TW Illustration by Jenn Martins
TW Illustration by Jenn Martins
In 2018, the travel industry grappled with the impact of major mergers, policy changes, technological advances and the unpredictability of Mother Nature.
By Johanna Jainchill
As is the case every year, travel industry news in 2018 was a mix of good, bad and open to interpretation.
In a huge reversal from the previous few years, travel headlines were, for the most part, free of news about controversial Trump administration policies, natural disasters, terrorism and disease, although each of those categories made cameo appearances.
Instead, 2018 proved to be a year of major industry mergers — including one that attested to the impact of huge technology advances — unwanted throwbacks in commission policies and, like every industry, a reckoning with the #MeToo movement.
Here, in no particular order, are what Travel Weekly’s editors think were the most memorable stories to emerge from our coverage.
Apple/Mark Travel merger
Apple Leisure Group (ALG) and the former Mark Travel Corp. shook the industry when they became one company on May 1, an unforeseen and unprecedented merger for two companies that for decades competed fiercely in the charter and all-inclusive packaged-travel markets.
Travel advisers wondered how it would impact their bottom lines when companies like Apple Vacations, Travel Impressions and CheapCaribbean.com became sister entities of Funjet Vacations, Southwest Vacations, United Vacations and Blue Sky Tours.
While they hoped the merger would lead to more streamlined and efficient booking processes and stronger pricing, many agents were concerned about having too much business with one company and whether or not consolidation would erode commissions.
One almost immediate consequence was the end of Funjet’s partnership with Sandals Resorts International due to Sandals competing with ALG’s AMResorts. And in August, the newly merged entity parted ways with Playa Resorts, unable to come to terms on an agreement to sell Playa’s brands, which include Hyatt Ziva, Hyatt Zilara, Panama Jack Resorts and the Sanctuary Cap Cana. Simultaneously, Mark ended its relationship with Excellence Resorts.
There were also some immediate benefits: ALG will now offer far more charters, giving agents more point-to-point vacation options for clients.
A merger of such magnitude takes time to come into its own. When asked in September about the status of combining so many disparate operations, ALG executive vice president Lynn Torrent told Travel Weekly, “It’s still our honeymoon. Ask us again in a year.”
We plan on doing that.
Marriott International started 2018 with an unwelcome bang for travel advisers, when the world’s largest hotel company announced it was reducing the commission it pays on group bookings to 7% from 10%.
Agents immediately interpreted the action as an echo of the erosion in base airline commissions. Those concerns peaked when both Hilton International and InterContinental Hotels Group quickly followed suit. By the time Hyatt fell into line in the fall, it had become almost a foregone conclusion.
On the bright side, quite a few hotel groups said they would not jump on the 7% bandwagon, hoping to woo more travel agent business. Wyndham Hotels said it was sticking to 10%, while Preferred Hotels & Resorts, Dream Hotel Group and boutique brand parent Denihan Hospitality all boosted their commissions on group bookings temporarily last spring in hopes of taking business from the behemoths.
Rebuilding the Caribbean
The 2017 Atlantic hurricane season was the most destructive on record, with the Category 5 monsters Irma and Maria cutting a swath of unprecedented destruction through the Caribbean and Florida Keys.
In 2018, that destruction gave way to recovery and rebuilding, culminating this fall with a majority of hurricane-damaged hotels reopening across the region. In Puerto Rico, all but 11 hotels have reopened, with 132 properties welcoming travelers this winter. Around the Caribbean, iconic hotels like Anguilla’s Belmond Cap Juluca, Isle de France in St. Barts and San Juan’s Caribe Hilton reopened this fall.
The recovery was not spread evenly across the islands. St. Thomas and St. John remain in rebuilding mode, with their largest properties, including Frenchman’s Reef & Morning Star Marriott, Sugar Bay, Caneel Bay and the Westin St. John Resort still closed.
While the rapid comeback of cruise tourism was a lifeline to areas where hotels were long shuttered, the storm took its toll there, too. Carnival Corp. CEO Arnold Donald described a “hurricane malaise” that impacted the company’s financial results even into the third quarter of this year.
Throughout the year, travel advisers did their part to help the Caribbean bounce back, educating clients about the reality on the ground and encouraging them to book the recovering islands.
Those efforts appear to be working: Virtuoso in October said Caribbean business for January and February 2019 was up 21% from a year earlier.
RCCL acquires Silversea
The biggest cruise acquisition in a decade took place in June when Royal Caribbean Cruises Ltd. (RCCL) announced it would acquire a $1 billion majority stake in Silversea Cruises.
The move gave RCCL a true luxury brand and, for the first time, a complete spectrum of brands, from the entry-level, contemporary Royal Caribbean International; the premium Celebrity; high-end Azamara Club Cruises; and luxury Silversea.
For its part, Silversea gained a large public company’s access to capital, a benefit that didn’t take long to materialize. With the ink barely dry on the deal’s closing papers, RCCL placed a three-ship order for Silversea in the fall, including two that will represent a new class for the luxury line when the ships begin sailing in 2022.
The acquisition also made RCCL an instant competitor in expedition cruising, among the fastest-growing segments of the industry and one of its most competitive.
Likewise, Seabourn this summer ordered two purpose-built expedition ships, giving Carnival Corp. an entry into the expedition segment when the ships debut in 2021 and 2022. Luxury line Crystal Cruises also plans to start expedition cruises, beginning with the 200-passenger Crystal Endeavor in 2020.
#MeToo in travel
The #MeToo movement didn’t rock the travel industry like it did media, Hollywood or the hallowed halls of the Supreme Court, but it certainly was not immune.
The movement’s most high-profile takedown was Steve Wynn, who resigned from his eponymous casino-resort company amid the fallout from sexual misconduct allegations. He wasn’t the only one. Standard Hotels founder Andre Balazs was accused of groping, while celebrity restaurateurs Mario Batali and Ken Friedman, owner of New York’s Spotted Pig, were accused of sexual harassment.
#MeToo also forced the hotel industry overall to take a serious look at how its employees in some cases had been systemically mistreated, culminating with the American Hotel & Lodging Association’s (AHLA) 5-Star Promise. Unveiled in September, the workplace safety initiative was designed to prevent sexual harassment and assault, most notably by providing hotel workers across the U.S. with panic buttons by 2020.
Outgoing AHLA CEO Katherine Lugar pulled no punches with her membership.
“As we know — and have heard even more so in the past year — no industry is immune from dealing with the issues of sexual harassment,” she said of the initiative. “Combating this takes vigilance.”
In June, the Travel Institute reported that more travel advisers than ever are independent contractors rather than full-time employees: 62%, up from 29% in 2008.
With this explosive growth, 2018 might have been the year that ICs showed off their ever-growing clout. But it was also a year in which their Achilles’ heel became more of a vulnerability than ever.
In July, a California Supreme Court ruling changed the factors that must be taken into consideration when determining whether a worker is an employee or an IC. The ruling presented a challenge for California agencies, among many other businesses, by defining an IC as someone who “performs work that is outside the usual course of the hiring entity’s business.”
Diane Embree, president of the California Coalition of Travel Organizations, who has been in the industry for more than 40 years, called the classification issue “arguably the most potentially harmful and biggest issue in the travel industry since I’ve been involved in the industry.”
It’s not only the California court that has made IC classification such a hot-button topic. ASTA’s annual Legislative Day event this year drew 150 travel advisers representing the breadth of the country, from Oregon to Florida, to Washington to lobby Congress. Among its top three priorities was harmonizing the competing definitions of an IC by the IRS and the Department of Labor.
U.S. pilot shortage
The largest U.S. airlines this year finally seemed to get serious about dealing with the nationwide pilot shortage that has already forced some regional carriers to fold.
United, American and Delta each announced plans in 2018 to begin pilot career-path programs designed to head off a looming shortage of 3,500 commercial pilots by 2020.
The programs are designed to get pilots into the cockpits of major airlines more quickly. Under current regulations, training to be an airline pilot can easily take 10 years.
In addition, the Regional Airline Association (RAA), which understands the severity of the issue all too well, this year asked the FAA to alter its controversial rule requiring most commercial pilots to log 1,500 hours of flying before qualifying to be licensed. That training can cost upwards of $200,000.
The RAA suggested alternatives such as allowing more hours on flight simulators, which the association asserts are effective and less cost-prohibitive than real flying hours.
The major airlines began taking the shortage seriously this year after it led to operational cutbacks, bankruptcies and outright closures at regional carriers. Great Lakes Airlines, for example, cited the shortage when it halted operations in the spring, and the regional industry has contracted 4.5% in terms of seats flown over the past nine years, even as the U.S. industry at large has grown 14.5%, a situation that RAA leaders said has been partially caused by the pilot shortage.
The government’s bad numbers
In April, the Department of Commerce’s National Travel and Tourism Office made the unprecedented admission that it would suspend publication of its visitor arrival numbers due to the detection of a serious error: A meaningful number of non-U.S. citizens traveling on visas to the U.S. had been erroneously categorized as U.S. residents, resulting in a probable undercount for 2017.
An investigation determined that the problem began when the Department of Homeland Security shifted the I-94 forms that foreign visitors must fill out upon entering the country from paper to electronic documents on its website and its apps as well as at kiosks at customs and immigration entry points.
A revised count found that 3.6 million more international visitors came to the U.S. in 2017 than had been initially reported, turning a 3.1% downturn in arrivals into an increase of 0.7%.
It was good news, but not great news, because the revised numbers still revealed that the U.S. underperformed global travel trends.
“While raw visitation figures have been slowly rising, they are not keeping pace with the explosive growth we are seeing in travel and tourism worldwide,” said U.S. Travel Association CEO Roger Dow. “U.S. market share has eroded.”
Nor did it do anything to convince U.S. citizens that their government could be trusted with numbers.
Regulation of airline seat sizes
In late September, Congress passed a bill requiring the DOT to set minimum standards for seat widths and the space between rows on commercial aircraft within a year.
The standards — to be based on what is necessary for passenger safety, not for comfort or health — came after years of airlines shrinking their seat sizes, especially between rows, to squeeze in as many passengers as possible, thus making each flight more profitable.
And it is not only seats that have been shrinking: Several airlines this year began debuting smaller lavatories.
As much as passengers may hate these trends, the days of legroom are likely over. A roller coaster sequence of events this year could result in the FAA’s congressional mandate having no teeth.
For one, when the consumer advocacy group FlyersRights filed a case against the FAA charging that reduced seat space made plane evacuation slower, the agency responded with a study concluding that evacuation efficiency is constrained by emergency exits, not by seat density.
Airlines are demonstrating no appetite for changing course. This year alone, both JetBlue and American were criticized on public forums for configuring cabins with even tighter seat space.
New Distribution Capability gets legs
It wasn’t long ago that the GDSs stood in firm resistance to IATA’s New Distribution Capability (NDC), viewing it as a disintermediation tool designed to cut them out of airline booking channels.
In 2018, that resistance, six years in the making, became a distant memory.
Over the summer, GDSs made a series of announcements about efforts to develop and test NDC-enabled solutions, implying a promise of more to come.
Sabre and Amadeus in August forged NDC partnerships with several major travel management companies. In October, Travelport said it had become the first GDS to employ NDC to manage a live flight booking.
Perhaps the most significant development was Sabre’s $360 million acquisition of Farelogix in November, which was largely seen by analysts as giving Sabre a significant NDC advantage over its competitors.
Airlines also accelerated their moves toward NDC. In October, Delta, United, British Airways, Finnair and Latam joined NDC Exchange, a marketplace for airline product sales. The Exchange, supported by NDC, is especially useful for the purchase of ancillary products such as checked bags and bundled fares, which are largely unavailable through the GDSs. It went live this year, with Air Canada as its first member airline.
Resistance is indeed futile.
AI in travel
It wasn’t so long ago that artificial intelligence (AI) seemed like a mysterious sci-fi technology. But in 2018, it seemed not a week went by without some kind of new AI adoption in sectors across the industry.
In November, American Express Global Business Travel partnered with Lola.com, an agency that employs a travel chat app powered by AI.
In August, Royal Caribbean Cruises Ltd. (RCCL) became the first cruise company to offer automated chat, as opposed to online chatting with a customer service staffer, when it added an AI-based technology to its CruisingPower.com website. The addition offered another option for travel advisers to interact with the company’s contact centers, saying its goal was to provide a faster way for agents to do business with RCCL.
Over the summer, Travelport partnered with IBM to create IBM Travel Manager, a platform that uses AI to help businesses manage corporate travel spending.
In April, Virtuoso for the first time accepted companies focused on AI into its Incubator program. And in the past two months, Booking.com and Expedia each said it was advancing its use of AI to communicate with both suppliers and customers and to deliver search results.
Where will this all lead? Check back at the culmination of 2019.
It wasn’t the kind of travel story any company wanted: The record hot, dry summer in Europe, which persisted into fall, had river cruise lines scrambling throughout their peak season to reroute ships and keep customers sailing and happy.
High and low water levels are cyclical, and river ships are always prepared to reroute and if necessary to bus passengers to different ships or hotels to complete their itineraries during peak summer heat.
But for such low levels to carry into October and November was unprecedented. While the Danube and the Elbe were most affected over the summer, river lines this fall had to abandon the popular Basel-Amsterdam sailings on the Rhine when the port of Cologne, Germany, was shuttered.
River cruise lines know that rivers are an unpredictable force of nature, like snowfall for ski resorts or hurricanes for beach destinations. This year, their extensive backup plans were put to the test, and by many accounts, they performed as well as could be expected. Whether the river lines had to swap passengers between ships at impassable points, put them in hotels or on motorcoaches to keep their tours going or develop alternative itineraries, this was not a river cruise season any line hopes to repeat.