Marketing Review - Spring 2008 - (Page 26)

facing difficult times as their largest single expense continues to climb. Many have added fuel surcharges to ticket prices, but rising prices eventually make it harder to fill seats. This puts an even greater premium on efficiency and cost-cutting. Delta has announced plans to shed half its workforce, some 30,000 people, in response to high fuel prices. We expect also to see more cooperation among competing airlines, with many sharing planes when passenger demand cannot fill separate flights. And this could be good news for Airbus, whose ultra-efficient A-380 made its first commercial flight in mid-March, for Singapore Airlines on the Singapore-toLondon route. Despite these and other efficiencies, we will not be surprised if fuel expenses alone ground one or two of the weakest carriers before the price of oil stabilizes. For the rest, the worst should be over in another two or three years. Implications for Cruises: Like the airlines, cruise operators are being forced to adopt fuel surcharges to maintain their profit margins. This will not seriously affect luxury cruiselines, but if oil prices remain in triple digits it could begin to erode the family and economy cruise markets. Again, the crunch should pass relatively soon. Implications for Hotels: For this sector, energy costs are an important expense, but far from the largest. So long as the price of oil does not go much higher, it should have only a modest effect on their bottom line. In the United States, some hotels may find that high gas prices inhibit drive-in traffic, particularly in family-oriented markets dependent on long-distance travel. This should be only a minor problem. In Europe, oil shortages caused by temporary closure of Russian pipelines could cause periodic price spikes that inhibit travel for brief periods. We do not expect such problems to last any longer than it takes Moscow to make its political points. By 2015 or so, Europe will have developed other petroleum sources, making the unreliability of supplies from Russia much less troublesome. Implications for Restaurants: While no one likes paying more for gas and electricity, high oil prices should have a relatively modest effect in this sector, where personnel costs trump all others. The greatest danger is that the price of gasoline will combine with other economic uncertain26 6 ties to discourage dining out. If so, the pain should ease once the American economy begins to recover in late 2008. Implications for Travel: At this point, consumers seem to be largely inured to the idea of paying more for their fuel than they once expected. Americans may cut back temporarily while the U.S. economy is in decline, but travel will recover quickly once GDP growth returns to positive territory. Elective travel should be one of the most inelastic markets, declining rapidly when prices follow costs higher. In recent years, it has proved to be much more comfortable with rising costs than many observers might have imagined. 6) Technology increasingly dominates both the economy and society. New technologies are surpassing the previous state of the art in all fields. Laptop computers and Internet-equipped cell phones provide 24/7 access to e-mail and Web sites. Flexible, general-service personal robots will appear in the home by 2015, expanding on the capabilities of robotic vacuum cleaners and lawn mowers. New materials are bringing stronger, lighter structures that can monitor their own wear. By 2015, artificial intelligence (AI), data mining, and virtual reality will help most organizations to assimilate data and solve problems beyond the range of today’s computers. The promise of nanotechnology is just being explored, but real possibilities range from high-powered super-batteries to cell-sized health monitors. Ultimately, speculations that we are approaching the “singularity,” the time when our artifacts become so intelligent that they can design themselves and we cannot understand how they work, may prove correct. At that point, humanity will be largely a passenger in its own evolution as a technological species. Implications for Airlines: Air travel will benefit more, and more immediately and directly, from new technologies than any other segment of hospitality and travel. New safety systems over the next decade are likely to include improved heads-up displays, en-route collision-avoidance equipment, and automated airport routing, both in the air and on the ground. Better sensors will tighten airport security by recognizing explosives that slip past today’s detectors. However, this equipment will not be installed until another Lockerbie- style bombing or a major hijacking renews public demand for greater safety. These innovations will not be cheap. Inairplane safety systems will be mandated at the company’s cost, while external equipment such as new satellites for the GPS system will be paid for by user fees. New materials that sense their own condition are beginning to appear, particularly from nanotechnology research. They will be incorporated into critical aircraft components such as engine mounts by 2020. Soon after, skin alloys will alert mechanics to fatigue and incipient cracks. By 2018, the first supersonic business jets will take to the air, with 20-passenger models likely to appear around 2025. By 2030, efficient supersonic travel will replace first-class sections on long routes over water. Implications for Cruises: Online travel agencies will account for only 9 percent of cruise sales in 2009, according to PhoCusWright. That will not long be true. Over the next decade, the most important technological development for cruiselines will be the continued growth of online booking. Early suggestions that cruise travel was too complex and expensive to book without human contact are fast proving to have been wrong. Carnival, Princess, Disney, and others have set up convenient and successful online booking systems for net-savvy cruisers. Operators with less efficient sites, or none at all, will find themselves at a growing competitive disadvantage. Five years from now, the tradition of booking through a travel agent will have vanished, save in the extreme high end of the market—and there is room to wonder how long agents can survive to serve the luxury market after losing the rest. Cruiselines hoping to do well in an increasingly net-savvy marketplace will have to pay scrupulous attention to their reputation. Tales of poor service and disappointed travelers go a long way in online forums, chat rooms, and blogs, and they can take forever to disappear. An impeccable brand is the only assurance the online shopper has that his cruise investment will be money well spent. The Internet has changed the cruise market in another way that dismays some operators. Bright European buyers are starting to check prices online and then buy from American agents, often at considerable savings. In one example, a trip HSMAI MARKETING REVIEW • SPRING 2008 200557672-001/ZOMI/GETTY IMAGES

Table of Contents Feed for the Digital Edition of Marketing Review - Spring 2008

HSMAI Marketing Review - Spring 2008 Contents COLUMN: The Online Marketer COLUMN: Success Stories COLUMN: Guest Column Ten Trends Now Shaping the Future of Hospitality Turning the 2008 Consumer Tax Rebates into Hospitality and Travel Sales 25 Extraordinary Minds in Hospitality and Travel Sales and Marketing The Lure of Lore: Connecting with Customers Through a Unique Brand Story A Careful Balancing Act A Meaningful Relationship: How Technology Affects the Connection Between Hospitality Marketers and Meeting Planners SPECIAL SECTION: The 2007 HSMAI Adrian Awards Building Five Star Imagery

Marketing Review - Spring 2008

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