March 2021 Newsletter
So, what does a vaccination do: Honestly?
It is a dying skill whilst reading to not only read but to be able to absorb what the real meaning is of the article they are reading. Whether by accident or design, the choice of words we see in articles seem chosen for their opaqueness rather than providing clarity to a text or subject matter. The word “massive” has been frequently used to describe absolutely anything connected with the morbidity surrounding the coronavirus: what is massive? In percentage terms is a “massive increase” 5%, 10%, 25% or 50% or even more? Ask 5 people for their interpretation of the world massive and you will likely get 5 different answers from across the spectrum. The authors or editors task has thus been achieved: confusion amongst the masses prevails. So, moving on with the confusion aspect, we are all led to believe that the only way for travel to be available to the general public is for those wanting to travel to get vaccinated. Getting a vaccination is not hard nor dangerous and is in fact already a requirement prior to travel to many countries across the globe. Vaccinations stop you getting ill. Period. Their intention is not to stop you passing on anything you may come into contact with and therein is the issue most people are missing.
Whilst reading a blog reply to a travel article, a traveller made the comment that she “would never dream of being sat next to someone on a plane who had not been vaccinated”. She, like many, is missing the plot. If you have 150 vaccinated people travelling on a plane, all 150 could in theory still be carrying the coronavirus; they could then transmit this to people at the “other end”, but the impact of them doing so disappears if those whom they are in contact with have also been vaccinated. It is this aspect that most people have lost sight of thanks to murky information. However, it is worth pointing out that a bonus of the current vaccination – or some of them – is that it appears that the jabs do in fact stop the virus being passed on; however, this was not the original intention and it will be many months before this extra benefit can be either proved or disproved as critical mass is achieved through the vaccination process. The bottom line thus is how therefore can so called “’Vaccination Passports” prevent the spread of the disease? If logic is applied the only benefit having a vaccine has is that it stops you from getting ill and thus potentially overloading the health system of that country you happen to be in. Therefore, having a negative PCR test should still be a pre-requisite for travelling if the intention is to stop the spread of the virus. Surely!
There is also one other small but interesting facet of the “Vaccination Passport hype. ‘leaving aside the political games EU leaders have resorted to in an attempt to cover their own shortcomings. The effectiveness of the Moderna and Pfizer jabs, is apparently measured as to (quote) “how they protect people against moderate to severe Covid- 19 disease, not how well they prevent infection or the spread of it”. This is a plain and simple medical fact. The science behind these two jabs also suspects that in the longer term they may also or possibly stop the spread of the disease, but again this will take some time and greater scrutiny to either prove or disprove whether the virus has been stopped from jumping from one person to another.
At the end of the day, as long as people think that it is safe to fly, they will fly, regardless of the facts behind the theories that aim to get the world back into the comfort zone. Just as the world talked itself into a downward frenzy a year ago, now is the time for the pendulum to swing the other way.
Jamadvice Travel | BCD Bulgaria
Vaccination passports, an opportunity not to be missed
Our editorial deals with the concept of “’Vaccination Passports”’ as a means to get the world mobile once again. As a separate side issue, it would be remiss of airlines (even indeed hotels) to miss the opportunity to ‘grab” as many client details as is possible. If, as we are being led to believe, each airline will operate its own “’Passport’” where travellers can upload all their health information and use it time and time again when booking a flight, then what a brilliant coup for the airlines: they now have a wider data base to direct sell to and “’why would you travel with anyone else now we have your details?” Brilliantly simple. Little wonder that EU and IATA plans to operate a “’neutral” vaccination passport scheme seems to be gathering little or no traction. For that to work you need people to buy into it. If one half of the equation is not buying into it i.e. the airlines, then its going to be hard for the likes of the EU and IATA to get their schemes off the ground. Which will, in the short to medium term, do little to encourage the world to start travelling again.
The role of aviation used to be clear and concise: the sun and snow part of travel was served by package operators and charter airlines, whilst the area of business travel was the domain of the traditional airlines. Not so very long-ago Low-Cost Airlines arrived on the scene and started initially to create a new demand, amongst many, for city or weekend breaks, then they moved onto servicing both winter and summer leisure destinations and finally found themselves with a big slice of the business travel market. As the world enters the “re-set” phase, the leisure travel sector will, arguably for the first time, become massively dependent on the fleet of foot of Low Cost airlines to drive demand but they are also increasingly being copied on the leisure front by the ‘traditional’ airlines who once not so long ago frowned at such activity. What is also clear is that the role of the “’Charters””, whilst not irrelevant, may find themselves playing second fiddle to the aforementioned. Unless that is, they quickly re-invent themselves and rely less on being a provider to Tour Operators, rather they need to become a hybrid carrier or cross between a Low Cost Airline and a Semi Charter provider.
If we look at who is doing what this summer, both Wizz and Ryanair have, at hugely short notice, put a whole new route network into place with the prime objective of providing supply for the pent up demand from holiday makers to get away to the sun. Ryanair for example has added 26 new holiday routes for summer 2021 with a total of 480 destinations now included in France, Greece, Italy, Portugal and Spain.
Across at the Lufthansa group, not long ago one of the very last airlines you would associate with “holiday traffic” both Austrian and Lufthansa have announced a raft of summer flights which incidentally includes twice weekly flights to Varna from Frankfurt as if to emphasise the point. All told 20 new destinations appear out of Frankfurt and 13 from Munich. Austria also features 20 new destinations from Vienna.
On a similar theme from a local perspective, we see Bulgaria Air also boosting its leisure offerings with regular flights starting May to the Greek destinations of Crete, Rhodes, Corfu and Thessaloniki (Halkidiki). Judging by the recent success of flights from Sofia to various holiday destinations, it would seem a smart move from the national carrier, particularly as flights to cities like Paris, Amsterdam and London are cut or restricted due to quarantine issues across Europe. If you can make money by flying somewhere, then why not do it.
Pay as you fly
An interesting and potentially seismic shift has just started surrounding how airlines charge, or should that be “’when’’ airlines charge their passengers for the flights they use. Under pressure from the German Business Travel Association, Lufthansa has started to offer more if its corporate clients a PAF Tariff. PAF stands for “Pay as you Fly””.
The aviation sector for many years has got away with a unique business model where it in effect borrows money from its clients and uses this for operational costs today, even though the money received from its clients may be for travel in weeks and months ahead. In so doing its cheaper for the airlines to operate this model than it is to go knocking on the bank managers door like every other business. What has brought about this “’re-focus”’ (the idea is not a new one) is the way that airlines across the globe handled and continue to handle billions of Euro’s worth of refunds they owed clients for flights that were cancelled. The new model would erase the time consuming and costly process of handling refunds as the money would not be collected from a booking until the flight has operated, thus avoiding any potential manual refund.
What should be highlighted here is that not all fares will fall under this process, rather just corporate fares in the initial phase, but the potential does arise for an expansion of them if they gain traction. From Lufthansa’s point of view such fares can be a unique selling point when negotiating with corporate clients and this in turn may force other airlines to follow suit. Against this though comes the economic reality that one of the reasons why airlines make the process of obtaining a refund difficult is that in their budgets, they factor in a substantial amount per annum for income from “’unclaimed ticket refunds”. Therefore, erasing the issue of refunds also takes away unearned income for the airline which will mean they will increase fares to compensate for this missed financial opportunity.
Turning back the clock
Several years ago, we forecasted that the future of food on board aircraft would revolve around travellers having the ability to pre-order meals before they boarded. Austrian were one of these airlines who, unknown to most, offered some excellent inexpensive pre-bookable meals that were delivered to your seat; even in economy class. Perhaps it was due to the relatively short duration of flights in and around Europe that the concept never gained the traction predicted. Fast forward several years and the concept looks like it may have a new beginning.
The Lufthansa Group ie. Lufthansa, Swiss and Austrian have been busy re-launching buy-on-board services which should not be confused with the food offerings Low-Cost Airlines offer. The timing is obviously key as many people will be reluctant or even unable to eat at airports before a flight. Taking an early morning or late evening flight often means missing eating much of the time and hence the ability to actually have a proper “old style” meal that doesn’t cost a fortune can be attractive, so much so that it could actually be a differentiator when choosing with whom to fly. Noting of course that originally the airlines sales pitch for business class travel was that you would get a hot meal as opposed to the lack of food options in economy. What goes around comes around.
As destinations, as well as airlines get more creative in trying to attract travellers back to the concept of travelling for enjoyment, the opportunities for the man in the street to get some real bargains may soon be here.
Emirates launched a free hotel stay offer bookable by the end of March for travel until the end of June for anyone booking return flights to Dubai. The deal offers two nights free stay which increases to three nights for business and first-class passengers.
Taking the idea further, would this not be a great idea for our own national carrier Bulgaria Air? They could offer free city, wine or spa visits around Bulgaria with the help of the Ministry of Tourism. This would kick start the industry in many areas and send a clear message that the country is open and working. Providing that is, that the country is indeed open and working.
Flights to North America to re-start?
There have been numerous false dawns over the years with regards to supposed new airlines starting operations out of Sofia Airport. Associated with these dawns was always the tag line “’with flights to the USA”. The last direct commercial flight between Bulgaria and the USA was some 22 years ago, the demand for such flights probably tempered by the new ease from the turn of the millennium for visa free travel to ever increasing numbers of countries in Europe which eventually became an open door when Bulgaria joined the EU. The demand to get away to a new life in North America was deemed irrelevant and trade between the two hardly generated business traffic. Under the radar somewhat, that may be about to change.
A (relatively) new start up airline named Gullivair which in fact is a sister airline of BH Air (Balkan Holidays) has now obtained the flight rights not only to the USA but also Canada. Whilst many will roll their eyes and think “’been there before”, there appears to be a difference this time around. That is, firstly the airline is already operating long haul charter flight to the Maldives and to the Dominican Republic and has been in possession of an A330 aircraft designed for such long haul work for over one year. A second A330 has just joined the fleet which was an ex Turkish Airlines plane. If we are also to believe the reports, the airline is obtaining 4 more such by the end of the year!
It remains to be seen how the airline can economically operate as many as 6 such planes as a fleet of three or four would appear to be sufficient but lets see what the future holds. Equally, other long-haul destinations could appear on the radar though these could, like the Maldives and the Dominican Republic, be seasonal charters with the actual destinations changing with the seasons.
What many will keep an open mind about is the sustainability of such a fleet. Bulgaria is a very small market and for such an operation to succeed in the ideal world you need either or both of a) passengers originating at both ends of the chain and b) feeder traffic connecting into the flights at both ends and this facet in particular needs to be supported for the longevity of the operation. This means code share and connecting flight agreements with partner airlines, something even Bulgaria Air has steered partially clear of in the past for whatever reason.
Take away a success
The past year has seen many novel ideas of cash generation by travel business’s but one of most eye catching is surely that from Japan’s All Nippon Airways who sold over 260,000 inflight meals in the first three months of this year to a grounded clientele.
The airlines offering proved so popular to domestic residents that meals invariably sold out within minutes once they were placed on a website and over 1.8 m USD was generated from the sales.
On a similar theme, Malaysia Airlines also announced it would make its signature Satay available to be bought online. The airline said that its chicken and beef satay’s which were previously exclusive to business class passengers, would be available for anyone living in the Kuala Lumpur area.
The Hyatt Group has just celebrated the opening of its 1000th property. The Alila Napa Valley in California which belongs to the chains Alila brand is the hotel in question and comes after founder Jay Pritzker bought the first hotel in 1957.
Remember that here in Sofia the chain opened the Hyatt Regency in 2020.
The blight the pandemic has on travellers continues to come to the fore as more travel focussed businesses announce their annual figures. The UK airports are one of the latest to release theirs and they show that the numbers of passengers using UK airports in summer 2020 was more or less the same – as 1975! 14.2 passengers passed through the airport facilities in 2020 whereas in 1975 it was 14.1 million.
Across the whole of 2020, numbers were down 75% to levels last seen in 1985 at 73.8 million passengers. The figure for pre-pandemic 2019 was 296.8 million.
At London Heathrow just 500,000 passengers used the airport in February this year which is the airports lowest number since 1966.
On the wider level, the latest doom and gloom analysis from IATA is that its member airlines will burn between 75 – 95 billion USD in 2021, the figures varying between one of optimism and one of pessimism.
For those involved in the procurement or finance within a company, getting the best deal when it came to travel, was always a high priority, if not the highest point on the agenda when it came to price negotiations with airlines and hotels. Taking a quick step back over the past years and looking at what was at the top of the executive thinking yields some interesting changes.
In 2014/2015, most people buying travel on behalf of their company listed “’getting to grips with airline pricing’” as their number one objective. The three years following that, the most important consideration was “cutting costs whilst maintaining quality”. When Brexit came along in 2019, that became the main topic of consideration for many who had business in or who conducted business with the UK.
The question of ” climate sustainability” was always hovering around and ranked fourth most important in 2014 but perhaps echoing the wider world, actually dropped out of the top 10 considerations until 2020. Meanwhile, the nugget “’duty of care, safety, wellbeing” was fifth in 2015, fourth in 2016 and then second in 2017 and 2018. It then reached the top spot in 2020.
Today, in 2021, that same duty of care, safety and wellbeing is without doubt the top of the tree when it comes to management consideration surrounding the booking of travel, whilst traveller wellbeing was split out into second place. The control of budgets slipped to third whilst sustainable practice rose from sixth to fourth in 2021.
The bottom line in all this is that price will not be a determining factor in choice once travel is kick started.
Get ready for a bargain
When (if) the world returns to normal and people once again can travel for either personal enjoyment of for business, what will be interesting is how the hotel industry copes with the return.
On the face of it, it could be argued that with the pent-up demand, people will be happy to pay a premium for flights or hotels and the cost factor will not feature overly high in people’s decision-making process. On the other side of it, the actual volumes of people travelling by the year end are hardly likely to be in excess of some 40% of where it once was. This 40% figure is a figure arrived at based on past experience, logic and a finger in the air to test the wind i.e. it is reasonable but don’t put your shirt on it. Therefore, unlike the aviation sector which will restrict the supply of seats to facilitate higher fares, there will be a lot of hotels chasing the reduced numbers of travellers.
Those hotels that sit in the “’economy’’ sector will find it easier to offer lower rates than premium hotels as the latter are expected to maintain higher staffing levels in order to provide a premium service. The flip side of that though is that 4 and 5 star hotels might feel themselves justified in trying to win back guests with lower than low room rates, simply to get their own wheels in motion. Already in our region, the past year saw business travellers paying an average room rate of around 118 Euros per night in 2020 whereas the previous year this figure was 150 Euro’s. It will not be easy for hotels to return to their former levels, it never is once these room rates drop and getting back to the rates hotel managers aspire to will not be achieved overnight.
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