Visa Program for Skilled Workers to Get Tighter under President Trump’s Executive Order

Morry Gash  / Associated Press

In this Dec. 13, 2016 photo, President-elect Donald Trump holds up Green Bay Packers jersey given to him by House Speaker Paul Ryan at a rally in West Allis, Wisconsin. Trump is slated to sign an executive order on April 18, 2017 to tighten up the H-1B visa program. Morry Gash / Associated Press

Skift Take: Highly skilled workers seeking to travel to the United States for work, and tech employers, in particular, will see some big changes as President Trump revamps the H-1B visa program. This is yet another program that would limit immigration — in this case for students and other job-seekers.

— Dennis Schaal

President Donald Trump is planning to sign an executive order that seeks to make changes to a visa program that brings in high-skilled workers.

Trump is heading Tuesday to Kenosha, Wisconsin, where he plans to sign an order dubbed “Buy American, Hire American,” said administration officials who spoke on the condition of anonymity despite the president’s frequent criticism of the use of anonymous sources.

The officials said the order, which Trump will sign at the headquarters of tool manufacturer Snap-on Inc., would direct the departments of Homeland Security, Justice, Labor and State to propose new rules to prevent immigration fraud and abuse. Those departments would also be asked to offer changes so that H-1B visas are awarded to the “most-skilled or highest-paid applicants.”

The White House said the program is currently undercutting American workers by bringing in cheaper labor and said some tech companies are using it to hire large numbers of workers and drive down wages.

Administration officials said the order also seeks to strengthen requirements that American-made products be used in certain federal construction projects, as well as in various federal transportation grant-funded projects. The officials said the commerce secretary will review how to close loopholes in enforcing the existing rules and provide recommendations to the president.

The order specifically asks the secretary to review waivers of these rules that exist in free-trade agreements. The administration said that if the waivers are not benefiting the United States they will be “renegotiated or revoked.”

During his campaign, Trump said at some point that he supported high-skilled visas, then came out against them. At one debate, he called for fully ending the program, saying: “It’s very bad for our workers and it’s unfair for our workers. And we should end it.”

The officials said the changes could be administrative or legislative and could include higher fees for the visas, changing the wage scale for the program or other initiatives.

About 85,000 H-1B visas are distributed annually by lottery. Many go to technology companies, which argue that the United States has a shortage of skilled technology workers.

But critics say the program has been hijacked by staffing companies that use the visas to import foreigners — often from India — who will work for less than Americans. The staffing companies then sell their services to corporate clients who use them to outsource tech work.

Employers from Walt Disney World to the University of California in San Francisco have laid off their tech employees and replaced them with H-1B visa holders. Adding to the indignity: The U.S. workers are sometimes asked to train their replacements to qualify for severance packages.

On the planned order by Trump, Ronil Hira, a professor in public policy at Howard University and a critic of the H-1B program, said, “It’s better than nothing.” But he added, “It’s not as aggressive as it needs to be.”

The tech industry has argued that the H-1B program is needed because it encourages students to stay in the U.S. after getting degrees in high-tech specialties — and they can’t always find enough American workers with the skills they need.

Congress is considering several bills to overhaul the visa program. One, introduced by Illinois Democratic Sen. Dick Durbin and Iowa Republican Sen. Chuck Grassley, would require companies seeking H-1B visas to first make a good-faith effort to hire Americans, a requirement many companies can dodge under the current system; give the Labor Department more power to investigate and sanction H-1B abuses; and give “the best and brightest” foreign students studying in the U.S. priority in getting H-1B visas.

Trump’s stop at the world headquarters of Snap-on Inc. would come as the president faces an approval rating of just 41 percent in Wisconsin, a state he barely won in November. The visit also would take him to the congressional district of House Speaker Paul Ryan, who won’t be joining the president because he’s on a bipartisan congressional trip visiting NATO countries.

Trump has traveled to promote his agenda less than his recent predecessors. White House spokesman Sean Spicer said Trump wanted to visit “a company that builds American-made tools with American workers.”

Trump carried Wisconsin in November by nearly 23,000 votes — less than 1 percentage point — making him the first Republican to win the state since 1984. He campaigned on the promise of returning manufacturing jobs that have been lost in Upper Midwest states.

Founded in Wisconsin in 1920, Snap-on makes hand and power tools, diagnostics software, information and management systems, and shop equipment for use in a variety of industries, including agriculture, the military and aviation. Its headquarters are in Kenosha and it has eight manufacturing sites in North America, including one in Milwaukee. The company employs about 11,000 people worldwide.

___

Associated Press writer Paul Wiseman contributed to this report.

This article was written by Catherine Lucey and Scott Bauer 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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Los Angeles Wants Its ‘Everyone is Welcome’ Campaign to Connect With Global Millennials

Discover Los Angeles

Los Angeles hopes its new campaign will help international travelers’ U.S. travel fears subside. Pictured are tourists taking a photo in Los Angeles. Discover Los Angeles

Skift Take: Los Angeles is part of a trend across major global cities as they attempt to distance themselves from less welcoming parts of their countries. Most cities can’t claim to be as diverse as Los Angeles, which helps its message appear honest yet measured.

— Dan Peltier

Los Angeles’ tourism industry may be riding the coattails of the “two-hour advertisement for Los Angeles” that is the Academy Award-winning film “La La Land,” said Discover Los Angeles CMO Don Skeoch. But the city is also doubling down on its message that it’s a welcoming and inclusive place to visit to help combat negative perceptions of the United States from President Trump’s travel ban and the U.S. political climate.

This week, Discover Los Angeles, the city’s destination marketing organization, will launch its “Everyone is Welcome” multi-million dollar global marketing campaign that focuses on reaching primarily millennial travelers in five international markets — Mexico, Canada, China, Australia, and the UK — as the city projects weaker growth in international visitation during the next three years if President Trump’s current rhetoric and policies continue.

International arrivals in Los Angeles are still projected to climb through 2019 but that growth won’t be as steep if policies such as the six-country travel ban remain in effect and negative opinions of the U.S. grow (see charts below).

Discover Los Angeles expected to hit 7.4 to 7.5 million international visitors in 2017 before the November 2016 election. Skeoch said the organization, using Tourism Economics data, altered its projections recently and expects 2017 international visitor totals (seven million) to be virtually unchanged from 2016. Tourism Economics projects the city could potentially lose 830,000 international visitors during the next three years which breaks down to about 240,000 arrivals this year, nearly 300,000 next year and about 290,000 in 2019.

International travelers in Los Angeles, on average, spend $1,000 per trip. “That’s about $800 million of potential lost tourism dollars over three years, said Skeoch. “More specifically, that’s $35 million in tourism tax revenue lost. No one wants to see those funds dry up and it’s really critical for us to try to mitigate the situation.”

Los Angeles Visitor Forecast January 2017

With Exec Orders/travel ban (in millions)

2014 2015 2016 2017* 2018* 2019*
Total International Visits 6.52 6.84 7.08 7.09 7.33 7.63
Leisure 5.28 5.57 5.74 5.76 5.95 6.2
Business 1.24 1.27 1.33 1.34 1.38 1.42
Canada 0.74 0.73 0.71 0.71 0.73 0.75
Mexico 1.73 1.74 1.76 1.67 1.69 1.73
Overseas 4.05 4.37 4.61 4.71 4.91 5.16
China 0.69 0.82 1.01 1.11 1.23 1.36
Japan 0.31 0.31 0.34 0.34 0.35 0.36
South Korea 0.25 0.3 0.3 0.3 0.31 0.33
India 0.09 0.11 0.12 0.13 0.13 0.15
Australia 0.4 0.43 0.43 0.43 0.44 0.45
UK 0.33 0.35 0.36 0.35 0.35 0.36
Germany 0.23 0.24 0.25 0.25 0.25 0.26
France 0.28 0.28 0.29 0.28 0.29 0.3
Scandinavia 0.15 0.17 0.18 0.18 0.18 0.18
Brazil 0.13 0.13 0.1 0.1 0.11 0.11
Middle East 0.13 0.16 0.16 0.15 0.15 0.15
Other Overseas 1.06 1.07 1.08 1.1 1.12 1.16

Los Angeles Visitor Forecast January 2017

Without Exec Orders/travel ban (in millions)

2014 2015 2016 2017* 2018* 2019*
Total International Visits 6.52 6.84 7.08 7.33 7.63 7.93
Leisure 5.28 5.57 5.74 5.95 6.19 6.45
Business 1.24 1.27 1.33 1.38 1.44 1.48
Canada 0.74 0.73 0.71 0.72 0.74 0.76
Mexico 1.73 1.74 1.76 1.79 1.83 1.87
Overseas 4.05 4.37 4.61 4.81 5.06 5.3
China 0.69 0.82 1.01 1.12 1.24 1.37
Japan 0.31 0.31 0.34 0.35 0.36 0.36
South Korea 0.25 0.3 0.3 0.3 0.31 0.33
India 0.09 0.11 0.12 0.12 0.13 0.14
Australia 0.4 0.43 0.43 0.44 0.46 0.48
UK 0.33 0.35 0.36 0.36 0.38 0.39
Germany 0.23 0.24 0.25 0.26 0.27 0.28
France 0.28 0.28 0.29 0.3 0.31 0.33
Scandinavia 0.15 0.17 0.18 0.18 0.19 0.2
Brazil 0.13 0.13 0.1 0.1 0.11 0.11
Middle East 0.13 0.16 0.16 0.15 0.15 0.16
Other Overseas 1.06 1.07 1.08 1.11 1.14 1.16

*Denotes projected international arrivals totals.
Source: Tourism Economics

GETTING THE MESSAGE RIGHT

Getting involved in the culture wars, which this campaign is in part responding to, is a slippery slope and has backfired for some brands that had good intentions. Discover Los Angeles’ “Everyone is Welcome” one-minute, 30-second campaign video (watch below), however, doesn’t feature any protestors or demonstrations but does highlight locals with disabilities, various racial backgrounds and sexual orientations, for example.

Everyone in the video appears natural and blends into the background of the city all while showing that these are the lives they live in Los Angeles and that they’re accepted.

Skeoch said the organization isn’t trying to be political with the campaign and instead approached the U.S. political climate as a business problem that needs to be addressed. “Someone has to take a leadership role because people think that safety and security are mutually exclusive,” he said. “They’re not. They’re complimentary but people take different positions there.”

Appearing tone-deaf in the campaign isn’t a concern with the video, said Skeoch. “We watched this spot over and over and over and I’d say we overanalyzed it,” he said. “We kept saying to our agency, Mistress, it’s got to be authentic. It will not read well if it’s not authentic.”

At the same time, the campaign’s aim isn’t to hide the reality that the U.S. is in a period of deep political divide and uncertainty or to advocate one position or the other, although the video ends with the message of “we welcome everyone” in eight languages including Arabic, Spanish and Japanese.

“I think what needs to be reinforced is that what you see in this spot and what you see when you come cannot be vastly different,” said Skeoch. “If you saw it and you were hanging around Venice you’d have to say ‘yeah, this is pretty accurate to what I’m experiencing as a visitor.’”

While local Angelenos are the stars of the video, such as two African American women doing yoga on a beach or a gay couple holding hands, there’s another noticeable character — a paper airplane. “If we didn’t have the paper airplanes as a metaphor, this wouldn’t have read as a tourism spot,” said Skeoch. “Our challenge was how do you tie diversity and open-mindedness to tourism? A paper airplane is a symbol of innocence and we start the video with a Mexican boy who might have aspirations to travel to Los Angeles.”

“If we didn’t have the paper airplanes as a metaphor, this wouldn’t have read as a tourism spot,” said Skeoch. “Our challenge was how do you tie diversity and open-mindedness to tourism? A paper airplane is a symbol of innocence and we start the video with a Mexican boy who might have aspirations to travel to Los Angeles.”

Everyone is Welcome — Especially Millennials

The six-week campaign will wrap-up at the end of May and will play out as digital and social advertising on platforms including Facebook, for example, which the organization chose because that’s a growing news source for millennials.

The video will run through paid boosts on Facebook and Instagram and will also appear on WeChat and Weibo in China. Skeoch said the organization expects to receive more than 100 million impressions with this campaign and more than half of the millennial (18 to 35) population in the five markets are expected to see the video at least three times.

Discover Los Angeles held focus groups last year in Vancouver, Mexico City, London, Shanghai, Beijing, and Sydney with millennial travelers to learn about their interest in travel and what would make them choose Los Angeles as a destination. “We learned that a millennial is a millennial is a millennial,” said Skeoch. “We thought someone in London would be different than someone in Shanghai. In terms of travel, they behave very similarly. We found that it’s our lifestyle and mindset in Los Angeles that appeals to them.”

The tourism board will also roll out a video for industry trade partners from CEO Ernest Wooden Jr that’s subtitled in Arabic, German, Japanese, Korean, Spanish, Portuguese, and Traditional and Simplified Chinese.

International Travelers’ U.S. Concerns

Millions of marketing dollars are unlikely to erase many international travelers’ fears of U.S. Customs and Border Protection and Transportation Security Administration officers in light of the Trump Administration’s immigration policies.

Tourism boards don’t have jurisdiction over airports and immigration — two factors that have many international travelers spooked. “That doesn’t mean we’re not concerned with visitors’ guest experiences whether that’s at the airport or moving around the market,” said Skeoch.

Skeoch said his team is particularly worried about losing market share from gulf markets such as the U.A.E. and also from Mexico, the latter more of a consumer sentiment, he said. “People may have sentiments towards the U.S. but that doesn’t mean they have negative sentiments towards Los Angeles,” he said.

Los Angeles also had the largest number of Chinese visitors of any U.S. city in 2016 (1.01 million) but China and India aren’t a concern for potential decreased market share, Skeoch said. A recent survey from Brand USA, for example, found that Chinese travelers were the only market more likely to visit the U.S. because of the political climate. “With the La La Land effect we’re finding some markets, and especially China, want to do precisely what they saw in the movie.”

Discover Los Angeles isn’t the first tourism board to roll out a marketing campaign to promote diversity and inclusiveness since the 2016 election. NYC & Company, which is also forecasting slower growth in international arrivals for 2017, has updated overseas billboard advertisements with “Welcoming the World” messaging and creative.

Los Angeles’ campaign, however, will likely reach more travelers because of the campaign’s social and digital focus on platforms they frequently use.

The city also has another advantage in its effort to portray itself as a welcoming, tolerate and progressive place with its general liberal reputation and the fact that former Democratic presidential nominee Hillary Clinton won the state by more than million votes in the general election. But not every city has what Los Angeles can claim — residents from 140 countries who speak some 224 languages making it one of only two U.S. cities without a majority population.

And being one of the major gateways into the U.S. makes it easier for the city to have this message. Los Angeles faces a loss in arrivals from nearby Mexico, an economy that’s increasingly improving as more Mexicans choose Canada for their vacations this year, and it’s one of the nearest U.S. gateways for Asia-Pacific markets that it can’t afford to lose as outbound travel from the region swells.

Watch the full video from the campaign below.

Ryan Wolkov

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What’s Really Behind the Hotel Industry’s Plans to Combat Airbnb

J. Scott Applewhite  / Associated Press

The American Hotel & Lodging Association is lobbying federal, state and local governments to clamp down on Airbnb. The U.S. Capitol is seen at dawn in Washington, D.C. in this April 4, 2017 photo. J. Scott Applewhite / Associated Press

Skift Take: There’s not David and Goliath battle happening here. Its more like new money versus old money, and we expect to see some excellent public relations work on every side.

— Deanna Ting

Over the weekend, The New York Times published an article, “Inside the Hotel Industry’s Plans to Combat Airbnb,” which included pages from a 2016 internal American Hotel & Lodging Association (AHLA) document, detailing the organization’s plans for limiting the growth of short-term rentals and the platforms that enable them, namely Airbnb.

That action plan includes the launch of a new ad campaign called “My Neighborhood” that would feature testimonials from people negatively impacted by short-term rentals, as well as funding research that purports to demonstrate how Airbnb and other platforms are predominantly used by commercial operators, not everyday middle-class Americans.

Is it a battle for the future of the middle class, as Airbnb consistently positions this? Or is it just another business battle between multi-national hotel chains and a venture capital-backed company valued at around $30 billion?

The AHLA’s Job

The New York Times article described AHLA as “a trade group that counts Marriott International, Hilton Worldwide and Hyatt Hotels as members,” interchangeably using “AHLA” and “the hotel industry” throughout its piece. Fighting illegal hotels is just one of many issues AHLA tackles. It also has campaigns aimed at preventing human trafficking, stopping online hotel booking scams, encouraging more youth to have careers in hospitality, and fighting increasing wage legislation that targets the hotel industry specifically.

The organization also runs its own political action committee, which spent $2.43 million on lobbying efforts in 2016, an increase of nearly 31 percent from the $1.86 million it spent on lobbying in 2015.

AHLA’s chief executive, Katherine Lugar, has been at her post since 2013, and formerly served as a top lobbyist for the Retail Industry Leaders Association. She is also the daughter-in-law of former Senator Richard G. Lugar (R-Indiana).

The more than 24,000 members that AHLA advocates for do not only include the Marriotts, Hiltons, and Hyatts of the world, but the roster also extends to hotel owners, real estate investment trusts, independent hotels, beds and breakfasts, and everyone from hotel company CEOs to the person staffing the front desk.

What the Document Revealed

For people who work in the travel and hospitality industry, The New York Times article and the internal document no doubt reaffirmed what many already know: That the AHLA and Airbnb are combatants fighting with one another in the arenas of public policy and public perception.

AHLA wants the federal and local governments to be tougher on short-term rentals, a number of which can be classified as illegal hotels, and limit the growth of a business that is, no doubt, having some impact on its members. All of this is taking place, however, as data from various sources have conflicting analyses on the real impact Airbnb is having on hotel business. How big a threat Airbnb is to the hotel business is unclear, but what’s certain is that the industry, and AHLA, see it as a viable one.

“Though we welcome the practice of true home sharing, where the owner is present during the guest’s stay, we’ve found that accounts for less than 20 percent of Airbnb’s business,” said Maiettta. “While 81 percent of Airbnb’s revenue nationwide – $4.6 billion – comes from whole-unit rentals where the owner is not present. That’s not home sharing, that’s a business.”

She added, “We call on Airbnb and short-term rental companies to stop misrepresenting their platform as one that simply supports the middle class when it’s clear the bulk of Airbnb’s revenue is coming from commercial activity. They have the power to report their data, remove commercial activity when appropriate, adhere to commonsense safety and security measure and pay their fair share of taxes. And they refuse to take even simple steps to do any of that.”

Airbnb Is Working for Legalization

Airbnb wants to gain legalization in jurisdictions around the world and it’s worked hard for the past few years trying to convince mayors and other lawmakers that homesharing is a win-win for all — that it’s an economic empowerment tool for the middle class. The company is also trying to convince those same lawmakers that having laws of any sort to regulate the sharing economy is misguided.

Airbnb spokesperson Nick Papas’ responsed to The New York Times article:  “With more than 250 government partnerships over the last year we have shown our seriousness of purpose when it comes to putting in place fair rules so everyday people can use their homes to make extra income, but from opposing raising the minimum wage to attacking home sharers, it’s clear the hotel cartel is intent on short-sheeting the middle class so they can keep price gouging consumers.”

“The hypocrisy is almost unbelievable: the hotel cartel wanted Airbnb to collect taxes and when we implemented a way to do so, they changed their position and lobbied cities to leave millions of dollars on the table. And their ‘model legislation’ would charge a middle class family $2,500 if they wanted to share their home for even one night.”

While AHLA’s strategy was the main focus of The New York Times article, Airbnb likewise has its own similarly multi-pronged strategy for battling the hotel industry that is gaining steam under the leadership of Chris Lehane, Global Head of Public Policy, and backed by significant spending on lobbyists in state capitals around the U.S., as well P.R.-driven stories about citizenship at Airbnb Citizen. For instance, in February, Airbnb launched “a campaign tracking the big hotels’ fiscal flip flops.”

In another case, Airbnb has sponsored self-described “national watchdog blog,” Checks and Balances Project as it publishes articles portraying the “hotel lobby” and any opponents — from academics to city council members — of homesharing in a negative light. Its primary target? A Penn State professor who authored a research study about Airbnb that received funding from AHLA.

In other words, both AHLA and Airbnb are doing whatever they can to advance their respective missions in the back halls of Washington, as well in the hearts and minds of the American people. It’s an ongoing battle, and one that isn’t going away anytime soon.

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Isolation Is the Next Big Thing in Luxury Travel

Hotel Remota

Hotel Remota in Patagonia offers remoteness and isolation, at a price. Hotel Remota

Skift Take: Silence is indeed golden and isolation comes at a premium as well for luxury travelers who really, really want to get away.

— Laura Powell

The Skift New Luxury Newsletter is our weekly newsletter focused on the business of selling luxury travel, the people and companies creating and selling experiences, emerging trends, and the changing consumer habits around the sector.

In addition to providing this weekly digest with stories that are relevant to the sector, Skift is expanding its coverage of the sector with stories like you find below.

Hotel Remota in the Chilean Patagonia. Pädaste Manor on Muhu Island, Estonia. Fogo Island Inn in Newfoundland, Canada. What do the following hotels have in common? All are in the middle of nowhere and their rooms sport luxury-level price tags.

Which begs the question — is isolation the next big thing in luxury travel?

Aman Chief Operating Officer Roland Fasel thinks so, “Especially for those who have seen and done it all, isolation or being disconnected from the pressures of everyday life can be a real luxury,” notes Fasel. “Guests nowadays want to achieve a deep level of transformation from the outside in which is sometimes best achieved with as few distractions as possible.”

Wilderness Hotel Nellim is a family-run hotel in Finnish Lapland. According to Milla Nissi, a sales representative for the property, “Especially for people living in large cities, isolation is a true luxury – to be able to just close your eyes and enjoy the peace and silence, without the constant reminders of your hectic everyday life. In Nellim, it is possible to hide from the world, away from everything, while still taking advantage of the high-quality accommodation and services we provide.”

Ah, there’s the catch. Even though they are traveling off the grid, most high-end travelers still want their Wi-fi and other creature comforts. Henna Konu, senior researcher and project manager with the University of Eastern Finland’s Centre for Tourism Studies agrees that isolation is becoming a form of luxury travel. However, she emphasizes, “in order to be a product for high-end travelers, the service chain needs to be perfect” and providers need to offer superior service.

Although several remote resorts offer private helicopter fly-ins for time-constrained travelers (talk about superior service), most visitors sojourn for hours to get to these isolated places. The lengthy journey, often combining travel by plane, car and boat, is an apt transition into isolation.

Remote is not just about literal distance, though. According to Martin Breuer, owner of Pädaste Manor in Estonia “A remote location creates a setting in which it’s possible to take a certain distance to everyday life. Maybe it’s about a certain slowness and the freedom of not having to make choices.”

Indeed, option overload, as detailed in the book The Paradox of Choice, is a major cause of anxiety in daily life. So is noise pollution. That’s why a big part of the relaxation experience in an isolated setting is the sound of silence. Silence is indeed golden these days, according to Mia Kyricos, whose consulting firm specializes in wellness, hospitality, tourism and lifestyle brands. “In the past, luxury was defined by cushy bathrobes and the thread count of sheets,” says Kyricos. “But in today’s noise-saturated world, silence, solitude, space are the true definitions of luxury.”

Fogo Island Inn proudly boasts about “miles and miles of blissful nothingness” in its marketing material. Finland taps into the rising demand for isolation and quiet with its Silence, Please tourism campaign, perhaps inspired by research being done at the University of Eastern Finland. For more than a decade, academics at UEF have been studying ways to make silence a tourism asset in sparsely-populated areas.

Aman’s Fasel sums it up. “Properties situated in locations that are often quite remote afford a sense of escapism, calm and serenity, …often much sought after with today’s fast-paced life. As a result, our guests are truly able to switch off and let the beauty of their surroundings relax their minds.”

Sign up for Skift’s New Luxury Newsletter

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Lufthansa Is No Longer Alone in Its Battle Against Airfare Middlemen

Ukrainian International

Ukraine International is the second airline company after Lufthansa Group to tack on a charge to bookings made via global distribution systems. Ukrainian International

Skift Take: Ukraine’s flag carrier is the first airline to follow Lufthansa’s bold September 2015 move to add a surcharge to bookings made via third-parties. Yet the industry may be overstating the threat to the revenue of the middlemen.

— Sean O’Neill

In the past week Ukraine International Airlines quietly joined Lufthansa Group’s skirmish with the middlemen who distribute airfares through most travel agencies worldwide.

As of April 19, it is adding a $9 fee per segment for bookings made through the four global distribution systems — Amadeus, SabreTravelport, and Travelsky — that process nearly all airline tickets worldwide that are not sold directly by airlines through their own websites or online agency portals.

The move represents a bit of changed course for the Ukrainian carrier. Last year it signed up to use Amadeus’s software to help sell their ancillary services, such as meals and bags, via travel agencies. Now it will be taxing tickets if they’re sold via agents who use Amadeus’s reservation systems to book tickets.

Lufthansa Group’s fee is $17 (16 euro) per ticket booked via those companies.

Despite the “tax,” a substantial majority of tickets are still being booked via the middlemen, the airline group says. It paid about a half billion dollars in costs to the middlemen in 2016, according to estimates by investment banks.

It is notable that an airline as small as Ukraine would take the risk of losing some business to pursue this commercial strategy. The conventional wisdom in the industry was that only an airline group the size of Lufthansa would feel the risks of losing some business in the most popular distribution channels would outweigh the benefits of avoiding the fees that GDSs bake into the cost of their contracts.

International Airlines Group, parent company of British Airways and Iberia, may make a similar move to Lufthansa Group’s and Ukraine’s by year-end, according to interviews on a background basis that Skift did with industry executives and investment analysts.

Tipping point?

In a 100-page report on Amadeus published April 7, Credit Suisse analysts, led by Neil Glynn say: “We firmly expect peer airlines, such as Air France-KLM and IAG, will follow Lufthansa in attempting to disintermediate Amadeus and its fellow Global Distribution Systems (GDSs).”

The analysts expect the changes in strategy – signaling their intent to drive business away from Amadeus and its GDS peers – will be revealed later this year.

On March 16, Lufthansa Group chief executive Carsten Spohr echoed the sentiment: “We also believe it’s only a question of time when others will follow…..what we hear in the industry. And with the business success of Lufthansa, I’d be very surprised if others will not follow”.

Amadeus is the largest of the GDSs, especially in the European market, and may be the most affected by the moves by Lufthansa and Ukraine International.

The Credit Suisse analysts estimate Lufthansa, Air France-KLM, and IAG (parent company of British Airways and Iberia) cumulatively represent 15 percent of Amadeus’s largest distribution customers.

Overstated risks?

Yet despite that buying power, Credit Suisse estimates that a 5 percent volume shift in airline ticket sales out of the GDSs would mean only about $53 million (50 million euro) drop in contribution to Amadeus’s distribution business.

The analysts add: “We expect Air France-KLM and IAG will… look to shift at least 10 percent of volume from the GDSs in order to justify their efforts (less would not be worth the effort given potentially unwinding full content agreement discounts could drive GDS costs per booking up 25 percent.”

So how significant is the threat to Amadeus — and its GDS peers?

On the one hand, that division represents two-thirds of Amadeus’ revenue and half of the company’s annual contribution to earnings.

Yet in the context of Amadeus’s $21.29 billion market capitalization, that is small hit that the company could theoretically manage by growing its new businesses, which include software services for airlines and hotels. (A similar contextual point could be drawn about Amadeus’s peer companies.)

What’s more, Credit Suisse has taken the most negative approach to forecasting the possible impact of airline disintermediation on Amadeus and its peers. Other analysts have been more sanguine.

In short, it may take airlines so long to shift share out of the GDS channel, and they may only be modestly successful in doing so, in which case the companies that run the GDSs may have shifted into new businesses by that time and become less dependent on them.

Lufthansa’s fee is still being contested in a lawsuit in a Texas court filed by one of the middlemen, Sabre. The fee has also been challenged by a lobbying arm of national travel agents’ and tour operators’ associations within the European Union, who filed an appeal in 2015 to the EU Commission’s watchdog body to intervene. Both cases are still unresolved.

But apparently Ukraine International feels confident that the wind will be at its back in its move.

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China’s Luxury Travelers Are Young and Spending More Than Ever

Kirsty Wigglesworth  / AP Photo

Shoppers carry designer label branded bags at Bicester Village designer outlet centre, in Bicester, England. Kirsty Wigglesworth / AP Photo

Skift Take: Chinese consumers are responsible for one-third of the world’s personal luxury spending, but the consumers are younger and more affluent than the sector is accustomed to serving. Speaking directly to this group will pay off with loyalty and service for decades to come.

— Samantha Shankman

The Skift New Luxury Newsletter is our weekly newsletter focused on the business of selling luxury travel, the people and companies creating and selling experiences, emerging trends, and the changing consumer habits around the sector.

In addition to providing this weekly digest with stories that are relevant to the sector, Skift is expanding its coverage of the sector with stories like you find below.

Chinese millennial travelers are the future of luxury spending: They’re well-traveled, affluent, and eager to spend on on luxury goods and experiences that show off their wealth.

This is great news for the travel and luxury retail sector, but let’s break down where the opportunities actually lie.

Globally, the share of luxury goods spending that comes from purchases made while traveling internationally is increasing and currently accounts for 40 percent of the global spend on luxury goods, according to the Deloitte report Global Powers of Luxury Goods 2016.

The rise of the Chinese traveler is nothing new and outbound travel from China continues to grow with most recent statistics indicating a 17-percent increase in 2015. Growth in spending on foreign travel by Chinese of all age groups and income status grew in 2016 to levels never seen before, hitting $261 billion for the first time. Half of Chinese travelers are millennials, age 15 to 29, who are less price-sensitive and more willing to spend money on indulgences than previous generations.

More than half, or 66 percent, of these Chinese millennials are high-income earners, but societal norms have as much an impact on their spending as their salaries, according to new Forrester Research.

Millennials living in major urban areas in China, more than any other emerging or developed nation, agreed with the statement, “I like to show off my taste and style,” regardless of their income.

More than half of Chinese millennials are likely to buy luxury goods while traveling, but their luxury spending extends beyond handbags and jewelry to travel and dining experiences, according to the research.

This is a shift mirroring much of what we’ve seen across the travel industry in which younger consumers spend more on experiences than products. Validating that change is data showing that the Chinese retail sector posted just 10-percent growth in 2015, almost half the 17-percent increase in outbound travel.

Smart travel and luxury brands have the opportunity to transform millennials, who are just developing their consumer habits, into loyal customers for decades to come although the question of exactly how to engender loyalty continues to fluster companies.

In addition to ever-growing luxury spend from traveling Chinese millennials, the Forrester report also suggests that eCommerce will be an important strategy in capturing luxury spend with cross-border eCommerce sales set to triple over the next five years.

Online purchases will capture market share from personal shopper services as consumers seek product authenticity and return guarantees. This shift is yet another opportunity for retailers to form more direct relationships among Chinese shoppers.

Forty-four percent of the online population in China were between the ages of 18 and 34 in 2015 — compared to just 27 percent in the U.S. – suggesting retailers that can foster loyalty among consumers will benefits for decades to come.

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Lufthansa Thinks Starting an Indian Airline Is a Bad Idea

My16SidedOffice  / Flickr

As carriers in the Middle East and Asia jockey for a competitive advantage in India’s air market, Lufthansa is sitting out. A Lufthansa aircraft taxis in Vancouver. My16SidedOffice / Flickr

Skift Take: Although Qatar Airways plans on entering India with a domestic carrier, and many other carriers have acquired stakes in domestic Indian carriers, Lufthansa thinks fuel prices are too costly to make a similar move.

— Andrew Sheivachman

Deutsche Lufthansa AG said starting a domestic airline in India, the world’s fastest growing aviation market, will be a “misadventure” because of high jet fuel taxes and the cost of operations.

Lufthansa’s comments come weeks after Qatar Airways Ltd. said it plans to start an airline in India with as many as 100 planes, as the Gulf carrier looks for a bigger share of a market projected to sell half a billion domestic tickets in a decade. Singapore Airlines Ltd., Etihad Airways PJSC and AirAsia Bhd. have also bought stakes in local carriers buoyed by an emerging middle-class flying for the first time.

“You only go make business when you have business plans which give you hope that you can be very successful,” said Wolfgang Will, a senior director for South Asia at Lufthansa, “And I did not hear up to now of any domestic airline in India making a lot of profit.”

Lufthansa has a history of running an Indian airline. It was part of a partnership that ran ModiLuft, which was grounded in 1996 after disputes over payments with the German carrier, creditors, oil companies and the Airports Authority of India. The airline’s permit was later used by two entrepreneurs to start SpiceJet Ltd., now India’s second-largest budget carrier.

Lured by an expanding market, more airlines are coming up in India. At least 43 businesses have applied to Indian regulators in the past two years to start some form of passenger air transport service in what’s projected to be the world’s third-biggest aviation market by 2020 and the largest by 2030. The increase in local traffic — estimated to reach half a billion in a decade — has outpaced all other markets for 23 straight months.

Fuel Costs

Still, the nation is home to some of the world’s costliest jet fuel, mainly due to provincial taxes of as much as 30 percent and cut-throat competition that forces airlines to sell tickets below cost. Aviation turbine fuel in India costs 70 percent more than it does abroad, and has led to the shuttering of as many as 17 airlines in the past two decades, according to a research paper by KPMG and The Associated Chambers of Commerce of India.

Indian carriers lost money every single year for a decade before posting a combined profit of $122 million in the year ended March 2016, helped by a crash in oil prices, according to Sydney-based CAPA Centre for Aviation. The industry is set to report losses of as much as $750 million in the two years ending March 2018, according to CAPA estimates.

©2017 Bloomberg L.P.

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

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United Airlines’ First Quarter Earnings Beat Forecasts

United Airlines

A United Airlines plane on the tarmac. The airline’s first quarter earnings beat estimates. United Airlines

Skift Take: While it’s too soon to see any fall out from its passenger-dragging incident, tomorrow’s earnings call will likely reveal more.

— Jason Clampet

United Continental Holdings Inc. (UAL) on Monday reported first-quarter profit of $96 million.

The Chicago-based company said it had profit of 31 cents per share. Earnings, adjusted for non-recurring costs, came to 41 cents per share.

The results topped Wall Street expectations. The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of 37 cents per share.

The airline posted revenue of $8.42 billion in the period, also surpassing Street forecasts. Four analysts surveyed by Zacks expected $8.36 billion.

United shares have declined roughly 3 percent since the beginning of the year. In the final minutes of trading on Monday, shares hit $70.77, a rise of 25 percent in the last 12 months.

This story was generated by Automated Insights using data from Zacks Investment Research.

Copyright (2017) Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

This article was 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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Hawaii Lawmakers Try to Settle Differences Over Vacation Rental Regulations

Cathy Bussewitz  / Associated Press

Hawaii Gov. David Ige is concerned that a rise in short-term rentals and vacation rentals is having a negative impact on Hawaii’s housing shortage. Cathy Bussewitz / Associated Press

Skift Take: In destinations like Hawaii where tourism is a top industry, managing the balance between the needs and wants of visitors and the needs of residents is a constant struggle that’s being reflected in the state’s current battles over vacation rental regulation.

— Deanna Ting

The chairmen of Hawaii’s House and Senate tourism committees expect to meet in the upcoming week to resolve differences over vacation rental tax bills that have passed their respective chambers.

Both bills would enable websites like Airbnb to collect state taxes on behalf of people renting rooms and homes.

Short-term rental operators are already required to pay general excise taxes and transient accommodations taxes under current law. But supporters say the legislation could help the state collect $100 million in taxes that are not currently being paid.

The issue is contentious in part because so many vacation rentals operate in violation of county law. This is particularly prevalent on Oahu, where the county has not authorized any new short-term rentals since the late 1980s.

Sen. Glenn Wakai said senators want to set up a taxing mechanism and to push the counties to set up a permitting system for short-term rentals if they have not done so already.

Senators want to make sure the vacation rental and bed-and-breakfast establishments do not negatively affect the communities where they’re located, said Wakai, a Democrat who represents Kalihi and Pearl Harbor.

Rep. Richard Onishi, a Democrat who represents Hilo and Volcano in the state House, said the Senate version includes provisions to enforce county rules. He said this should be left up to the counties, as they each have their own laws and permitting requirements.

He noted the legislation had to satisfy many different stakeholders, including the state tax department, the public, the neighborhoods where vacation rentals are operated, online rental platforms like Airbnb, hotels, hotel worker unions and others.

He stressed that lawmakers do not want the legislation to send a message that the state is legitimizing illegal rentals.

“By all means, we’re not trying to say because we collect appropriate taxes, that these units are permitted or they are legal,” Onishi said.

The Legislature passed similar legislation last year only to have it vetoed by Gov. David Ige, who said he was concerned it would facilitate illegal short-term rentals.

He said encouraging people to rent to visitors instead of residents could exacerbate Hawaii’s severe housing shortage and homelessness crisis.

Onishi said he has been working with the governor’s staff on the issues since the beginning of the legislative session to address his concerns and avoid a similar outcome this year. But Wakai said he has been disappointed at the lack of engagement by the governor’s office with him on the issue.

Ige, when asked about Wakai’s concerns, said he knows his chief of staff, Mike McCartney, has met with Senate and House members on the issue.

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IHG Reveals Second Credit Card Data Breach Occurred in 2016

Mark Lennihan  / Associated Press

InterContinental Hotels Group, parent of brands including Holiday Inn Express and Candlewood Suites, said some of its franchised properties in the U.S. and Puerto Rico suffered a recent credit card data breach. Mark Lennihan / Associated Press

Skift Take: This is yet another reminder for the hotel industry about the crucial importance of cyber security.

— Deanna Ting

Last week, InterContinental Hotels Group (IHG) announced it had suffered a data breach at multiple IHG-branded franchise hotel locations in the U.S. and Puerto Rico during the period of September 29, 2016 to December 29, 2016.

IHG did not disclose the exact number of properties impacted. To learn which properties were impacted, guests need to search for hotels that may have been impacted on IHG’s website.

It’s the second such data breach the company has revealed this year. The earlier breach, announced in February, impacted 12 hotels in the U.S. The company operates and manages hotel brands that include Holiday Inn, Holiday Inn Express, Candlewood Suites, Hotel Indigo, and InterContinental Hotels.

IHG said a cybersecurity investigation revealed that malware accessed payment card data from cards used on site at some of its franchisee-operated properties in the Americas, thereby generating unauthorized charges on those cards after being used at IHG front desks.

The company added that while there’s no evidence that unauthorized access to payment card data took place after December 29, confirmation that the malware was removed didn’t take place until the properties were investigated in February and March of this year.

IHG also noted that before this breach, many of IHG’s franchise-operated hotels had installed IHG’s Secure Payment Solution, a point-to-point encryption payment acceptance solution, and that those properties that had this technology prior to September 29 or shortly thereafter were not impacted by this most recent breach. Properties that had implemented SPS before September 29, 2016 were not affected.

IHG said that it also doesn’t believe any other guest information, other than cardholder names and numbers, was taken by the hack.

IHG isn’t the only hotel company to suffer from recent breaches of customer credit card data. Other hotel brands that have dealt with this recently include Trump Hotels, Hard Rock Hotels, Omni Hotels & Resorts, and Hilton Hotels.

Ryan Wolkov

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