New York Hospitality by Vijay Dandapani

Internet Travel Bargains

The Wall Street Journal's Middle Seat column has a report on stretching travel dollars. The column starts off with a mention of the site Yapta, a resource highlighted in June of this year by this website as one that tracks the prices of airline tickets as they change and sends customers a "price drop" email if the price goes down which may entitle the customer to a refund or voucher from the airline.

The Middle Seat also mentions Expertflyer.com, "a subscription Web site favored by hard-core road warriors who mine the intricacies of airline fare codes and upgrade rules, has a more sophisticated "Award and Upgrade Availability" search function. You can search for coach, business-class or first-class awards at different price levels on different airlines, and search for upgrade opportunities as well".

Other sites noted by the WSJ, all of which have previously been mentioned here, include Kayak, which compares fares and which also has a "feature that opens a chart showing you airline fees -- now a crucial element when comparing prices between airlines", Farecompare which, among other things, "shows historical graphs of the lowest prices offered on a route" and can "show you discounted first-class seats to hundreds of different destinations".

Sites useful for trip planning include Flightstats "so you get early notice of cancellations, gate changes or delays. Flight alerts are also helpful when picking people up at airports, too". Another interesting site mentioned is Tripit which "will take all your travel confirmations and compile one detailed itinerary, even adding directions to hotels or appointments, plus weather forecasts and other local information".

Sites specific to the hotel industry not mentioned in the article where travelers can find bargains owing to the economic downturn include Laterooms where some rooms can be had for as much as "70% off" per the website. For those of a sking bent there is Igluski where discounts of as much as 50% on some chalets in Europe are on tap.

Silver lining in the economy?

Purveyors of unremittingly woeful economic news seems to be the only ones in heavy demand with some such as the world's most sought after Cassandra, Nouriel Roubini earning as much as $50,000 per attendee for a single session where he presumably dishes out more misery while he rakes in millions. Contrarians, in a positive sense, are hard to come by but perhaps this report in the Wall Street Journal could be the first silver lining in a while.

The Journal quotes the Mortgage Bankers Association weekly survey as showing "applications filed for mortgages to buy homes increased a seasonally adjusted 10.6%". Other positive news, in the report include the fact that "applications to refinance existing mortgages increased 62.6% on a week-to-week basis" and that "applications (for home mortgages) for the week ended Dec. 19 ran 124.6% ahead of the mortgage activity seen during the same week last year". Few would disagree that the housing crisis, whatever the primary reason(s) for its origins is responsible for the overall decline in the economy with its victims including the the hotel industry. So, even a nascent uptick as evidenced by the MBA report is a welcome sign for all including hoteliers.

Luxury hotels and price elasticity

Prior to the collapse of financial markets worldwide, some analysts were speculating that the custom for luxury hotels may be impervious to price hikes owing, in part, to the wealth of its clients. Articles headlined "Are luxury hotels recession proof?" were circulating with the suggestion that "luxury hotel guests indicate a willingness to accept larger rate hikes compared to a year earlier (2007 vs 2006)" and that "wealthy individuals to whom price is less of a factor in selecting a hotel".

But as most luxury purveyors of lodging are finding, unfortunately, that premise had much validity as predictions of $200 oil by an ostensible oracle. Unfortunately, the rich, it appears, are just as prone to cut backs and demand better pricing. Around the world, luxury hotels have been battered by the economic recession demonstrating that high hotels have a price elasticity that is no different to any other commodity subject to the vicissitudes of discretionary income.

Yet as USA Today reports, the NBTA expects hotel prices to increase from 1% to 4% nationally while American Express forecasts U.S. hotel rates to decline between -2% to +5.5% as compared to this year's rates.  The New York Times also reported earlier this month that the "Four Seasons hotels in New York, Miami and Scottsdale have been offering a third night free while for Christmas, the Boca Raton Resort & Club in Florida has a family holiday package that offers two connecting rooms for the price of one (starting at $249 a night)".

The aftermath of what appears to be an unprecedented economic downturn could still follow historical patterns for and, as was the case in 2003, only a sustained business cycle recovery will spur a price uptick for hotels, luxury and otherwise.

Hotel (in)security

Emergency management as a proactive security measure has been mentioned on this site recently. Hotels need to continually evaluate and evolve new methods to combat terrorists, thieves and the unwelcome publicity that follows causing a potential loss in clientel. Terrorist attacks, dire economic news and a host of real and imagined malaises are just a few of the reasons that almost every publication discusses hotel security. The latest include the following:

The Financial Times (subscription required) takes a relatively balanced look at security needs in an article headlined "Executives seek five-star security". Focused on Mumbai, India, the article canvasses opinions from guests, operators and consultants. Among the reasoned quotes from security consultants was one who noted that a "hotel's security is only as good as the intelligence support it gets from the government and national security bodies". It is now fairly widely acknowledged that the Indian government performed abysmally in that regard.

Another interesting point raised in the FT that is relevant to hotels worldwide is that "hotel staff are as important as any security hardware a hotel provides. Security requires a real mindset from hotel staff".  Even after 9/11, many urban hotels in the US remain susceptible to bombings similar to the one that demolished the Islamabad Marriott and, a very long time ago, the Vista hotel in New York.

USA Today has an article on how the terrorist attacks on Mumbai have dented business travel with occupancy rates dipping by a third. The article quotes the Association of Corporate Travel Executives as having surveyed 134 corporate travel managers after the Mumbai attacks. ACTE found that "just 6% planned to curtail travel to the region, but 78% were reviewing their hotel contracts with a greater emphasis on security". Among some of the findings: Companies are placing the onus on hotels to prove "to corporations that their security is up to date. Companies are asking the hotels they deal with to coordinate better with police, fire and military authorities, train staff in evacuation techniques, install back-up communication systems in guest rooms, and improve surveillance".

On a similar vein, MSNBC's Mika Brzezinski was mugged in the area immediately outside her unnamed (presumably) luxury hotel entrance. Her co-anchor, Joe Scarborough, demanded on his eponymously named show that the hotel be called to account for its perceived lack of security.

So what are hotels to do in an environment that they, arguably, in limited control of? Beyond emergency management, in today's terrorism driven atmosphere it behooves properties to also consider sensitizing staff to extraneous threats. Measures could include:

• Making employees aware of world events and ongoing threats.
• Encouraging staff to be alert and immediately report any situation that may constitute a threat or suspicious activity via the hotel's emergency response system.
• Staff should be made to know the location of the closest police stations and hospitals.
• Ensuring staff  take notice and report suspicious packages, devices, unattended briefcases, or other unusual materials. Most importantly, they should not attempt to handle or remove such objects.
• Take any threatening or malicious telephone call, facsimile, or bomb threat seriously and set up a standard reporting format for them that provides as much detail as possible for law enforcement authorities..
• Personnel must know emergency exits and stairwells (the Mumbai hotel staff apparently did a remarkable job of escorting many guests out of harm's way)
• Rearrange exterior vehicle barriers, traffic cones, and road blocks to alter traffic patterns near facilities.
• Rotate security staff schedules so as to avoid routine and repetition.
• Limit the number of employee access points and loading docks with thoroughly documented entry/exit procedures.
• Conduct periodic reviews of vendors and their delivery staff to minimize facility entry by unwanted personnel
• Illegally parked vehicles in the hotel "loading zone" area should be challenged and moved expeditiously.

Ultimately, hotel security is best unseen when unneeded but highly visible and omnipresent when needed. With that underlying principle in any hotel's security program, guests are more likely to be at ease even in today's environment.

Osmotic marketing

The Wall Street Journal of December 15th 2008 has an article by Professor Ross D. Petty of Babson College, MA that could be of interest to lesser known businesses seeking to get on the fast lane to customers. Prof Petty labels the tactic as "judo brand marketing" by which a company can leverage a larger business's assets to its own advantage.

The Journal article headlined "Gild by Association" suggests a number of ways by which a company can use the more recognizable brand name without running afoul of the law. Examples cited include an instance where "a company could develop a product that's compatible with a better-known item, such as a line of replacement blades for a popular razor, and then use the famous name prominently in advertising. A company might also run ads that compare its product with a much bigger brand -- or try to get people talking by mocking a rival's better-known mascot".

The marketing strategy is premised on the "doctrine of fair use" where a "a company can use another's trademark without consent in certain circumstances -- including some types of marketing". The article does point out the risks and the need to stay within boundaries by noting that "these tactics can be risky. There are limits to fair use, and companies can be sued even if they handle another company's brand identifiers, such as logos and mascots, carefully". One suggestion to avoid legal repercussions from the copyright owner is to be deliberately vague as in the case of "ambush marketing" where a company that isn't an official sponsor of an event tries to make the audience think that it is - as was the case with some ads during the olympics.

Applications of judo marketing suggested by the artice include "brand extensions,  a popular tactic among companies. Putting out a somewhat different version of a well-known product, such as laundry detergents with added bleach or fabric softener, can be much less risky and costly than trying to build up a new brand from scratch". Another is via "compatible products" where "companies could put out products and services that work with a better-known brand, such as razor blades, printer cartridges and automobile-repair services. In these cases, manufacturers are allowed to say that their products and services are compatible with the bigger brand names -- as long as they don't suggest that the bigger brand approves of the offerings, or is affiliated with them". Others include "ornamental use", a version of compatible products, where a T-shirt is adorned with the company logo of a bigger brand.  Parody marketing is also mentioned where "a trademark is mimicked rather than producing an exact copy, often to make a humorous comment on a well-known brand".

There are takeaways for hotels, particularly independent operators and include capitalizing on events such as the "Indy 500" for hotels in the Indianapolis area as well as hotels in New York looking to garner attention from one of many major world events that are frequently staged in the Big Apple. Independent hotel operators in a crowded market could also use these tactics to highlight their situational advantages in reference to better known global brands in the marketplace. But anyone who embraces these measures must do so with the clear understanding that there are likely to be challenges from brand owners that compel via litigation not only a cessation of it but also potential financial costs that may outwiegh any advantages gained.

Layaway stays?

The retail industry may have some pointers for hoteliers by showing that running out of ideas in an adverse economic environment is not an option and, in fact, is a sure way of running out of money. Faced with consumer reluctance stemming from a lack of confidence as well as credit, some retailers like Sears have brought back a sales facilitator known as a "layaway" from a bygone era. Sears has tried to entice shoppers by offering to put away items that they pay 15-20% down on. When shoppers pays the entire amount for the item/s they get to take them home.

Layaways were common place till the late 80s when a plethora of easy credit rendered that sales approach irrelevant. But even before consumers were awash in easy money few, if any hotels, used that method to fill rooms. With the industry buffeted by a variety of economic headwinds perhaps it is time to bring back the old as new. Some vacation promoters such as travelfrom.com already have a layaway vacation plan and call it a "sunny day" plan. Others include layawayvacations.net and personaltravel.com. And late last month USA Today ran a story on layaway vacations. As yet, none seem to have originated from the hospitality industry. A marketing opportunity for the asking?

Tax (dis)incentives

A recent MIT study by two professors at the institute's Sloan School of Management found that a sales tax can decrease online purchases by more than 15%. The study focused on online retailers who were compelled to levy a sales tax when they decided to have a physical presence via a store in the state. The paper entitled How does an Obligation to Collect Sales Tax Affect Consumer and Firm Behavior? has important public policy implications not just for sales tax but also the infamous hotel tax that jurisdictions around the country are quick to tack on based on the (mistaken) notion that it is has no local implications.

The MIT study found that "for retailers who have not yet established a physical presence in high-tax states, the sales tax obligation is a significant deterrent to do so. The higher the tax rate, the more you may want to avoid that state because the bigger the effects on sales will be. Retailers that do a large percentage of business through remote channels like the Internet will stay away from high-tax states. A telling example was that of Gateway Computers which closed all retail stores in part because of the requirement to charge sales tax for online sales. Not only did the state lose out in terms of its citizens being compelled to buy more expensive computers but also jobs from the closure of the physical outlets.

State, city and townships looking to continue to float bloated bureaucracies from the credit binged times of the recent past via hotel tax revenues ought to realize that the out of town customer equally has a choice of destinations and very likely will devote their business to low tax destinations. New York which is on the verge of increasing the hotel occupancy tax ought to consider not only the MIT study but also the measures another similar city center destination, Hong Kong is considering - the abolition of the accommodation tax.

Bail out for hotels?

The current spate of bailouts first for the financial industry and, soon to be followed, at a minimum, for the auto industry is reminiscent - albeit in a considerably smaller scale - of the bailouts in the immediate aftermath of 9/11. That preview of today's events saw the usual suspects for bailouts - airlines - with the begging bowl at the ready. Their efforts did not go unrewarded as the Federal government rewarded both flying and failing airlines with a bailout to the tune of $20billion. Hotels, as is typical owing, in some measure, to the highly fragmented ownership of the industry did not get even a whiff of that largesse. Others, including a tour operator of trips to the Grand Canyon did see "relief" while bankrupt airlines such as Vanguard, Midway and Reliant saw as much as $20 million come their way.

It is unlikely that the scale of the current bailout is going to make a difference in terms of aid to hotel operators reeling from the financial contraction - unless the hotel is in Buffalo, New York. The Buffalo News reports on a failed yet persistent strategy on the part of the City of Buffalo that has seen more than $65 million poured into downtown Buffalo hotels.  Somewhat expectedly, the paper notes that "some of downtown’s largest hotel operators say the last thing they need is more competition, especially subsidized competitors".

It is hard to rationalize though easier to understand the folly behind the process that has seen the construction of one and the approval of two other subsidized hotels via significant tax breaks all of which would result in an increase the inventory of downtown Buffalo hotel rooms by 22 percent. The Mayor of Buffalo states that "we need more hotel rooms in downtown Buffalo" while the president of the Buffalo Niagara Convention & Visitors Bureau (sensibly) says "more rooms would not help bolster the convention and tourism business".  The powers that be that run the city of Buffalo would serve their citizens well by reading up a little about the history of subsidized hotels (the few relative to the country's largely privately developed hostelries) and cease pouring good money after bad. The history of efforts to subsidize airlines and their outcome needs no amplification.

Advertising suicide?

A recession, especially one as deep and long and the current one prompts controllers and CFOs to take the proverbial axe to ad budgets. That has increasingly been the case particularly after it was officially announced that the US economy has been in recession since December 2007. However, a Forbes.com article cites quotes a strongly opposing perspective as enunciated by Wharton marketing professor Peter Fader. The professor correctly notes that "as companies slash advertising in a downturn, they leave empty space in consumers' minds for aggressive marketers to make strong inroads". Another Wharton professor, Leonard Lodish, echoes that sentiment and adds that "with demand slack for advertising services, the cost of these services goes down, making advertising expenditures all the more defensible in a bad business climate. "If your company has something to say that is relevant in this environment, it's going to be more efficient to say it now than to say it in better times,"

While some in the hospitality and the larger tour and travel industry (as in many others) are slashing ad budgets owing to hard economic times a few like the Orlando/Orange County Convention & Visitors Bureau are rightly clamoring for more ad dollars. Hotel operators who emulate that example are likely to reap better than ever rewards as a consequence. Nevertheless, leaner times make it all the more imperative to have the right message out unlike this one from a major corporation which seems to endorse a theme that promotes suicide and is arguably suicidal for business.

Jet lag panacea?

For travelers the world over, especially frequent world travelers, jet-lag has been an enduring and unwelcome phenomenon for decades. But there could be a solution or at least a significant palliative that researchers have come up with to combat the problem.

The Los Angeles Times has a report headlined " New drug may put jet lag to rest". The newspaper says that "an experimental drug that mimics the effects of the hormone melatonin can reset the body's circadian rhythms, bringing relief to jet-lagged travelers and night-shift workers. A study of 450 people who were subjected to simulated jet lag in a sleep laboratory, a team from Brigham and Women's Hospital in Boston found that the drug restored near normal sleep the first night it was used". Most interestingly "there were no aftereffects from the drug, minimal side effects, and people who took it performed normally the next day". 

If true the drug could bring about considerable relief for wearied travelers criss-crossing the globe. What the reports does not appear to cover is whether the supposedly harmful effects, including shortening of life spans, of trans-continental travel gleaned from earlier studies would be mitigated by the drug. Presumably, since the study's subjects "slept better" that aspect of the negatives of inter-national travel is minimized if not eliminated.