A BRIEFING FOR APRIL 23-MAY 7, 2009
By Joe Brancatelli
· Hilton Folds Denizen Hotels After Starwood Suit
· So Much for the Privatization of Midway Airport
· Reluctant FAA Will Now Release Bird-Strike Data
· The New Hotels Keep Gushing From the Pipeline
· Northwest Moves to Delta Gates at Two Airports
· The SuperShuttle Sets Up Shop in Pittsburgh
· Flown Overseas Lately? So You're The One!
Is Hilton Happy to Be Free of Denizen Hotels?
Hilton's plan to build another luxury brand has come to a screaming halt now that it has put the frothy folks behind the new Denizen Hotels project on paid administrative leave. Apparently the bright boys behind the project--Ross Klein and Amar Lalvani and a so-called "luxury and lifestyle team"--walked off with more than 100,000 paper and electronic files when they defected from Starwood last summer. At least that's what Starwood claims in a lawsuit filed last week against Hilton in a New York federal district court. And there seems to be at least some basic truth to the accusation since Hilton returned eight boxes of files and documents to Starwood even before the lawsuit was filed. At Starwood, Klein and Lalvani were credited with developing the W brand as well as the just-launched Aloft and Element chains. Denizen was supposedly aimed at the luxury segment, where Hilton already has two brands (Conrad and Waldorf Astoria) and the market is flooded with oversupply and suffering through catastrophic declines in room occupancy and nightly rate. Hilton says the suspension of Denizen development is temporary, but it's hard to see the project resuming any time soon given the parlous state of luxury lodging and the weight of the Starwood lawsuit. Oh, and just for the good measure: The flighty Denizen Web site seems to have been deactivated, too.
The Failure of Midway Privatization Doesn't Stop the Talking Heads
I mentioned in the Brancatelli File last week that a private consortium leasing Midway Airport from the City of Chicago missed its first rent payment. Now comes word that that the 99-year, $2.52 billion deal is off--permanently. The lease has been cancelled, the consortium (including divisions of Citigroup, John Hancock Insurance and Vancouver Airport) is gone and Chicago keeps $126 million of "earnest" money. This is the second attempt at privatizing a U.S. commercial airport. Stewart Airport in Newburgh, New York, was leased to Britain's National Express and that also ended badly. National Express essentially abandoned Stewart; it is now in the hands of the Port Authority, the quasi-public agency that runs Newark Airport and New York City's Kennedy and LaGuardia airports. So do two consecutive, high-profile failures cool the ardor of experts promoting airport privatization? Of course not. "Privatization is the only alternative," says lawyer and privatization advocate Frank Rapoport, who claims that "we're the last civilized country to finally wake up." Nor is Catherine Lang, a Federal Aviation Administration (FAA) bureaucrat currently running the airports office, fazed. Even though she previously called the Midway privatization a litmus test, she now urges "caution in reading more into the [Chicago failure] than there is." She's also willing to ignore the failure of the FAA's decade-old pilot program that called for five airports to be privatized. Only Stewart ever made it to the pilot program. The next test will be in Branson, Missouri. A private firm has built a new, $155 million airport that is due to open next month. So far only two carriers, AirTran Airways and Sun Country Airlines, have agreed to fly there.
Anywhere You Look, Disastrous Results for International Service
U.S. carriers have reported first-quarter earnings and the numbers are universally dreary, except for small profits reported by AirTran and JetBlue. Most notable, however, is the absolutely murderous results for international flying, until recently the supposed profit center of choice among the lemming-like Big Six. At United Airlines, for example, revenue from China flying declined by 15 percent. Revenue dropped 30 percent on flights to and from Australia, where bad economic times have been supplemented by a new competitor (V Australia) and the imminent arrival of Delta Air Lines. At Continental Airlines, chief operating officer Jeff Smisek reported that transatlantic ticket prices fell 35 percent on average. Transatlantic routes are "pretty ugly right now," he admitted. At Delta Air Lines, which now dedicates 40 percent of its flying to overseas service, the overseas results were stunningly bad. When combined with statistics from Northwest, which it acquired in a merger late last year, transatlantic revenue dropped 18.6 percent despite a slight increase in capacity over the first quarter of 2008. Latin America flying also increased slightly, yet revenue fell by about 10 percent. American Airlines reported that international revenue plunged 11.1 percent in the first quarter of 2009 compared to last year's first period. That includes a 17.6 percent decline on transatlantic flights. Transpacific revenue declined 7.3 percent despite a 4.2 percent increase in available seats.
The Birds Have Apparently Dropped Their Objections
Nothing focuses public attention more than a secular miracle. And the whole world is focused on and curious about bird strikes after the amazing odyssey of US Airways Flight 1549 in January. But far be it from our federal regulators to understand the public mood. The on-the-Hudson landing of Flight 1549 after a bird strike led average folks and the National Transportation Safety Board to demand more public reporting on existing bird-strike statistics. The response from the Federal Aviation Administration (FAA), the keeper of the stats? No news for you. But after months of stonewalling, the FAA said yesterday (April 22) said that it will open its books on incidents involving aircraft and birds to the public. The FAA initially had claimed making bird-strike information public would somehow put passengers at risk. Apparently, however, lobbyists for birds have dropped their objections and virtually all of the FAA's records on the subject will be public beginning Friday, April 24. (Okay, I made the part about bird lobbyists up, but you get the idea )
More Hotels? Sure, Why Not Gild the Dead Lilly?
With hotel occupancy plummeting and room rates falling precipitously, logic would lead you to believe that the hotel industry would stop opening hotels. But that's not how it works in lodging, when projects put into the pipeline years ago keep gushing out. So get out your scorecard and make note of this week's new openings. There are four new Hilton Garden Inn properties: a 224-room hotel at Toronto/Pearson Airport; a 140-room hotel in Ridgefield Park, New Jersey; a 105-room outlet in Tifton, Georgia; and a 115-room hotel in Fontana, California. There are two new Courtyard by Marriott properties: a 218-room hotel adjacent to the New York Avenue Metro Station in Washington and a 92-room hotel in Denton, Texas. Meanwhile, InterContinental has opened a 100-room Candlewood Suites in Manassas, Virginia, and a 100-room Hotel Indigo in San Jose, Costa Rica. . The 125-room boutique Moonrise Hotel has opened in St. Louis. The hotel has a rooftop terrace; introductory rates start at $159 a night.
Business Travel News You Need to Know
Northwest Airlines has shifted to Delta Air Lines gates and facilities at Fort Lauderdale Airport. Northwest service switches to Delta facilities at Tampa next Tuesday (April 28). The SuperShuttle shared-van service now operates to and from Pittsburgh, its 33rd airport. The virtually moribund U.S. version of the Diners Club card, owned by Discover but licensed to former owner Citigroup, has added some airport lounges to its network. The card will now get you access to the 11 Salon Premier clubs operated by AeroMexico and two Premium Plaza lounges in Singapore's Changi Airport.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
THE FINE PRINT 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.
This column is Copyright © 2009 by Joe Brancatelli. JoeSentMe.com is Copyright © 2009 by Joe Brancatelli. All rights reserved.