New York Hospitality by Vijay Dandapani

Travel Agent - the new phoenix?

The advent of the internet brought about a gradual but steady diminution of the role of the TA with some predicting the demise of the intermediary to the point that many airlines (in particular) and even some hotels began to actively curtail their payments to them. TAs in India seem particularly badly affected.

However, despite a decline in their numbers, the industry is keeping its nose in front as several reports point out and agencies in some countries are actually seeing growth as this report from the UK points out. The report notes that despite the downturn those that specialize in cruises and ski-vacations are doing well. Also on the upswing are bookings that are far into the future - those for December of this year and summer 2010. Interestingly travel insurance sought by would be vacationers is back in demand.

In the US, Charleston's Post and Courier has an article that points out that "Travel agent offers personal touch to set up ideal vacations". Among the benefits of using one - saving money on a trip as people might get the lowest airline rate but end up making extra connections and adding to their trip time.

Also, supporting the TA industry (in the UK) with a new drive are two new promotions from American airlines. One of the offers (extended only through TAs) allows passengers "the chance to experience the high life through complimentary one-way upgrades from Business to First Class".

Nevertheless, the news is far from all-positive with many still reporting bleak travel prospects brought on by shrinking wallets all around. The number of plane tickets sold in the United States in 2008 was down 7 percent from 2007 according to that report.

Internet frauds - hotels

Historically, it is when the industry in a tailspin (as per the Wall Street Journal) that fraudsters seek to prey on it. This time around is no different as according to fraudtip.com  "a well-organized online fraud is scamming over 71,000 travelers each month as they book rooms online at some of America's best known hotel chains, including Hyatt, Clarion, TraveLodge, Comfort Inn, Red Roof, EconoLodge, Super 8, Ramada, Days Inn, and Wyndham".

The report notes that the "scam combines advanced online advertising, bogus hotel locators, third-party reservation systems, and an Internet browser virus to redirect hotel guest traffic to fake versions of well-known hotel chain websites" with the "hardest hit (being) Super 8 Motels, Days Inn, and Ramada". Per the report in Fraudtip, it is estimated that an astounding 50,000 travelers seeking out these hotels are redirected to the bogus sites each month!

A curious and somewhat surprising aspect of the findings of the report is the somewhat confusing demographic of the victims. The report shows that "the fraudulent sites are attracting a higher-than-average percentage of female visitors, teens, as well as adults 50+. The scam has also attracted a higher-than-average percentage of African American visitors, and has proven effective in attracting an affluent audience, and a high index of graduates and post graduates". 

A separate report, also on Fraudtip.com has, is to industry veterans, a case of deja-vu in terms of fraud. A credit manager, James Balls, at a British hotel in Bradford-on-Avon was busy directing refunds, purportedly for dissatisfied customers, to his own account. While his activities were inappropriate his moniker was not.

Tightening the belt

A down economy almost always pushes up the economy segment in a service industry. That certainly appears to be the case with the airline industry as fliers opt for a seat class termed by some airlines as "premium economy". The notion of premium, though, is stretched as the seats, in some cases, offer a mere 5" extra in "pitch" which is the distance between rows. In many instances, the seats are barely recline anymore than a regular coach seat and the service standards, such as they are, seldom exceed that of coach.  Nevertheless, that has sparked interest among business travelers and several airlines report erstwhile business travelers taking up cabin space in that category.

The erosion in premium travel has naturally affected the hotel industry as well with customers looking for lower rates but, unlike the airline industry, hotels do not have the luxury of trimming offerings to match the decline in rate. That has resulted in severe rate erosion in the upscale segment with the New York Times reporting that some boutique hotels offering rates comparable to economy brands. The Times article notes that the "Honua Kai Resort & Spa, scheduled to open Jan. 28, is offering rooms from $195 — 50 percent off published rates. Near Miami, the Blue, a 240-room resort that opened in September, has extended its opening price of $189 a night through April, down from listed rates of $360. And the Nines, a new Starwood Luxury Collection property in Portland, Ore., is offering rooms for an attention-getting $99 a night for 99 days through mid-April".

The flood of new hotel rooms in principal cities at the trough of economic activity has not helped. The Times article notes that Phoenix, AZ, saw 36 new hotels in the past 12 months resulting in a 10% drop in hotel occupancy levels. Developers unleashed hotel inventory in New York City as well with the "most openings for the 12 months ending in November" as 54 new hotels added nearly 8000 rooms kicking Manhattan's inventory up by 10%.

The Chicago Tribune has a report along the same lines saying that "Hotel operators have seen room reservations fall drastically as business travelers and vacationers cut down on trips". Once again, rate erosion is evident from the article which notes that "many hotels will give travelers a break by lowering prices or offering incentives, such as free meals, in hope of enticing more business".

But as in the aftermath of 9/11, many travelers seem to be shunning the lux for the staid. Another NYT article notes that hotel guests seem to be going for "budget hotels" with major national brand names. The depth of this downturn may well cause the penchant for boutiques amongst developers and owners to be curtailed.

Site optimizing via customer feedback

Google announced the "winners" of a website workout contest it ran a few months ago. Only four of the several hundred companies that entered the contest made the cut. The winners "improved their businesses with Website Optimizer, Google’s free testing and optimization tool". That translated into increased conversions of lookers into customers.

Google touts its Website Optimizer as a "free website testing and optimization tool, (that) allows you to increase the value of your existing websites and traffic without spending a cent. Using Website Optimizer to test and optimize site content and design, you can quickly and easily increase revenue and ROI whether you're new to marketing or an expert".

The four winners included hotel company, Outrigger Hotels and Resorts. The company "experimented": with three variations of its home page to see which resulted in the most conversions. One version "A" had a large photo of a destination on its home page while version"B" had smaller photos with a third version having a large photo along with smaller photos. Using Google Optimizer, Outrigger found that the middle version garnered a 7% increase in conversions.

The bottom line is that Optimizer enables companies, hotels included, make informed decisions on websites based on active customer feedback rather than on corporate hunches.

Bare-knuckle advertising?

Does  a smaller economic pie signal mean-spirited times in business, specifically advertising? Apparently so, according to a report in the Wall Street Journal (subscription required) headlined "Ads to Go Leaner, Meaner in '09". With ad spending set to decline "6.2% to 161.8 billlion", advertisers are tasking ad agencies with a mandate to produce ads that "work harder".

The Journal article notes that major brands such as "Microsoft, Burger King, Campbell Soup and Dunkin' Donuts took direct aim at their competitors, a marketing technique deployed more frequently in a downturn. Domino's Pizza is starting 2009 with an aggressive campaign for its Oven Baked Sandwiches that touts results from a taste test claiming consumers prefer its sandwiches to Subway's hoagies. ""Ads have to get combative in bad times,"" says Nick Brien, chief executive of Interpublic Grooup's Mediabrands. ""It's a dog fight, and it's about getting leaner and meaner""

Another feature will be "face reading technology" via "Ad executives are predicting that ads will be "short and sweet" and that "TV ads will emphasize how a purchase will cost you less, and the message will be communicated in less time. Instead of the usual 30-second spots that consumers are used to seeing, expect advertisers to cut back to 15 and even 10 seconds to save money on their ad buys". Also on tap will be less glitz as "pricey, glitzy ad production will be rare -- no problem for the YouTube generation that hasn't been impressed by gorgeous camera work. Hello to video, studio backgrounds and direct-response TV, ads that promote 1-800 numbers". Also expected is "face-reading technology". "The ability to recognize whether a person looking at a digital sign is male, female, young, old and their ethnicity is here. It will enhance and better align creative to reach its target, thus enabling advertisers to communicate and connect to their consumer".

The article goes on to claim that 2009 ads will be actually liked by consumers! "People will, amazingly, see more and more advertising they actually like and seek out. It will mean immersive, long-form Internet experiences like Frito-Lay's hotel626.com or Burger King's whoppervirgins.com because, more and more, TV commercials are simply too easy to avoid (and all too deserving of such treatment)". (Hotel626.com has nothing to do with the hotel industry and is a web-game with even less of a direct connection to doritos.)

Perhaps the austere economic climate will also herald the end of junk ads via banners at least as per the Chief Digital Officer for ad giant Omnicom as "more and more, reputable companies won't be buying up the space around the Web sites you visit. Clicking these ads will become less and less legitimate as brands will endeavor to do things that add more value to you in the social-media and customer-service space".

The economic boom of this decade saw the creation of many new hotel brands with names like Aloft, Andaz, Element and Indigo. Whether they take on each other more viscerally as predicted by some of these ad experts will be known before the year is out.