American Leisure Reshapes Board, Breaks Ground on Resort

ORLANDO - American Leisure Holdings, an international travel services manager and travel destination development company, said it fortified its board of directors to help launch “aggressive” acquisitions of more travel distribution and management companies.
David Levine, former chairman and chief executive of ResortQuest International Inc., was named chairman-elect. Levine was with ResortQuest during an explosion of growth, market creation and branding in the vacation home sales and vacation home management industry, American Leisure said, adding that Levine would help fine-tune the AMLH business model and “guide the company through the rigors of public finance.”
Also named to the board is Thomas Cornish, president and chief executive of Seitlin Insurance Inc. of Miami, Fla. American Leisure pointed to Cornish’s finance, banking and corporate governance experience as leverage to help it access and evaluate public and private sources of debt and equity financing, and to prepare the company for its entry into those markets.
Also announced to the board is Carlos Fernandez, formerly an audit partner with KPMG in Madrid and Miami and, more recently, was managing director of the mergers and acquisitions group. Fernandez will help American Leisure structure strategic acquisitions and fulfill the responsibilities of public company financial reporting, the company said.
L. William Chiles, chairman of the board since July 2003, will remain on the board and lead its New Initiative committee. Chiles is also board chairman of Hickory Travel Systems Inc., a subsidiary of the company. Hickory is a consortium travel services provider whose members buy over $15 billion of travel sales.
Retiring from the AMLH Board is Gillian Wright, who has served since the company took form in a reverse merger three years ago. She gains the title of Director Emeritus of the Company.
The announcements were made with the groundbreaking of the American Leisure’s new luxury resort near Orlando. The resort is to be operated by the upscale hotel manager, Sonesta International Hotels Inc. of Boston. Known as Sonesta Orlando Resort at Tierra del Sol, it will have 972 vacation home resort units, 625 of which have been sold, totaling over $200 million.

Demand-Supply Imbalance: Boon for Budget Brands in India

A wise entry strategy into the Indian market that is so buoyant - Develop budget hotel with a mid-market orientation that satisfies the value for money principle
The Indian tourism industry has performed well over the last eighteen months. Foreign tourist arrivals in 2004 touched their highest-ever figure of 3 million, and the size of the domestic tourism is presently estimated at 230 million. The outlook for the economy is positive; the government's polices are perceived as investment friendly and, for the first time ever, domestic carriers can test foreign grounds. The hotel industry is on cloud nine, with hotels witnessing record occupancies and average rate growth. The macro economic outlook is expected to continue providing momentum for growth, and we expect demand for room nights across key commercial and leisure destinations across India to grow annually at an average of 16-20 percent over the next three to five years.
With 95,000 odd rooms in the country, the size of the hotel industry represents an abysmal figure for India's size and growth prospects. Based on the forecasted growth in demand we expect that another 75,000 to 80,000 rooms will need to be added, across the country, in the next five years, to be able to meet the increase in demand. Our preliminary research indicates that, at best, there are currently only 35,000-40,000 rooms under different stages of planning and construction that are expected to enter the market in the next five years.
The recent boom witnessed by the hotel industry and the expected demand-supply imbalance has renewed the interest of many real estate enthusiasts in hotel development projects and the preferred positioning for a majority of projects seems to be luxury. Why the luxury segment? Because of a higher average rate, a better bottom line figure and better returns. Luxury hotels also attract a lot of attention and easily fit into the perceived business profile of individual developers, many of whom do not want to be seen associated with budget or economy products!
Luxury seems to be the buzzword as the high-end segment provides an opportunity to register windfall profits in the long run. Does this reflect an apt understanding of trends?
If I have to advise a potential developer on a wise entry strategy into a market that is so buoyant, I would say, "Budget hotel with a mid-market orientation that offers value for money."
Why Budget? Well, let's see...
In the next five years, the Indian hotel industry is expected to witness an acute shortage of room supply. The demand-supply imbalance will transform the market into a supplier's market and this will, naturally, lead to a dramatic rise in rates in most cities. Companies will find rates prohibitive for the mid-level business traveler, forcing them to look for more cost-effective alternatives. IT majors in India like Infosys and Wipro are actively considering the development of guesthouses at their campuses in Bangalore. The mid-level traveler constitutes a key target market for most luxury hotels in commercial destinations and this segment also exhibits comparatively higher average length of stay patterns. Displacement of this business will be available for hotel with a mid market orientation that can satisfy the value for money principal. At some point in time macro economic factors and industry dynamics will present an optimum demand-supply balance and yields will be rationalized. Till such time, budget hotels will be able to operate at impressive occupancies, maximize yields through proactive rate management and build a loyal customer among niche markets like the non-negotiated commercial traveler, airline STPC and extended stay. Post rationalization, the rate adjustment factor will be comparatively lower for hotels with mid-market orientation and these hotels are expected to present a flatter, but more stable, growth trajectory over a long term period.
While there has been much talk about record number of foreign tourist arrivals, very little has actually been said or done about domestic tourism, which, according to our estimates, has registered 40 percent annual growth in the last three years and is currently estimated at 230 million travelers. The latest data released by the government of India shows that the country’s Per capita Income grew by an impressive 7.1 percent in 2003/04, while Gross Domestic Savings at current prices touched an all time high of 28 percent. Significantly, the present-day consumption boom in India has been influenced more by higher disposable income rather than lower savings.
This is good news, as income induced spending is likely to sustain itself for a longer period. Higher disposable incomes are also expected to enhance the concept of traveling for leisure. At existing hotel rates across key leisure destinations in India, travel to many far-east destinations is more economical than travel on domestic circuits. In such a scenario, a budget hotel offering comfortable accommodation and satisfactory food and beverage alternatives at affordable prices has much to gain from the domestic travel market. In my opinion, a hotel with mid market orientation and budget brand affiliation is better suited to cater to this all-important segment. Moreover, for any hotel, a greater dependency on domestic tourism also means more certainty and stability in terms of revenue: inbound tourism, undoubtedly, is strongly influenced by trends and developments, economic and otherwise, in the source countries as well as around the world in general. Dependency on foreign tourism can be a double-edged sword as travel decisions are based on global patterns and events that happen elsewhere can have serious impact on your performance. Post 9/11, post SARS outbreak, post Afghanistan and Iraq wars, and most likely post tsunami it is the domestic traveler that has been the saving grace of Indian hospitality industry and in my opinion a hotel with mid market orientation and budget brand affiliation is better suited to cater to this all important segment.
The non-availability of quality sites for hotel development has forced international brands keen to enter the Indian market to become more flexible in terms of their product specifications. Luxury brand operators and management companies seem willing to make adjustments in terms of certain preconditions and requirements, in order to be able to plant that all-important flag. Developers must, however, keep in mind that the overall development cost, and subsequent operational costs, associated with a mid-market product are far less than for a luxury product. When the demand-supply imbalance situation improves, which will improve once new hotels open, only those hotels that are planned and conceptualized to cater to the ideal business mix will be able to sustain themselves. While, based on recent performances and existing trends, there is a strong temptation to opt for luxury, budget developments, due to their inherent nature of operation, associated costs and flexibility, are better suited to withstand the next economic downturn as and when it takes place.
What India needs today is additional supply in room inventory that will ease the huge supply imbalance. The real requirement is for products that will offer value for money and which are customized to effectively cater to individual travel needs. The need of the hour is for developers to understand and access the true potential of certain key hotel markets, absorb the concept of budget accommodation, and incorporate a well thought-out development strategy.
Over the last 24 months, most cities have witnessed impressive growth in average rate, due to strong demand and not much addition in supply. However, the potential to increase rates without displacing clients has almost peaked. With new hotels opening in these cities we expect to see a much-needed phase of rate consolidation. Thus, if you do not already have a hotel that is up and running and achieving an average rate of US$250, the safest basket to put your investment in is budget. The demand-supply imbalance indeed presents an ideal opportunity and is a boon for budget brands looking at India.

By Siddharth Thaker HVS International

Airline compensation

According to the UK's Civil Aviation Authority, Britons spend 2m hours annually waiting for delayed flights. While a boon for airport retailers of lager, money belts and plug adaptors, this is far from ideal. The European Union has come to the rescue with a new compensation scheme that makes airlines liable for passengers who are bumped off, or whose flights are delayed or cancelled.

So far so good. But the rules may be more dangerous than first appears. The compensation levels - EU250-600 for a cancelled flight - are a multiple of the price of most economy tickets. Secondly the regulation is extremely badly drafted. It exempts airlines from liability if cancellations are due to "exceptional circumstances" such as strikes or air traffic control problems. Yet, alarmingly, this qualification does not seem to apply to delays. And the guidance accompanying the regulation says even "the most difficult of weather conditions" will not be considered exceptional.

The EU has not attempted to cost its new rule. While the low-cost airlines seem relaxed, one major European carrier estimates its costs will rise by EU35m. This implies a sector-wide bill of about EU200m annually, a figure backed up by preliminary UK government estimates. Given that Europe's conventional airlines only made a EU700m profit in 2004 according to the Association of European Airlines, that is significant. It also excludes probable future administrative costs from dealing with the several million passengers eligible under the scheme.
As a piece of poorly executed red tape, this regulation is hard to beat. The EU is being challenged by some airlines in the European Court of Justice. Unless they win, the scheme's true cost may yet come back to haunt passengers and investors.

Low-Fare Carrier Hits New Heights In Brazil

It offers cheaper flights than rivals. It serves peanuts and soft drinks and boasts 25-minute turnarounds. It flies an all-Boeing fleet of new 737s.
If this sounds like a familiar low-cost air carrier in the U.S., it's meant to. Four-year-old Brazilian carrier Gol Intelligent Airlines patterned its business after Southwest Airlines (NYSE:LUV - News).
It's been a successful strategy. Gol has been profitable since 2002 and now commands about 25% of Brazil's airline market. It's the third largest domestic carrier after Tam and the long-struggling Varig, which also flies overseas.
Since it went public in June at $17 a share, Gol's stock has risen more than 85%.
"They are doing everything right," said Robert Booth, chairman of AvGroup, a Miami, Fla.-based aviation consulting firm that specializes in Latin America.
'Everyone Can Fly'
Gol -- which in Portuguese means "goal" -- flies to 37 cities in Brazil, a country that is nearly as big as the continental U.S. Most of its 170 million citizens couldn't afford a plane ticket until Gol came along with cheap advanced fares.
Many of Gol's late night red-eye flights cost about the same as a bus ticket. The company's advertising slogan: "Gol. Here everyone can fly."
Cut-rate fares between 1 a.m. and 5 a.m. are part of the airline's strategy to lure more passengers. It's working. The flights operate at 92% of capacity or more, and about 15% of passengers have never flown on a plane before.
"They're getting people who've never flown before off the buses and automobile," Booth said.
Gol's top management knows all about Brazil's bus business. Founder and chairman Constantino de Oliveira owns one of Brazil's biggest bus companies, Aurea Group.
He had long wanted to start a low fare and low cost airline in Brazil. In 2000 -- a year before Gol's launch -- he seized the moment by grabbing pilots and other furloughed employees from major carrier Vasp, which was downsizing.
The regulatory climate also had eased by then.
De Oliveira and his son -- Constantino Jr., Gol's chief executive -- visited operations at Southwest and JetBlue (NasdaqNM:JBLU - News) in the U.S. and easyJet in Europe. Southwest had the biggest impact, says Richard Lark, Gol's chief financial officer.
The "Gol Effect" -- like the "Southwest Effect" -- has caused air passenger growth to explode in markets it's entered.
"The first five air markets we started operations in 2001 have grown twice the national average," Lark said. "Our growth depends more on adding aircraft than GDP growth."
Gol's leased fleet of 29 Boeing 737s will get a boost next year. In early February, the company announced that it increased to 63 the number of 737-800s it plans to buy outright from Boeing. Gol previously planned to buy 43 planes.
The first deliveries are set to start next year.
Managing Costs
Long flying days, coupled with fast turnarounds, help leverage fixed costs over more revenue-producing miles. The airplanes themselves represent about 50% of Gol's costs, Lark says.
Unlike the U.S. air market, where labor costs account for as much as 40% of overall costs, airline labor costs in Brazil make up less than 10% of the total.
"In Brazil, if you can manage your aircraft well you have a good chance of keeping costs low," Lark said.
Almost 70% of Gol's revenue comes from business travelers. Since business travelers are not as price-sensitive as leisure customers, Gol can pass through 70% of its fuel-cost increases through fare hikes, Lark says.
Brazil's business travelers also generate higher profits for Gol since they're willing to pay for convenience and last-minute travel.
"Our prices are 20% to 25% less than competitors on average," Lark said. "But in many of the most competitive markets where there is high demand by business travelers, our value proposition is more or less the same."
Gol's earnings in last year's third quarter rose 52% from the prior year to 41 cents a share. Revenue gained 31% to $181 million.
Analysts polled by First Call estimate full-year 2004 earnings of $1.45 a share. They expect earnings this year will grow 26% to $1.82.
Gol plans to expand service to major cities across South America over the next three years.
It began service to Argentina in December and expects to start service to Bolivia by June. The firm has no plans to fly beyond South America.
"There are 500 million people living in all of Latin America," Booth said. "Less than 10% of the population uses air service, so the potential is enormous."

Biggest Bedroom In Sky Comes to Baltimore/Washington International Airport

BALTIMORE, Feb. 15 /PRNewswire/ -- The biggest bedroom in the sky officially has come to Baltimore/Washington International Airport as British Airways has launched its Club World business class product on its BWI/London route, making the British carrier the only airline flying the route offering a revolutionary new seat which converts to a fully flat 180 degree, six foot- long bed.
And to make the Club World flat beds instantly attractive in the Baltimore/Washington marketplace, British Airways is offering a $999 one-way Club World introductory fare ($1,998 roundtrip), knocking 76 percent off the normal $8,250 roundtrip fare. The sale price will be available through Sunday midnight EST, March 20.
At the same time, BWI will also receive a new class of travel for economy passengers called "World Traveller Plus," tailored to the needs of long-haul customers who want added comfort at an affordable premium price between business class and economy. World Traveller Plus features a comfortable 38- inch pitch seat in a separate cabin aboard all longhaul B777, B747 and B767 aircraft.
"British Airways is delighted to offer Baltimore/Washington these unique new products. The flat beds have proven to be extremely popular with our business class customers and we are confident our customers will enjoy the comfort and privacy of Club World," said Derrick Surratt, Director of Sales Southeast USA for British Airways. "The aircraft configuration permits us to provide more capacity and to match market demand for all cabins. If the success of the flat beds in other markets is any indication, this is a win-win situation for Baltimore."
World Traveller Plus seats to London also will be on sale priced at $199 one-way ($398 roundtrip) -- a savings of 79 percent off the regular $1950 return fare. All airfares will be subject to government fees and taxes and a $2.50 September 11th security charge. Both the Club World and World Traveller Plus offers are exclusive to BWI departures and must include a minimum stay of one Saturday night; maximum stay is 12 months.
British Airways serves Baltimore/Washington International Airport daily with the most modern aircraft of the skies, the Boeing 767 with 24 Club World, 24 World Traveller Plus and 141 World traveller (economy class), or the B777 configured to 14 First Class, 40 Club World, 40 World Traveller Plus and 122 World Traveller (economy class) seats.
The daily eastbound flight, BA228, departs each evening at 8:50 p.m. and arrives at London's Heathrow Airport at 9:10 a.m., the following morning. The return westbound service, BA229, departs Heathrow everyday at 11:50 a.m. and arrives at BWI at 3:30 p.m., the same afternoon.
British Airways was the first carrier to offer a seat that converts to a fully flat bed for business class travellers. Club World has won the endorsement of customers generating loyalty and driving improved customer satisfaction. The flat bed has won a host of accolades from both the design and travel industry, including the prestigious Grand Prix at the International Design Effectiveness Awards and the Marketing Society's Award for Innovation.
British Airways is one of the world's largest airlines carrying more international passengers between countries around the world. Further information on fares, flight schedules and British Airways Holiday packages is available from local travel agents.

China Southern Offering Latest Flight Information via Mobile Phone

Latest Flight Information in Guangzhou at Your Fingertips

GUANGZHOU, China--(BUSINESS WIRE)--Feb. 15, 2005--China Southern Airlines (NYSE:ZNH - News; HKSE:1055) (SHA:600029) -- www.cs-air.com/en -- the largest airline in The People's Republic of China, is making the latest daily flight information schedule for flights at the Baiyun International Airport in Guangzhou available via mobile phones.
To provide members with the latest updated flight information, China Southern Airlines' Sky Pearl Club frequent flyer program is pleased to launch its all-new Mobile Phone Message Service.
Sky Pearl Club members can enjoy this amazing new service by calling 958-866 in China and punching in either "MZ," "M" or "MINGZHU" on their China Mobile and/or China Unicom mobile phone.
This new service is available at no charge to Club members through June 30.
The largest airline in The People's Republic of China for the past 13 years, China Southern Airlines -- www.cs-air.com/en -- connects more than 80 cities around the globe. Major business and vacation destinations served in China include: Beijing, Chengdu, Guangzhou, Guilin, Hong Kong, Kunming, Shanghai, Shenzhen and Wuhan and as well as international service, including: Amsterdam, Bangkok, Fukuoka, Hanoi, Ho Chi Minh City, Islamabad, Kuala Lumpur, Jakarta, Los Angeles, Manila, Melbourne, Moscow, Osaka, Paris, Penang, Phnom Penh, Seoul, Singapore, Sydney and Tokyo.