New York Hospitality by Vijay Dandapani

Travel Promotion Act (TPA) An Oxymoron?

The soon to be enacted Travel Promotion Act (TPA) is being heralded by many in the industry and beyond as the elixir that will take inbound tourism to new heights with benefits that include an additional $4billion in new consumer spending per year along with 40,000 new jobs besides millions in taxes that will reduce the deficit by over $400 million within 10 years.

The fact that the bill envisages, on the surface, no new tax on US taxpayers with most of the monies raised by taxing foreigners (particularly the ones who currently provide the bulk of US tourist dollars) seems to have made the bill not just palatable but positively delectable. Proponents of the bill have also continually pointed out that other western countries have concerted government directed spending geared towards "promoting travel" as a reason for such a measure while also noting that the US's "share" of international tourism declined through most of this decade. There are arguments that point to potentially contradictory outcomes.

For starters the European Union, from where a significant chunk of inbound tourists emanate, intends to retaliate against the $10 tax with a tax of their own directed at US visitors. European travel leaders at trade shows such as ITB have repeatedly expressed frustration with the US's complicated entry procedure for its ostensibly visa-free entry in the post 9/11 era starting initially with fingerprinting (initially 2 digits and later all ten) to photographs which only got magnified with the introduction of ESTA, a once every two year electronic registration requirement for "visa-waiver" countries for tourists intending to travel to the US.  The contrast with European entry for American visitors could not be more stark: no forms (not even customs) much less photographs or worse a fee/tax. In essence, the addition of a $10 fee together with the compulsory filling up of an (electronic) form converts visa-free countries into de-facto visa-required countries.

Many European tour professionals speak of clients not wanting to bother with going through the hoops to visit the US and choose to go elsewhere. It is unlikely that a government sponsored initiative is going to persuade them otherwise since the underlying factors remain and arguably will get worse. Saying that the US does not spend any money on tourism is not entirely accurate either as many states and scores of major corporations are present in full force at major tourism exhibitions.

The American Society of Travel Agents recently noted that the industry faces a relentless tidal wave of  tax and fee proposals  from a multitude of sources – federal, state and local  - including hotel occupancy tax proposals that will challenge the industry and our ability to respond.  It is unclear how this tax, albeit on foreigners, is going to mitigate the challenges the travel industry faces in terms of costs regardless of whether it effects the changes in mindsets overseas or not as the $10 fee on them is going to be $10 less spent within the US. 

Lastly, there was a Federal government agency as part of the Department of Commerce, the USTTA, that sought to promote tourism to the US that was disbanded in 1994. In its aftermath, tourism did not decline and the US's share of tourism in the 90s kept pace with similar developed nations. It is unclear how a new similarly tasked agency can produce a contrary outcome.

Plumbing the depths for pricing

It seems that there's no let up on the way down for hotel pricing as Britain's Times newspaper reports on the upmarket Intercontinental hotel chain's acknowledges that "while business to its top-end InterContinental-branded hotels had been hit by the collapse in corporate spending, weekend discounts had lured customers who had never stayed in five-star hotels before."

The luxury hotel chain's CEO, Andrew Cosslett notes that "weekends, normally slower than weekdays in its city centre InterContinentals, were now the busiest part of the week (and) when you talk to management at our hotels in San Francisco or New York, they say their car parks are full and they’re having to take overflowing parking." Mr. Cosslett also observes that "compression in rates between midscale and luxury hotels” had thrown up anomalies. saying that "we’ve had weekends in New York and London where our Indigo property has charged more than the InterContinental. The dynamics have been out of kilter. That’s been a phenomenon that we haven’t seen before.” Mr. Cosslett may not be entirely right on that front as there was a similar disconnect, at least in the US and particularly in New York, in the aftermath of 9/11 when there was a hesitancy on the part of business travelers to be seen in high end hostelry.

The foregoing affliction seems also to have hit celebrity owned lodging as well as USA Today's widely read Hotel Check-in blog notes that Richard Gere is having trouble filling his 8 room luxury inn, the Bedford Post Inn,  in upscale Westchester County in New York. Hotel Check-in says that the Inn has resorted to discounts of upto 30% to fill its tiny stable of beds. Discounted pricing has also roiled the ANA hotel chain with the result that Morgan Stanley is looking to walk away from its investment. 

Looking longer term Mintel, a supplier of consumer, product and media intelligence that purports to provide a preview of worldwide trends in consumer behavior amongst other things, notes that it "expects to see more people taking off in the new decade with a 6% increase in travel spending expected for 2010." That is the good news. The "bad" news as Mintel observes is that "the growth will be slow and will mainly stem from reduced prices on hotels, rental cars and airlines, all trying to get hesitant consumers to travel again.”

No rest, as they say, for the weary but if the recent numbers of one upmarket retailer's (Whole Foods) are anything to go by consumers may actually be beginning to come out of the cold to shop and, hopefully, spend in higher end hotels.

Filling rooms with social search

Aardvark is the name of a kind of an African anteater but is betterl known as being one of the first entries to appear in many encyclopedias and even  dictionaries and many a business has used the name in the pre-digital age to ensure primacy of positioning. It also is the name of a social search site which claims that "When you want trusted information — product recommendations, travel suggestions, local tips, or career advice — a real conversation with a friend (or friend-of-friend) can be much more helpful than searching the web." 

The site currently has about 90,000 users (as of October last year) and lets users create their networks by importing contacts from their email accounts, instant messaging services and Facebook (won't be long before it is expanded to include linkedin, Plaxo etc). Aardvark's search engine considers people's profiles, connections, people's favorites things and location when matching questions with respondents.

Evidently, Google thought they were on to something and acquired them for an undisclosed sum of money (estimated by techcrunch at $50m) as the search giant shares the Aardvark's view that it "has defined a new kind of social search: sometimes you want a person, not a web page, to answer your question." That would fulfill a human desire for human contact that never really went away but got buried under the deluge of (often times suspect) information in the world wide web. Among the advantages Aardvark has over a traditional (although there is nothing traditional about Google) search engine is that it only has to pair the searcher with a person who knows about the topic and doesn’t have to worry about actually finding the answer. That allows for more flexibility in the phraseology of the query.

While some experts have panned using Aardvark as a search tool for travel they, nevertheless, acknowledge its potential for impacting the travel industry saying that "we know that a lot of people will like Aardvark and Google's scale is a good fit, especially with the launch of Google Buzz which is a great fit." The company generates revenue by charging some users to serve as specialists in particular fields and provide "sponsored answers." It also takes a cut on transactions recommended by and acted on through its service. An expert quoted by Ecommerce times even thinks that ""Aardvark will start inserting contextual advertising into peer review queries" That could be really meaningful not just for hoteliers but just about any purveyor of goods and services.

Metrosexual hotels

Ian Schrager may have pioneered the boutique hotel concept but Starwood upped the ante considerably when it recently made a path-breaking announcement by appointing a "fashion director" or "stylist" for its W hotels. The Wall Street Journal reports that the 36 hotel chain is "Putting a new spin on the term "designer hotel," (by) hiring a fashion director to amp up its style credentials and its profile within the fashion industry. After a two-year search, the chain is planning to announce next week—on Feb. 11, the opening day of New York Fashion Week—that it has hired stylist Amanda Ross in what is very likely a first for the hotel industry." 

Starwood's move is of a piece with a venture last September when "W Hotels pressed to forge ties with music and fashion by hiring a music director, Michaelangelo L'Acqua, who has worked with designer Tom Ford and at Gucci and Yves Saint Laurent." The Journal notes that "fashion has been a potent marketing vehicle for everything from bottled water to tennis star Roger Federer."

W may be on to more than a trend as the lens for fashion gets wider and encompasses areas beyond the catwalk and on to event management, locales and, importantly, a tourism generator. Boutique hotels have sprung up around the world in response to customers being more attuned and demanding of design elements. Stylizing the service delivery and facilities component is surely a winning formula that will attract the metrosexual person.

The latter term originated as a portmanteau blending metropolitan (stylish) and heterosexual male but is increasingly gender-neutral, merely meaning a generation of younger folk who are successful, stylish and highly selective about how they spend their money and with whom and where they spend their time. The where likely is a metro-sexual hotel such as the W chain or, in New York, new entrants such as the Eventi and Distrikt.