The Tactical Traveler By Joe Brancatelli
HOME E-MAIL JOE PRINT SEND A LINK 2016 COLUMNS THE ARCHIVES SEARCH
Business-Travel Briefing for July 14-July 28, 2016
The briefing in brief: American's credit card deal indicates banks are slowing the gravy train. A very bad week, financially and legally, for United at Newark. Hilton and Marriott are running away with the hotel market. New ways to get PreCheck free or cheap. And more.
Not the End. Not the Beginning of the End. Maybe the End of the Beginning.
American Airlines announced this week that it has cut new deals with its credit card issuers, Citi and Barclays. The two-channel agreement even specifies where each bank can solicit American flyers. Citi gets to sell via AA.com, direct mail and in Admirals Clubs while Barclays will solicit you in airports and, beginning next year, on American flights. But American said nothing publicly about the burning issue: How much revenue did the world's largest frequent flyer program beat from the two banks? The public silence was understandable since American, which had hoped for a windfall, didn't do better than the exclusive $2 billion-a-year American Express and Delta negotiated and the Chase/United partnership. In an SEC filing, however, American said the Citi and Barclays agreements would add $200 million in income in the second half of this year, $500 million next year and $800 million in 2018. Those numbers sound impressive, of course, but consider that American AAdvantage is substantially larger than either Delta SkyMiles or United MileagePlus and should have been able to leapfrog the Amex/Delta and Chase/United deals. It's also notable that neither bank was interested in ponying up enough to secure exclusive access to American customers. Inevitable conclusion? As we've discussed in recent months, the gravy train may be over for airlines. As the banks' costs to buy miles approaches 200 basis points, there's less chance they can make a reasonable return. And the moment banks lose interest in buying miles, the frequency programs as they are currently structured begin to unravel. After all, banks currently buy upwards of two-thirds of all miles issued.
Newark Is Turning Into a Legal and Financial Cesspool for United
This hasn't been a good week for United Airlines at Newark Airport, its largest international hub. Earlier this week, United said it would take a $264 million charge in the second quarter due to the reduced value of its Newark take-off and landing slots. As you recall, the Federal Aviation Administration decided this spring that it would lift slot restrictions at Newark and that dilutes the value of United's positions. And yesterday (July 13), United agreed to pay a $2.5 million fine in lieu of criminal prosecution for the Newark bribery and extortion scheme that led to the ouster last year of chief executive Jeff Smisek. As you recall, United agreed to restart a route between Newark and Columbia, South Carolina, to please David Samson, then chairman of the agency that runs the airport. Samson was blocking a hanger United hoped to build at Newark. Samson, who pleaded guilty to corruption charges yesterday, owned a weekend home near Columbia and wanted the nonstop route for his personal convenience. According to United's plea deal with the Justice Department, Smisek personally approved the launch of the loss-making route to mollify Samson. Smisek, who is still at risk of prosecution, should have known better, of course. He originally arrived at United's predecessor, Continental Airlines, as general counsel. Samson eventually used the flight 27 times between October, 2012, and January, 2014. The route was dropped immediately after Samson resigned as chairman of the bi-state Port Authority in March, 2014, as part of the Bridgegate scandal. You'll find more details on Samson's extortion of United here.
Suddenly, Everyone Wants You to Join PreCheck
PreCheck is notoriously unreliable, subject as it is to the TSA's whims on when lines are open or closed, but having it is better than not. And it's even better not to pay the $85 fee to get it. Several credit cards, most notably the American Express Platinum, will reimburse your fee. You also get PreCheck privileges if you join Global Entry, the U.S. Customs service's $100 bypass scheme. But now there are other options. JetBlue Airways is giving PreCheck free to Mosaic-level members of its TrueBlue program. (Check your E-mail for a code or contact TrueBlue before the promotion expires on September 10.) Until August 22, Southwest Airlines is allowing you to redeem 9,000 Rapid Rewards points to cover the $85 PreCheck fee. (Log into Rapid Rewards and click on the "More Rewards" tab.). It's not a particularly good deal, but Club Carlson now allows you to redeem 65,000 Gold Points to offset the fee. And because Delta Air Lines always has to be different, it has taken a 5 percent stake in Clear, the nearly moribund program that allows you to go to the head of security lines at some airports. SkyMiles Diamond members now receive free Clear membership. Other elites are being offered membership for $79 a year instead of the normal $179. General SkyMiles members can join for $99 a year. More details are here.
Hilton and Marriott Are Running Away With the Hotel Market
Find yourself staying in more Hilton and Marriott hotels around the world? It's no coincidence. Those two hotel groups are lapping the lodging fields and growing faster than any other chains. According to statistics from consulting group Lodging Econometrics, Hilton has 1,536 projects and 246,000 rooms in the development pipeline, more than any other company. Close behind, however, is Marriott. Even without its pending merger with Starwood Hotels, Marriott has 1,431 properties and 231,000 rooms under development. But that's not all. As you can see below, Hilton and Marriott are opening hotels right now at a breakneck pace.
Hilton has opened 19 properties in the last few days. That includes Hampton-branded properties in Mason, Ohio; White House, Tennessee; Millbrook, Nova Scotia; Summerville, South Carolina; and Hudson, Wisconsin. The Home2 Suites chain has added hotels in Yukon, Oklahoma; York, Pennsylvania; Durham, North Carolina; and Chandler, Arizona. There's a new Homewood Suites in Carmel, Indiana, a Hilton Garden Inn in the Cypress Station area of Houston and a Canopy in Reykjavik, Iceland. The DoubleTree conversion brand has reflagged formerly independent hotels in Veracruz, Mexico; Naha, on the Japanese island of Okinawa; and Sighisoara, Romania. Finally, Hilton has opened dual-branded developments in downtown San Diego (a combination Hilton Garden Inn and Homewood Suites) and Roseville, Minnesota (a combo Hampton Inn and Home2 Suites).
Marriott, meanwhile, has also opened 19 properties. Almost half of the newbies are Fairfield Inn properties, including branches in Panama City, Florida; Edmonton, Alberta; Snyder, Texas; Houma, Louisiana; Huntington, West Virginia; Lansing, Michigan; Richmond, Virginia; Midvale, Utah; and Lancaster, Pennsylvania. There are new Residence Inn outposts in Hillsboro, Oregon; Cedar Rapids, Iowa; Lake Charles, Louisiana; and in the Domain area of Austin, Texas. There are new Courtyard properties in Mount Pleasant, Michigan; at the Alliance Town Center in Fort Worth, Texas; and in Erie, Pennsylvania. There are new SpringHill Suites in Merrillville, Indiana, and Independence, Ohio. Finally, there's a new TownePlace Suites in Robinson Township in suburban Pittsburgh.
Business Travel News You Need to Know
Qatar Airways already owns 15 percent of IAG, the parent company of British Airways and Iberia, and now it is acquiring a 10 percent stake in LATAM, parent company of LAN and TAM of South America. All of these airlines are partners in the Oneworld Alliance, of course. Separately, Qatar is buying 49 percent of Meridiana, an Italian carrier that flies to several destinations from New York/Kennedy Airport.
French travelers take note: Unions that represent about half of Air France flight attendants have voted to strike from July 27 to August 2.
This column is Copyright © 2016 by Joe Brancatelli. JoeSentMe.com is Copyright © 2016 by Joe Brancatelli. All rights reserved. All of the opinions and material in this column are the sole property and responsibility of Joe Brancatelli. This material may not be reproduced in any form without his express written permission.