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PEOPLE WILL TALK
By Joe Brancatelli
December 17, 2009 -- My last-minute gift guide for business travelers is posted at Portfolio.com, but let me add People Will Talk, a wonderful, if obscure, Cary Grant movie from 1951. Directed by Joe Mankiewicz, it tackles McCarthyism in an unusual, oblique and entertaining way. Besides, there are no bad Cary Grant movies at the $12 price point.
Despite the headline, however, People Will Talk, the movie, is not the topic of this week's column. As the last scheduled screed of the year, I wanted to use this space to summarize some fascinating interviews I've conducted in recent weeks. Stick with me if you want to learn more about lie-flat seat-beds, in-flight WiFi, hotel frequency programs and a new approach to private-jet rentals.
WHY IS HILTON DEVALUATING HILTON HHONORS NOW?
Nightly hotel rates nationwide are down 20 to 30 percent this year and occupancy rates have plunged as fewer travelers are on the road. So the obvious question is: Why would Hilton devaluate the Hilton HHonors program now? What logic is there in asking your very best customers, the members of your loyalty program, to accept a points devaluation that works out to about 20 percent?
In case you missed the news, starting next month Hilton will have seven basic reward categories and most will require more points than last year. Moreover, about 10 percent of the chain's approximately 3,500 hotels will be placed in a higher reward category than last year. By Hilton's own admission, the combined effect of that double whammy is a nearly 20 percent reduction in the value of the HHonors points you earn.
Jeff Diskin, Hilton's senior vice president of global customer marketing, was playing a weak hand when we discussed HHonors, but he doggedly made his case. "Announcing a point increase at any time isn't easy," he admitted. "Going into 2009, we were looking at a difficult environment, so we said let's leave the point levels alone even though some of our competitors did devalue their programs."
So I asked him bluntly: Are you devaluing HHonors for 2010 because travelers didn't flock to Hilton Family hotels when you didn't raise point levels in 2009? "We have to be competitive," he responded. "And since we hadn't raised reward levels since 2003, you have to consider how much hotel rates increased in that time. This year there was a large decrease in [the average daily rate] at hotels, but they are still much higher than when we last raised [reward prices] in 2003."
And Diskin repeatedly pushed the mantra that will clearly be Hilton Hhonors' defense in 2010: "Do the math," he suggested. "We think we still offer more value than any of our competitors' programs."
A final note: The HHonors devaluation will be somewhat mitigated by Hilton's return to the systemwide promotion arena in 2010. For several years, HHonors stayed on the sidelines while competitors such as Marriott, Starwood and especially Hyatt offered lucrative short-term deals that helped travelers boost their points balances and claim additional rewards. Diskin promises "an ongoing litany of systemwide promotions in 2010. Some of the money we save by changing the reward chart will be redirected to other promotions."
BEDDING DOWN IN CONTINENTAL BUSINESSFIRST
Years behind their competitors, the U.S. legacy carriers have slowly been upgrading their anemic international business-class offerings. That upgrade takes the shape of seats that fold down into beds. Not all of the reviews of these beds have been positive, which isn't a surprise since most of the U.S. carriers chose outdated products and/or skimped on the real estate they allotted to the beds.
But I've been watching what Continental Airlines has been doing. Its BusinessFirst cabin has clearly been the best-rated among U.S. airlines for at least a decade. I've been a big fan of the product and I am also a realist: For all of the publicity surrounding business-class beds, most travelers actually sleep just as well in a high-quality cradle seat (which Continental offers) as they do in in-flight beds.
Still, the price of entry into the business-class stakes these days is a bed, so the first Continental plane with beds took to the air last month. There should be three similarly equipped planes flying by the end of the year, according to Eric Kleinman, Continental's director of product marketing.
"We're proud of our existing BusinessFirst product, but this new seat is something we know we needed to stay competitive," he admitted. "A flat bed is expected now and perception is reality."
The new Continental seat converts to a fully flat bed that is 78 inches long and 23 inches wide with the armrests raised. It's 27 inches wide with the armrests lowered. It also features a 15.4-inch monitor; iPod connectivity; power and USB ports; fixed privacy dividers; storage under the ottoman, over the shoulder and under the monitor; a large tray table; and other nice wrinkles.
Unlike some of its competitors, Continental is adding the beds without cutting legroom or slashing the number of seats in the cabin. "We like keeping our BusinessFirst cabin intact, so we're reducing the number of coach seats to accommodate the beds."
On Continental's Boeing 777s, the new seats in business class mean nine fewer seats in coach. On Continental's Boeing 757s, which the airline uses on routes to secondary European cities, there is no loss of coach seats because an electronics storage closet was removed. The seating configuration on Continental's Boeing 767s hasn't been finalized.
Kleimman says it takes 20 days to add the seats to an aircraft, so don't look for a rapid rollout of the new beds. It'll take about 18 months for each fleet type to be converted. "We would like to install faster, but we have to keep the planes flying," Kleinman explains. "Even in these down times, there simply isn't a lot of slack in the system."
THE FUTURE OF IN-FLIGHT WI-FI ACCORDING TO LUFTHANSA
About 650 domestic jets have now been equipped with Aircell's GoGo in-flight WiFi service and, for all the publicity it has generated, there is very little evidence that travelers are interested in buying. The so-called "take" rate is only about 5 percent--and an unknown (but large) portion of those flyers are surfing free thanks to some promotion or other.
But one international carrier has remained a supporter of in-flight WiFi even when the product literally didn't exist. Lufthansa was the largest customer of the Boeing Connexion service that collapsed in 2006 with perhaps a billion dollars in losses for the plane maker. Lufthansa searched for a replacement over the last three years--international in-flight WiFi requires an expensive, satellite-based overwater system, unlike the land-based GoGo--and it thinks it's found one. Beginning in the middle of next year, Lufthansa will revive its so-called FlyNet service using equipment provided and serviced by Panasonic.
"We look at this from the long-term strategic perspective," says Don Bunkenburg, a U.S.-based Lufthansa executive. "In the beginning, I don't see in-flight WiFi as a profit center. I see it as a brand differentiator. In the long term, though, travelers will be willing to pay for it."
According to Bunkenburg, the WiFi will first appear over the North Atlantic because "the majority of our [North Atlantic] fleet already has the equipment on board." In other words, Lufthansa is hoping to re-use the Boeing Connexion equipment, which the airline never removed. Bunkenberg says 64 out of 95 planes in Lufthansa's long-haul fleet already have much of the necessary onboard equipment.
The future of international in-flight WiFi may not look much like the past, however. Bunkenburg says Lufthansa expects "a lot more travelers using mobile devices than laptops, especially in the beginning." Mobile devices equipped for WiFi literally did not exist when Connexion was operating. And while pricing for FlyNet hasn't been set, Bunkenburg did acknowledge that Lufthansa is looking at offering it free to premium-class passengers.
"It's part of what we're looking at," he says. "We haven't reached any conclusions. There are multiple pricing strategies being examined."
A FEW WORDS ABOUT CORPORATE JETS
Most business travelers I know don't have access to--and certainly cannot afford--private corporate jets. And the confusing, convoluted and ultimately misleading pricing options for corporate-jet rentals are another turnoff.
But when an operator like JetSuite comes along, some attention must be paid. For starters, it uses a new plane, the sports-car-like, 4-seat Embraer Phenom 100. It's also come up with a somewhat more affordable and more comprehensible fare structure. And it's headed by Alex Wilcox, who has a history of making smart, passenger-savvy decisions at Virgin Atlantic, JetBlue Airways and Kingfisher, the private Indian airline owned by flamboyant liquor kingpin Vijay Mallya.
Private jets "are still a luxury product," Wilcox concedes. "But we're not selling price. We're selling time savings and logical travel patterns."
Pointing to statistics that show most private-jet use is for shorter-haul flights for just a few passengers, Wilcox touts the Phenom 100's 1,000-mile range and 4-seat capacity. "This accomplishes 80 percent of the missions that are out there for private jets. The rest of the industry uses aircraft that are too big for the mission. It's like taking a motorcoach across town with two or three people instead of using a taxi."
Wilcox also thinks he has a geographic advantage by starting JetSuite in California and Nevada. "In the 700-mile catchment area of Las Vegas, 80 percent of the private-jet flights go to 39 airports. But if you go to Atlanta, the same 80 percent of the traffic is dispersed to 390 airports. So we have the right plane and we're starting from the right places."
Wilcox returns to the taxi metaphor when he explains JetSuite's pricing. The airline's 10-day card costs $35,000. That entitles you to 10 days of flying. The JetSuite 25-day card costs $75,000, or about $3,000 a day. Buyers also pay $999 an hour for the actual flying time.
"It's like a flag drop on a taxi," he says. "You pay $3,000 for the first mile, then it's $999 an hour for when you actually use the plane."
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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.
THE FINE PRINT All of the opinions and material in this column are the sole property and responsibility of Joe Brancatelli. This material may not be reproduced in any form without his express written permission.
This column is Copyright © 2009 by Joe Brancatelli. JoeSentMe.com is Copyright © 2009 by Joe Brancatelli. All rights reserved.