By Bill Poling
Years hence, you’ll want to have an answer when the person in the next rocking chair asks, “What year was it when we didn’t have any hurricanes?” That will be 2013.
This answer will be the same if they ask when ARC shut down Helix, when Delta bought a piece of Virgin Atlantic, when the New York Hilton gave up on room service, or when Hyatt went into all-inclusives.
But that will be just for starters. For the real conversation about 2013, you’ll need to refer to one of those Top 10 lists that journalists love to conjure up this time of year.
You’re in luck. We’ve done it again, and we present Travel Weekly’s Top 10 travel news stories of 2013.
for Carnival Corp.
• 2/18: Cruisers booked on Carnival Triumph forced to change plans
• 2/25: Triumph suits add to Carnival woes
• 7/1: Arison steps down as CEO, names successor
• 8/5: New on the job, Carnival Corp. CEO Arnold Donald is ‘listening’
A year after the devastating loss of life from the capsizing of the Costa Concordia, Carnival Corp. was again haunted early in 2013 after an engine room fire disabled the Carnival Triumph in the Gulf of Mexico on Feb. 10. The plight of the ship and its passengers, drifting with limited power and no propulsion, grabbed the headlines, flattened the Wave season for much of the industry and set the stage for what would turn out to be a year of transformation for the world’s largest cruise company.
In June, Carnival Corp. Chairman and CEO Micky Arison hired former Carnival Cruise Lines CEO Bob Dickinson as a consultant on distribution issues and to enhance the company’s relationships with travel agents.
But that was just the beginning.
Days later, Arison — son of co-founder Ted Arison — announced he was relinquishing the CEO role to long-time board member Arnold Donald, a relative unknown in the industry despite his 12 years of service as a director.
Soon there were signs of a new approach to trade relations. An open letter from Arison to agents, in a widely circulated advertisement in October, acknowledged the role of agents in the company’s success. And in response to agent concerns, Carnival Cruise Lines revised its rate structure to simplify its categories to make them easier for agents to explain and to sell.
The evolution continues. As Donald settled into his new role, the company reshuffled its top management, creating a new advisory role for former vice chairman and COO Howard Frank. The company also created Holland America Group, creating a central management for the Holland America, Princess and Seabourn brands.
In all, Carnival Corp. underwent more radical change in 2013 than it had in the previous decade.
Radical change at American Express
• 4/15: AmEx to sell Travel Impressions to Apple
• 9/16: AmEx agrees to sell publishing unit
• 9/16: AmEx closes its 20 travel offices
• 9/30: AmEx to sell half of business-travel division to Certares
American Express might be running a close second to Carnival as the year’s most changed travel company, partly a reflection of its renewed focus on financial services and a desire to pare down noncore functions.
The first jolt came in April with the sale of Travel Impressions and other AmEx tour operations to Apple Leisure Group, parent of Apple Vacations, AMResorts and other brands. The sale was not only notable for what AmEx was giving up, but for what it portends for Apple, newly acquisitive after a cash infusion by Bain Capital in 2012.
Months later came the divestiture of American Express Publishing Corp., publisher of Travel + Leisure and Food & Wine, to Time Inc.
American Express also disclosed plans to close some 20 storefront offices that sell leisure travel, moving agents in those offices into the ranks of work-at-home travel counselors.
But the big shocker came in September when it was announced that American Express was to sell half of its Global Business Travel division, essentially turning a $30 billion travel management operation into a 50-50 joint venture with an investment group headed by Certares International Bank.
As with the Travel Impressions sale, the transaction raised eyebrows not only because of what AmEx was spinning off, but also because of the identity of the buyer: The CEO of Certares is Michael “Greg” O’Hara, co-chair of Travel Leaders Group.
Where that leads could be prove to be a major story for 2014.
• 6/24: Travelocity Business sold to BCD
• 8/26 Expedia to power Travelocity sales
• 9/2 Expedia-Travelocity deal could shift online sales away from hotels
Travelocity was a pioneer in the online travel game. A decade ago, if there was talk of the “Big Two” in online travel, it was understood to mean Travelocity and Expedia, often in that order.
But by 2006, Expedia’s focus on merchant hotel sales had helped vault it to the No. 3 spot on Travel Weekly’s Power List, with sales volume of $15.6 billion. That was twice the total of the former online leader, which got a late start in the race for supremacy in hotel bookings.
Since Sabre was taken private by Silver Lake Partners and Texas Pacific Group in 2007, the inner workings of its Travelocity unit have been less than transparent, but two events in 2013 strongly suggest that the brand might be succumbing to its challenges.
In June, the company sold off its corporate booking tool, Travelocity Business, to BCD Travel for an undisclosed sum. There had been speculation at the time that the spin-off was part of a housecleaning prior to an initial public offering, but the stock offering never came.
Instead, two months later, Travelocity disclosed plans to essentially outsource all of its operations to Expedia, a virtual merger — or virtual takeover — that is expected to kick in next year.
In addition to giving a big boost to Expedia in its market-share battle with Priceline, the deal, in the words of one analyst, amounted to a Travelocity “surrender” to its long-time rival.
Travelocity, however, remained insistent that even though Expedia will be powering its site, the deal was a partnership rather than a merger, and that it fully intended to grow the brand.
Where does the gnome go from here?
The debate over NDC
• 3/18: IATA seeks DOT OK on NDC resolution
• 4/22: Fear of unknown grows rampant as IATA pushes NDC initiative
• 5/6: Filings with DOT on NDC reveal deep airlines/agents split
• 7/21: IATA responds to critics of Resolution 787
IATA filed its application for DOT approval of its Resolution 787 in March, setting off a firestorm of criticism. IATA described the plan as a well-intentioned effort to set XML messaging standards so that airlines could distribute ancillary services and customized service bundles through the agency channel.
That sounded innocent enough, but critics charged that behind the veneer of innocence, the airlines were trying to force a new distribution paradigm down the industry’s throat. And the filibuster was joined.
Numerous stakeholders in the intermediary channel, including ASTA and the Travel Technology Association, said the plan would eliminate comparison shopping, prevent consumers from obtaining anonymous fare quotes and require travelers to reveal too many personal details to make a booking — all of which IATA denied.
As negative comments overwhelmed the DOT docket, the airlines passed a resolution at IATA’s Annual General Meeting in June stating that the New Distribution Capability (NDC) wouldn’t do any of the pernicious things that critics said it was trying to do.
As the year progressed, tempers cooled as IATA offered, and ASTA accepted, an opportunity to get more involved in the process. Travelport adopted a more conciliatory attitude, and other industry officials began to admit publicly that if new airline products are to be available through agents, then some kind of XML messaging standard will be a crucial part of making that happen, whether it comes from IATA or not.
• 2/18: AA-US airways merger valued at $11 billion
• 8/19 DOJ antitrust suit to prolong battle that’s decades old
• 11/18 Slots deal clears way for merger
The Justice Department’s antitrust division surprised the industry in August by challenging the American-US Airways merger, an $11 billion deal announced in February and widely seen as the final act in a series of airline mega-mergers.
The department claimed that the merger would reduce competition in numerous domestic markets and give the merged carrier an impermissibly large share of takeoff and landing slots at Washington’s Reagan National Airport.
Although consumer advocates cheered the move for attempting to put the brakes on the airline merger trend, the challenge was widely criticized by business and legal analysts, who said the case rested on a faulty analysis.
The carriers vowed to fight it out in court, but after the presiding judge asked the parties to give mediation a shot, they quickly came up with a settlement.
The deal calls for the carriers to sell off 52 pairs of Washington slots and 17 pairs at New York LaGuardia and to relinquish two gates at each of five major airports around the country.
Determined to get more low-fare competitors and new entrants into the slot-controlled airports, the Justice Department will supervise the sales and approve the buyers.
American and US Airways said the divestiture and other conditions won’t cause them to miss their goal of $1 billion in synergies after the first year, and they closed the deal on Dec. 9, emerging as American Airlines Group.
• 2/25: Travel could be the public face of sequestration’s budget cuts
• 4/22 Industry gets first measure of sequester’s travel impact
• 4/29: FAA: Staffing cuts created 40% jump in delayed flights
• 5/26: FAA budget issue might obscure more weighty industry factors
Goofy government might be an everyday event in Washington, but in 2013 partisan gridlock in Congress created two avoidable fiscal crises that had a direct impact on travel: a sequester and a shutdown.
The sequester consisted of a package of automatic, across-the-board spending cuts designed to be so harsh and indiscriminate that Congress would be motivated to pass a budget in order to avoid them.
It didn’t work. The spending cuts, softened by an interim amendment, went into effect in March, disrupting air traffic control and slowing customs processing at gateway airports. It even threatened to delay the reopening of Yellowstone’s snow-covered roads, until some local tourism and business interests in Wyoming chipped in to get the roads plowed.
The spike in flight delays prompted Congress to soften the impact on the FAA. The furor over funding subsided until the beginning of the fiscal year, when another budget stalemate shut down virtually the entire federal government for 16 days in October.
The shutdown emptied national parks and closed numerous attractions, monuments and museums to the puzzlement of many overseas visitors. Travel or participation in conventions or meetings by government employees also came to a halt.
The U.S. Travel Association estimated that the episode cost the economy $152 million a day in travel-related spending, or $2.4 billion in all. Whether our elected officials learned anything from it remains to be seen.
• 3/25: New York Sen. Schumer proposes cruise bill of rights
• 5/27: Cruise lines adopt first ‘bill of rights’ for clients at sea
• 8/22: Rockefeller calls for DOT oversight tax on cruise lines
Acting to quell growing criticism and media attention, CLIA member cruise lines in May voluntarily adopted a bill of rights for passengers, specifying, among other things, the right to refunds for canceled or interrupted cruises and the lines’ obligations in the event of disruptions or emergencies.
The 10-point plan went beyond a six-point list that had been suggested by Sen. Charles Schumer (D-N.Y.), but it wasn’t enough to deter Sen. Jay Rockefeller (D-W.Va.), the powerful head of the Senate Commerce Committee.
Rockefeller, who browbeat industry executives during a July oversight hearing, introduced a Cruise Passenger Protection Act that would make the CLIA Bill of Rights enforceable in courts and empower the Transportation Department to impose a consumer protection regime on cruise lines, with the power to levy fines for violations.
He also introduced a bill to address his long-standing complaint that cruise lines don’t pay their fair share of federal taxes. The bill would subject foreign flag cruise lines to U.S. income tax and add a 5% excise tax, or “gross receipts” tax, on all U.S.-related cruise revenue, potentially amounting to hundreds of millions of dollars per year.
The cruise lines are fighting it and, from the industry’s perspective, the congressional Republicans’ general distaste for new taxes and new regulations may work in their favor, but the cruise lines’ public image is still fragile. Could another stranding or incident at sea tip the balance?
Reinventing car rental
• 1/7: Avis’ Zipcar purchase suggests car-sharing business has legs
• 4/8: Hertz bets on car-sharing as ‘future’ of auto rentals
• 7/22: Car-sharing the newest frontier for big three rental firms
When did car-sharing come of age? You could say it was in 2007 when Zipcar and Flexcar merged to create a single national brand, or in 2011 when Zipcar’s IPO gave it a market cap of $1 billion, but we vote for Jan. 1, 2013, when Avis Budget agreed to pony up $500 million to acquire Zipcar, the leading car-share operator with, at the time, some 750,000 members — many on college campuses.
Some of Zipcar’s fans saw the move as a dispiriting takeover of a plucky upstart by a corporate Goliath. But the transaction also validated the business model and signaled that car-sharing was here to stay: Avis not only wanted in, it was paying a premium and paying in cash to get in fast.
The deal closed in March, and within weeks, Hertz put its own car-share division on steroids, adding self-service technology for hourly rentals to thousands of cars in its fleet. Dubbed Hertz 24/7, the service is now available in some 300 locations in six countries.
Enterprise also got into the act by combining several acquisitions to create Enterprise CarShare, and then moved into the ride-share space by acquiring Zimride, which matches drivers with passengers — all online, of course.
Car-sharing took on an added twist at several airports this year when startups FlightCar and Hubber began to recruit airline passengers to make their own cars available for short-term rentals while they were out of town.
Why rent when you can share?
• 1/21: Safety concerns prompt 787s to be grounded around globe
• 4/29: United eyes 787 return for Denver-Japan
In a severe blow to Boeing, the FAA grounded the entire fleet of the 787 Dreamliner for three months early this year, the first such action against a major airliner since the DC-10 grounding in 1979.
This time, the grounding did not follow a horrendous crash, but the 787, barely into its second year of service, had experienced numerous instances of overheating, smoke and fires in its battery compartment early in January. A few such incidents could be chalked up to the teething pains common with most new aircraft types, but by midmonth the FAA had seen enough.
The immediate impact was confined to the handful of airlines that had taken delivery, with the schedules of Japanese rivals Japan Airlines and All Nippon Airways being the hardest hit.
Before its launch, the 787’s composite structure was thought to be the most radical and risky feature of the aircraft, but the grounding was triggered by something much more mundane — the backup battery for the auxiliary power system, for which Boeing had chosen lithium.
The grounding prompted Airbus, which is developing a competing aircraft, the A350, to forgo lithium batteries for the initial version of its plane and rely instead on older (and heavier) nickel-cadmium technology.
Boeing engineers came up with a solution that got the aircraft back into service, and deliveries resumed, with Boeing boldly predicting that the grounding would not have a significant financial impact.
Though the 787 program has been plagued by delays, some 60 airlines around the world have 1,000 on order. Perhaps the Dreamliner is finally over the hump.
PEDs in flight
• 11/4: FAA approves use of mobile devices at takeoff, landing
• 11/25: FCC to review ban on in-flight cellular
In-flight service has been revolutionized by seats, beds, baggage fees and WiFi, but airline passengers were mostly turned on in 2013 by government pronouncements about what they could and could not do with their personal electronic devices.
The FAA kicked things off in 2012 when it empaneled a high-level advisory committee to review all the technical and human factors related to the use of electronic devices such as laptops, e-readers, tablets and smartphones during critical phases of flight, such as takeoffs and landings.
The panel made its recommendations in September 2013, and a month later the FAA adopted a procedure that would enable airlines to permit gate-to-gate use of virtually all devices except cellphones for voice calls, which remained the subject of a ban by the Federal Communications Commission (FCC).
Within days, most major airlines were taking steps to get in compliance with the FAA guidance, to the cheers of frequent and infrequent flyers alike.
The rest of the world took notice. The European Aviation Safety Agency, which sets standards for the European Union, had a representative on the FAA panel and followed the U.S. action with a pronouncement of its own, closely matching the U.S. rule.
But the story didn’t end there. In November, the FCC made a surprise announcement that it was reviewing its ban on cellphone usage, which was based on outdated technical information.
Some foreign airlines had already proved that with so-called Picocells or cellular relay stations on their aircraft, it was possible to provide in-flight cell service without disrupting networks on the ground.
The news was greeted with trepidation by travelers, who feared an outbreak of loud and unending cellphone chatter, but the FCC cautioned that it’s merely addressing the question of technical standards.
Whether to allow mobile phone use in flight — for data, texting and/or voice — will remain a decision for individual airlines, all of whom know that passengers can vote with their feet — and their tweets.
But just hours after the FCC voted to begin its review, Transportation Secretary Anthony Foxx stated that the Department of Transportation was assuming authority over the use of cellphones onboard aircraft on the grounds that it was a matter of consumer protection.