Travel insurance for a recession-plagued world

by Tom Johansmeyer on

The woes visited upon the travel industry this year have forced consumers to cope with a variety of risks that simply weren’t an issue a few years ago. With hotels struggling to pay their mortgages and airlines struggling to … well, exist, as usual … travelers need to think about what happens if one of these companies shuts its doors.

Direct Line travel insurance policies, it seems, are adapting to this new reality. If your hotel shuts its doors, car service can’t afford the gas to pick you up or airline calls it quits, you’ll be able to get some relief. The insurer also covers villa rental companies, theme parks and other travel service providers in the event of a financial failure.

And, it looks like the extremes are addressed.

If you are stranded someplace because an airline screws up while you’re on your trip, the company will pick up the tab for a flight home – a level of protection not currently included by credit card companies under the Consumer Credit Act.

Jennifer Thomas, spokesperson for Direct Line, said, “Holidaymakers are understandably looking to spend less on travel these days, and booking directly with airlines and hotels can be a good way of getting more while spending less.” She continues, “This means that it is now more essential than ever to have insurance in case these firms fail, as there is no protection from schemes such as ATOL or ABTA if booked direct. With our updated travel insurance policies, our customers can now travel with increased peace of mind, knowing that they will be covered in the unfortunate event of a supplier’s collapse.”

Airline recession will continue into 2010, good news for passengers

by Tom Johansmeyer on

The airline industry must be excited to see 2009 coming to a close. It was a year of route cuts, perk cuts and abuse from passengers over all kinds of sacrifices in the cabin … and a genuine commitment to fees for extra bags. The global financial crisis triggered in September 2008 hit the travel industry with extra severity, forcing airlines, famous for not being able to generate easy profits anyway, to scramble to keep their heads above water. But, at least there’s next year … not really.

While nobody with even shred of sense expected 2010 to be the year the airline industry went wheels up, the latest prediction from the International Air Transport Association is pretty grim. IATA expects the sector to lose $5.6 billion next year, thanks to higher fuel costs and revenue declines because of lower fares. This is worse than the $3.8 billion it originally forecasted. The number of passengers filling seats, IATA believes, will increase, but it won’t be enough to make a difference.

There’s good news in here. Continued brutal competition will keep fares low, so if you missed your chance to take that dream trip this year, you’ll have another bite at the apple in 2010. For the airlines … well, there isn’t any good news. But, is there ever?

[Photo by emrank | counting days | via Flickr]

Virgin America: Financials prove service makes a difference

by Tom Johansmeyer on

We’ve all gotten used to bailing out airlines that can’t figure out how to take care of their paying customers, operate profitably or otherwise get their respective acts together. And, there really isn’t much hope of this situation changing. To be an airline, in general, is to be dysfunctional … until you look at the new entrant, Virgin America. The privately held carrier announced on Friday that its revenue surged 38.3 percent from the third quarter of 2008 to the third quarter of 2009.

The airline has amassed a collection of awards to back up its commitment to customer service, including “Best Domestic Airline” in Travel + Leisure‘s 2009 World’s Best Awards and “Best Business/First Class” among domestic airlines in Condé Nast Traveler‘s 2009 Business Travel Poll. And, the fact that the 1,500-person company is adding jobs in this market — beating both the recession and its worsened form in the travel business — suggests that it is possible for an airline to not just survive but actually succeed.

David Cush, Virgin America’s President and CEO, says, “Despite an uncertain economic climate since our 2007 launch, we’re pleased to report steady and strong financial performance and our first quarterly operating profit.” He adds, “At a time when flyers are more discerning than ever, it is clear that our low fares, award-winning guest service and innovative amenities continue to convert a growing network of loyal travelers. We look forward to bringing our unique value proposition to more travelers as we grow in 2010 and beyond. ”

%Gallery-78557%

But, enough of the soft stuff — let’s turn to the numbers. That’s where you’ll find the truth in these matters. Cost containment and operational efficiency helped Virgin America post a record load factor of 86.6 percent, an increase of 5.2 percentage points year-over-year. Costs per available seat mile were pushed down 33.9 percent (24.4 percent ex-fuel), and operating income swung from a $54 million loss in the third quarter of 2008 to a $5.1 million gain this year. Along the way, Virgin America realized a mishandled baggage rate of 1.18 per thousand — three times better than the industry average. And, it attained an on-time rate of 87.2 percent.

Sorry to go “quant” and dwell on the numbers a bit, but they speak to a common theme here at Gadling: whether the airlines are doomed to fail … and be propped up by the government taxpayers and fail again … and so on. Virgin America’s proved that an airline can amass 1.1 million loyalty program members and fly 5.8 million passengers in just over two years and still find a way to get into the black. There is probably market share gain in this airline’s future, but it is making a big mistake: by not screwing up, it’s taking a pass on all the free money the feds are more than willing to give to an industry that refuses to help itself.

The online travel market moves past pulling the trigger

by Tom Johansmeyer on

If you think you need to sell seats or rooms to be a player in the online travel industry, think again! Travel research firm PhoCusWright found in a new survey that the online travel marketplace has evolved over the past few years to include a wide selection of non-transactional travel sites that serve as “pointers” to those online destinations were eager travelers can melt some plastic. But, the publication of regular content — at sites like Gadling, for example — is where many travel buyers are forming their relationships, leading to the possibility that the strongest online travel brands may not have any selling capabilities (or interests in developing them) at all.

For companies in the business of selling travel online, this opens a new range of considerations, in which relationships with non-transactional content providers have to be managed carefully. After all, the seller wants to cultivate the customer’s loyalty but also wants to ensure a steady stream of traffic from complementary businesses. “Metasearch” sites, like Kayak, which scour several online travel sales sites, are also playing an increasingly important role in the online travel dynamic.

“Before consumers ever hit the ‘book now’ button, they undergo a whole process of gathering, qualifying and comparing travel options,” says Carroll Rheem, director, research at PhoCusWright. “Both metasearch and review sites are designed to help consumers in this often cumbersome decision-making process. Therefore, it is not surprising that the popularity of these types of Web sites has grown significantly over the past several years.”

As of the end of June this year, Kayak was the top met search site on the web, with close to 7 million monthly unique visitors. Rheem observes that Kayak is among “the most exciting brands in the travel space today.” She notes, “We wanted to take a closer look at which elements of their content and functionality consumers are gravitating toward and what impact they have on booking behavior.”

Markets tend to change during periods of upheaval, so look for the next few years to yield a completely different landscape online. The online travel agencies and other sellers will probably become spots for trigger-pullers only, with the relationship being owned further up the travel information supply chain. Travel buyers will form their relationships with sources of information, not sources of inventory.

Foreign visitation to the U.S. on the road to recovery

by Tom Johansmeyer on

The travel market is showing some signs of stability! Finally! In September, the Department of Commerce reports that 4.1 million people visited the United States from abroad, down only 1 percent from the previous September. Visitation for the first nine months of this year fell 8 percent. Spending was down 14 percent from September to September, hitting $10.3 billion for the month. Year-to-date, foreign visitors to the United States have spent $90.6 billion, which is off 16 percent year-over-year. Nonetheless, it’s headed in the right direction. Nonetheless, foreign visitation suffered its eleventh straight month of declines.

Canadian visitation ticked up 3 percent in September, though for the first nine months of the year, it’s still down 7 percent. Meanwhile, visits from Mexico fell a modest 1 percent from September 2008 to September 2009 and is down 6 percent for the year.

Visitors crossing an ocean to reach the United States fell 4 percent in September — bringing the year-to-date decline to 9 percent. In September, 11 of the top 20 countries posted declines, five of them at double-digit rates. But, there’s some good news. Visits from the United Kingdom, Germany, Spain, the Netherlands and Ireland posted double-digit year-over-year increases for the month.