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Black Friday, 13 November, 2009

Good morning

My weekly happy-making celebration first :  another 15 readers became Travel Insider supporters last week, including three more extravagantly generous 'Platinum Elite' members - Gary P from PorterCase, Lary J, and Brad C from Travelrest.

We now have 892 current supporters for 2009.  If 108 more of you choose to support The Travel Insider, we'll make 1000 for the year.

Today is a 'Black Friday' (ie a Friday that is the 13th of the month) - traditionally an unlucky day, and particularly for traveling.  I'm currently in Britain and, contrarian that I am, I'm to spend my Black Friday driving 360 miles from the Cotswolds up to Glasgow, and then from there on to a lovely castle hotel a short distance north.

I'm actually looking forward to the drive enormously, because I've a really wonderful rental car (thank you, Hertz).  It is a VW Scirocco GT, a car that has won 'car of the year' awards from several sources.  It is extraordinarily powerful - its turbocharged engine will spin the wheels in both first and second gears, and reaches 100 mph embarrassingly quickly (with a six speed close ratio manual transmission, I several times, when overtaking, got the engine well into the red line zone in third gear just because it got there so quickly before I even had a chance to think about changing gear), and it surges enthusiastically on to a speed limited maximum of 149 mph (not that I've personally got up to those speeds).

A good suite of electronics, enormous power, and (perhaps just as well) great braking and traction, plus a clean crisp suspension make this a really fun car to tootle along the country roads in, and it sure is a great deal different to the very bland experience I was anticipating in the Ford Mondeo (a bit like a Taurus in the US) I'd reserved.  Perhaps it is just as well that the two GPS units I'm traveling with both have speed camera data bases in them to give me warning of upcoming speed traps.

It truly is amazing the types of cars that Hertz sometimes makes available.  I'm still not sure if I liked the MINI I had from them earlier in the year, and I've also driven a lovely turbo-charged Saab and even a Volvo.

I'm in Britain primarily for two reasons.  The first is as an unavoidable outcome of trialing the new British Airways service between JFK and London's tiny little, centrally located London City airport (LCY); the second being to attend the World Travel Market trade show.

My BA flight on Sunday evening was an interesting experience, and slightly reminiscent of earlier flights on BA's now sadly largely moribund subsidiary, Openskies (which flies a 757 with two business class cabins totaling 64 seats).  However, BA's new service is constrained by the short runway and steep approach required into LCY and so can only operate the 'baby' of Airbus' A320 series, the A318.  An A318 normally can hold 117 coach class passengers, or a mix of 8 first and 99 coach class passengers.  But BA have fitted out their new A318s into an all-business class cabin, containing a mere eight rows of seats, each row having two seats on either side of the aisle - 32 seats in total.

This is a flight I desperately wanted to like for all possible reasons, but, alas, about the kindest thing that can be said about the flight over is that it was generally better than coach class on a regular BA flight.  I'll spare you the gory details however until after my return flight, so as to have a more balanced experience of two flights to base my opinions on.

However, I can already indicate that some things won't change, no matter how often I fly these planes - the seats which are too short to stretch out in (I'm a far from unusually tall 6'), the lack of any decent hot food on the flight over (naturally, justified as 'being for your convenience') and the way out of date approach to in-flight entertainment (stand alone video players with a slow and clunky interface and no moving map type flight info display), as well as the disappointment at finding what I'd misunderstood to be on-board Wi-Fi was actually nothing of the sort.

It was instead very slow GPRS data for GSM type cell phones only, and with nondisclosed rates for using the service.Actually, the rates are not very relevant, because it seems that neither of the two US GSM carriers - T-Mobile and AT&T - will allow their phones to connect through BA's onboard phone service, making it totally useless for all US travelers.

The overall BA business class travel experience continues to be subtly cheapened - for example, you no longer get any serving of peanuts or anything at all with your drink, and the amenities kit continues to shrink and shrink, no longer being the eagerly awaited and treasured goody-bags of stuff they once were.

Now, we all know why this is.  BA continues to lose a huge amount of money - last week I mentioned Ryanair's great half year profit, this week BA announced a record half year loss of £292 million, with revenue down 13.7% compared to last year.  So it seems they feel the need to economize wherever they can, whether they should or not.

And - stop press - BA have just announced their intention to merge with Iberia (the Spanish airline).  Apparently their hope is that if you take two airlines, both of which are losing ridiculous amounts of money, you won't end up with an even bigger airline that in total loses even more money, but instead you'll end up with an airline that magically becomes profitable.

The new merged carrier would be 55% owned by BA and 45% owned by IB.  That seems to place a massive premium on the IB side of the equation.  Details here.

There are two different types of losses that any company can make on selling its products, and in cheapening its business class product, BA is confusing the two types.  The obvious type of loss is when you sell a product for $10 but it costs you $20 in direct costs to provide the product that you then sell for $10.  Clearly, in such a case, you have no choice but to either reduce your $20 cost price or increase your $10 selling price.

The other type of loss is where you sell a product for $10, and which only costs you $1 to start with, but you make a loss because of all your overhead and indirect expenses.  What do you do in such a case?  Sure, you could try and cut back the $1 cost, and/or increase the $10 selling price.  But if the overhead costs are consuming more than $9 per sale, what are the chances of getting to profit by cutting back on the single $1 of direct product cost?  In such situations, companies need to look at their overhead costs, not their product costs.

In the case of any airline operating trans-Atlantic services, it probably could be argued that they have perhaps $300, perhaps even $500 of direct product costs.  So if they sell a ticket for $250, they'll be losing money just by subtracting the $300-$500 of direct product costs from the $250 of revenue generated.  In such a case - that is, with coach class fares - they need to either reduce their direct product costs or increase the selling price of the ticket.  That's a very simple scenario that we can all understand.

But what about the business class traveler?  He is paying somewhere between $5,000 and $10,000 for his ticket.  An airline's product cost for a business class passenger are almost identical to those of a coach class passenger, with the largest direct cost being the jet fuel to transport the weight of the passenger and his bags.  The extra food, drink, etc represents a very small amount only.  But let's give the airlines the benefit of the doubt and say that an airline's direct costs of flying a business class passenger are $400-$600.  But if the airline is selling the ticket to that passenger for somewhere between $5,000 and $10,000, and if it claims to be losing money on the transaction, then what the airline is telling us is that it has an overhead cost that is ten to twenty times greater than its direct costs.  With overhead costs of say $5,000 - $10,000 per ticket, what do you think the rational response is - should you start cutting back on the lettuce leafs on the salad (and save a penny per passenger?) or should you do something about your out-of-control overhead costs that are costing you so many thousands of dollars per passenger.

The airlines clearly misunderstood the wisdom of the saying 'look after the pennies and the pounds will take care of themselves'.  By focusing on reducing the direct costs of flying a business or first class passenger, all they're doing is discouraging people from paying the massive premiums to fly business or first class.  And with fewer and fewer premium cabin passengers, the remaining passengers have to absorb  still more of the enormous corporate overhead per passenger.  BA - and all the other airlines - need to stop trimming services in their premium cabins.  They need to start returning services to those cabins, so as to get returning passengers into those cabins.

My other reason for visiting was to attend the annual World Travel Market trade show in London.  This is an enormous show, and each year massively over-taxes the inadequate capabilities of the ExCel Convention Center in London, but as long as you don't want to eat, drink, travel to or from the convention center, or use the washrooms or cloakrooms during each full day there, you'll be just fine.

I went almost directly from the plane to the show, stopping only for a shower and to get changed at a hotel close to LCY where BA has an arrangement for its passengers to use their facilities (this was a very bad experience, unfortunately), and so with the memories of BA's new premium business class service fresh in my mind, found myself stopping in stunned awe alongside a mockup of a business class 'seat' (more like a suite) offered by a relatively new airline, Oman Air.  Their business class seat and amenities was so stunningly better than BA's First Class - a huge big video screen and integrated entertainment system, lots of comfort aids, extravagant amenities kits, and (I'm told) brilliant food and drink.  Unfortunately the airline has no current plans to fly to the US, but it is another indicator that the dinosaur approach of ever cheapening their premium cabin products is not the only way of doing business.

If there was an overarching theme to the WTM show this year, it had to be some sort of variation on an eco-friendly theme.  This continues to puzzle me because let's all face up to the ugly truth - if you really want to be ultra-eco-sensitive, you shouldn't travel anywhere, other than on your bicycle.  If you're traveling thousands of miles, then by the beliefs of the eco-freaks, you're massively harming the world, contributing to global warming (something we desperately need with the planet continuing to set new records for cold rather than hot temperatures) and all that other stuff.

Being told that the airline we fly uses some sort of bio-jet fuel really doesn't address these concerns, and neither does the hotel we stay at proudly telling us it is saving energy by using even dimmer lights in the hotel rooms and changing the sheets less frequently.  My feeling is that by pretending to (or, worse still, genuinely) believing in all the global warming theories, and by paying lip-service to doing things to offset their 'carbon footprints', travel operators are merely appeasing the eco-freaks, the same way that Neville Chamberlain appeased Hitler prior to WW2.  Each concession given to the other side only encourages them to become more militant and to seek further concessions.

The truth is that eco-friendly tourism can not comprise anything more than staying at home and reading a library book about a destination.  Even watching a travel video starts to be less eco-friendly.

The travel industry would be better advised to point out the hypocrisies and inconsistencies of the eco-freaks and the pet projects they campaign for/against rather than surrendering to the views of these people.  Because, for sure, they'll now find out, eventually, that the eco-freaks themselves want nothing more/less than to massively curtail all our travel, whether it be so-called eco-friendly travel or not.  If we want to 'save the planet', we can do this better by reducing population growth, and spending money on improving energy efficiency and good eco-practices in places such as China and India, not by cutting back on our personal travel.

In addition to the eco-friendly theme of the show, I did sense a much greater sense of confidence about the future than was the case at last year's show.  Leading indicators continue to hint that we may have turned the corner in this recession; let's hope that is so.

This will be a short newsletter (sort of) and with no feature column, due to traveling.  What with jetlag and the awful inefficiencies of trying to work in a hotel room with slow unreliable internet and very uncomfortable desk/chair, I find it is taking me two or three times as long to do anything/everything, while being very physically draining, and at a time when I just don't have 2-3 times as much time to do things in anyway!

I've heard from several readers expressing their appreciation of the Magellan's 10% discount offer, which is open for one more week.  There truly is a terrific range of different things to buy, and the 10% discount makes it even better.  And Scott (of Alaska Travelgram fame) sent in a link to this Youtube video he made while touring one of Magellan's 'brick and mortar' stores.

It was a very good October for Southwest Airlines.  Not only were passenger numbers up 1.9% on last year, but because it had cut back on flights, it had an average of a 79.2% load factor (percentage seats filled per flight) - the highest in its history.  And, best of all (from the airline's perspective) its revenue per available seat mile was also up, by about 1%.  This doesn't mean its fares were up 1% year on year, though - because this revenue is measured per available seat mile, when the percentage of seats sold increases, the revenue per ASM increases, even if the fares don't.

Compare that to Continental, which estimates a drop in its ASM of about 15 - 16%, and US Airways, with a 9% drop.  Details here.

It isn't just Joe Brancatelli who says bag fees are bad for airlines.  Southwest is now saying it attributes part of its success to not charging bag fees - see this story.  But at the same time Southwest says that it believes it has picked up an extra 2% - 3% of passengers due to not charging bag fees (that might not sound like much, but it made the difference between having an increase or a decrease in traffic in October), other airlines are gleefully boasting at how they can add extra fees and claiming that their passengers don't mind - see this story.

But of course the weakness in their logic is they don't see the passengers who no longer book with them.  Those passengers - part of the reason why such airlines are reporting decreased passenger numbers - have switched to Southwest.

More hotel follies.  I included an email last week from a reader who was charged $20 to be allowed in to his hotel room prior to the official 3pm checkin time, even though the room was ready and waiting for him.  Reader Marc follows up with his experience and his solution :

I was amazed at the commentary you had about hotels charging you for checking-in and getting a room before the normal check-in time. This exact same thing happened to me at the Marriott Hotel at the Sao Paulo Airport in Brazil (a great hotel, by the way).

I arrived around 8am and was told I would have to pay a 50% charge on top of my $100 rate for checking-in before 4pm.  After flying 10 hours, the last thing I wanted to do was head to my day-long meetings after flying all night and looking a bit disheveled!  I agreed to pay the rate but argued that the room was empty anyway and it would cost them nothing to allow me to use it early.  They did not agree and charged me the extra amount.

Upon my return to the States, I contacted the Elite department (I'm a Marriott Platinum) and complained that the room was empty anyway, so why not give me the room early?  They forwarded my complaint to the General Manager of the hotel and they have since changed the policy.  He apparently agreed that it was better customer service than to potentially lose a good customer.  Since that day, I have never had a problem checking-in early at any Marriott hotel that I have stayed in.

It's just another reason to become an Elite member and stay at a hotel chain you really like.  Loyalty does have its benefits.

Perhaps the main moral of Marc's story is to always complain - both directly to the hotel, and subsequently to the franchise head office, if you find yourself in a similar situation.  Don't passively allow this to become another normal fee that hotels plan on charging us, because if we allow that to happen, you know what the next evolution will be, don't you?  Hotels will start moving their checkin time later and later, and before you know where you are, if you want to checkin before 6pm (or maybe later) you'll be paying major surcharges.

Of course, not all of us always stay at hotels where we are elite members of their frequent guest programs.  Reader Tom has another strategy that anyone can use.  He writes

Many times (esp. for corporate travelers?) cancel policy is up until 6 p.m.   So if being hit up for an early check-in fee, you could counter and say, "I can cancel my room up until 6 p.m., so let me see if I can find another hotel that will let me check in early for no additional charge".  And then do it if they don't revert.

Reader R writes in about another problem with hotel bookings, but this time, not the fault of the hotels themselves :

Are you aware of the following scam perpetrated by on-line hotel booking agents like Orbitz, Travelocity and Hotels.com?

When they take a reservation, they always claim (in the fine print) that the hotel has a cancellation policy that penalizes you a full night's amount if you cancel up to a mere 24 hours prior to check-in.  No hotel I'm aware of actually does that.

This experience brought this to light :

I made a reservation through Hotels.com for two nights at Red Lion Downtown, Seattle, four week in advance.  As soon as I made the reservation, I realized I'd made a mistake - it should have been one night, not two.  So I immediately cancelled the reservation and rebooked properly.  A check of the credit card account the next day revealed a charge for two nights, then a refund for one night only, followed by a recharge for one night.

I checked with the hotel directly, and they acknowledged this was not their policy, telling me they refund the whole amount up to some reasonable short interval before check-in.  A phone call to Hotels.com - after a presumably sham delay while the rep "checked with the hotel" - extracted a promise for a full refund which in fact appeared on my credit card account a short time later.  I would have of course disputed the charge with the credit card company if they had refused and they probably knew that.

To be fair, some hotels these days do have varying cancellation policies that may incur some penalty, even for a moderately in advance cancellation, but it would be unusual for a hotel to charge a full one night cancellation fee on a booking made and immediately cancelled, all a month in advance.

Talking about hotels, there have been plenty of articles detailing how hotels are finding the current economic climate very difficult.  But the flip side of this situation - hotels with too few guests - is that the Priceline service becomes more valuable to hotels, who are somewhere between keen and desperate to fill their rooms at any price at all.  When hotels are doing well and filling most of their rooms at close to full price, they have little need for Priceline and you'll find few bargains there, but at times like the present, you can find incredible bargains on Priceline, and I'm using it for nearly all my hotel shopping at present, and getting rates usually well below half the lowest normal rates for the hotels I stay at.

This is confirmed in this article that reports Priceline enjoying excellent increased profits.

One of the things I'm most proud of writing this year is my article series on How best to use Priceline to get the absolutely lowest prices for hotel stays.  If you haven't read this series yet, do at least speed read through it now to understand the basic concepts, and refer back to it next time you're actually making a Priceline booking.  This information will save you money and get you a better hotel.

Still thinking about hotels, and tourism in general, a new report has just been released by the European Tour Operators Association about the impact of the Olympic Games for the last six cities that hosted them (by the way, I bet you can't name all six immediately preceding city hosts).  Their report finds that the tourism benefits of hosting the Olympic Games are 'wholly illusory. and could even be detrimental.  This should not surprise you - I make the same claim whenever discussing the Olympic Games.

“The latest data from Beijing is particularly striking.  From the spring of 2008 international visitor arrivals to Beijing plummeted and in the month before the Games, they were 30% down on the previous year,” the study said.  “In the months after the Games, the tourism slump continued with international arrivals more than 20% down.”

Last year London had nearly 15 million visitors, bringing in over £8 billion.  It is already bracing itself for an influx of "atypical" visitors during the games, whose spending habits are not those of usual tourists, ETOA claimed.

But if London follows the pattern of Beijing, it would see over 2.5 million fewer visitors at a loss of £1.5 billion.

While the data for Beijing needs to be seen in context as 2008 was not a strong year for tourism in the whole Asia Pacific region, the city still fared “considerably worse” than the rest of China.  Demand for mainland China may have fallen by two per cent, but Beijing lost 18% of its prior year’s total.

Tourism growth for Olympic cities tends to be stalled and the stall becomes most apparent when a comparison is made with competitor destinations.  For example, in the five years prior to the Olympics, Australia and New Zealand’s tourism was growing at the same rate but Australia’s growth lost ground (relative to NZ) significantly straight after the Olympics.

“It is clear that the Olympics did not materially help Australian tourism, or if it did, it made very little difference,” ETOA said. “Sydney’s even underperformed against the rest of Australia.

The reason I asked if you could remember the last six cities to host the games is because one of the (many) nonsenses that each city and region and country's tourist bodies confidently assert is that hosting the Olympics will create billions of dollars of free publicity and ongoing benefits in terms of increased visitor arrivals for many years into the future.  If you can't remember past Olympic host cities, just how much future benefit do they receive?

When you think about it, the nature of these claims also shows that the tourism bodies are quietly conceding that there'll be no immediate benefit, and so they invent an impossible to measure figure for the value of 'free publicity' and the even more nebulous 'recognition' that they will get from the Olympics, and they further diffuse the vague benefits by saying they will flow in for many years into the future.

The facts of the ETOA study seem starkly irrefutable.  So can someone explain to me why it is that cities and countries are so eager to be chosen as an Olympic venue?

More drunk pilots?  A UA pilot was arrested at Heathrow prior to flying a flight to Chicago, causing the cancellation of the flight.  One of the other crew members apparently reported him to the local police.  Details here.

This Week's Security Horror Story :  The former Assistant Chief of Police who wrote the excellent column I perhaps too briefly linked to last week has now written a follow up column, pointing out that the signs informing passengers that being screened with the new 'Whole Body Imaging' machines is an optional process are displayed only once you've gone through the process, and also pointing out that on her last trip through BWI they were only 'randomly' screening women rather than men (due to a TSA staff shortage).

You should certainly read her first article, and then consider reading her second article too, and, as was the case with her first article, the reader comments at the end also make for thought-provoking reading.

The TSA has had to retreat back from its insidious 'mission creeping', at least in one respect, and sadly, probably only temporarily.  The TSA's purpose is to ensure that nothing which could endanger a plane or its passengers gets through airport security.  But it has decided that it should also seek out any other type of illegal activity it can find, even though it is not tasked with such duties.

After a dreadful attempt at bullying a passenger to disclose where he got $4700 in cash that he was taking onto a flight - there being nothing illegal about carrying such an amount of cash, and with the passenger standing up for his rights and surreptitiously recording the TSA bullying, and after the publicity that ensued and the decision by the ACLU to bring a suit against the TSA, apparently has caused the TSA to marginally back down from its self-appointed broader role.  Details here.

I'll be back home next week, and so we'll be on a normal schedule, although I expect another shorter newsletter next week too.

Until then, please enjoy safe travels

David M Rowell aka The Travel Insider

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