Ten days ago, at the Travel Weekly New Orleans Leadership Forum, a combination of statements were made that, taken together, form an interesting perspective from which to view -- and plan -- industry developments.
I'll retrace the conversations, which added up to something of an epiphany.
At our Leadership Forums (also held in Hawaii, Mexico and Las Vegas), we bring in speakers who address issues of local importance. In New Orleans, for example, Roger Dow, CEO of the U.S. Travel Association, talked about the meetings market, which has been struggling since Hurricane Katrina.
We also invite suppliers who bring business to the destinations. During onstage interviews with both Continental Airlines' director of leisure sales, Vic Kerckhoff, and Sabre Travel Network's senior vice president for global accounts, Chris Kroeger, the subject of airline unbundling arose.
We talked about how various services that used to be included in a ticket price (checked baggage, meals, blankets, etc.) now may require additional fees and payments from passengers. Kerckhoff spoke in terms of revenue enhancement for the airline, and Kroeger touched on the challenges of helping travel agents decipher the various combinations of components and base airfare to make meaningful cost comparisons for clients. The complexity, he agreed, works to the benefit of agents.
Ray Snisky, executive vice president of La Macchia Enterprises (which owns the Mark Travel brands Funjet Vacations, Southwest Airlines Vacations, Blue Sky Tours and Trisept Solutions), and Patrick Mitchell, Norwegian Cruise Line's vice president of global sales, strategy and planning, made similar points about why they rely heavily on travel agents.
Both have products with enough complexity to warrant an intermediary. Mitchell emphasized that yield management on ship cabins was leading NCL to exploit differences among cabins and then price accordingly. A cabin near an elevator, for example, might justify a higher rate than an identical one down the hall.
I glanced up and saw hoteliers in the audience intently scribbling notes. You could see that something clicked. Would people pay more for a room near an elevator in a hotel? For one farther from the ice machine? Nearer a fire exit? On an all-female floor? A child-free floor?
Peter Yesawich, CEO of Ypartnership, was the last speaker of the day. He didn't address the topic of complexity directly, but he did say that despite the recession, "people will still pay a premium to get what they want."
For some businesses, complexity raises costs. For example, because a pair of shoes sells for the same price regardless of size, it would be better for the footwear industry if we all had the same size feet and it didn't have to create dozens of patterns of varying widths and lengths of the same style shoe.
But for the travel industry, differentiation and complexity almost always provide opportunity. The more that airlines unbundle, the greater the number of differentiated cabins on a ship, the more ways in which a "standard room" can be valued, the better for the carriers, cruise lines and hoteliers.
And when complexity spills over into consumer confusion, it is travel agents who are the ultimate winners.
Contact Arnie Weissmann at [email protected], or follow him on Twitter at twitter.com/awtravelweekly.