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Spooked! Travel Business Economics and Things that Go Bump in the Night

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Spooked! Travel Business Economics and Things that Go Bump in the Night Travel distribution faces another period of recurring business woes, this time made worse by a global financial crisis of confidence. While worldwide economic problems are undeniable, look beyond the opinions of experts and soothsayers to make correct decisions about your own short and long-term plans.

Things as they Really Are Perhaps the most difficult challenge of life and business is to see the present and the likely future as they really are. That is a central reason for good consultants—an external and dispassionate view is exceedingly helpful in identifying problems and making decisions. Because the “Ain’t It Awful” folk are again making their views known, it’s essential to think and plan clearly. Here are several practical observations:

Short-Term Reactions Are Usually Wrong And Planning Is Essential

Much of the travel industry likes to recall prior trials as prologue to current circumstances -- among the most notorious being responses to the post-9/11 world. Conventional wisdom notwithstanding, most 9/11 travel business realignments were inappropriate. Changes in direction were too quick and sacrificed opportunities many large companies found were impossible to recreate. The immediate effects of 9/11 transitioned rather quickly, but the widespread “talent flight” imposed by industry-wide staff reductions was perhaps the most competitively damaging event of the past 30 years. Adapting to any business change demands keeping your head, avoiding short-term reactions, and carefully balancing what changes must happen today with operational and competitive needs that surely will come the next day.

Despite Contrary Propaganda, This Isn’t The 1930s

Today’s world events are serious, but they are not catastrophic and they affect businesses in different ways. Experts are divided as to the nature and severity of the economic challenges we face -- except to say that they aren’t the ones at fault. Most agree that the world’s economy, especially America’s, is vastly more robust than it was even a few years ago and Great Depression parallels are simply misinformed. There is fairly uniform agreement that recent government actions will bring the desired positive results. The timing of an economic improvement is unclear, but the turnaround itself is not in question, nor is the fact that, unlike the 1930s, decisive actions were not delayed.

Manage Your Expectations

Recent times have seen “bubbles” that were clearly unsustainable -- real estate being only the most recent, albeit the largest. Just as it’s impractical to believe that the Internet bubble of the late 1990s will ever return, speculative housing prices are not headed back up anytime soon.

Copyright © 2008 Cornerstone Information Systems. All rights reserved. Page 2 of 4 This document is provided "as-is" with no explicit or implicit guarantee or warranty as to the accuracy of the information contained here.


Spooked! Travel Business Economics and Things that Go Bump in the Night I recently attended a lecture by a prominent Washington, DC mortgage industry expert who bemoaned that housing buyers will now need verifiable incomes that are adequate to sustain their loans, accompanied by realistic down payments. Well, that is one definition of a depressed market, but the industry lived with such conditions for decades before deciding there was a better way. Be sure you know what standards the experts are applying.

Forget Airline Finances

The travel industry is disproportionately influenced by what airlines are saying and doing. Airlines have always been highly cyclical, suffering periods of boom and bust. Deregulation made this worse. There are numerous classic case-studies involving airlines: One demonstrates that a now merged major carrier generated no net profits whatever throughout its over 50 years of operation; another proves that, if everyone employed by a still operating major airline worked for nothing it still couldn’t turn a profit. Life will be much easier if we accept that all but a few airlines have no idea whatever how to successfully price their services, let alone operate their businesses. Travel distribution companies work with airlines, but operate on very different business principles.

Don’t Assume Big Companies Know What They’re Doing

After a press release from a major travel company announced lay-offs during a prior industry downturn, I called a board-member friend and asked how the recent changes affected the company’s five-year plan. “Around here,” came the reply, “we’re lucky to have a five-month plan.” Some major travel companies are exceedingly well-run; others are not. Reading press releases about business changes by the majors as they adapt to economic conditions is about as efficacious as reading the headlines on tabloid newspapers. Your own business planning must be unique.

The Bias Against Innovation The widely-held bias against innovation affects large and small companies, despite the enormous value it holds. Astute managers understand that innovation is the only effective path to long-term success -- but it’s difficult to think about the long-term while handling perceived immediate needs. In the travel business, you can’t save your way to prosperity. At some point, you have to have real growth. If costs are too high you must control them, while protecting the delivery of products and services your customers really want to buy. Growth means expanding markets, customers, and products in new and sustainable ways: innovating. Costs can be reduced to very modest levels, but customers usually follow the same path. Circuit City, the decades-old electronics retailer, recently entered bankruptcy. Observers readily attribute its failure to the economic downturn, but the company started down the road to ruin long ago when its management experts decided higher profits meant cheapening inventory and dumping experienced employees who were the main reason people shopped there. The last time I was in Circuit City (and it will

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Spooked! Travel Business Economics and Things that Go Bump in the Night be the last) I was literally the only customer in the store, there was nothing I wanted to buy, and the staff couldn’t have cared less. The implications for the travel industry are clear: customers value service and expertise in a business where service is the differentiator. They reward you by remaining loyal when you give them what they want and your competitors do not. In summary, take time to plan, and critically consider every situation; forget what others are doing -- their business is not yours; protect innovation -- it is the engine that sustains you; productivity-enhancing tools, practices and strategies are key. Confusion brings opportunities. You succeed, as Kipling wrote, "if you can keep your head when all about you are losing theirs."

About Cornerstone Information Systems What if you could do double the work in half the time? This is what Cornerstone Information Systems accomplishes for their customers by handling the technology side of business so their customers can focus all their attention on their core competencies with the passion and drive that leads to success. As a leading professional services company, Cornerstone helps travel management companies, corporate travel departments, airline and global distribution systems work to their fullest and most profitable potential. Founded in 1992, Cornerstone Information Systems is a privately-held company based in Bloomington, Indiana with offices in eight locations worldwide.

About the Author David Wardell is a senior consultant for all phases of travel operations and technology, with 34 years experience for many major industry vendors, corporate buyers, and large and small travel agencies worldwide. He has authored over 450 articles for trade, technical, and general interest publications. Email: dwardell@ciswired.com Phone: +1 (202) 558-7762

Cornerstone Information Systems 304 West Kirkwood Avenue Bloomington, IN USA 47404 http://www.ciswired.com

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Spooked: Travel Business Economics and Things that Go Bump in the Night