By Johanna Jainchill
Cuba. Terrorism. Mergers.
Lufthansa's GDS fee. Crystal Cruises. Fathom. The sharing economy. The open
skies feud. The strong dollar.
For travelers, 2015 was bookended by news about borders. The
year began with the nudging open of borders that had been closed to U.S.
tourists for a half century but ended with calls to tighten borders worldwide.
In January, the historical thaw between the U.S. and Cuba
began a process that makes travel to the long-forbidden island much easier, but
by December, there was a very real possibility that the U.S. and Europe might
tighten their borders in the face of terrorism, raising new barriers to travel.
The industry can only hope to reclaim the optimism that
ushered in 2015. But given the recent terror attacks and the coming election
campaign, that's anyone's guess.
Here, in no particular order, are the topics we think made
the year most memorable:
Cuba
The extent to which Cuba managed to dominate travel talk for
much of 2015 was dizzying.
It's hard to believe that just one year ago this month,
President Obama announced that the U.S. would restore diplomatic ties with the
Caribbean's largest island nation. Since then, every few months, Washington and
Havana have taken steps that seemed to inch the two nations closer to
normalized relations, from the U.S. removing Cuba from its list of state
sponsors of terrorism to both reopening embassies in each other's capitals for
the first time since 1961.
On the travel front, the pace of change was even more
frenetic. The administration eased travel restrictions to Cuba in January so
U.S. citizens no longer had to apply for individual licenses from the Treasury
Department to travel there but could instead self-report that they were
visiting under one of 12 categories of allowable travel, ranging from
educational to humanitarian to religious reasons.
The industry pounced.
Several major tour operators have since debuted their first
Cuba tours, including Apple Vacations, Abercrombie & Kent and Travel
Impressions.
In February, CheapAir.com became the first OTA to enable
U.S. travelers to book flights between the U.S. and Cuba, albeit through third
countries, a capability it expanded to direct charter flights later in the
year. Several commercial airlines began increasing charter flight schedules to
Cuba, and the GDSs said they had readied or were in the process of readying
their systems to accept regularly scheduled commercial flights to the island.
All of that took place well before the U.S. State Department
said last week that the U.S. and Cuba had reached an agreement to resume direct
commercial flights between the countries.
With hotel development in Cuba still decades behind, it
seemed natural that a cruise line would be among the first suppliers to
introduce products for the island. Carnival Corp.'s new social impact brand,
Fathom, said it would become that line, obtaining a license from the U.S.
government to sail to Cuba in the spring of 2016.
The only thing that could stand in Fathom's way of marking
that milestone is the pace at which Cuba has been opening to Americans; it's
very possible that by then, all travel restrictions will have been lifted, making
Cuban ports regular stops on Caribbean itineraries.
Terrorism
Since the 9/11 terrorist attacks 14 years ago, travelers in
general have become more inured to threats of violence. But this year, their
resilience has been tested by an increasing number of violent incidents.
It started in January with the Paris attacks on the offices
of the satirical magazine Charlie Hebdo. Though tourists weren't targeted, the
attacks took place in the most visited city in the world.
Then in two separate incidents in Tunisia, cruise passengers
visiting a Tunis museum were among the victims of a terrorist attack that left
23 dead, and 38 tourists, primarily from Britain, were gunned down at the
seaside resort of Sousse.
Yet there were no serious ripples to the U.S. travel
industry at large until November's twin attacks by ISIS. The first brought down
a Russian MetroJet airliner taking tourists home from Egypt's Sinai peninsula,
killing all 224 people onboard. The second was the terrorist attacks on Nov. 13
that killed 130 people in Paris cafes, a concert hall and a soccer stadium.
The Paris attacks brought tourism in France to a near
standstill, as did raids tied to the resulting investigation in nearby
Brussels. The events sparked discussions about securing borders in both the
U.S. and Europe.
For the tourism industry, the fallout could have serious
implications. Talks of reintroducing border controls among Europe's 26
open-border countries would significantly change how travelers move through the
Continent.
In the U.S., the attacks prompted the White House to make
immediate changes to the Visa Waiver Program (VWP), which allows citizens of 38
member countries to enter the U.S. and stay of up to 90 days without a visa.
The concern was that most of the Paris attackers were citizens of France or
Belgium, both VWP countries. And shortly thereafter, lawmakers introduced
legislation that would add even more restrictions to the program. Members of
the travel industry worry that further restrictions could deter the many
millions of international travelers who peacefully visit the U.S. every year
and add billions to the economy.
Terrorism has damaged tourism industries in places like
Egypt and Tunisia, where it represents a crucial part of the gross domestic
spending. It remains to be seen if the U.S. and Europe can devise policies to
protect their citizens while also enabling them to move freely around the
world.
Merger mania
In recent years, travel industry merger and acquisition news
has been dominated by airlines. But in 2015 our attention was grabbed by
Marriott International's acquisition of Starwood Hotels & Resorts
Worldwide, creating the biggest hotel company in the world by far, and before
that by Expedia's triple play: Travelocity, Orbitz and HomeAway.
Analysts quickly predicted that Marriott's $12.2 billion
acquisition would necessitate the shedding of some of the combined company's 30
brands. Granted, Marriott CEO Arne Sorenson said shortly after the deal was
announced that he expected Starwood's 11 brands to "remain in place."
But he also noted that some of those brands compete -- for example, Marriott's
Renaissance with Starwood's Le Meridien -- making the future unclear.
Travel advisers undoubtedly hope that Starwood's trade
relations approach is the one the company hangs on to. As ASTA CEO Zane Kerby
told Travel Weekly last month, Starwood has a track record of being
"supporters of the trade industry," while Marriott has been
"kind of on and off," a not-so-opaque reference to the hotelier's
"Book Direct" campaign.
Top online news stories
of 2015
We took a look at the articles on TravelWeekly.com this year
and ranked them by page views. Here are the 10 most popular:
1.Celebrity Cruises to go mainly with bundle pricing (June
30)
2.Report: Baha Mar resort 'unlikely' to open this year (May
12)
3.The same old story: Baha Mar opening delayed (May 6)
4.Caribbean and Mexico resorts plagued by sargassum outbreak
(Aug. 30)
5.Low water levels plague Europe river cruises (Sept. 2)
6.Dominican Republic tops in Caribbean tourism, and growing
(May 21)
7.Margaritaville's presence grows from song to eateries to
resorts (Jan. 4)
8.Harmony of the Seas to sail from Barcelona in 2016 (March
13)
9.Drug violence occurs near Puerto Vallarta but not in
tourist areas (May 4)
10.RCCL stops discounting close-in bookings for most cruises
(April 20)
For OTAs, the Marriott/Starwood merger is not good news
because the combined company will have more than 1.1 million rooms globally,
giving it substantial distribution leverage.
But OTAs have been busy consolidating, as well. Expedia
acquired Travelocity for $280 million in January, Orbitz Worldwide for $1.34
billion in September and HomeAway for $3.9 billion last month. HomeAway and its
brands, including VRBO.com, accelerate Expedia's efforts to gain share in the
private-accommodations sector, while Orbitz and Travelocity help it compete
against Priceline, which itself acquired a $60 million stake in Brazil-based
OTA Hotel Urbano.
And just as OTAs can't be thrilled about the
Marriott/Starwood combo, the same goes for hotels being wary about Expedia's
buying spree. In an objection to the Orbitz deal filed with the U.S. Justice
Department, the American Hotel & Lodging Association asserted the deal
would raise consumer costs and hurt small hotel operators.
Lufthansa's GDS fee
When the airlines of the Lufthansa Group (Lufthansa,
Austrian Airlines, Brussels Airlines and Swiss International Air Lines) in
September added a fee of 16 euros to every booking made via a GDS, they were
not the first airlines to attempt to circumvent the GDSs and persuade travel
agents to book direct.
But considering the way Lufthansa has dug in its heels on
the issue, it apparently plans to be the first carrier to make the strategy
stick. Lufthansa Chief Commercial Officer Jens Bischof said shortly after
implementing the surcharge that it was intended to "disrupt" the
travel distribution landscape and was about much more than the fee itself.
"We are very aware that our new distribution strategy
is disruptive, and it will change the future way of distribution," Bischof
told the Association of Corporate Travel Executives.
Bischof's words only further inflamed travel sellers who had
been steering business away from Lufthansa since the surcharge went into
effect, attempting to send a message to the rest of the airline industry that
it should not follow suit.
Rather than reverse direction under the pressure of what at
least one GDS reported were depressed Lufthansa sales after the surcharge went
into effect, Lufthansa inked an enhanced distribution agreement with Google
Flights, signaling that the German carrier was resolute in its trajectory away
from GDSs.
Crystal Cruises
In 2015, Crystal Cruises was the mouse that roared. For
years, the luxury cruise line's loyal clientele enjoyed a high-quality product
on two beautiful but aging ships. Each year travel sellers would ask if the
line planned to expand, but for more than a decade, it did not.
Then along came Edie.
Upon taking the helm as Crystal's CEO two years ago, Edie
Rodriguez famously said that her plan was to grow the line to "seven ships
for seven seas." What she didn't say then was that the boast was just a
start.
Rodriguez later said that she only took the job because she
had been promised the line would find a buyer willing to grow it. Genting Hong
Kong became that buyer, and last summer Crystal announced the most ambitious
expansion plan in recent cruise history: three new 1,000-passenger ships, plus
an expansion into river cruising, yacht sailings and luxury private-jet tours.
Crystal not only ordered the ships, but to avoid any delays
in delivery, Genting bought Lloyd Werft, the European shipyard that had been
contracted to build them. Last month, Crystal acquired a Boeing 777-200LR for
its Crystal Luxury Air startup, and Crystal Yacht Cruises was scheduled to
debut just before Christmas with the Crystal Esprit, an extensively
refurbished, 62-passenger yacht.
While some industry watchers might be skeptical that Crystal
can deliver all that it says it will, so far it has.
Baha Mar
Bahamas' star-crossed mega-resort was also among the
industry's most talked-about projects this year, though for all the wrong
reasons.
The $3.5 billion project, the most expensive development in
Bahamas' history, was originally slated to open in Nassau by the end of 2014
and fly the flags of luxury brands Grand Hyatt, SLS and Rosewood in addition to
an eponymous casino-hotel and the pre-existing Melia Nassau Beach.
Beset by delays, that date was pushed to spring, and by the
time spring came and went, the question became not when but if the resort would
ever open.
The Chinese-backed project filed for Chapter 11 bankruptcy
protection in June under the auspices of wanting to complete construction and
open as soon as possible. But instead of moving the project along, bankruptcy
only made things messier: Talks among the developer, lender, contractor and the
Bahamian government became contentious; Rosewood begged out of its licensing
agreement with the development; the U.S. Bankruptcy Court threw out the case in
September; Baha Mar laid off thousands of workers in the fall; and Bahamas
court officials prepared to start a potential liquidation process in November.
All this, even as Baha Mar officials declared the project
97% finished.
With no imminent resolution likely, it appears Baha Mar has
very little chance to capture any of this year's Caribbean high-season dollars,
which it sorely needs. The question for 2016 is: Will it ever
The sharing economy
As peer-to-peer travel businesses become ever more mainstream
and take a larger piece of the lodging pie, it would make sense for hotels to
double down in opposition to home-rental services like Airbnb, which hoteliers
insist depress their revenue.
Instead, a surprising trend that emerged in 2015 was of traditional
hotel brands doing the exact opposite: cutting deals with the upstarts.
Both Hyatt Hotels and Wyndham Worldwide put their money in
home-sharing websites; Hyatt invested an undisclosed sum in London-based
Onefinestay, which rents out luxury homes in cities such as New York and Paris,
and Wyndham entered into a partnership with London-based home-exchange operator
Love Home Swap.
Beyond hoteliers, other traditional travel sellers also
moved into the segment. Signature Travel Network entered into an agreement for
its travel adviser members to sell Onefinestay's upscale inventory, and Expedia
bought HomeAway for $3.9 billion last month, along with its brands, including
VRBO.com and VacationRentals.com.
Both deals offered strong indications that the travel
distribution side recognizes the value of the home-rental model.
Fathom
Fathom, Carnival Corp.'s new for-profit, social-impact
cruise brand, made waves this year for many reasons, one of which was that it
was so unusual for Carnival.
Then again, the launch underscored how much Carnival has
changed in the last few years under its new CEO, Arnold Donald. Last year, that
change was manifested in the line's renewed outreach to the trade. This year,
it was the launch of the first do-good cruise line by any major brand.
Fathom will take guests to foreign countries to participate
in cooperative social projects, starting in the Dominican Republic in April,
followed by Cuba in May.
The launch also pointed to the power of the millennial generation,
which seems to have firmly overtaken boomers as the go-to market in almost
every business segment. When Carnival launched Fathom, it was clear that
millennials were on its mind, primarily ones who would not have otherwise
cruised, and even more specifically, the "purpose-driven millennial,"
according to the brand's founding director, Tara Russell.
Research supports this line of thinking. The results of a
comprehensive survey by Tourism Cares on the philanthropic traveler, released
in September, found that millennials are particularly tuned in to social-impact
travel: On average, they volunteer more than double the hours and donate nearly
three times the money that travelers 55 and older do. Further, 81% volunteered
during their travels in the past two years, and 50% said they intended to plan
more trips around giving back.
Open skies
Few areas of travel regulation seem to divide the industry
more than airline policies, and this year, the open skies debate was the most
divisive issue of all.
The fight over whether or not Persian Gulf carriers
Emirates, Etihad and Qatar should be investigated by the U.S. government for
violating open skies agreements has divided the airline industry itself as well
as travel marketing organizations and politicians.
At issue is the assertion by the Big Three U.S. airlines --
Delta, American and United -- that the Gulf carriers have received $42 billion
in subsidies from their governments since 2004, violating open skies agreements
by giving them an unfair advantage in the international aviation market. The
Gulf carriers deny this charge.
U.S. cargo carriers and smaller airlines like JetBlue as
well as the U.S. Travel Association oppose any restrictions on the expansion of
the Gulf carriers' U.S. routes, arguing that open competition is best for all
and promote travel.
The battles escalated this fall when Delta and United said
they would suspend Dubai routes from Atlanta and Washington, respectively.
Delta said it would redeploy resources to "where it can compete on a level
playing field that's not distorted by subsidized, state-owned airlines."
While many city and state politicians have voiced support
for the Big Three U.S. airlines, who warn the subsidies will mean fewer jobs in
their cities and states, the Obama administration has made no move so far on
the issue. And if the airlines continue to enjoy record profits in 2016, it is
doubtful there would be any public support for changes that could lead to
higher airfares and fewer consumer choices.
Strong dollar, weak
yuan
For China and the U.S., 2015 has been a tale of two
currencies. The dollar surged for most of 2015, while the yuan suffered a
serious slump. The impact has been a mixed bag for the industry.
The yuan's weakness threatens to erode outbound Chinese
travel, which is the fastest-growing overseas source market for U.S. travel
spending. The yuan's downturn has already affected U.S.-based hotel-casino
operators in Macau, the Hong Kong-area destination where travelers from
mainland China account for about two-thirds of visitors.
The strong dollar, meanwhile, has helped what agents in the
spring said had been a 20% jump in international travel, according to Travel
Weekly's annual Consumer Trends report. And some tour operators, including
Tauck and Trafalgar, said the strong dollar enabled them to drop prices for
2016.
On the downside, the U.S. Commerce Department reported that
the tourism trade balance had dropped 17% for the first eight months of 2015,
meaning that American were spending more money overseas than in-bound tourists
were spending on U.S. soil.
Starwood's CFO said in October that New York faced
"pressure" from fewer international travelers "due to the strong
dollar," and Royal Caribbean Cruises Ltd. in April reported that with the
majority of its onboard prices in U.S. dollars, international passengers were
buying less while sailing.
The party may be over, or just beginning, depending on where
you stand. After surging for most of the year against other world currencies,
the dollar's value began to drop in October.
