It's difficult to assess the impact of the economic downturn on the travel industry, in part because we're less an industry than a community of industries. Airlines are in survival mode, cutting capacity and laying off thousands. Some cruise lines have reported layoffs, others not; STA Travel, an agency devoted to student travel, has reorganized and cut its U.S. work force significantly.
And then there's the case of Gogo Worldwide Vacations, which announced recently it would increase its sales force from 14 to 22. Dean Smith, its president, told Travel Weekly that this was consistent with the strategy developed by its parent company, Australia-based Flight Centre, when facing tough economic times. He said that aggressive marketing had helped them increase revenue and profits by 20% in the year following 9/11, a period that saw the rest of the travel community suffer.
One must be careful, however, in generalizing about the wisdom of this, or any course of action that one company takes. There are doubtless additional factors specific to Gogo that came into play in its decision-making. Other mitigating factors might have included the relative strength of the Australian dollar vs. the U.S. dollar and the challenges that Gogo has been facing from a reinvigorated Travel Impressions over the past several years.
But regardless of the particulars, it's encouraging to see a company commit to expansion in tough times and to point to a positive track record for justification.
And it's instructive to note that this has happened in the tour segment. Because many companies in other sectors -- aviation, hospitality, cruise and car rental -- are public, they keep one eye (at least) on their stock prices, frequently basing decisions on what they hope to be able to report in the next quarterly earnings call.
But most tour operations, like most travel agencies, are privately held, and can take a longer view.
"You can rationalize yourself out of business," Marc Kazlauskas, president of Insight Vacations, a division of privately held Travel Corp., told me over breakfast recently as we discussed companies that were cutting back. "Right now, we're certainly looking at where we can gain market share. It's a great time for getting exposure, because there's less noise when others pull back. And believe me, there's still plenty of business out there."
Perhaps the best illustration of how a company can rationalize itself out of business is a joke I heard a few years back:
A city slicker was driving through the country and saw a farmer holding up a pig so it could eat apples straight off a tree. Curious, the man from the city pulled his car over, walked up to the fence and called to the farmer. As the farmer and his pig came up to him, the city slicker noticed that the animal had two regular legs and two wooden legs.
"Couldn't help but notice how you were feeding your pig," the city slicker said.
"Oh yes," said the farmer. "I take real good care of this pig. It's a very special pig."
"Well, one night, we're all asleep and this pig starts raising a ruckus outside my window. I wake up and smell smoke. Turns out the house is on fire, and the missus and I barely get down the stairs and out of the house alive. But then we see the pig run right into the flames, and he comes out a minute later, carrying our precious baby son."
"That's amazing," the visitor said.
"That's not all," the farmer said. "About four years later, I hear my boy calling for help from over in the pond. I rush down there and see that my boy is drowning, but before I can get into the water, this pig dives into the pond, swims over to our boy and pulls him ashore. Then he performs artificial respiration on the boy until he revives."
"That's incredible," the city slicker said. "This is a very special pig. But you still haven't explained why he has two wooden legs."
"Well," the farmer said, "a pig like that, you don't eat him all at once!"
Not everyone can fatten up, rather than eat, their pigs during hard times. Even when businesses can identify opportunities associated with down cycles, they can't always make the required investment.
And when survival is at stake, of course, you do what you must. But in the long view, chopping away at your business should be seen as the last resort.
Seldom do attempts to cut one's way to profitability lead to eating higher up on the hog.
Email Arnie Weissmann at [email protected].