Travel Weekly Preview 2014: Pointed in the right direction

By Bill Poling

The ingredients are in place for the travel industry to have a year of growth and prosperity in 2014. Demand is strong, the economy is improving, and the major supplier categories are beginning the year with their houses pretty much in order. 
With the consummation of the American-US Airways merger, the airline industry is getting reacquainted with profitability and is poised to push on. The cruise industry, buffeted by disasters and breakdowns in 2012 and 2013, is finally seeing the bad publicity recede.

Hotels and resorts, buoyed by rising rates and occupancies, continue to attract both guests and investors. The car rental industry, also firmed up by consolidation, is making itself more accessible every day. And tour and river cruise companies are beginning the year with momentum and product lines tweaked by innovation.

A quick scan of leading indicators suggests that, barring external disruptions, the economic environment will be good enough for every mode to do well. It even looks like the federal government might behave itself in 2014, sparing us the jolts of sequestration and shutdowns.

The recession knocked a lot of our abbreviations and acronyms on their ears: GDP, Nasdaq, etc. Most distressing for millions of workers, the typical IRA and 401(k) took a hit too. Most of these have regained their lost ground and some — the market indexes, for example — have picked up new momentum.

But early on, many experts honed in on two big data points that, more than any other, would tell the tale of this recovery: unemployment and housing. Both have been particularly stubborn, but as 2013 comes to a close there are signs that even these two laggards are finally getting traction.

Preview 2014According to the Bureau of Labor Statistics, the national unemployment rate dropped another notch, to 7%, in November, a level not seen since the index crossed that line on its way north in December 2008. The average work week and hourly wage are also trending up.

For 2014, the Federal Reserve is forecasting a continued drop in the unemployment rate, possibly to as low as 6.4%. Although the trend has been slow because of pockets of high unemployment in particular geographic areas and among certain demographic groups, the overall trend has been pronounced and positive.

On the housing front, there are still far too many homeowners dealing with foreclosure, and far too many homeowners are underwater on their mortgage (i.e., they owe more than the property is worth), but the tide has turned.

The National Association of Home Builders reported earlier this month that in 54 of the nation’s 350 metropolitan areas, activity in the housing market is at or above normal levels, based on an algorithm that factors in housing permits, home prices and employment levels.

More than a third of the metro markets were at 90% of normal, and overall the national housing market is running at 86% of normal, the association said.

October data from the Department of Housing and Urban Development put the number of underwater borrowers at 7.1 million, down from 10.8 million a year earlier. New foreclosure actions were down by a third.

The housing market and housing prices are particularly important markers because home equity is a major contributor to total household net worth and to many families’ sense of security and, consequently, their willingness to spend.

Notably, household net worth as measured by the Federal Reserve reached pre-recession levels in 2012, and total household equity in real estate, after sliding to $6.2 trillion in 2011, approached $9.7 trillion in this year’s third quarter.

Against this backdrop, optimism seems appropriate, and the airlines are apparently eager to oblige. IATA has forecast a 31% increase in global airline passengers during the five-year period between 2012 and 2017, which translates to nearly a billion new air travelers.

For the American travel market next year, the U.S. Travel Association is forecasting a 5% increase in total travel expenditures, to $940 billion, with $151 billion of that coming from a record 73.4 million international visitors.

This could go well. Unless something goes wrong.

Cruise industry is seeking big jump in telecom speeds

Cruise industry is seeking big jump in telecom speeds

By Tom Stieghorst

Cruise passenger laptopFaced with accelerating demands by passengers for digital connections for their mobile devices, cruise lines are pushing vendors for faster, cheaper, more reliable telecommunications at sea.

In response, the satellite providers are getting creative in their efforts to provide the bandwidth that enables Internet access, social media use and other telecom services.

Solutions include creating a hybrid of satellite and land-based carrier networks, installing additional antennae on ships for more flexible, reliable signal tracking and using satellites in lower orbits to reduce signal transmission times.

In some cases, passengers can expect a “dramatic” rise in the speed of Internet access from the ships, one analyst said.

The innovations from companies such as MTN Satellite Communications and Harris CapRock are being implemented now, although they won’t start being ready for use until next year or 2015.

“There are a whole series of new technologies and satellites that are going to be available in the coming couple of years that will greatly improve the performance and the available bandwidth on those ships,” said Rick Simonian, president of maritime solutions at Harris CapRock.

With its purchase of CapRock Communications in 2010, Harris Corp. embraced a commitment to the cruise ship segment. Since then, it has won contracts with Royal Caribbean Cruises Ltd. and Carnival Corp. to install new equipment and provide services.

Its contract with Carnival, disclosed in mid-October, covers more than 100 ships in the fleets of 10 Carnival brands.

Harris CapRock said it will provide bandwidth levels higher than those previously available on each fleet to meet “new service requirements Carnival set for its guests and crew.”

Simonian said a key piece of the puzzle is installation of more than one satellite antenna on each ship. Most ships, he said, have a single antenna, housed in a spherical dome fixed to the ship’s mast.

“The problem with that is that if the ship is turning and the line of sight to the satellite gets blocked by the smokestack, or if they’re in some other obstruction, then the service goes down,” he said.

Two antennae mitigate that problem and will also be capable of switching back and forth between different radio frequencies, C-band and Ku-band, using the resiliency of one and the greater bandwidth of the other as conditions change.

Earlier this year, Harris CapRock completed installing gear on 33 ships belonging to Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. It will also integrate an ambitious new satellite system from O3b Networks, starting with the Oasis and Allure of the Seas.

O3b is launching satellites that orbit about 8,000 miles above the Earth, rather than the 23,000-mile distance of existing, geostationary satellites.

That cuts the back-and-forth signal speed to the satellites from 720 milliseconds to 130 milliseconds.

“It will dramatically increase the amount of bandwidth available, to kind of unheard-of rates,” Simonian said. “The only ships that get rates like this would be Navy aircraft carriers, just for comparison.”

O3b has launched four of its eight-satellites constellation and should be ready to serve the Oasis and Allure next spring, Simonian said.

But the O3b concept has some limitations and is unproven, said Chris Quilty, who covers satellite companies for the Raymond, James & Associates brokerage.

“Royal Caribbean has made a huge, very expensive bet on a category-killer solution for the cruise industry,” Quilty said.

One limit is that coverage doesn’t extended beyond latitudes up to 45 degrees north and south of the equator, which excludes cruise areas such as the Baltic Sea and Alaska.

Also, O3b’s satellites aren’t fixed in geosynchronous position like higher-orbiting satellites, so they have to be tracked.

“One is coming up over the horizon as the other is going down,” Quilty said. The tracking system that’s required, he said, “is much more complex. I would say it’s a high-risk, high reward proposition.”

MTN Communications is offering a different solution, one that seamlessly switches satellite signals from satellites to land-based networks when ships approach or are in ports.

When that happens, existing satellite bandwidth is freed up for use by cruise ships farther out at sea.

“Adding more satellite bandwidth will no longer solve the ‘constantly connected’ demand,” said Errol Olivier, president and CEO of MTN. “And, way too often, adding more bandwidth just raises the costs for cruise operators.”

As cruise lines roll out MTN’s hybrid system and other solutions, such as the one offered by Harris CapRock, the retail cost of Internet service, which is currently 50 cents to 75 cents per minute, should come down, even as performance improves.

How much prices will drop and speeds will increase is up to the cruise lines, Simonian said, adding, “That information is proprietary. They [the cruise lines] want to protect that.”

MTN once held upward of 90% of the cruise industry communications market, and it still serves Norwegian Cruise Line, Oceania Cruises, Pullmantur, Windstar Cruises and others.

Still, Harris in recent months has gained a big foothold by landing the two biggest companies in the industry as customers.

Brad Grady, an analyst at Northern Sky Research, said that because Harris is a big, public company with a broad client base ranging from the U.S. Navy to the global oil and gas industry, it can use its scale to reduce prices.

“There is always a bigger fish willing to do more at a better price,” he said. “And for larger end-users, specialization does not necessarily beat price.”

Quilty said that except for the U.S. government, Harris is the largest consumer of satellite capacity in the world.

“By definition it is an economy-of-scale business, so you can generally buy capacity at a lower price,” he said.

Cruise ‘failing to cater for over 55s’ , says Fred Olsen

Cruise ‘failing to cater for over 55s’ , says Fred Olsen

By Hollie-Rae Merrick

Fred Olsen Cruise Lines’ Nathan Philpot questioned whether the cruise industry was ageist as he highlighted the importance of the older cruiser.

Speaking at Clia’s Columbus Day in Liverpool, sales and marketing director Philpot questioned whether it was right to try and attract a younger audience of cruisers.

He said considering one third of the population – 18 million people – is over 55, cruise lines and agents should be targeting this pool of potential cruisers.

“Cruise is a love it or hate it product as far as I’m concerned,” he said,  highlighting that 64% of clients are not interested in cruising, 14% have been on a cruise and 24% would consider it.

“That means there are 17 and a half million people that already are existing cruisers or potential cruisers,” he added. “What are we doing wrong? We’re not catering to the needs of the over 55s market.”

Philpot referred to the response to BBC’s recent series The Cruise: A Life At Sea, which featured a Fred Olsen world cruise, by asking if the cruise industry was ageist.

The show received a negative reaction from the industry with some saying it highlighted the preconceptions of cruising being for the older generations.

“It did cause a few issues about age. It was a world cruise average age of 69. The industry didn’t seem to like looking at cruisers as they are. Perhaps we prefer the airbrushed views of cruisers.

“Are we as a cruise industry ageist?”

Philpot said research by the cruise line had showed that the biggest barrier for bookings was the preconception that is was suitable for older clients. But he said that point should be a positive rather than a negative and that the industry should be doing more to cater to the 18 million over 55-years-old.

He added: “We need to question ourselves – are we promoting the image of cruise that we feel more comfortable with or the image of cruise that us most relevant to the audience we are talking to?”