Jeff Clarke, President & CEO, Travelport, Tom Klein, Group President, Sabre Travel Network, Zhang Nanyan, CEO, 7 Days Group Holdings Ltd.

Gordon Wilson and I just arrived in Beijing for the Global Travel & Tourism Summit, and the World Travel & Tourism Council (WTTC) couldn’t have chosen a more appropriate location for its annual conference.  After a global travel downturn that lasted more than a year, China is one of the nations that are leading the recovery, and this means more opportunity for travelers and the travel industry. Consider a few key statistics:

• According to WTTC forecasts, travel and tourism in China will grow by an average of 9% annually   during the next 10 years, increasing its T&T GDP from $500 billion this year to nearly $2 trillion in 2020 - second only to the U.S.
• China’s capital investment in travel and tourism will more than triple during the same time period, the WTTC predicts, passing the U.S. to become No. 1 in this category.
• According to the UN World Tourism Organization (WTO), China will be the fourth largest source of outbound tourism by 2020 with an expected 100 million travelers per year.  It is also an increasingly popular destination for international travelers.  The China National Tourism Office says that nearly 22 million foreigners visited the country in 2009.
• China’s rapid growth has helped make Asia Pacific the world’s largest aviation market.  The IATA reports the number of travelers within Asia Pacific in 2009 (647 million) exceeded those in North America (638 million) for the first time.

IATA also gives China credit for substantial progress in strengthening its airline industry, from improved safety and 100% e-ticketing to policies that have allowed airline consolidations and created stronger carriers.

To learn more about what these trends means for the travel industry - both domestic and international - Travelport recently worked with an independent research firm to survey business and leisure travelers in 12 countries, including China.

Among other things, China scored highest in using social networking sites to research business travel online.  China ranked third in the use of social networking sites to research leisure trips.  These results show there are significant opportunities for travel agencies and providers who can incorporate social networking sites and products into their business model.

Nearly half of consumers in China (46%) pay cash when purchasing leisure travel, second only to consumers in Russia (72%).  About one-third use credit cards, and only 1% use debit cards.  Agencies who can accept electronic payments - whether credit cards, debit cards, PayPal or other systems - will be able to grow market share.  As Chinese consumers pay more electronically, there will also be more opportunities for online travel agencies to reach new customers.

You can find out more about our survey by clicking here.

The survey results confirm the attractiveness of the China market, and the significant room for growth in demand and in new travel products and services.

Travelport has been working in China since 1984 through our group tour business, GTA.  In 2004, Gullivers Travel Associates (China) Ltd. became the first European travel company to be granted a license by the China National Tourism Administration to operate within mainland China.  The company has 100 employees serving China’s inbound market and domestic travel business with a comprehensive database and supplier network.

In the GDS business, Travelport works with TravelSky, China’s leading provider of information technology for the country’s air and travel industry.  TravelSky uses our Travelport E-Ticket Interchange system and interline e-ticketing capabilities.

As the Chinese economy continues to grow and create more wealth for its citizens, the number of business and leisure travelers in China will expand rapidly, as the WTTC and WTO data show.  Although doing business in China is often a challenge, the size of the market and the prospects for growth during the next decade make it the biggest growth opportunity for the travel and tourism industry.

Jeff

Today, Travelport participated in the official U.S. launch of  MASSIVEGOOD at the United Nations in New York, where former President Bill Clinton initiated the donation process with the ‘first click.’ Joining President Clinton were UN officials including Secretary General Ban Ki- Moon and leaders from the travel and tourism industry.

The idea behind MASSIVEGOOD is simple because it offers travelers the opportunity to make a small, voluntary contribution of 2 dollars/euros/pounds each time they book a trip in order to support programs that improve child and maternal health in the developing world.

It’s powerful because it brings together the three leading global distribution system (GDS) providers - Travelport, Sabre and Amadeus - in a partnership with the Millennium Foundation, which created MASSIVEGOOD, working alongside UNITAID. MASSIVEGOOD will create a sustainable funding stream for UNITAID’s efforts to expand the availability and reduce the cost of treatments for HIV/AIDS, tuberculosis and malaria - diseases that are devastating in poor nations.

It’s not often that the leading players in a highly competitive industry come together behind a common cause. But when the opportunity to make a difference in our world is so profound, the decision to act collectively is an easy one. We hope this cooperation within the travel industry will be a model for other industries across the world.

The potential is huge. Together, the GDS providers handle 1.1 billion transactions per year, representing hundreds of millions of travelers. The contribution process is built into our respective point of sale applications and will be available when travelers book through a travel agent. Even if only a small percentage of travelers participate, MASSIVEGOOD can make a huge difference in the lives of millions of people who will benefit from medical and pharmaceutical advances.

This is a fitting role for the travel industry because mass travel is a powerful force for cultural awareness and understanding. The more people travel, the more connections they make with other lands and people, the more they recognize their roles as global citizens, the more likely they will take part in this vast humanitarian effort.

You can find out more about MASSIVEGOOD at their web site, www.massivegood.org. Also check out the work being done by UNITAID at www.unitaid.eu.

And click here to see director Spike Lee’s film “Masterpieces” created for MASSIVEGOOD.

As MASSIVEGOOD rolls out across the world during the next few weeks, I encourage all travelers to take advantage of the opportunity to make a small individual contribution - and a huge collective contribution - to this ground-breaking initiative.

It is simple, it is powerful, and it can bring about real change in helping to save lives on a massive scale.

But we also learned with the H1N1 outbreak in Mexico and the U.S. last spring that disease is not the only risk. Poor information-sharing by governments can exacerbate the situation by leading them to make poorly informed decisions on travel advisories and bans.

Rumor and speculation, rather than facts, guided far too many global governmental decisions regarding how people should travel and how goods should be transported between countries. This inconsistent messaging and miscommunication caused many companies and individuals to cancel travel plans - adding to the already immense challenges of a global economic downturn. This can have a cascading effect on the travel and tourism industry, which generates approximately $5.5 trillion in economic activity annually, according to the World Travel & Tourism Council.

The events of last spring argue for greater coordination between governments. To that end, Travelport has called on the governments of the United States and the European Union to develop a US-EU Task Force on Global Emergency Communications. The proposal is part of the Transatlantic Business Dialogue’s “Building a Transatlantic Innovation Economy,” a set of recommendations developed by the transatlantic business community. [You can see the recommendations by clicking here.]

Governments on both sides of the Atlantic need to develop a coordinated approach when communicating restrictions on global travel and shipping during health and security-related emergencies. A public-private task force on emergency communications will help us achieve consistency in messaging and minimize unnecessary disruptions of global travel and trade.

The task force would serve as a clearinghouse of fact-based information for elected officials responding to global crises. It would also help establish cross-border relationships between decision-makers and develop processes to ensure consistent communications in the event of an emergency. Ideally, the task force would be chaired by government and business representatives from the travel and supply chain industries. Other members would represent different sectors of the economy and include health and security representatives.

In a world where rumors and speculation spread even faster than viruses like H1N1, we need to make sure that we’re getting accurate information into the hands of decision-makers. A task force on global emergency communications will go a long to make sure that happens.

It’s gratifying, then, when an independent organization recognizes the work we do. InformationWeek magazine recently ranked Travelport No. 11 on its InformationWeek 500 for our innovative use of information technology. This is a prestigious list because it doesn’t just look at what companies spend on information technology - it looks at how innovative they are in using IT to serve customers and grow their businesses. (You can see the 2009 rankings by clicking here.) I’m proud to say that Travelport had the only GDS ranked in the Top 250.

Our high ranking is largely the result of the complex and highly successful project to consolidate our Denver data center operations into our Atlanta facility. The switchover required months of planning and testing to make sure we made the migration cleanly and without disrupting service important to our customers and partners.

Our team used new and innovative technologies to migrate over one petabyte (that’s 1,000,000 gigabytes) of critical data. During the migration, data was moved data from three different mainframe environments and 600 servers, more than 60,000 network route changes were made, and 45 million travel reservations were shifted to Atlanta with minimal service interruption.

Results of the migration have exceeded expectations. Customers report a 50% improvement in response time for key applications. For Travelport, the migration significantly improved our technical infrastructure, provided major cost savings, improved reliability of global operations and reduced the physical data center footprint in support of our Green Initiative.

At the end of the day, though, Travelport IT innovation is focused on one overarching goal: to create exceptional travel experiences for our customers. That’s what we’re in business for, and we’ll continue to invest in technology that helps us deliver on that goal.

Travelport recently joined with our GDS competitors, Sabre and Amadeus, to support the Millennium Foundation for Innovative Finance for Health, which supports the work of UNITAID in its global mission to combat such life-threatening diseases as HIV/AIDS, malaria and tuberculosis in developing countries.

Through a Millennium Foundation initiative called MASSIVEGOOD, our three companies will offer travellers a convenient and secure way to give back through a simple voluntary donation of $2, €2, £2 or more. The contribution process will be built into our point of sale applications and will be available whether travellers book online or through a travel agent. (Click here to view a video that explains more.)

The success of the Millennium Foundation’s innovative financing solution depends on creating a global movement. We hope that cooperation within the travel industry will be a model for other industries across the world.

The GDSs have a unique role to play. We provide a critical link to hundreds of millions of travellers - many of them with a global perspective and an appreciation of the challenges faced by those in developing countries.

Together, we issue more than 500 million airline tickets each year. This means that even a small percentage of participants could make a big difference in the lives of millions of people. We see the potential of this program to reduce child mortality and improve maternal health - saving lives on a massive scale.

This is a fitting role for the travel industry because mass travel is a powerful force for social and cultural awareness and understanding. The more people travel, the more connections they make with other lands and people, the more they recognize their roles as global citizens, and the more likely they are to take advantage of this new program to make a contribution and a difference.

The MASSIVEGOOD program will be rolled out in 2010, so stay tuned.

The travel industry argued at the time that business travel is an important stimulus of economic activity that should be encouraged, not discouraged. (See my earlier blog on the subject here.) Now, a new report sponsored by the U.S. Travel Association (USTA) and the Destination & Travel Foundation shows just how important business travel is to growth and productivity.

The study, conducted by the global research firm Oxford Economics, determined that every dollar invested in business travel results, on average, in $12.50 of increased revenue and $3.80 of new profits. This is in addition to the $246 billion in spending and 2.3 million jobs generated annually by business travel in the U.S., according to the USTA.

Researchers found that a 10% increase in business travel spending would increase productivity, driving higher sales and profitability and lead to an increase in U.S. GDP of 1.5-2.8%. Studies in the EU countries and the UK have also found a strong relationship between business travel, productivity and economic activity.

The study reinforced something I think virtually all business and sales executives would agree on - that meeting personally with customers and potential customers makes a big difference in our business success. Executives and business travelers surveyed by Oxford Economics estimated that they have an average 40% conversion rate when they meet in person with prospective customers but only a 16% conversion rate without such a meeting. They also estimated 28% of their current business would be lost without in-person meetings. There’s just no substitute for face-to-face contact.

But business travel has a positive impact beyond keeping customers and converting prospects. It also helps companies build business/vendors relationships (trade shows and conferences, to name a couple of examples). And it’s a way to invest in employees through internal meetings, incentive events and conferences.

The USTA study makes clear that business travel is not just an expense - it’s an important investment in the business and in the relationships we build with our customer, partners and suppliers. Not to mention the economic benefits it has for airlines, hotels, restaurants, rental car companies, taxi drivers and many other businesses - and their employees - who depend on travel and tourism.

I encourage you to read the study, which you can find by clicking here.

A good place to start is with the latest book by Wired editor Chris Anderson, Free: the Future of a Radical Price (2009).   Its thesis is that in a digital world, price is rapidly falling to zero.  The new world he describes is the digital equivalent of the Gillette model of selling razors at a loss and making money on the blades.  We’re seeing this with everything from software to photo sharing and editing sites, where online businesses attract customers with free basic services and make money on more feature-rich premium services.  It’s a model engrained in those under 30, who are accustomed to getting their information for free.

A good example is the recent decision by online travel companies (OTC) like Orbitz Worldwide to eliminate booking fees.  For a decade, the OTCs believed they needed to charge consumers to book flights in order to make money.  The fees had the effect of leading many consumers to find a flight on the OTC but book it on the airline’s own Web site.  Since eliminating booking fees, more consumers are booking their flights through the OTCs.  At Orbitz Worldwide, for example, air transaction grew 22 percentage points in the second quarter compared to the first quarter of 2009, when fees were still in place.

The Black Swan: the Impact of the Highly Improbable (2007), by Nissam Nicholas Taleb.  The title comes from the assumption made in the 17th Century that all swans were white because it was the only color ever observed - until a species of black swans was discovered in Australia.  His message is we can’t predict important events simply based on past events or conventional assumptions.  He explores the way the brain and experience works, our innate optimism and our inability to read signs.

There’s a clear lesson here for business around the notion of asymmetric risk - in other words, risks that arise from wholly unexpected or unpredictable places, outside our normal range of experience and observation.  I used the book with Travelport’s senior leadership team last year as a way to encourage new thinking about the kinds of companies that could disintermediate our businesses.

Outliers: Stories of Success (2008), by Malcolm Gladwell, looks behind the secrets of success and finds interesting patterns that defy some of our long held notions of why some people succeed wildly (think Bill Gates) while others never quite seem to live up to their potential.  He finds individual merit has less to do with it than culture, community, upbringing, fortuitous timing and dogged persistence.  All the outliers he studied invested at least 10,000 hours of intense, focused effort to become expert in their area.

There are also two older books that have had a lasting influence on me.

The first is Capitalism, Socialism and Democracy (1942), Joseph Schumpeter’s classic economic essay addressing the concept of capitalism driving innovation through “creative destruction,” a Darwinian view of markets.  This book has been particularly influential on me when I’ve managed mergers, re-engineering and outsourcing operations offshore.

The second is The Soul of a New Machine (1981), by Tracy Kidder.   I first read Soul when I joined Digital Equipment Corp. in 1985.  Kidder spent a year following a team of passionate engineers at Data General who were designing and building a new computer to compete with DEC’s products.  It shows how core technology development occurs, the risks, processes and personalities of complex system design, and the heated competition internally and externally in high tech corporations.  It emphasizes the extraordinary effort and passion individuals need to achieve breakthroughs.  It is also a poignant story.  Despite the quality of the product and the immense effort to overcome great odds, it didn’t succeed in saving Data General in the marketplace.

The book helped me understand that passion, focus and enormous hard work drive breakthroughs.  But I also learned that this passion and focus quickly dissipates in large organizations and in business-as-usual (non-crisis) environments.  As such, it’s important to set up small, empowered groups and inject a sense of urgency into their mission.

Regardless of what business or industry you’re in, there are great lessons in each of these books.  In a world as competitive as this one, we need all the insight we can get.

It’s all about supply and demand, and there’s a lot more travel supply than there is demand today.  Hotel occupancy rates in May fell to 56% in the U.S, 59% in Europe and 61% in Asia Pacific*.   June aircraft load factors at several major airlines in the US were stable or even slightly higher than last year, but that is on the back of substantial capacity cuts (a feat which is not easily replicated on the lodging side).  Some major European airlines saw load factor drops in June.**

To generate more demand, airlines and hotels are cutting prices on key routes and in key markets.

On the London/New York City route, for example, the lowest air fares in June were down 46% from London and 35% from New York compared to June 2008.  Overall, the lowest economy cabin fares in June fell by 11% globally and by 23% in the U.S. year over year.  The number of published fares in June increased by 16% globally and 34% in the U.S. from last year, so consumers have a lot more choice. ***

Hotel deals also abound.  Average daily rates (ADR) for hotels in the top global cities dropped by a much as a third from April 2008 to April 2009.  This includes ADR declines of 33% in Madrid, 32% in London, 31% in Sydney, 26% in New York and Rome, 22% in Paris and 21% in Hong Kong.*  The number of hotels offering promotions such as four nights for the price of three, free WiFi and additional loyalty points continues to grow.

Adding to the savings for travelers is the decision by online travel agencies (OTA) like Orbitz and CheapTickets.com to eliminate flight booking fees.  OTAs are also playing a big role in driving travel packages and promotions.

At the same time, travelers with flexibility in terms of when they travel are finding a lot of last-minute deals as airlines and hotels compete to fill seats and rooms.

Special promotions, lower air fares and reduced hotel rates are helping ease the impact of the global economic crisis on the travel industry.  The 12% decline in air traffic bookings in June was an improvement over the 14% decline in May.   The June number was also better than forward booking trends suggested. Bookings for June/July/August have been relatively strong during the last month, driven by price promotions and last minute demand for summer travel. **

It appears to us that we may have reached bottom in terms of demand declines.  Real recovery in demand, of course, will take longer – the end of 2009 at the earliest and more likely 2010.  Even then, forecasters see gradual improvement over the next few years, not a big surge in demand.

For now, though, there are a lot of good opportunities for deal-hunting travelers.

Sources:
* STR Global
** Travelport market research data
*** Travelport GDS proprietary data base

As you can imagine, we had a lot of issues to discuss: the state of the travel economy, the impact of the swine flu virus, the ability of travel and tourism to stimulate economic growth, building public/private partnerships, and much more.  It was also an opportunity to share ideas for developing the travel and tourism business in Brazil, which has huge potential as an international destination.

The Summit is also a big networking event.  It’s not often that we have so many industry leaders in one place, so it’s a great place to meet with customers, suppliers, partners and government officials to discuss the key issues facing our industry – and, of course, talk about potential business opportunities.

One of the highlights of the Summit was the announcement of the winners of the Tourism for Tomorrow Awards.  Travelport is a co-sponsor of the awards, which provide outstanding examples of how businesses and destinations are creating sustainable travel services and opportunities.  I had the honor of presenting two of the four awards.

Travel and tourism represents 8% of global GDP, according to the WTTC, so it has the size and scale to energize economies around the world.  But the long-term growth of our industry also depends on our success in delivering travel and tourism experiences that are environmentally, economically and culturally sustainable.  We have to be a leader, not a follower.  And one way we can lead is by shining a bright light on the companies and organizations that are pointing the way to a more sustainable future.

The award winners – and the other eight finalists as well – stand out because of their vision, their creativity and ingenuity and their unwavering determination to turn their vision into reality.

Take the Destination Stewardship Award recipient – Grupo PUNTACANA from the Dominican Republic.  For nearly three decades, it has worked to create a community that respects the natural habitat of Punta Cana and betters the lives of local people.  The Punta Cana International Airport, for example, was designed to reflect the local culture and built using local materials.  Of Grupo PUNTACANA’s 1,700 employees, 99% are from the Dominican region.  It also founded the Puntacana Ecological Foundation, which created a 1500-acre private nature reserve, contributes to coral reef conservation and supports sustainable development initiatives.

The Conservation Award winner was NatureAir, which flies to 17 destinations within Costa Rica.  Five years ago, the company made a pledge to set new standards for sustainable practices in the airline industry.  It compensates for 100% of its greenhouse gas emissions through preservation and reforestation of tropical forests in the Osa Peninsula, in the southwest corner of the country.   NatureAir has also developed Costa Rica’s only alternative fueling station, and fuels company vehicles and equipment using 100% bio-diesel.

The winner of the Community Benefit Award was the Zakoura Foundation for Micro Credit, a Morocco-based not-for-profit organization.  In 2003, Zakoura launched a Rural Tourism Program to develop tourism-related projects focused on financial, cultural and environmental sustainability.  The idea is to give rural people opportunities to diversify and increase their incomes by creating or developing tourist activities, from restaurants and local produce to accommodations and leisure activities.

The Global Tourism Business Award went to Marriott International Inc., one of the world’s largest hotel groups.  For the past 18 months, Marriott has worked with Conservation International on a sweeping initiative to put 1.4 million acres of Amazon rainforest under conservation protection – a model for collaboration between the private sector and conservation organizations.  In addition to carbon offsets through rainforest protection, Marriott is reducing fuel and water consumption, working with vendors to provide greener products, creating green construction standards, and providing environmental education for employees.

You can find out more about the winners and finalists by clicking here.

It’s hard sometimes during an economic crisis to look too far into the future.   But the Tourism for Tomorrow Award winners underscore that the travel and tourism industry is not only talking about sustainable travel but doing something about it.  Each of the 12 finalists is an outstanding example of what the future of travel can be and the positive impact sustainable travel can have on the environment, community development and local economies – as well as the long-term growth of our industry.

The target of their ire is travel by companies receiving emergency federal loans.  The problem is that the impact of their declarations hasn’t been limited to the companies in the financial services industry that are receiving government assistance.  It is also discouraging responsible business travel as companies seek to avoid the perception that they’re being extravagant in their travel decisions.  This is damaging an industry already in a deep recession.

According to the U.S. Travel Association, meetings, events and incentive travel generate $101 billion in spending, $16 billion in taxes and one million jobs annually.  Business-related travel overall generates $240 billion in spending, $39 billion in taxes and 2.4 million jobs.

The global recession has already had a dramatic effect on our industry in the U.S. and around the world.  The Commerce Department reports that the U.S. lost 200,000 travel and tourism related jobs in 2008.  The U.S. Department of Labor predicts an additional 247,000 job losses this year.

It’s easy to see why.  In December, for example, the number of meetings held in Las Vegas was down nearly 17%, and the number of visitors fell 11%.  Hotel occupancy in downtown Atlanta – a big convention city – was down 20% in December.  Orlando attracted 25% fewer conventions and trade shows during the second half of 2008 than it did during the same period in 2007.  Those statistics are repeated in cities around the country.

In the midst of the worst travel recession since 9/11, lawmakers should be encouraging responsible business travel – and all other kinds of travel as well – instead of discouraging it.  The U.S. Department of Commerce reports that for every two direct travel jobs, one additional indirect travel job is created.  This sounds a lot like economic stimulus to me.

I also want to reinforce the point I made in my last post.  We need to promote travel and tourism at the national level, just as the vast majority of developed nations do.  And we can do it without spending taxpayers’ money.

At the same time, our industry needs to step up its efforts to educate Congress, the Administration and the public about the vital role that travel and tourism play in our economy – business travel, leisure travel, all kinds of travel.  The events of the past few weeks indicate that lawmakers don’t make the connection between business travel and jobs.  We need to help connect the dots.

I’m pleased to say that President Obama is one of those who recognize the economic impact of travel.  I was with a group of travel industry leaders who met with the President on March 11 to discuss these issues.  You can view our press statement here.

The more we do now to promote travel and tourism – not just in the U.S. but around the world – the better off we’ll be when the economy eventually begins to recover.

Jeff