New York Hospitality by Vijay Dandapani

The China syndrome & hotels

People who recall The China Syndrome, a three-decade old thriller with an all star cast, know that it had nothing to do with China, the country. The plot about a cover-up at a nuclear plant jokingly referred to how a meltdown would go all the way to China. Cover-ups of a different sort - only this time they are for real and from China - have resulted in a spate of recalls in a variety of industries and have finally hit the hotel industry.

Reuters reports on upscale hotel supplier of toiletries Gilchrist & Soames "recalling toothpaste made in China -- that it had distributed to hotels in more than a dozen countries --after discovering the product contained a chemical used to make automobile antifreeze. Independent tests showed some samples contained diethylene glycol, a kidney and liver toxin and a central nervous system depressant. The recall involves 0.65-ounce tubes of toothpaste made in China by Ming Fai Enterprises International Co. Ltd. and distributed under the Gilchrist & Soames name. The company said it stopped shipping toothpaste made in China after it received an alert from the U.S. Food and Drug Administration on June 1 about tainted product. At that time, it suggested to hotels that they stop offering the toothpaste until testing was "complete."

The article notes that a " fifth round of independent lab tests showed the presence of diethylene glycol in some samples from the Chinese supplier at levels exceeding FDA guidelines ", Gilchrist & Soames President Kathie De Voe said in a statement. Unsurprisingly, a spokeswoman for Gilchrist & Soames would not release the names of hotels affected by the recall nor would she say how many of the small tubes of toothpaste were involved.

There were other branded toothpastes including Colgate that had recalls and the FDA has posted a list of those at it website. Individual hotel companies ought to be forthright as well and inform the public to avert any injury to guests and to their brand.

Hotel operators, guests and consumers at large have a right to wonder as to what comes next from behind the Great Wall of China given the recall of toys contaminated by lead paint and sold by Mattel, the world's largest toy maker, Chery (not accidentally close to the spelling of Chevy) cars made in China and sold in Europe that fold like cards in a crash and bridges that collapse causing deaths to tourists.

Iron Curtain of America?

The welcome mat for visitors to the US from the 27 visa waiver countries just got pulled from under their feet as a consequence of a new bill signed into law by President Bush last Friday. Under the provisions of the new law "Western European business travelers will be forced to give 48-hours notice of their plans to visit the U.S" reports MSNBC. While the enaction of the law is not a surprise to the travel industry given that the bill was a consequence of a recommendation of the 9/11 commission, its real impact, when it kicks into effect, most likely will be an unpleasant surprise.

Designed to enhance security, it arguably will fall short considerably in that area but will almost certainly curb spontaneity in travel. The bureucrats who crafted this bill fail to address what happens when travel plans are changed at the last minude due to a variety of circumstances ranging from business needs to weather and aircraft problems.

By requiring "visitors from 22 western European countries — including the UK, France, Germany, Italy and Spain — to be registered online 48 hours before departure for the U.S", the government is, in effect, telling hundreds of thousands of visitors who pick up and go based on bargain fares, a cheap dollar and a host of other impulse driven decisions to not come to the US. Homeland Security believes the 48 hour window will allow it to filter out potential terrorists from the 27 countries many of whom have a large population of Muslims, some of whom may be disaffected. While it is hard to refute that notion entirely it is far easier to prove that erecting barriers only results in economic isolation. Already, residents of many countries including the 27 visa-waiver countries, are under the impression that visiting Fortress USA is far too onerous a task, a fact proven by declining growth in international visitor statistics.

In a post 9/11 era, the idea of questioning the security-only proponents within the government is a tough assignment but it is not clear that the steady drumbeat one hears from them has really enhanced security. Nobody, least of all the tourism industry, wants compromises in that area but the absence of terrorism for the past six years is certainly no vindication of the (sometimes draconian) measures; after all it took more than eight years for the terrorists to strike between the first and second world trade center attacks at a time when virtually no one was focussing on guarding the homeland. Legislation that does not adequately take into consideration all facets of the US economy ill serves the industry and the country.

Best ads of 06

As online video and search become the new must-haves in any media planner's kit, TV, print and radio are trying hard to hold on to their pre-eminent position in traditional media . Tv advertising, undeniably the best vehicle for building enduring brands, still has its magic if Business Week Online's best ads of 2006 is any indication. A few ads like Sony's Bravia highlight tv's favorite winning strategy - the rare moment of surprise. Another prominent trend - understated is out of fashion; the American-idol reared audiences of today enjoy the jaw-droppingly blunt & politically-incorrect streak! The new face of traditional advertising employs every trick in the book - shock, delight and annoy but stick! Art imitates life!

Most memorable ads of 2006

Heathrow's aftermath

The impact to the industry of the attempted terrorist attacks at planes departing Heathrow for the US is too early to be assessed as flight disruptions have yet to result in significant cancellations. But an immediate outcome of the new rules regarding carry-on baggage is the need for hotels to respond to customer needs for room amenities that were heretofore seen in hotels in the mid and upper scale segments. These include shampoos and toothpastes, all banned per new DHS (Department of Homeland Security) rules. Chains like Super 8 and Motel 6 were beginning to roll out shampoos prior to Heathrow but now it likely will become a must for all segments. The Washington Post reports that Marriott's Renaissance and Ritz-Carlton hotels has moved up a gear and "beefed up on toiletries for their arriving guests, including contact lens solution and sunscreen, and fielded calls from departing guests about shipping the items they couldn't take with them on flights." While lesser chians are unlikely to go as far as lens solutions, they are likely to consider offering not only toitet amenities but also help out with regard to luggage that customers are unable to carry on. One added help would be for hotels to consider installing real time arrival departure information - that is a fairly easy proposition as most airports have web based information that can be displayed on any TV or computer. Eventually, if the airline industry is (as is likely) badly affected by the latest onslaught from the terrorists, it has grim portents for the hotel industry.

Terrorism and Tourism

The devastation in Lebanon underscores the widely known (though less broadly acknowledged) fact that terrorism impacts tourism adversely. In the early 80's, Beirut's internecine strife and the terrorist bases in Southern Lebanon decimated that city's tourism industry. It had barely begun a revival when the current conflict has all but destroyed yet it again. With Beirut's hotels reporting less than twenty percent occupancy, it seems near certain that most operators will go out of business before long. That country's tourism minister is quoted as saying that this summer alone would have brought in $2 billion in revenues. Presumably, all of that is lost. Other countries that have had notable troughs brought on by terrorism are Egypt and Sri Lanka. In the former's case, al gama'a al islamiya brought that country's (considerable) tourism sector to its knees by deliberately going after foreign tourists. For the latter, the terrorist Tamil Tiger organization effectively choked off tourism dollars by attacking commcercial centers, inspiring fear among locals and outsiders.

One indicator of a nation's vulnerability to terrorism is the ratio of tourism receipts to total exports. For the US, it is a paltry 0.8 percent although in dollar terms it is a whopping $100 billion with total tourism dollars (including domestic spending) exceeding $600 billion. Nevertheless, the US remains very vulnerable to the threat of terrorism and its impact on tourism remains as a seemingly permanent overhang since Al Qaeda's attack on New York City. That wrought greater damage in monetary terms as compared to any other anywhere else and the Big Apple's hotels too saw occupancies dip to the low 30's in October 2001; traditionally one of the strongest months for the city's hotels. That was followed by another sparse period of hotel occupancies during the onset of the invasion of Iraq. If much of all that seems a distant, if constantly nagging, memory for New Yorkers, it is a measure of the resilience the industry displays. Americans are the biggest spenders both within the US and elsewhere and have not been deterred for any extended periods from traveling to tourism hotspots, literally and figuratively. Egypt and the Big Apple have both seen the return of the American tourist. However, the industry can do more in leaving its imprimatur on the World Tourism Organization, currently, the only forum that addresses global tourism issues. Unfortunately, its United Nations platform results in its focus wasted on issues such as "sustainable" tourism. That ought to change either by the development of an alternative forum or by the industry's taking a business oriented approach to the WTO.

Hotels and Kelo vs New London

The San Francisco Chronicle today has a report on a ballot initiative in California that would seek to limit the State's use of eminent domain. The paper notes that in 25 states and several local jurisdictions local laws and ordinances to blunt the Supreme Court's ruling of a year ago that affirmed the Town of New London's right to seize private property for a different owner to develop a hotel, condominiums and commercial space. That action by the nation's top court evoked a firestorm across the country's legislatures and in Congress resulting in an unusual resolution in the House of Representatives that decried the Supreme Court's decision. It even got personal with a petition in Weare, N.H. for taking over Justice David Souter's (one of the yeas in the SC's decision) farmhouse in that town with a view to converting it into a hotel!

However, the reaction among developers of real estate including hotels has been muted at best with few if any, hotel companies commenting on the case. Takings via eminent domain have almost never been used in the US for hotel development as historically these actions have been for public goods such as roads and other infrastructure related projects. There are instances in other countries such as India with fairly strong private property rights where eminent domain is being actively used to build much needed infrastructure such as airports and roads but also for developing "technology parks" and hotels.

In California, the measure would no doubt make it virtually impossible for governments to seize private property without incurring high costs in a state. That would hardly be a surprise given California's historically high costs of development even in a normal transaction. For US hotel owners, the implications of Kelo cuts both ways. Heretofore blighted property in declining downtowns could be possibly be revived via redevelopment plans with opportunites for hotel development. Equally, hotels that ought to be under the wrecking ball can be hastened to their demise with the land being put to better use. However, the US is unlikely to see any concerted and activist action in favor of eminent domain as a tool for development. Apart from militating against the notion of fair play, it is a poor gage of valuation. The market has almost always proven to be the best judge of best use. The state should limit itself to what it has historically done best - the provision and maintenance of infrastructure.