ArnieWeissmannIn several channels and industry segments, the rules are being rewritten. And although the rewrite is clearly tied to this particular economic cycle, that doesn't necessarily mean the changes are temporary.

In fact, the combined effects of these short-term tactical shifts may have a more dramatic, long-term effect on the travel landscape than any of the well-planned strategic moves by industry players that have occurred over the past 10 years.

Right now, cruise executives must feel a bit like Lucy and Ethel when the conveyer belt speeds up and chocolates come at them faster than the women can wrap them. In our current situation, alas, the chocolates do not represent passengers, but empty berths. The cruise lines, finding themselves at the confluence of increasing capacity and reduced demand, have responded tactically by lowering prices dramatically.

It's unclear whether the concurrent increase in noncommissionable fees is tactical or strategic, but the combination of NCFs and cheap cruises is leaving agents, the lines' most productive channel, feeling frustrated and endangered.

With Regent Seven Seas' recent move to remove NCFs starting in 2010, perhaps this trend has topped out. But the pressure to fill ships and reduce costs continues to increase, and cruise executives are likely to experiment with alternative channels, from deal publishers to, perhaps, very nontraditional channels. If results are favorable, these experiments will be institutionalized, reducing the lines' dependence on travel agents.

On another front, the hospitality industry's resolve to maintain price discipline and avoid discounting has been shattered. Despite memories of the painfully slow rate recovery following the deep, post-9/11 discounting, dramatic discounts are now the rule. But a more secular (as opposed to cyclical) change may be afoot.

The meltdown of the luxury sector may result in consequences that cut across the entire hotel community. Unable to maintain the expense associated with white glove service and amenities, increasing numbers of luxe hotels may, rather than close their doors, consider mimicking the Arctic Club in Seattle, which voluntarily took itself down from five stars to four as a way to lower expenses. If others follow this example, it could produce oversupply in the upscale category and push some of those properties down to midscale.

Ironically, the biggest fallout of a collapse of luxury may be a chain reaction that produces the most pain at the lower end of hotel inventory.

Wholesaler packagers face a different challenge. These low-margin businesses are being tested as never before. The individual supplier-direct deals on the Internet right now are so dramatic that if wholesalers tack on even the slimmest of margins to their net rates, they may find themselves only at parity with Internet supplier-direct pricing.

To compound the problem, the market is so dynamic it can overwhelm the efficiencies of dynamic packaging. According to Shirley Tafoya, president of Travelzoo, the dramatic swings in air and hotel pricing make it hard for a "deal" to stick: A consumer may respond to a great offer but then cannot find it, because prices on the components have fluctuated between the time the deal was posted and the time the consumer sees it.

Because the largest packagers have decidedly different approaches, each has certain advantages. The ones best matched to the current environment may come out of the recession with significant increases in market share.

Apple Vacations' vertical integration -- it controls portions of its own air and hotel inventory -- enables it to stabilize portions of its air and hotel pricing.

MLT, the only large-scale wholesaler still owned by an airline (Northwest), has a margin advantage in being able to pull inventory from its parent at reduced rates.

The Mark Travel brands, notably Funjet Vacations, have traditionally benefitted from superior technology, and that technological edge may prove beneficial in such a volatile marketplace.

Travel Impressions has grown in recent years as a result of its emphasis on service support to travel agents, and its buying power has increased as it has beefed up in scale.

Gogo Worldwide Vacations, the granddaddy of "wholetailing," has by and large resisted the lure of Internet bookings and relies instead on its unique advantage: It's joined at the hip with Liberty Travel retail outlets.

These are all very strong brands, and they're likely to survive even a prolonged recession. But their market share rankings may see some dramatic shifts.

Sources who deal with many wholesalers tell me that two companies, and, are thriving in this environment and are not only providing attractive deals but have been able to, for the most part, take the frustration out of the booking process by efficiently connecting consumers with the deals.

And travel agents, too, have an advantage in this marketplace. Even after the advent of dynamic packaging, most Web packages start out on the Internet but end at a call center. Service provided by an experienced travel agent is far more likely to be a satisfactory experience for a consumer than that provided by even a well-trained call center representative.

For agents, a primary concern is loss of commission revenue if prices across the board stay too low, too long. Their doomsday scenario would occur if cruise lines disintermediate and there's a sharp consumer market share shift from travel agent-friendly wholesalers to intermediaries and suppliers who sell primarily through Web-direct channels.

The depth and impact of any of these possible changes is directly correlated to the length of the recession. Good news comes from Stan Plog, the most respected researcher in travel. He tells me that travel is one of the first industries to rebound after recessions, typically six to nine months after a downturn. He acknowledges that the current recession is "particularly deep" and may set the clock back, but he remains confident that Americans, if denied their vacations for too long, get cabin fever, pack a bag and go, regardless of their economic fears.

Email Arnie Weissmann at [email protected].


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