WHAT DIES THIS TIME ON THE ROAD?
By Joe Brancatelli
March 19, 2009 -- This is a historical given: Every recession in the last generation has changed the nature of business travel. When the economy turned back up, fewer business travelers were still standing, fewer airlines were still flying and the entire experience of living a life on the road was harder, nastier, less fulfilling and more expensive.
I don't think this recession, which is, even by conservative estimates, flirting with a depression, will be much different. When that glorious day comes when some expert declares the economy cured, we'll be looking at a seriously altered business-travel landscape. In my Portfolio column this week, I discuss some of the likely changes in the fundamental nature of air travel. But here, let's focus on what won't even survive the recession.
Stayed at an Adam's Mark hotel lately? That once-notable chain was doomed by the post-9/11 recession. How was your last flight on Midway Airlines? Deregulation's first carrier died in the 1990-93 Gulf War recession. Eastern Airlines, Pro Air, Access Air, the original Red Lion Hotels, Stouffer's Hotels and dozens more disappeared in recessionary times. Checked your E-mail at a Laptop Lane on your last trip? Leave your checked bag at a remote airline check-in station inside a hotel lobby lately? Consulted an OAG Pocket Flight Guide recently? They, too, and dozens of other travel concepts were swallowed up during recessions.
So what dies this time? Here are my best guesses. I'd be interested in hearing what you think won't make the cut when happy days are here again.
ONE LEGACY CARRIER
Recessionary periods are hell on legacy carriers and one of the five remaining big airlines probably won't see the other side of this downturn. My guess is United Airlines. On its best days, United is a mess and we need not put too fine a point on what we all know. But the airline is literally disappearing before our eyes. Forty percent of what flies as United Airlines now is actually operated by a grab bag of commuter carriers. What is left of the actual United Airlines has largely abandoned Latin America and turned huge chunks of its European capacity over to the Star Alliance. Its Asian network is fading and logic dictates that United will retreat from Australia if the competition from newcomers (Delta and V Australia) and the strong incumbent (Qantas) gets much hotter. Next year, all of its labor contracts will become "amendable." (Technically, contracts never expire in the airline industry.) By next January, United will once again have to talk with JPMorgan Chase about its credit card "holdbacks." And the carrier is quickly burning through its miniscule cash reserves. Time is running out on the nation's worst-managed major airline and a merger, dismemberment or liquidation seems far more likely than a revival of its fortunes.
UNLIMITED FREE WIFI AT HOTELS
Everyone prefers free WiFi at hotels and the so-called focused-service chains such as Hilton Garden Inn, Courtyard by Marriott and Hyatt Place have been quick to accommodate us as part of the nightly rate. A smattering of properties in the deluxe, full-service and budget categories do, too. But unlimited free WiFi may not survive this recession. When our primary use for the Net was E-mail and light Web surfing, costs were marginal for the hotels providing free access. But as we get into heavy-duty stuff like videoconferencing, huge downloads, multimedia presentations and other bandwidth-chomping tasks, hotels face runaway costs to keep their systems running. Some properties are already testing tiered pricing for Net access--cheap or free for slow-speed access for E-mail, higher prices for the more sophisticated stuff--and we're likely to see more of those types of arrangements in the coming months.
It's hard to tell what will kill Virgin America first, the bizarre financing arrangement that has raised issues about its "citizenship" or the speed with which it is running through its finances. The protracted pre-launch battle over its legal bona fides--Richard Branson can't own or control the airline since he's not a U.S. citizen and the hedge funds he brought in were permitted to cash out with a guaranteed financial return--led Virgin Atlantic to burn through millions waiting to fly. Its financial performance since its 2007 launch has only exacerbated the problem and scared the hedge funds away. So we're left with a cash-consuming carrier that has no U.S. investors flying on routes where it faces fierce competition from legacy carriers and respected alternate airlines such as Alaska and JetBlue. Before this recession ends, Virgin America will die or be bought out at a knockdown price and hardly anyone will notice that it's gone.
SEVERAL HOTEL BRANDS
Business travelers generally like the major hotel chains because they seem to have a brand at every few dollars along the pricing scale. That might have been a profitable strategy for the chains when the economy was rolling along. But in a post-recessionary world when there are fewer business travelers on the road, the crazy-quilt of brands won't make much financial sense. Can Marriott continue to justify three full-service brands (Marriott, JW Marriott and Renaissance) and three extended-stay brands (SpringHill, TownePlace and Residence Inn)? Can Hilton justify two luxury brands (Conrad and Waldorf Astoria) and still find owners that want to pay to build Denizen Hotels? InterContinental should be worried that the success of Holiday Inn Express has done to the core Holiday Inn brand what Coors Light did to the Coors brand. There are about 42,000 hotels with 4.5 million rooms in the United States and the development pipeline continues to gush. A lot of those properties are going to make nice condos or retirement communities one day soon.
THE REGISTERED-TRAVELER CONCEPT
It's for history to decide who or what killed the concept of registered-traveler security-bypass lanes at the airport. The Transportation Security Administration (TSA) adopted the not-invented-here mentality from the start and tried to strangle registered traveler in its metaphoric crib. The insufferably arrogant Steve Brill, whose entrepreneurial acumen is mostly a figment of his own fevered imagination, made things worse by alternately trying to bully and mollify the TSA bureaucracy. The result? A system that operates at fewer than two dozen airports and not at crucial hubs like Chicago, Dallas/Fort Worth, Detroit, Houston, Miami, Philadelphia, Seattle, Charlotte or Minneapolis. There's no security bypass permitted, either. And now that traffic has collapsed and security lines have largely disappeared, Brill is asking frequent travelers to pay for a glorified line-cut program. Since most of his most logical potential customers already receive line-cut privileges as part of their elite frequent flyer program benefits, it's hard to see how Clear survives this recession. In fact, Brill himself has already removed himself from day-to-day management and Clear lanes are cutting their hours of operation, another disincentive to pay to play.
ZAGAT SURVEY GUIDES
It's not so much that the Zagat Survey formula of dining guides is being co-opted by faster, more nimble and more engaging Web-based products such as the wonderfully obsessive Chow. It's that for all the huffing and puffing and promoting, Tim and Nina Zagat have never really been able to make the Zagat name matter much beyond their Manhattan base. After a brief period in the early 1990s when it looked as if Zagat could challenge Michelin for global culinary influence, the little burgundy guides (and their aggressively uninteresting Web site) seem almost peripheral to the business-travel lifestyle now. In the big American cities, there are dozens of local sites that are better tip sheets than Zagat and dozens more city guides that regurgitate Zagat-like information. Internationally, most business travelers will consult Michelin or TimeOut.com long before surfing to Zagat.com. By the time this recession is over, Zagat is likely to be a minor subsidiary of a Web aggregator. And foodies will wonder why the Zagat formula, which somehow gives a pleasant pub in Peoria and a culinary palace in Paris the same 27 rating, ever was taken so seriously.
A SLEW OF INDEPENDENT HOTELS
The iconic Greenbrier Resort in West Virginia filed for bankruptcy protection today and its parent company, the CSX railroad, has struck a deal to sell the property to Marriott for next to nothing. Expect many similar deals as the recession continues. The major chains may be saddled with too many brands and too many properties, but independent hotels simply can't compete with the chains' global reach, sophisticated reservation systems and sprawling frequent guest plans. By the time this recession is over, there'll be many fewer resorts and big-city hotels without a brand affiliation.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
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