LOOKING BACK AT THE INBOUND REPORT’s 14 TOP STORIES FOR ‘2014

1. Brand USA Reauthorized: The undisputed top story of the year came near its end—the reauthorization through Fiscal Year 2021 of the Corporation for Travel Promotion, DBA Brand USA. The prospects for losing the agency to history after the end of the current Fiscal Year became a very real possibility this year, especially WITH the announcement at the beginning of 2014 by Congressman Paul Ryan (R-Wis.) chairman of the House Budget Committee, of a Fiscal Year 2015 budget that would have terminated Brand USA. Intensive lobbying by the U.S. Travel Association and its president and CEO, Roger Dow, had bipartisan coalitions in both the U.S. Senate and House of Representatives pass their own versions of a reauthorization bill: the Senate included its measure in a comprehensive immigration reform bill that stood no chance in the House, while the latter overwhelming approved its version last July. It received no attention until it was slipped into an omnibus appropriations measure that was hurried through the House and Senate over the final legislative weekend of December. After it passed, Dow issued a statement that, typically, credited others, including nearly 20 members of Congress and his own staff, for quietly moving the bill through the noise and clutter of that final weekend.

2. USA, China Announce 10-Year Visas for Each Other’s Travelers : Using the Asia Pacific Economic Cooperation (APEC) Summit in Beijing as a venue, the U.S. and Chinese governments announced in mid-November that they had agreed to begin immediately issuing longer-term visas for business, leisure and student travelers. The length of tourist and business visas will be extended for each country’s citizens to 10 years from the current one-year limit. Student visas would be extended from one year to five years. The news about the 10-year tourist visa for Chinese travels came just days before the annual China International Travel Mart (CITM), Nov. 14-16 in Shanghai—the largest travel show in China. The longer-term visas factored into projections that, by 2021, China will send 7.3 million visitors to the USA—by more than two million the largest annual total ever for an overseas source market.  

3. U.S. Receptives Lose Millions with Collapse of Spanish Bed Bank Transhotel Group: Receptivetour operators in the United States lost millions of dollars owed them by the Madrid-based Transhotel Group, whose brands include the bedbank hotelplease!, as the company entered into bankruptcy, stopped taking reservations and tried to restructure a reported debt of more than $60 million. The action followed a failed attempt by Transhotel’s management to sell the business to the Barcelona-based Hotusa Group. The two companies had been in discussions for several months, which helped lead to widespread reports that the company was in trouble.The collapse of Transhotel had a ripple effect in the U.S., where the company had been very active. Indicative of its presence and reach in the inbound tourism industry in the U.S., last April, it sent three senior sales staff—Juan Rodriguez, divisional contracting manager of the Americas; Raif Farkouh, contracting and product director-America, and Lucia Plazas, hotel contract manager—to IPW in Chicago. In the IPW directory, the company said it had an inventory of 60,000 hotels and was connected to 78,000 travel agencies worldwide in 23 countries. The RTOs that Inbound spoke to were reluctant to discuss the damage that had been done by the Transhotel collapse, but one major receptive told us that his company lost $1.3 million—“and this is after reducing their credit to the floor.”

4. Carlyle Group Acquires Bonotel: The Carlyle Group, the global asset manager based in Washington D.C., increased the size of its footprint in the travel industry early last March by acquiring a majority stake in Bonotel Exclusive Travel, the Las Vegas-headquartered receptive tour operator known for its upscale product line, especially in Las Vegas where it negotiated a semi-exclusive arrangement with all MGM Grand properties. CEO David Sporn, who founded Bonotel in 1991, has continued to manage the business as CEO and chairman and maintain a financial stake in the company. Also joining the board of Bonotel was longtime industry veteran Michael Fisher, former CEO of Allied Tours (now part of Allied T Pro, a Kuoni brand) who has served since 2008 as president of Travelenergy, an international tourism and travel consultancy. Fisher’s father, Stanley, was generally considered to be an industry pioneer—the first receptive operator to offer operators product on a national scale. Unlike other FIT bed-bank RTOs, Sporn was able to entice upscale and boutique hotels by showing them a lavish hardback coffee table book he distributed to Bonotel’s clients as the gold standard. “In addition to distribution, we are actually marketing and branding the hotels to international buyers looking for luxury, something that none of the other receptives were doing,” Sporn told The Inbound Report during a lunch at a Las Vegas restaurant in 2010. With higher price points come higher profits and eventually an exit strategy that attracted a blue chip private equity firm. Other investments include CVC Brazil, the largest tour operator in Brazil; Aviator, a San Francisco-based global online aggregator of attractions (purchased by TripAdvisor in September 2014); WorldStrides, an operator of student travel programs to more than 80 countries; and Ctrip (Ctrip.com) one of the largest travel agencies in China.

5. The Collapse of the Russian Market: From the beginning of July through September, some 20 tour operators in Russia, including several of its largest, shut down. By year’s end, travel industry leaders in Russia suggested that outbound tourism was off by as much as 50 percent, year-over-year. While the U.S. was not that affected—Russia is not on the list of Top 20 international source markets—favored destinations such as Cyprus, Turkey, Greece and in-close European destinations were seriously impacted. The Russian ruble fell catastrophically vs. other major currencies in the wake of economic sanctions imposed by the U.S. and the EU in the wake of Russia’s annexation of the Crimea and its support of pro-Russian separatists in the Ukraine who shot down a Malaysian Air flight last July. Some industry sources were predicting a contraction of travel companies by at least one-third by the time peak travel season arrives in 2015. (Since this item appeared, the ruble collapsed by nearly 50% making outbound tourism nearly impossible for all but the super wealthy.)

6. Kuoni’s Spring Cleaning at Kuoni/GTA: Last May, three years to the month after Zurich-based Kuoni acquired GTA, it engaged in a major housecleaning that sent more than a spring breeze throughout the company. First, NYC-based Sean Bayliss, GTA’s vice president, sourcing-Americas, told Inbound that he was resigning. Then came the news from Adam Rogers, also from GTA-NYC, that he was leaving. At the same time, Colleen Ernst, head of contracting for 18 years in Zurich, was let go. Next, Claudia Benvenuto, business development manager, left the due to the elimination of the company‘s in-destination sales department. Benvenuto had been with Kuoni, GTA’s owner for ten years, serving previously with AlliedTPro, another Kuoni brand. Not long thereafter, in a letter addressed to “partners” and “colleagues,” Patrice Arezina, director of indirect sales, Kuoni France, left the company, telling friends in an e-mail that, after having spent “twelve exceptional years” at Kuoni, he wanted to “take a little time to devote to new projects.” Also, Gary Vetri, who was involved with in-destination sales at GTA, announced that his position had been eliminated.

7. Rate Parity and Dynamic Pricing Controversies—They pit major hotel chains against receptive operators, who are beginning to push back in major cities. As we observed last May, “It looks as though the dynamic direct-connect systems for FIT business (hotel chains or hotels-to-tour operator’s websites) is making a huge organizational change for the FIT sector industry—in some cases trying to eliminate the human factor in contracting —with immediate effect. In addition, we seem to be seeing this development as one which is taking the ‘hospitality’ out of the hospitality industry; that is, there is no longer any dealing with people, just negotiations with computers. It sounds like the time for RTOs to reinvent or to withdraw has fully arrived.”  Uri Argov, founder and CEO of Tourico Holidays, sounded off on one aspect of the issue—rate parity—during a discussion in November at NAJ’s RTO Summit in Orlando. After suggesting that some hoteliers still have a tendency to minimize the size of the leisure group market and don’t like to negotiate with receptive tour operators, Argov said “Parity is the worst violator of human rights in the world.” He also called it “price fixing” and an “anti-trust” activity.

8. International LGBT Goes Mainstream: While it has been a part of trade shows in other parts of the globe, this was the year, for the USA, that the international gay and lesbian market came out of the closet at IPW last April in Chicago and appeared as a cohesive niche that can drive substantial inbound travel from abroad. With high disposable incomes and discretionary time to vacation to the U.S., buyers, sellers, marketers and media were present and welcome everywhere. Diversity Marketing, a company based in Europe, was at the show selling advertising on Tomontour.com, a gay men’s travel website. Meanwhile, many destinations were promoting their gay friendly hotels, events and recommended itineraries.

9. Attention Wal-Mart Shoppers, for Your One-Stop Travel Shopping Needs, We Now Have Tourico: One day last June, after a final afternoon of negotiations at the company’s headquarters in Bentonville, Arkansas, Douglas Mcmillon, president and CEO, Wal-Mart Stores, and Uri Argov, president and CEO of Tourico Holidays, shook hands on the deal that made the Orlando-based Tourico the booking engine for Sam’s Club Travel, the travel company for the wholesale club of Walmart Corp. that is now be available to the 50 million members of Sam’s Club. The global merchandising giant had been looking for a travel channel of distribution and considered bids by other companies. Ultimately, Tourico won the job because of its global reach. By the summer of 2014, the Orlando-based receptive operator that was founded in 1994, had an inventory of hotels, airline partners, ground services, cruise lines and ticketed attractions that exceeded 10,000, situated in 800 destinations worldwide. After the agreement was sealed, the total of seven officials from the two companies who were at the session then went to a no-linen-cloth eatery where they feasted for less than $15 a person—reflecting the parsimonious budgeting ethic of both Wal-Mart and Tourico.

10. In Memoriam: James Feng, a key figure in the success of Active America China, the annual travel industry event that brings tour operators from China to the U.S. to meet U.S. suppliers and DMOs in order to learn about new travel product, passed away June 6th at the age of 37 from heart failure. Jake Steinman, founder and CEO of the NAJ Group, which publishes The Inbound Report and produces Active America, credited Feng, who was based in Shanghai, for recruiting “a high quality group of tour operators” for the annual trade show. Said Steinman: “Many of you, I’m sure, remember his smiling countenance from the Summit as he gently nudged Chinese tour operators to make sure they were present for their appointments. I came to know him only professionally where I appreciated his forthright nature and his strong integrity, and he ultimately became a friend and an integral member of the AA China team. The criteria I always use for transitioning a business acquaintance to a personal friend are these: 1. I have to respect them; 2. admire them; and 3. trust them. It may explain why he had so many friends from the industry…and so many tears will surely be shed on both sides of the Pacific.”

11. Brand USA Shows 1.1 Million-Visitor ROI in its Marketing Campaign: Faced with loudly voiced skepticism on the part of Congressional critics who doubted the need for its role, Brand USA was able give its supporters in Congress something tangible to use as the travel industry worked to get the agency reauthorized when its current life expires in 2015. It released the results of a study based on the Oxford Economics global forecast model which showed that, for the 2013 fiscal year of Brand USA operations (October 2012 to September 2013) tourism arrivals to the USA grew faster than would have otherwise been expected in the eight countries in which Brand USA conducted significant marketing activity. A counterfactual† growth estimate (expected growth given economic conditions in each market) revealed that, for the eight markets targeted by BUSA’s marketing campaign, there was a net increase in visitor traffic of 1.1 million. Also,

• • Percentage increase 2.3 percent
  • Observed increase: 51.82 million
  • Counterfactual: 50.67
  • Based on BUSA allocations and visitor spending from the key markets, there was a 23-to-1 return on investment.

Fiscal year 2013 US inbound performance

(October 2012-September 2013)

(000s)

Source: Brand USA 

†The counterfactual scenario is defined as the expected growth given economic conditions in each market based on the Oxford Economics global forecast model.

12. Country Boy Makes Good. Native Tennessean Fred Dixon Becomes Permanent CEO of NYC & Company: Last March, New York

    

    City Mayor Bill de Blasio made permanent the interim appointment of Fred Dixon as president and CEO of New York City & Co., the city’s tourism and marketing arm and, arguably, the most high-visibility DMO in America. Dixon, who had served since 2005 as the agency’s executive vice president, market development, was named interim CEO late in December 2013 following the announcement by the outgoing president and CEO, George Fertitta, that he was leaving the post after seven-and-a-half years to join the research organization/think tank, Bloomberg Associates, established by outgoing New York City Mayor Michael Bloomberg to help provide solutions to issues confronting U.S. cities. Within the tour and travel industry in the U.S., Dixon’s appointment was viewed as recognition of the importance of his performance on the job, as well as the tourism component of New York City & Co., which Fertitta—he owned his own advertising public relations agency before taking over—had organized along PR agency lines. Dixon is a veteran of more than two decades in the supplier side of the industry. Among the experiences listed on his CV, he has served as: vice president of sales, Group Sales Box Office; director of sales and marketing for Planet Hollywood in the New York City area; and director of tourism sales for the Nashville CVB. Dixon was born in Sevier County, Tennessee, which is also home to Dolly Parton. His family owns the Gillette Motel in Gatlinburg, where Dixon was once tourism sales manager for the Gatlinburg CVB.

13.  The Über-VIP Tour Revealed: Delegates to NAJ’s RTO-Summit last February in Los Angeles heard a remarkable narrative from Sherman Liu, CEO of El Monte, California-based DTE Travel, on how he has managed to get small groups the opportunity to meet with such business luminaries as Warren Buffett, Bill Gates, and Michael Bloomberg. The reason is that, primarily, each of the billionaire business leaders wanted to increase their business activity in China. Liu also made it a point to make large contributions to the favored charities or foundations of the individuals in question. Summit delegates were entertained by Liu’s account of lunching with Buffett. They learned that: the Omaha, Nebraska-based Buffett, one of the richest men in the world, ate only cheeseburgers and Cokes for all three meals during Liu’s visits; that he drove a 1996 Volvo; and that he has lived in the same house for the past 60 years, a house that has never been remodeled. Liu’s easy but polite manner with the super-rich also translates into a professional reputation of quiet confidence that enables his company to book more than a half-million room nights (he could easily book more) at the major cities where he has tours.  

14. Remaking the Recruitment Process—Tourico’s Paid Travel Academy Program:  Starting last January in Orlando, Tourico Holidays         left behind the old models and the old practices used by travel industry in recruiting employees or in training future prospects—usually through internships, school-sponsored training jobs and apprenticeships. Tourico, instead, launched a 10-week Travel Academy Program—with an intensive curriculum that involved classroom instruction, regular lectures from industry leaders and professional sales and marketing experts, as well as hands-on experience on the job. All elements of the program offer the enrollees (less than one in 100 applicants is accepted), who are recent college graduates with travel industry skills—these include negotiation management, problem-solving skills, user training for various software programs, presentation planning, and project implementation. The trainees also receive full benefits, base pay, housing, meal plan, laptops, cell phones and transportation and entertainment in the Orlando area. Based on language skills and job expertise, the graduates are sent to locations all over the world, or the stay at the Orlando home office. In addition to lessening the need to recruit employees from other operators or from suppliers, who might not be compatible with the Tourico culture, one Tourico executive explained that the Academy program allows the company to “Tourico-ize” its new employees.

15. Finally, the Great Non-Story of 2014: Remember the Ebola virus scare?