Weekly Roundup Friday 3 August 2012

Good morning

The Olympics are now in full swing in London.  Well, although the swing might be full (whatever that actually means) there are two things that are decidedly not full.  The Olympic stadiums, and London in general.

Look at the pictures in this article (which also contains the interesting fact that arrested ticket touts are consistently found to be selling tickets that had originally been given away to foreign dignitaries) and this article to see vast expanses of empty seats without a single spectator, and then ponder the mystery of how it is that the tickets to many of these events were declared to be ‘sold out’ months beforehand.

The public embarrassment about this has become so extreme that the Olympic authorities are even pulling soldiers off their security duties and requiring they sit in stands to fill empty seats to try and camouflage the emptiness of the stadiums (okay, more correctly perhaps, stadia).

And look at pictures in this article, this article and this article to see the extraordinary emptiness of London streets that are normally jam packed with people.  An almost empty Oxford and Regent Street – impossible!  No line outside Madame Tussauds – that’s like no line at a favorite Disney ride in the middle of a school holiday weekend.

The lie that is trotted out every four years about how the host city and nation will be the massive beneficiary of a flood of tourism is yet again being proven to be just that – a total falsehood.  Even London hotels aren’t full with Olympic tourists, and have had to drop their rates in the last few weeks by as much as 25% to try and buy in some business.

However, one part of the Games has massively exceeded expectations by almost four-fold.  Its cost.  Originally projected at about $4 billion, figures are now being quoted around $14.5 billion (see the end of this item, for example) with the common disclaimer added that ‘we’ll probably never know the exact total true cost’.

Talking about money, shed a tear for our own athletes.  Did you know that, unlike most other athletes from other countries, they get taxed on their winnings.  Bronze medallists get a $10,000 prize, silver win $15,000 and gold win $25,000, all of which the IRS wishes to share.

On the other hand, some lucky winners get chances to make a great deal more money – not just from obvious opportunities like sponsorships and becoming professional trainers and so on.  They can also stand to make up to $40,000 a time giving speeches on the after-dinner circuit.

In lots of other news this week :

• What Does Ryanair’s CEO Really Mean?
• Boeing to Fight Back?  Well, Maybe.
• ‘Our Passengers Won’t Mind More Cramped Seating’
• Why We Hate Politicians
• My Favorite Luggage Manufacturer’s Latest Innovation
• Ten (More) Travel Tips
• Hotel Per Diem Rates to Drop?
• More on Hotel Rate Fixing
• Sunny Yuma’s Gamble Pays Off
• Google Stumbles Again with Hardware
• Life’s Cycles, Expressed in Microsoft’s Lost Decade
• Deckchair Despots to be Deposed
• And Lastly This Week….

What Does Ryanair’s CEO Really Mean?

An interesting story came out this week, quoting the professionally controversial CEO of Ryanair, Michael O’Leary, as saying they are in talks with a Chinese aircraft manufacturer to get them to design a new jet with wider doors, so the plane could have people board twice as quickly.

It is true that on shorter flights (as is commonly the case in much of Europe) a considerable cost to an airline is the time it takes for a plane load of passengers to all shuffle off the plane, and subsequently for a new load of passengers to board the plane.

Double width doors are an interesting thought, but double width doors would also require a double-width aisle if they are to actually result in true improvements to loading/unloading (it isn’t really the doorway that is the bottleneck), and even that might be insufficient.  It is easy to see how one passenger could manage to expansively block an entire double-width aisle as part of their fussing around and opening overhead bins to find space to then stow their carry-on.

Let’s consider the concept.  On a typical narrow-body plane, making the aisle double-wide would require removing one seat per row.  Whether this means a current six across configuration becomes five across, or a new plane is built that potentially could hold seven seats but instead only has six plus a wider aisle, which would most airlines prefer?  An extra seat per row or a faster boarding/deplaning time?

Particularly these days where airlines are now operating their planes very much closer to full, the extra seat would probably be preferred.  It is unlikely that flights would be short enough, and the time saved significant enough, to balance the loss of revenue created by taking out a seat per row.

Most of the time, the best solution to faster deplaning and boarding simply involves using two jetways rather than one, and using both front and rear doors to get passengers on/off the plane twice as quickly.  That’s where airlines and airports should be concentrating their push for efficiency – by building gates with two jetways rather than one (A380 gates typically have three jetways).

Mind you, that this analysis suggests O’Leary’s idea is foolish is hardly startling.  O’Leary loves to say foolish things purely to get some free publicity, with his favorite refrain being a threat to either take out the toilets or to put pay locks on them, requiring passengers to pay to use them.  There is no way he could or would ever remove the toilets, for the simple fact that he’d effectively have nothing to put in their place – Boeing 737s are typically rated to hold no more than 189 passengers and his planes already hold the maximum number.

However, rather than being sidetracked by toilets, or being blind-sided by an analysis of the implications of wider doors and aisles, there’s actually a significant bombshell concealed within O’Leary’s statement.  Did you pick up on it?

In the past, he often says he has spoken to Boeing about putting locks on the toilet doors.  But did he say, this time, he was speaking to Boeing about wider entrance doors?  No.  He said he was talking to Comac, the manufacturer of a new jet slated to compete against the 737 and A320 series of planes.

Ryanair currently operates a fleet of almost 300 Boeing 737-800 planes.  While they are very new (an average age of 3.9 years as of April 2012) and so could remain in service for a long time before they need replacing, the new more fuel efficient 737 Max and A320 Neo planes will force Ryanair into improving the efficiency of their planes soon enough, too.

In 2009 Ryanair ‘negotiated in public’ with Boeing about a new order for potentially 200 planes before announcing it was unable to reach agreement with Boeing and had no plans to buy any more planes from Boeing.  In 2011 Ryanair stated it was cooperating with Comac in the development of a 200 seater plane that would compete with the 737 and A320 series of planes, and perhaps this latest statement is O’Leary’s way of continuing to goad Boeing (and to a lesser extent, Airbus) into making him a better offer.

Is he serious?  Well, although Comac have announced a number of official orders for their new C919 plane (due to take to the air in 2014), Ryanair’s name doesn’t appear on that list.

Nonetheless, it is a reminder that a third competitor to Boeing and Airbus is getting closer and closer to becoming a reality.

Boeing to Fight Back?  Well, Maybe.

Here’s an interesting short article that primarily shows a series of patent application drawings filed by Boeing.  We’ve written before about some of the revolutionary types of new planes that are being researched (most recently here) so you’ll probably be keen to know about Boeing’s new breakthrough which it is patenting.

Well, be prepared for a disappointment.  There are two elements to the plane.  The first is that it has two levels rather than one – something remarkably similar to the A380, one might almost say (or, for that matter, not a million miles different to the double decked B314 flying boats built in the late 1930s).

The second element is that instead of having the wing connect with the plane’s fuselage near the bottom or near the top of the cylindrical fuselage, this revolutionary new innovation would have the wing connect closer to the middle.  Sort of like the Mig-19, dating back to the early 1950s, among other planes, for example.

Wow.  Amazing stuff indeed.  Clearly, with such original ideas as these, Boeing has nothing to fear from the Chinese with startling innovations such as this.

‘Our Passengers Won’t Mind More Cramped Seating’

Talking about planes and seating, this headline is the sort of quote you’d expect to see attributed to Ryanair, or to perhaps one of the worst of the US dinosaurs who are so dismissive of their passengers and the travel experience they inflict on them.

But in this case, the quote comes from the successful and well regarded Canadian airline Westjet.  They are reducing the seat pitch on their 737-800s from a generous 34″ down to a more cramped 31-32″, so as to add more seats and to create a Premium Economy class.  On some of their other 737 series planes, seat pitch will reduce from 32″ down to 31″.

Westjet says this will enable them to standardize their product, and their CEO, Gregg Saretsky, said the carrier does not expect passengers to “feel any impact from the reconfiguration, but we’ll certainly get the revenue benefit”.

Here’s an interesting thought for Westjet to ponder.  If passengers aren’t expected to feel any impact from losing 3″ of seat pitch, what exactly is the benefit you expect them to perceive by turning around and creating ‘premium economy’ seats that offer them back the extra seat pitch spacing and charging appreciably more for the seats?

More details here.

Why We Hate Politicians

The good news :  The Senate Commerce Committee overwhelmingly passed a bill this Tuesday, authorizing the Secretary of Transportation to forbid US airlines from paying the controversial new carbon tax being levied by the EU.  One of its members, Senator John Thune (R – SD) thundered

More than USD$3.1 billion will be wrapped up in new taxes between 2012 and 2020 that could otherwise be invested in creating jobs and stimulating economic growth in our country

So what’s not to like about that?  Oh – the bad news.  In a compromise move to secure bipartisan support, the Committee wishes to simultaneously ban the EU’s taxing scheme that would tax airlines ‘only’ on flights to/from or within Europe, but also to advance towards an alternate plan to globally tax all airlines, everywhere in the world.  Details here.

I wonder if Senator Thune could tell us how many billions more dollars a global tax scheme on airlines would cost.

My Favorite Luggage Manufacturer’s Latest Innovation

Over the years, I’ve owned cheap luggage and I’ve owned expensive luggage.  Also over the years I’ve had bags fail – and the thing is they’ve never failed me at the end of a trip, as I take the suitcase or whatever out of the trunk of my car, back home once more.  Inevitably they fail in the worst places, at the worst times.

On occasion, I’ve been forcibly reminded of something we’ve most of us completely forgotten – the bad old days before suitcases had wheels.  How did we ever manage?  And what would you do if your heavy suitcase lost a wheel, near the beginning of a trip?  Even the simplest of things become difficult if you’re juggling a suitcase, a carry-on, and something else, and the suitcase needs to be carried rather than rolled.

So I eventually came to realize the false economy of buying the cheapest bag out there, and settled instead for the best value and most reliable bags, bar none – the Briggs & Riley line of bags.  They have the industry’s best warranty – most other bags come with a limited time warranty that specifically excludes any damage to a bag caused by an airline or other common carrier, which is of course where 95% of the damage comes from.  Oh – the other 5%?  That would probably be considered ‘fair wear and tear’ and also excluded!

But Briggs & Riley have a lifetime no questions asked warranty.  If anything goes wrong with a B&R bag, at any time, for any reason, they’ll repair or replace the bag for you, no questions asked.  Whenever I mention them, as I occasionally do, I have readers writing in to enthusiastically tell me of their wonderful experiences with their B&R bags – either how they’ve never needed to use the warranty after millions of bag-miles traveled, or how they have needed to make a warranty claim and been delighted with the ease and speed of the service.

Briggs & Riley are definitely not the cheapest, but they’re also far from the most expensive (paradoxically, the more expensive companies almost invariably have inferior warranties).  They are simply the best company, with the best products, offered at the best values.

They’ve just come out with an interesting new idea.  For some time now there have been gusseted/expandable bags available – you can unzip a gusset around a bag to make it deeper, or zip it up again to make it less deep.  But now, B&R have taken this one step further, and have a multi-position set of extenders inside the bag that can vary the bag’s depth by as much as 2.5″ or so, and in a dozen different steps – not just an ‘all or nothing’ design.  This is pictured in the image at the top of the newsletter.

One way of making use of this is to fill your bag with everything, zip it up, then press down to compact the contents and let the bag ‘ratchet’ itself to the appropriate degree of tightness.  This is a great way of then holding everything in your bag in place for the journey as well.

A very clever idea.

Ten (More) Travel Tips

I guess you could consider the preceding to be a travel tip – buy Briggs & Riley travel bags.  Here’s an article listing ten more tips from ‘the experts’.

These lists of tips often seem to be rather superficial and obvious, but probably they’re not so obvious to everyone, and maybe upon checking the list, you might be reminded of something you’d forgotten about, and which you could benefit from, so it is probably worth a quick speed-read through.

Hotel Per Diem Rates to Drop?

The GSA issued per diem rates for hotel accommodation and meals are used not only to set the rates at which government departments will pay for employee travel, but also by some private companies too.  It is not uncommon for the GSA rates to be offered in lieu of receipts, particularly for meals, or in some amount as a compensation when employees stay privately rather than in hotels.

So the GSA’s determinations of what represent fair rates to pay for food and accommodation are influential across the board for many travelers.  Oh – and they’re also very important to hoteliers, too.  Clearly it is beneficial for a hotel to be able to sell rooms to government travelers for as much money as possible, and so the higher the per diems that are assessed by the GSA, the more that hotels can charge.

Here’s an interesting article about how the GSA is looking to cut back its per diem rates for 2013 as part of a process to hopefully reign in government spending on travel.  Needless to say, hoteliers are terrified.

More on Hotel Rate Fixing

I’ve written before about how all the major hotel chains now seem to have agreements with companies that resell their rooms that force their resellers to obey ‘minimum advertised price’ requirements.

For example, a hotel might have a published ‘door rate’ of $200/night for a standard room, and sell it to Brand X Online Travel Agency for $150/night and to Brand Y for $140/night, but require both companies to in turn sell the rooms on their own websites for at least $175/night.  The hotel itself also has discounts and promotions on its site that reduces the full rack rate down to $175 too.

Brandy Y probably objects to this requirement – it might wish to undercut its competitor (Brand X), making use of its $10 cost advantage, and so sell for $165/night.  Of course, if Brand Y did that, then the hotel’s own ‘It will never cost you more to book direct with us’ guarantee is put at risk.  And Brand X would be forced to match Brand Y’s $165 rate, and would probably complain to the hotel and ask for a better net rate itself.

Then Brand Y might drop its rate to $160, and so on and so on until perhaps Brand X ends up selling rooms at cost ($150) and hating the situation, choosing to obscure the hotel on its website as much as possible, and the hotel itself finds itself being caught up in its lowest price guarantee.

There is however one clear winner – us as potential guests.  We could then book rooms for $150/night instead of $175 or $200.  This is the way the free market is supposed to operate.

Instead, the hotels generally require all resellers to observe the minimum advertised price policy, keeping rates high.  The Online Travel Agencies sort of complain about this, but also sort of don’t.  The more aggressive ones (with good low contract rates) would like to compete on price and sell more rooms at lower margins – a strategy that can get close to making sense when transactions are entirely electronic and so don’t have any measurable ‘cost’ associated with them.  The less aggressive ones are happy to keep the extra margin as more profit for themselves, and are glad they don’t have to compete against hungrier competitors.  And the OTAs with poor net rates still get to play with the big boys and can sell rooms at the same rates, albeit with less profit for themselves.

The hotel wins by keeping its rates protected, and by avoiding arguments and disillusionment among its many different resellers.  On the other hand, its retail prices do remain high, and all the extra margin it is paying to some travel resellers isn’t actually being used the way it could and arguably should be used – to bring in more business through more aggressive rates or marketing or whatever.

So, for better or worse, the preceding is how things sort of work these days.

But is it legal?  That’s a question the hotels and OTAs are generally very keen to avoid answering.  But it seems – at least in the UK – that perhaps it is not legal, as this article now indicates.

Sunny Yuma’s Gamble Pays Off

Last year Yuma announced a special promotion, ostensibly to celebrate Arizona’s 100th birthday, although the link between the anniversary and promotion is hard to immediately comprehend.  But apparently, some time way in the past, there was a promotion offering ‘free board every day the sun doesn’t shine’ – with the advertisement shown in old photos of the city’s hotels.

So this time around, the city decided to hedge its bets slightly, and offered free food to visitors if the sun didn’t shine that day, with the offer period running from 1 August 2011 through 31 July 2012.  With the twelve months now over, the city is pleased – for all reasons – to announce that it enjoyed sunny weather for all 365 days and didn’t have to provide a single free meal.

Of course, this was perhaps not an extremely risky offer to extend.  The Guinness Book of World Records lists Yuma as the sunniest place on earth (how do they determine that, I wonder?).

Tourism is big business for Yuma.  In 2011, tourism supported 6,330 jobs in Yuma county, and tourist spending totaled more than $603 million.

Google Stumbles Again with Hardware

Google makes a great search engine, for sure; and is very successful with its search business.

But transitioning into hardware development is proving to be as difficult for Google as it has been for Microsoft (with Microsoft’s tablet device seeming less and less relevant to the mass market with each passing week).

Microsoft set what may have been a world record for brevity of life of a hardware product developed by a major company, with its appallingly awful Kin phone, released in mid May 2010 and discontinued in mid July the same year.  But Google may be about to take an unbeatable lead in that category.

When Google announced its Nexus 7 tablet on 27 June this year, it also announced, at the same event, a curious device called the Nexus Q.  It was to be a sort of an internet video streaming connectivity device, and was to sell for a massive $299 (it had no screen, it was just a basic small box of electronics that you connected at one end to your tv and at the other end to your internet.  Whereas the $199 Nexus 7 tablet was clearly an amazing value and bargain, the Nexux Q device seemed to be stunningly overpriced.

Exactly what it would do was a bit fuzzy and hard to comprehend, and as for understanding how or why it would be better than, for example, an Apple TV or a Roku player (devices that do very similar things and which cost $60 – $100 rather than $300), this was an even harder to comprehend concept.

It is also relevant to note that many televisions and Blu-ray players come with built-in capabilities very similar to those offered by the Apple and Roku devices, essentially entirely for free.  Most people find it challenging enough to appreciate the value-add of an entry level $60 Roku player; the $300 price tag on the Nexus Q was widely commented on for being bizarrely over-inflated.  Even the most ardent of ‘Google can do no wrong’ fans found it hard to say too much too positive about the Nexus Q.

The device was supposed to go on sale sometime in July, and Google started taking orders for them.  But now, with July behind us, Google said this Tuesday that it will delay the launch of this device while it works on ‘making it even better’.  Google sent an email to people who had pre-ordered the unit saying that it had received feedback that people wanted the Nexus Q to do even more than it currently does, and so it had decided to postpone the product launch.

This late decision rather begs the questions as to how many of the units had already been manufactured and are now sitting unloved in warehouses.  Oh – and as for the revised delivery date of the new improved Nexus Q, Google has yet to provide a new delivery date, and their website has now been degraded such that there are now no teaser details about the unit at all, merely an opportunity to add your name to a list of people who will be advised further when something more is announced.

Could this be the shortest ever product life of a new product from a major company?

I have a theory about how it is that Google – and other companies – manage to fall so spectacularly on their face with such products.  These companies are typically managed, almost all the way up to the CEO’s office, with under-30 year olds with less than five years relevant work experience, and most of that experience being in an insulated world of ‘let’s pretend’ rather than the raw world of ‘real’ selling.

Sure, such staffers invariably have great B-school degrees, they’ve worked up a marketing career path at lightning speed, and they know all the latest buzz-words (which usually serve to obfuscate rather than illuminate, and to hide a lack of knowledge rather than to show specific skills), and as long as they limit their interactions to each other, they do well.

But when they have to stick their head up out of their foxhole and wave a real product at the real world, the fact that they live a different type of existence means they’ve insulated themselves from what the mass market as a whole wants.  A Google uber-techy nerd, either single or a DINK, and earning something way north of $100,000 a year would think nothing at all about dropping $300 on a fancy new gadget; indeed, I know people like that who happily spend much more than that, regularly buying expensive gadgets that then lie around, in their boxes, never even opened.

They remind me of the dinosaur airline executives who famously dismissed discount airlines as being irrelevant to their business.  The dinosaur airline executives maintained that the traveling public would happily pay 30% or more extra to fly on their ‘name brand’ airline, spurning the cheaper fares of the startup low-cost carriers.  That was about as wrong a view as is possible, and one wonders if the same distorted view of reality impacts on the people who release products like the Kin and Zune and Slate and Nexus Q.

Life’s Cycles, Expressed in Microsoft’s Lost Decade

You may have noticed that three of the four colossal failures that I listed at the end of the preceding paragraph came from Microsoft over the last less than ten years.

As a sometime student and sometime practitioner of business management issues, I’ve always been fascinated with corporate life-cycles – how companies, just like the products they make and the civilizations they exist within, all invariably go through similar life-cycles.  They rise from obscurity, they become prominent and dominate their fields for a while, and then they fall from grace again.  No matter how unassailable the companies seem to be at their height, they all (without exception as best I can call to mind) end up fading from glory.

For the last 27 years, I’ve lived only a mile or two from Microsoft’s world headquarters, so I’ve unavoidably been peripherally aware of some of the goings on at Microsoft as it has evolved over the decades, and I’ve certainly observed its stalled share price and the growing amount of disaffection among its present and past employees.  Here is a ‘must read’ article series from Vanity Fair titled ‘Microsoft’s Lost Decade’ that talks about some of these issues.

It provides an amazing view into what has happened and got wrong at Microsoft, and closely aligns with what I hear ‘on the grapevine’ in the local area.  It isn’t the only perspective, and the issues are complex, but it is a valuable and insightful statement of things that Microsoft should never have allowed happen to itself.

Like airlines, like seemingly every other failed or failing corporate endeavor (Blackberry, for example), one has to wonder ‘How can they be so shortsighted and foolish’?

Google’s current saving grace seems to be that its major competitor is a Microsoft product, Bing – a product which is struggling to gain traction, just the same way that Microsoft’s phone operating system is struggling to gain traction against Google’s Android.

Even Apple seems to be losing a bit of its gloss.  Its iPhone 4S product last year underwhelmed, and for once in its life, it has had to switch strategies in a desperate attempt to compensate for a product that was far from state of the art when released and which is now convincingly obsolete.

The iPhone 4S is being roundly outsold by the Samsung Galaxy III (here’s an interesting article), and so – at least as it seems to me – Apple has switched from being famously close-lipped about its future product releases, and has instead apparently allowed for the strategic leak of a considerable amount of detail about its new iPhone 5 product, now expected to be actually announced on 12 September and to go on sale on 21 September.  Perhaps Apple is willing to lose out on sales of present iPhone 4S units as people wait for the new phone in the hope that potential purchasers of Samsung and other Android phones might also wait for the new iPhone 5 product too.

Here’s a fascinating chart that shows the changing percentages of contribution to Apple’s financial situation as between regular Mac desktop and portable computers, iPods, iPhones, iPads, and miscellaneous other stuff.  This vividly shows the extraordinary transformation of Apple over the last five years from being a computer company to now being a mobile device company.

A similar logic about leaking might also apply to the chorus of leaks about Apple’s new 7.85″ tablet that is expected to be announced, perhaps at the same time; a device designed to counter the Google Nexus 7 and its predecessor, the Amazon Kindle Fire.  Oh, and Amazon is also spewing liberally forth with leaks about its successor to its now totally obsoleted Kindle Fire, too.

Deckchair Despots to be Deposed

One of the more annoying practices anywhere is when a small group of inconsiderate people take advantage of the fact that most people are polite and courteous; by ‘reserving’ the best spots wherever it is they are by placing an item of trivial value on the seat, then disappearing and not using the space they have reserved for most of the time, secure in the knowledge that everyone else will be way too polite to remove their item and claim the chair/space/whatever for themselves.

Possession might be nine tenths of the law, but this is clearly an example of the exception.

Such practices are particularly prevalent on cruise ships, where a few people rush out to claim the best deck chairs as belonging exclusively to them at the start of each day, and then only occasionally return to actually use the chair intermittently during the day.  Other passengers seethe quietly, but do nothing, and the cruise line itself utters platitudes while providing no relief.

Until now.  Carnival has now taken a baby step towards deposing the deckchair despots.  They are trialing a program on Carnival Breeze, whereby staff will patrol and place stickers with the time written on them on unused but ‘reserved’ deck chairs.  If the stickers remain 40 minutes later, the item placed on the chair will be removed and the chair thereby freed up for others.

If this sounds familiar, it should be – it is the same sort of theory as chalking the tires of parked cars, of course.  Carnival has explained how the program will work to guests on board the ship, but therein lies the weakness of the plan.  Scofflaws now know they have to check their seat once every 40 minutes, and who’s not to say that a family of four who have ‘reserved’ four seats won’t send one person back every 40 minutes to clear away any tags on all four seats before immediately leaving again.

Nonetheless, it is a step in the right direction, and hopefully will be improved upon and more widely picked up by other cruise lines too.  More details here.

And Lastly This Week……

I’ve mentioned several times over the last month about the draconian restrictions imposed on Britain banning any reference to anything to do with the Olympics by other than official sponsors.  Here’s a commendable example of one company’s attempt to avoid getting into trouble.

We all know that sometimes it can take a very long time waiting on hold to get through to an airline, but at what point do you give up and try again later?  This man in Australia must surely have set a new record, waiting 15 hours on hold to speak to Qantas.

And truly lastly this week, none of us wish to encourage drunk driving, and it seems fair and reasonable that there should be strict enforcement of infringements of such dangerous acts, for the safety of us all.  But, even the most ardent member of MADD must surely agree that this case is, well, just plan mad.

Until next week, please enjoy safe travels

 

 

David.