See the financial crisis on this unusual Wall Street tour

by Tom Johansmeyer on

It’s rare that you get a guided tour through still unfolding carnage. Imagine walking through Aceh right after the tsunami or New Orleans while the rains from Katrina still fell. Lower Manhattan‘s financial crisis tour doesn’t involve as much bad weather or physical danger, but it does give you the chance to learn about the most profound financial disaster in decades in the place where it all started.

This is “The Wall Street Experience.”

Guided by a former Wall Street insider, you’ll spend the 90 minute tour learning how some traders raked in billions in profits while entire banks came to an end. Also, you’ll be introduced to a “shadow banking system” that the government ignored until it was too late.

It’s not all mayhem down on the Street, though.

The tour will give you an overview of the history, architecture and trivia for this part of the city. The culture of the trader is wrapped up in these walls and streets – and you’ll hear all about it. But, did you know that this was once the political center of the United States? A statue of George Washington stands in front of the building from which he governed the country, staring across the street at a world of financial engineering he’d probably never be able to understand.

The tour guide, Andrew Luan, is a former Deutsche Bank vice president and traded what are now called “toxic assets.” He charges $40 a person, though children are free. Part of the proceeds goes to increasing financial literacy. Financial illiteracy is at crisis levels right now, so I applaud Luan for this. If you have become a victim of the financial crisis, The Wall Street Experience does offer weekly tours for those who can’t afford to pay.

Making sense of the airline industry

by Tom Johansmeyer on

The situation is currently grim for airlines, having gone from “bad in January to ugly by March,” according to USA Today, mirroring the U.S. economy as a whole. But, some feel that the worst is behind us. At the same time, a decline in business traveler traffic may suggest that we have a long way to go.

That’s why I love USA Today … two perspectives for the price of one!

Let’s make one thing perfectly clear: airline executives are unanimous in refusing to state that a recovery has begun. Keep in mind that CEOs have to be incredibly careful whenever they speak. Something that’s interpreted as a prediction could be disastrous later. A prediction becomes a goal to be met, and failure to do so can have harsh implications on the stock price.

In case you don’t know, that means real people lose real money.

That being said, Delta, American and Continental executives allowed themselves some modest hope, suggesting that “at least traffic levels aren’t collapsing the way they did last year.”

For now, there’s little to celebrate aside from the hope that we’ve hit bottom. Continental’s revenue per available seat mile (RASM) fell 4.8 percent in January, 11.5 percent in February and 20 percent in March. April is likely to be down 13 percent to 15 percent.

RASM basically tells you how much revenue an airline pulls in for every seat flown. Let’s make it easy: assume that a plane has two seats and flies 100 miles. One passenger pays $200 and the other pays $100. The first passenger pays $2 per mile, and the other pays $1 per mile. It averages out to revenue of $1.50 per available seat mile.

Now, assume that we have a third seat … and it’s empty. So, we’re working with $2, $1 and $0. That’s RASM of $1 (as opposed to the $1.50 above).

Figuring this out for an entire airline for a full month is obviously much more complicated, but you can probably see the value in doing so. It’s a way to figure out just how productive every seat on every plane is – even the empties.

Delta’s perspective is that things aren’t getting worse right now, even if they aren’t good, and American believes that it’s too early to tell.

The decline in business travel is seen as a big part of the problem. Business travelers tend to spend a lot of time in planes, and they don’t always get the lead time to buy tickets (or prepare their families for long absences) that they’d like. As a result, they often pay more for tickets than vacationers, who have the luxury of planning ahead.

To keep expenses down, many companies are trying to cut their spending on travel, opting for other collaboration alternatives. While face-to-face meetings are nice, they tend to be a lot more expensive than webinars and conference calls. When you have to squeeze the budget, travel is an easy place to cut spending a bit.

I saw this firsthand during the last economic downturn (following the collapse of the “dotcom economy” and the terror attacks of September 11, 2001). I was a management consultant and flew every week. While my clients were willing to foot the bill for weekly travel, I found myself under a lot more pressure to find cheaper flights, stay at hotels that were less expensive (and less convenient) and take a taxi to the airport instead of driving and putting my car in the lot for a week.

Though business travel can be cut, it won’t go away completely. There will always be a need. While many cite conventions as a source of business travel, you’re more likely to run into weekly grind travelers at airports in this economic environment. Catch the first flight out of a major airport on a Monday morning, and you’ll see business and business casual attire, laptops clutched and weary looks. These people make the same run every week, returning home on a late flight Thursday or Friday. When you have a lot of people dropping $500 a week on flights – each doing it 40 times a year or more each – the airlines benefit. When they slow down, the airlines feel pain.

To compensate, as you’ve seen here on Gadling, airlines are coming up with more fees – and they’re not all as crazy as the Ryanair pay-to-pee proposal. Baggage charges seem to be most common, with Delta hitting up passengers for $50 to check a second bag on international flights (starting July 1, 2009). The airline hopes this will generate another $100 million this year.

Delta’s not innovating, here; it’s just the most recent.

The need is salient, given recently released first quarter financial results. JetBlue and AirTran stood out by turning profits ($12 million and $28 million, respectively), largely because the cost of jet fuel dropped. Take that out of the equation, and AirTran’s 31 percent revenue decline would have had a greater impact.

Meanwhile, US Airways posted a $103 million loss. Alaska Air Group lost $19.2 million for the quarter. Delta, American and United showed substantial losses, as well.

Leisure travel isn’t the primary driver, as fare deals have kept this section of the market fairly active, if less profitable. It’s the business travelers who are straining airline financial performance. It will take a turn in the economy to solve this problem. Any measures available to the airlines are more likely to slow the bleeding than repair the situation as a whole.

When will that happen?

Like the airline CEOs, I’m not crazy about making predictions, as my success is shaped more by luck than clairvoyance. But, I’ll take a small step out on a limb. Businesses will green light travel increases when they see an upside to doing so. When sales teams encounter big opportunities, they will be able to make the case to fly. This means that a client has to be ready to write a big check. Also, startup activity will result in the use of venture capital funding to hop on planes with the hope of pitching new ideas to clients interested in growing their businesses or realizing a cost savings.

You won’t notice it at first; these trends take a while to gain steam. Success builds upon success, with each win leading to several new opportunities and a willingness to fund travel for them.

Am I willing to throw a date or timeframe out there?

No way!

We’ll all have to wait and see.

Canadians flocking to Iceland, but Europeans are preferred

by Tom Johansmeyer on

The economic collapse of Iceland has been covered extensively and zealously, so it’s no surprise that people are taking an interest. For Canadians, this makes even more sense, given their proximity to the country that has as many people as my neighborhood. At this time last year (when I went), just picking up dinner would cost you a fortune. Now, it’s almost half price … and that doesn’t include the great deals that are being offered.

Last year, more than 10,000 Canadians visited Iceland, effectively increasing the country’s population by 10 percent, even if only temporarily. That’s an increase of 68 percent from 2007.

Overall, Iceland welcomed just over 500,000 guests last year.

Like most travel deals, the unplanned currency-based discount won’t last forever. Like the weather up there, the economy is showing signs of thawing, thanks to a fiscal hand from the rest of the world.

For now, the 8,200-person travel industry is focusing on drawing guests from Europe. Hey, Canadians are great, but there aren’t as many of them as there are Europeans, and the small nation needs as much tourist cash as it can get. In 2008, 70,000 visitors came from the United Kingdom, followed by Germany with 45,100 and Denmark with 41,000.

Fortunately, Icelanders aren’t picky. They treated me well, and that was when the local currency was going strong.

If you go, take the walking tour. The guide predicted the fall of the Icelandic markets months ahead of time.

Germans still coming to U.S., but not as much

by Tom Johansmeyer on

German bookings to the United States were strong through the end of last year, even as overall action from outside the country dipped in the fourth quarter. Data from the U.S. Department of Commerce shows that nearly 1.8 million Germans came across the Atlantic Ocean, an increase of 17 percent from 2007.

Fourth quarter arrivals from German last year reached 420,285, a gain of more than 9 percent from the same period in 2007. In October alone, 177,167 German tourists came to the United States – up 16 percent from October 2007. The pace slowed in November and December, which were up only 5 percent and 2 percent year-over-year.

And, 2009 looks good.

More than 20 percent of tour operators in Germany have reported that bookings to the United States for the first quarter of 2009 are likely to be consistent with the same period in 2008. Another 43 percent expect increases.

Of course, German travel isn’t recession-proof. The second quarter looks less favorable, with bookings down from 2007. Nearly 64 percent of German tour operators expect the pace to slow.

CNN viewers believe staycations are fun

by Tom Johansmeyer on

I know, I half-promised someone that I wouldn’t write about the stupid movement any more, but the travel news has been slower lately than I’d hoped. So, you get to deal with another BS story about “staycations.” At least, I’ve kicked in a video this time.

For those of you with addresses beneath rocks, a “staycation” is a euphemism for “the financial crisis has left me too broke or too petrified to spend money on travel.” The concern is real. Anyone who sees a silver lining to our current economic situation probably does so through the lens of LSD.

It’s no secret that fewer people are traveling. Instead of conducting its small “Twitter poll,” CNN could just as easily have come to Gadling, where we’ve hit up a large group of real people to understand their travel plans – or lack thereof.

Well, the slow news days of late affecting the travel industry hit CNN as it hit me. So, they interviewed Matt Wixon, author of The Great American Staycation about how to make the most of very little. His prime example is to look at your hometown the way a tourist would … a total rehash of the boilerplate staycation story.

But, how would a tourist view some bland suburb? Sure, you could always head over to the nearest city, which could provide some relief.

Ultimately, a successful staycation is really nothing other than the command your mother gave you when you spent too much time in front of the television: use your imagination. Since you are responsible for the fun you have on your non-trip vacation, you are ultimately on the hook for making the experience satisfying.

Duh.

A great staycation, therefore, is just finding ways to amuse yourself at home.

Check out the video after the jump.