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2018

December 2018 Newsletter

Editorial

Here we are at the year end once again, a cycle that seems to accelerate the older we become. This past year has seen its usual comings and goings and the usual issues re re re-appearing when it comes to local affairs. The world of travel lives on and continues to thrive, especially in the world of Business Travel, despite claims from the twenty something year old MBA graduates that it would die a quick death. People need to travel for leisure, for self fulfilment and for business and we all know that business makes the world go round.

Here is a look back at some of the notable and noticeably ridiculous travel related stories from 2018 and at this point may we wish you an even more successful 2019.

Mark Thomas

Managing Director

HRG Bulgaria

January

Funny how the years first editorial would remain relevant and in the news throughout the year! The road to the airport was a case of ‘”better late than never’’, as for the country’s presidency of the EU; that appeared to do no harm to the image of Bulgaria at all and to the contrary, it was a positive piece of PR. What is amusing is the later story of the designated ‘”preferred hotel”  for many of the EU hangers-on, the Marinella and the subsequent tax swoop by the police and the issuing of a European arrest warrant for the owners. Obviously, the massively discounted rates the hotel gave to the government’s EU  visitors were too good to be true! As for Bansko, the same story will appear in ten years time and like now, there will still probably be no second gondola to reduce the excessive waiting times for skiers.

Finally, a new road to Sofia Airport; It only took 11 years but better late than never! The new road to the airport was supposed to be opened along with the opening of the new terminal 2 back in December 2007 – just before Bulgaria joined the EU, but land issues delayed that until January 2018 when, by coincidence, Bulgaria became president of the aforementioned EU! The new link takes drivers directly to Terminal 2 via a road bridge whilst those using the de-facto ‘” Low Cost ‘” terminal 1 take the slip road just before the new bridge. Let’s hope any further development does not have to wait until Bulgaria is once again president of the EU.

Talking of airports, the two Black Sea airports of Bourgas and Varna are churning out record numbers again with overall growth being an impressive 8.42% combined. A total of4.95m passengers used the two airports and things look set to continue on an upward growth cycle as Ryanair announced that it will open a new base in Bourgas in March 2018 with 11 new routes being introduced.

As we mentioned, Bulgaria is now the President of the EU for the next six months and this means lots of regimista’s  landing on our shores. Its been a long-standing question as to whether or not the local upmarket hotels benefit from this influx or will the Marinella take most of the cake with their heavily discounted government rates? Certainly, some local hotels seem to be shrugging their shoulders and I refer here to the Intercontinental located in arguably the best central location opposite the Parliament building, except that is, it isn’t open! The former Radisson hotel has not seen occupants for several weeks now as it prepared to change management but equally the new managers i.e. the Intercontinental, are not prepared to open their doors until all the renovation work is done to their spec, which is already several weeks late! Meanwhile, the local media has announced something that we have kept under wraps for several months now and that is that a new Marriott is planned for Sofia on Hristo Botev Blvd.  whilst this is due to open in 2020, only a fool would bet that this will actually come to fruition on time or at all! By the way, don’t forget we also have a Hyatt coming along at Levski Monument just as soon as they sort out what to do with the Roman ruins. So, all in all, it looks like a lot of branded international hotels will be on our doorstep soon: will there be the demand for them is the big question?

Perhaps the biggest talking point in the local domain recently has been the “supposed’” agreement whereby a second much needed gondola lift will be built in the ski resort of Bansko.  That’s the good news but the bad news is that this has riled the Green brigade who fear – perhaps with some justification – that this will open the door for even more construction in what is actually a National Park! Bansko already has far too many beds for the size of the ski/resort area so it’s difficult to imagine anyone being so stupid to build yet more hotels and thus increase the supply which struggles to marry with demand. Yet the same argument could have been said five years ago but people still build empty hotels. On the other side, how does Italy, France and Austria successfully manage its resorts that dwarf the size of the Bansko area but yet find the balance between nature and human recreation?

February

It’s easy to forget but just twelve months ago everyone and anyone was talking about cryptocurrency and how very soon all the planet would change forever in the way it paid for things. Fast forward to the year end and its more of a case of ‘”do you remember them cryptocurrency thingies?” in the same manner people talk of the dodo bird!

Crypto First

Brisbane Airport is set to become the world’s airport to accept cryptocurrency payments in its terminal shopping area. It is teaming up with a crypto currency firm to offer shopping using Bitcoin, ethereum and other digital currencies.

Interesting that the spell check on this typing doesn’t recognize ethereum!  For sure it does recognize Dollar and Euro!

 

March

March saw the “re-opening’ of the landmark Intercontinental Hotel. Although it wasn’t exactly a re-opening as when this facility closed it was a Radisson Blu Hotel and long long ago it was the Grand Hotel Sofia before a new Grand Hotel appeared somewhere else! Anyhow the new prime located Interconti’’  has opened after extensive refurbishment and will be an important player in the local hotel industry. Just for the record, most people forget that years ago the Intercontinental was actually what the Marinella is now before it became the Kempinski. Confused?

Intercontinental Opens

The long awaited opening/re-opening of the Intercontinental Hotel in Sofia is underway. Under the radar and away from the lights the hotel is, in fact, functioning and ramping its operations up step by step ahead of the official launch in Mid-April.

The hotel was, until relatively recently, a Radisson Blu Hotel and prior to that, a Radisson SAS. Even longer ago but still in the memory of some it was the old Grand Hotel Sofia although by this time it wasn’t so Grand. This is, in fact, no relation to the current operating Grand Hotel.

It will be interesting to see how the hotel performs in today’s climate but with the brand of Intercontinental and the location of the hotel there is no reason why it shouldn’t be a success. Whether the sample rates generally advertised which range between 136 – 283 Euro for the same standard room during a midweek night over the next four months can be maintained is a totally different question. Hotel rates in Sofia are often optimistically priced at opening time and settle down to local levels soon after.

 

April

The airlines ability to wriggle out of potential compensation payments by using whatever ploy or excuse is available is legendary. Luckily Europe has the EU to counter  this and in the game of cat and mouse, the airlines are losing more battles than they are winning; thankfully. In this particular case, was the airlines defence ‘”we are not responsible  for the actions of our own staff?’”  If so, it failed.

Courts beat airlines

The European Court of Justice has ruled that airlines must offer passengers compensation for delays and cancellations caused by wildcat strikes.

The ruling, by the highest court in the EU, means passengers can claim for compensation if airline staff suddenly call in sick, as has become a fashionable trend when unions are in dispute with management at some airlines.

Previously strikes were not recognized by airlines as being a valid reason to pay out arguing that these were extraordinary circumstances; then again airlines have generally considered anything that would force them to pay out are extraordinary circumstances as their business model is to take and not pay back.

May

The first months of the year had seen a procession of strange stories surrounding passengers, who, obviously a sandwich short of a lunch box, had tried to pass off all sorts of animals as “”emotional support pets’” but after a much documented case of someone trying to bring along a peacock, the airlines finally said ‘”enough is enough’”.  Mind you, we are still not sure about miniature horses!

Seriously!

The recent nutter event in the USA where a passenger tried to bring a peacock on board a flight as an ‘” emotional support animal”’ has prompted another US carrier, this time American Airlines to revise its own pet support rules.

From July 1st2018, no more ferrets, goats, spiders or hedgehogs will be accepted although trained miniature horses will still be allowed (quote).

Normal people in more sane parts of the world still need convincing that this is not an April fool’s joke. Sadly.

June

Our editorial in June looked at the economic theory of the laws surrounding supply and demand. The people of Sofia and indeed Bulgaria has benefitted massively from the connectivity that the Low Cost Airlines have provided to the city and to the country at large.

The Laws of Supply and Demand

Does demand create supply or does supply create demand; a question that sounds like something taken from an economics class. When it comes to the Travel Industry the same question can still be asked and indeed both scenarios could be said to be equally relevant although the argument is that in today’s modern travel world, supply would seem to create demand.

If we think back to the start of Low Cost Airlines across Europe, quite often they would fly (for example) from somewhere in the UK that few people had ever heard of to somewhere in France that equally few people had heard of. One could hardly say that there was a pent up demand for travel between the two places yet the planes were full. The offer of such flights created a previously nonexistent demand for travel for whatever reason between the two places.  We might transpose this onto the local level.

Sofia in particular is a boom city at the moment both on the business front and on the leisure front. On the leisure side of things, Sofia has long existed but was hardly flush with weekend breakers or short stay tourists. Marketing attempts by the government were inept and indeed still are, but something happened along the way that saw Sofia becoming a newly discovered short break destination for Europeans and non-Europeans alike. True, being a part of the EU helped although holding the EU Presidency probably didn’t! Being the ‘” cheapest’” country in Europe definitely helped as did having an excellent abundance of inexpensive new built hotels. What really is the catalyst in the supply demand theory though is connectivity; which in lay speak means flights that connect Sofia with other places.

The number of flights connecting Sofia to Europe and beyond continues to grow and a huge portion of this is down to Wizz Air and Ryanair (though not exclusively). These two airlines now carry approaching 50% of the passengers into and out of Sofia, but it’s important to note that they have largely not replaced other carriers that were already doing the job, but rather they are bringing in new flights with new travellers and on the flip side of that, introducing air travel to Bulgarians who previously could not afford such a luxury, with the result that passenger footfall levels year on year using Sofia Airport are increasing by around 8%. In effect the circle of having the perfect combination of flight connectivity, great inexpensive hotels, value for money eating and drinking, great climate and enough history and culture to keep most occupied for a few days, means Sofia is probably either in the Premier League of European City breaks or is about to enter it.

Whilst on the theme of supply and demand, we can also take a local view on the same theory with flights to the Middle East. Not so very long ago, apart from flights to Tel Aviv there were no flights to the likes of Dubai and Doha, yet just a hand full of few years later we now have 16 flights a week combined to these destinations, the breakdown of passengers being a mixture of business and leisure travellers but with the emphasis on the latter. If we take the leisure section of this then quite clearly the vast majority of people have/had never travelled to not just the Middle East buy beyond into Thailand and Bali etc, the sudden availability of this option via the airlines created the demand, a demand that is equally as buoyant as the incoming short break visitors to Sofia. Equally, we should turn full circle with the supply and demand theory for flights to the Middle East and realise that not insignificant number of visitors from these areas are now also coming to Bulgaria be it for skiing, shopping or even gambling. The ongoing cycle creates a win win scenario for all aspects of our industry and long may it continue.

Now, who said Demand creates supply?

July/August

This one is still rumbling along  (see April) but the story line resonates across other aspects of travel. Trade Unions seem to think of themselves as being above the law, yet the public at large are getting fed up with their strikes (particularly the French ) and the resulting financial impact this has on travellers down the line. The EU courts, as a general protector of consumer rights,  are heading towards the position that if a union strikes, it will eventually have to be accountable; financially that is.

Charge the strikers

Ryanair flights have recently been affected by the strike action of cabin crew and pilots in several countries including Belgium, Spain and Portugal. Whilst strikes are not uncommon, Ryanair have set a deliberate challenge to the authorities by refusing to pay compensation to affected passengers as is required under EU law.

The airline argues that such strikes are (key words)” exceptional circumstances’ and therefore no compensation is due as the matters are out of the control of the airline. The authorities deem otherwise but Ryanair seems set to take this matter further …(maybe helped morally by Air France!).

What maybe the solution would be for Ryanair to relent to the laws of Europe and pay affected passengers but at the same time seek equal damages from the striking trade unions who also possibly breach their own terms of employment. That way everyone is happy: except the strikers who are the ones hit in the pocket.

September

A trick of the airlines that many have known for some time, was finally exposed. Airlines like to claim they are more prompt than ever (except when the French Air traffic controllers are at play) but strangely enough the actual journey time is as long or indeed longer than ever!  There is of course also the added benefit from the airlines perspective of reducing the need to pay compensation for delayed flights by making scheduled flight times artificially longer than they are.

Padding out the schedules

Anyone who has been a regular flyer over a couple of decade will no doubt have noticed that the
‘”flying times’” seem to have got longer despite the modernization of the  actual planes . UK’s Which Magazine has noted that 76 out of 125 flights it looked at now had longer flight times than they did in 2006!

As a rough rule of thumb, airlines have tagged on around 20 minutes per flight over the years which therefore gives them more ‘” wiggle room’” to claim on time operations and at the same time potentially avoid having to pay compensation for delayed flights!

There is one thing that airlines are, they are not stupid when it comes to duping the fare paying public.

eatstaylovebulgariaOctober

The title to this article should perhaps read ‘”yet another’”. The cases of travel providers having their technology systems hacked and thus exposing their customer’s personal details are becoming almost daily. Airline after airline; hotel chain after hotel chain, it seems no business is immune let alone capable of stopping this merry go round. Who said technology was a great advance?

Hacked off yet?

Whilst on the theme of ‘another month another….” This time it’s another month another hack of personal data. This time Hong Kong based Cathay Pacific has admitted that 9.4 million of its passengers have had their information stolen from its systems. Information stolen include passport numbers, email addresses, id card numbers, expired credit card details and travel history. No passwords were accessed.

Not to be outdone, at almost the same time, British Airways admitted that on top of the previously announced hack of details of 380,000 of its customer’s data, it had missed the fact that another 185,000 of its customers had also been exposed to security breaches but that one had ‘” slipped through the ever increasingly wider and holey net!””

The leak comes after much publicised leaks involving numerous hotels groups as well as Air Canada and Delta.

November

We all get used to asset stripping, done of course for the benefit of ‘”shareholder value’’. Austrian has been a vital cog in the wheel for Bulgarian based travellers for decades but is the clock ticking on their long term survival. New (ish) owners Lufthansa may or may not have long term plans for them in what would then fit the textbook acquisition model of “acquire and scrap’” when it comes to taking over once rival entities.

Is the writing on the wall?

As Bulgaria stepped out of communism and into the free world (sic) in the early 1990’s, one airline company was vital for the new found connectivity that the country needed with the new outside world; that airline was not Balkan of various guises, but Austrian Airlines. As the 90’s ticked by and the new millennium arrived, Austrian became even more important to the local business world as the route through Vienna was the gateway to many, if not all, places where commercial activity was focused in Europe. Indeed, the airline became a vital cog in the wheel of connectivity between new Europe and old Europe. Has the era of Austrian Airlines gone and is it about to be put to grass by its new masters, Lufthansa?

Let me say at the outset though that Austrian remains the carrier of choice for many local business travellers and there are numerous reasons for this from the convenience of their numerous flight times, to the service and functionality of Vienna Airport. The airline currently operates around 29 flights per week to Sofia: an indicator in itself of the popularity of the airline as well as its importance to the business community. So why the fear about its future?

Austrian has suffered financial turbulence like many other airlines and was gobbled up by Lufthansa in 2009. Since that time, one can hardly say that the airline has been the focus of much investment by its new owners. Its widely known that the ‘’traditional” airlines like Lufthansa, Air France and BA have found it almost impossible to make a profit on their short haul operations, itself the heartland of the Austrian business model. These ‘” traditional’” airlines make whatever money they can on Long Haul routes and ideally on Long Haul routes where competition is kept to a minimum. In many respects the historic business model has been (past tense) that an airlines loss making short haul (read European) network feeds the profitable Long Haul network and at the end of the day the ink turns black rather than red. It’s therefore logical that to be profitable a traditional airline model requires the airline to have a long haul network and a long haul fleet: here lays the problem. Austrian has just 6 Boeing 767 and 6 Boeing 777 planes for its long haul flights and what’s more they are an average of 23 and 18 years old respectively. That’s ancient in today’s terms. To paint an even bleaker picture on matters, the Austrian fleet in total is one of the oldest in Europe at an average of 14.4 years old. Compare this with the new kids on the block like Wizz and Ryanair whose fleets are roughly 5 years old and are therefore not only more modern but also more fuel efficient. Just to compare like with like, BA’s fleet is roughly 12 years old on average but unlike Austrian, they seem to have a clear plan of fleet replacement.

The bottom line, even if it is opaque, is that Lufthansa’s lack of investment in Austrian is sending all the wrong signals and it becomes a vicious circle. Austrians return on investment because of its ageing fleet is just 4% which is roughly half that earned by other Lufthansa group members. Investment is needed urgently by Austrian if it to compete on the European stage but it will also likely need a radical change in its business model if it is to survive in the longer term. The danger is, not that this would surprise many, the airline simply becomes a small regional airline feeding the main hubs of Munich, Frankfurt and even Zurich. Therefore, providing some value to its masters despite what the wider audience of business travellers would dearly prefer; namely a strong, modern and relevant Austrian.

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Tel:+ 359 (2) 943 3011;
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e-mail:mark@bg.hrgworldwide.com