3rd Party Victims of the Recession

Last night I had dinner with another Professor. He is on assignment with a large travel supplier trying to solve a complex internal set of problems relating to IT.

We discussed how the recession will impact the functions he interacts with - both corporate and the subsidiary he works for. There are going to be a lot of people who will be toast. Our original aggressive estimate of up to 100K people who are laid off or cut totally in the US market for Aviation and Travel for 2008 now seems light.

Despite the need to cut costs even further will mean that there will be some tough decisions. We have seen certain facilities cut and now we are hearing that hotels have cut services as well as shutting whole floors to reduce costs. The products are being quietly cut, certain cruise lines (probably all of them) have cut headcount at head office and indeed on some of the ships. Work rules have been altered.

One area I didn't expect to take the hit so soon is the outsourcing market in South Asia, Eastern Europe and other similar locations. Already I have seen significant cuts in companies we know operate in ATT (Aviation Travel and Tourism). I have received many different requests for assistance and work projects. I cannot even hazard a guess other than to say India is going to experience a severe cold from the cancellation, delay and reduction of outsourcing work. As these workers are themselves part of the class who are now starting to enter the middle class consumerism - particularly travel inside India - it will reverberate outwards.

China is also holding on to its pocket books tightly. A combination of Chinese policy (for example restricting visits to Macao for local Chinese would be gamblers) a significant fall in confidence and an overly zealous restrictive policy during the Olympics has resulted in very large drops in occupancy and yields. The markets that have started to become dependent on China for tourists is also seeing significant drops.

So for how long will they (and us) have to suffer? 2009 is a write off - 2010 is not looking too good.

Best of luck to all of us.

So yes Virginia there is a recession Version 2.0 this time with proof.

The recent study by TIA makes sobering reading. Trips not taken, unhappiness with the process. The chief drivers of revenue are the most pissed off.

http://www.cnn.com/2008/TRAVEL/05/30/airtravel.decline.ap/index.html

I think we are all now feeling the pinch. The anecdotal evidence is overwhelming.

The problem that has overcome us all have been shielded by older data forms and statistics that are from a bygone era. I believe we could ask any person in the country (GWB exempted) and she/he will tell you that the world is in recession. Even the Oracle from Omaha calls it that way.

We draw our evidence from the following sources:

GDS sectors are way down (latest to report is Travelport) so far Sabre and Amadeus are not talking.
Savage cuts are now showing up across the board. Hawaii we believe we be down by 20% or greater before the end of the year when all the elements are in.
Significant cuts are being planned. Ryanair was first to announce its Winter 08-09 cuts. Now we see it across the board.
American will drastically reduce its Caribbean traffic and others across the board at the same time parking 75 plus aircraft. The headcount numbers are not yet out.
Las Vegas is WAY off
Hawaii is WAY off
We could go on but lets stop here for now.

So chaps, accept it for what it is and live with it. We are in for a long one. The first real recession the world has seen in more than 2 decades. The world will emerge (I hope) and there will be a different world at the end of it. The slope of the recovery curve will be a lot less resilient and SLOWER. During this time those people who have been the prime drivers for revenue on the legacy carriers (business travelers) will find alternatives. That includes the new virtual there from Nortel. And probably Skype will be the preferred form of communication if eBay ever lets it.

For all of us this is going to reshape the business we are in. So now we need to start rethinking that fundamental new set of thoughts. Collaboration will work better than individual contributions. Are you in?

Good luck to all of us.

Cheers

Timothy