively.

We are also showing the 45 central reservation systems we work with their speed and latency via our connection relative to an anonymized set of competitors. So without naming names, we can point out a CRS’s speed it takes a travel agent to shop and book a transaction on it relative to others.”

Right now we’re offering this for free. We’re learning how to get good at this.

Skift: Right, and does DHISCO charge for it or is the idea of like giving an analysis like about which attributes are most important sort of a way of just building … it’s a free service to build a relationship with the important clients?

Skift: So hotel and lodging owners who were concerned about the brittleness of Pegasus’ systems and then they built direct connections. What is your message to them now to lure them back, what’s a metric or proof to say, feel confident, we are your choice.

Portmann: We now have 18 KPIs09, key performance indicators, that we provide them free of charge that not only tells them how well we’re doing the job we promised them we would do.

So we have 18 of those discreet metrics now that we’re distributing and the good news is that we’re getting high scores on reliability and we’re super fast and super stable. Those are table stakes nowadays in technology, but we hadn’t been performing that well in the past.

Skift: What’s the biggest problem in hotel distribution today?

Portmann: From a technology perspective, there needs to be a revolutionary change in data structure.

I don’t think the answer is for the industry to try to push for technical messaging standards the way the airline industry has with the New Distribution Capability. The hotel industry is too fragmented, while there is a concentration of a few airline groups that can drive through a standards change in airline distribution and merchandising.

I know I’m making a radical statement to reject standards, but hear me out.

Hospitality reminds me of health care 15, 20 years ago where we had very fragmented and disconnected systems and we did not have a data structure that facilitated inoperability.

And quite frankly, the travel tech environment has gotten even increasingly complex with mobile only or mobile first distribution.

There is somewhere between 900 and 4,000 attributes floating around, meaning different types of ways of describing hotel information.

It’s madness.

We’ve got to start over and I have this conversation often with our largest hotel partners and our largest demand partners including the global distribution systems like Amadeus and Sabre that have the power to advocate for industry change.

I suspect that we’re all going to come to the same place which is standards but not going to work.

Ryan Wolkov

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Lufthansa Group CEO: Electronics Ban Would Be a ‘Mess’

Lufthansa

A widespread electronics ban will likely be disruptive to passengers, according to Lufthansa Group CEO Carsten Spohr. Airbus President and CEO Fabrice Brégier, left, poses in front of a new Airbus A320neo with Spohr, center, and Robert Leduc, president of Pratt &Whitney. Lufthansa

Skift Take: If some form of a global electronics ban in airliner cabins is enacted, expect delays and disruptions as airports and airlines struggle to adapt.

— Andrew Sheivachman

It seems like every day there is a new report on an imminent electronics ban on laptops and tablets in airline cabins, but one thing is for sure: Global airlines are preparing for the worst.

At an International Aviation Club luncheon in Washington, D.C. on Wednesday, Lufthansa Group CEO Carsten Spohr gave some insight into the prospects of a wider ban and what it means for airlines across the world.

Spohr, who has overseen the expansion of Lufthansa’s low-cost Eurowings brand and presided over the company’s controversial imposition of a global distribution system booking surcharge, said that conversations are still ongoing between security officials and global airlines.

“Security is for governments, safety is for [the airlines],” said Spohr, making a distinction between the need to prevent a terrorist attack and the dangers risked by placing hundreds of devices with lithium-ion batteries in the aircraft hold, where they could possibly combust.

“If it happens,” Spohr said, referring to a wider ban, “the industry is prepared, but it’s going to be a huge mess… I think it was close that it would have happened a few weeks ago [sic].”

From Lufthansa’s perspective, the dialogue between airlines and security officials in both the U.S. and Europe is a positive step forward to encourage collaborative action and help airlines provide better service if a ban takes place.

While Middle Eastern airlines affected by the initial ban have come up with clever ways to cope with it, from providing white glove service for checking in devices to loaning screened laptops and tablets to flyers already onboard, the scale of the biggest global airlines would make it hard to institute similar solutions.

“Everyone I talk to now tells me that there’s a very full dialogue,” said Spohr. “I think people are now engaging so we can find the best solution. Of course we in the industry are not prepared to trade security for safety. Batteries in the belly, as we know, could have been a much bigger threat than the other one, which we take quite seriously.”

He continued that behavior detection technology, which is more advanced than some other security screening methods, could be used at the gate to single out potential threats without requiring flyers to leave their laptops at home or check them before entering security.

Unfortunately for airports and airlines, any ban would  likely be extremely disruptive to normal operations, according to Spohr. The industry is simply not prepared to cope with the extra step of screening for laptops and checking them in, which is bad news for flyers.

“I think in the end, [the ban] probably has to be global,” said Spohr of the intelligence assessment. “I don’t understand why it’s more dangerous to bring a laptop in the cabin to the U.S. and back. We want a smarter solution, not just a solution.”

Ryan Wolkov

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Airbnb App Now Provides Hosts’ Check-In Instructions for Guests

Airbnb

Airbnb’s new app tool makes it easier for hosts to communicate check-in instructions to their guests. Airbnb

Skift Take: Why didn’t Airbnb think of this earlier?

— Deanna Ting

Airbnb is making it easier for guests to know exactly how to check-in to their Airbnb homes with a new check-in tool on its mobile app.

With the new tool, hosts who opt into the new feature can put together a step-by-step guide on what guests need to know to check-in, such as which door to open, where the lockbox is located, and what code to enter.

Hosts only need to compile the guide once and it will be accessible to all of their guests. The guide can be accessed via the Airbnb mobile app even without Internet access.

The check-in guide feature is something many hosts and other enterprising companies have, in some ways, already offered to guests, whether in the form of PDFs or electronic guides such as those produced by San Francisco-based Hostfully, which helps short-term and vacation rental hosts develop personal guidebooks for their guests.

David Jacoby, Hostfully president and co-founder, said that, “As an Airbnb Superhost myself, this looks like a much-needed feature and I am excited to give it a try.”

He also asked, “When will we be able to also add video? This will be quite popular and helpful for those hosts who share an extra bedroom in their home in the traditional Airbnb way.”

However, Jacoby also noted this feature might not be as well-suited for hosts who work with a vacation rental management company and advertise their listings on multiple platforms.

“[They] get their bookings from multiple platforms, and Airbnb is actually No. 3 on the list in many cases, behind HomeAway /VRBO as well as the company’s own website,” he said.

According to data compiled by Skift Research, HomeAway, including VRBO, has approximately 1.2 million professionally managed rental listings, while Airbnb has an estimated 1 million professionally managed listings out of a total of more than 3 million listings.

“Vacation rental management companies are looking more and more for platform-agnostic tools to streamline their own guest communications and hospitality operations,” Jacoby said. “It is a headache for them to have to manage a check-in process through Airbnb’s app, and a separate one through HomeAway’s app, and yet a third for people who book directly.

“They would rather be able to send a simple URL to every guest that takes them to the same digital guidebook that has all the information they need for check in, home essentials, recommendations etc. As Airbnb tries to be friendlier to traditional vacation rentals, they will have an ongoing tension between wanting to keep the guest within Airbnb, versus letting the vacation rental management company manage the guest within their normal workflow.”

Ryan Wolkov

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U.S. Business Travel Is Still Expected to Grow in 2017 — Skift Corporate Travel Innovation Report

Jason Lee  / Reuters

Business travel is expected to continue to grow this year after a rocky first few months. Flight attendants clean the cabin of a China United Airlines aircraft after it landed at the Nanyuan Airport in Beijing, China. Jason Lee / Reuters

Skift Take: Perhaps the fears of a business travel downturn in the U.S. have been overblown.

— Andrew Sheivachman

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

It seems like everyone these days has a different opinion on whether the political situation in the U.S. is affecting business travel growth.

New research from The U.S. Travel Association finds that after an up and down beginning to the year, with growth slowing in three out of the first four months, projections show that solid business travel growth is anticipated for the remainder of 2017. It takes a few months for Oxford Economics to figure this out on behalf of U.S. Travel, so stayed tuned for future updates that reflect more recent data from the Trump era.

At the IATA Annual General Meeting in Cancun this week, as well, international airline executives said that they have yet to see a significant drop in air bookings as a result of the still-limited electronics ban and general state of political turmoil here.

So against all odds, and despite the doomsaying, the prognosis for increased business travel growth remains positive in the U.S.

We have the latest on hotels experimenting with voice-controlled devices in their guest rooms (do you really want Amazon Alexa listening into your travelers’ conversations?) and Sabre’s expectation that U.S. airlines won’t add a surcharge when passengers book with travel management companies.

There’s also a deep dive into the rationale, and ramifications, of Qatar’s falling out with several of its Middle East allies. So much for the Middle East as the new great global airline hub network.

Check out all the latest below, and let us know your thoughts on the state of U.S. business travel today.

— Andrew Sheivachman, Skift 

Social Quote of the Day

“Not today, Satan!” – me walking into a hotel room and throwing 12 goddam decorative pillows to the floor. @colsonwhitehead

Business of Buying

Business Travel Growth Is Expected to Rise in U.S. Despite Recent Dip: International travel to the U.S. will continue to grow this year, according to U.S. Travel. But given the unpredictability of the U.S. government at this time, the outlook could get worse in a hurry.? Read more at Skift

Understanding the Qatar Ban and Its Implications for Qatar Airways: The Qatar diplomatic ban is a nightmare for Qatar Airways. Its routings and market share will undoubtedly suffer in the near and medium term. Read more at Skift

Airlines CEOs Say They Have 15 Minutes to Respond to Customer Crisis Incidents: Three airline CEOs on a four-person panel — all of them except United’s Oscar Munoz — said airlines must apologize within 15 minutes for all incidents where they may be at fault. That seems fast, but the news cycle demands it. Read more at Skift

British Airways Uses Its Loyalty Program to Apologize: After things go bad, a big burst of loyalty generosity is an easy way for a travel provider to say “we’re sorry.” Read more at Skift

Sabre Predicts U.S. Airlines Won’t Level Booking Surcharges: Sabre argues that it would be self-harming for U.S.-based airlines to copy the surcharges that European airlines like Lufthansa and British Airways are adding on bookings processed outside of their own networks. Perhaps. But airlines often have views widely different than Sabre’s. Read more at Skift

Foreign Airline CEOs Say They See No Trump Slump on U.S. Routes: It’s amazing how resilient U.S. tourism is. Europeans flock to America during the summer, and while anecdotal evidence suggests some travelers may be altering their plans because of politics, many airlines say they’re having no trouble filling seats. Read more at Skift

Safety + Security

Trump’s Air Traffic Control Proposal Promises Change Without Giving Details: A private air traffic control system isn’t dangerous or untested; many countries around the world use them. Until more details are known about what it will take to implement and operate this new system in the U.S., however, you should remain skeptical about the transformative prospects of such a change. Read more at Skift

Disruption + Innovation

New Long-Haul Budget Airline Level Targets Weakened Alitalia: We’re undecided about whether International Airlines Group will show resolve with Level to build a a long-haul, low-cost carrier over the long term. But in the meantime, it may pose a real challenge to struggling Alitalia. Read more at Skift

Apple Talks Up Enhancements to Its Translation and Mapping Tools: Apple’s annual gathering of mobile app makers revealed that the company is enhancing its voice-activated translation tools. That perked up our ears. But Siri’s still not as fast as many travelers would like. Read more at Skift

Points International Aims to Upgrade Airline and Hotel Loyalty Programs: Points is trying to diversify beyond being the world’s largest reseller of airlines and hotels points. But this loyalty tech company needs a little more mojo if it wants to produce truly game-changing products. Read more at Skift

Best Western Is Testing Voice-Activated Rooms: Like Marriott and other hotel companies, Best Western is figuring out if there’s a home for Amazon’s Alexa in the hotel guest room. Read more at Skift

COMMENTS

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

Subscribe to Skift’s Free Corporate Travel Innovation Report

Ryan Wolkov

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