Something’s in the Air

I read with great interest a number of news stories over the past few days concerning the volcano erupting in Iceland, and how the disruption of air travel over half of the world has led a number of hotels to jack up the prices they are charging stranded travelers. All in all, I’m not sure what I find more appalling: the lack of long-term customer relations strategy I’m seeing, or all of the comments you tend to find on such stories by people who don’t appear to have the whole “supply and demand” thing down yet. Although I suppose we should probably start by admitting that the whole situation is going to end up making somebody look bad, no matter what you do…

First of all, there have been a number of stories online about hotels raising their prices by as much as 400%, since they know the stranded tourists can’t just leave. I’m always a bit skeptical of such stories, because unless the city in which they are happening is alleged to have more transient passengers than hotel rooms in it, such things are pure nonsense. If a given hotel were to raise their nightly rate by 400% it’s much more likely that some competitor would take advantage of the situation by only raising its rates by 300%, or perhaps 200%, than it would be to follow suit; within a matter of hours the entire market would be competitive again. Unless we are talking about relatively small cities, places unaccustomed to high volumes of passenger traffic, or places where a monopoly on hotel rooms by one firm or owner exists (all of which are problematic for other reasons, too), this situation is unlikely at best…

But for the sake of argument, let’s suppose that there is a place somewhere in the world affected by the volcano where every guest room in town is already rented, and the hotels are all charging everything they can get away with charging. Let us further suppose that you own a hotel there, and you know that you can rent the room that just opened up for $400 USD per night this week. Why would you offer that room for $200 USD? Are you supposed to take a 33% cut in your profits just because somebody’s flight was cancelled? If so, should you make less money on your rooms EVERY time somebody has a flight cancelled? What about people who were just late getting up and/or too hung over to clear security in time, and wound up missing their flights; should you subsidize them, too? What about weeks when there’s a convention in town? Should you intentionally cut profits just because demand for your rooms is high?

Granted that in the case of an extraordinary situation, where tens of thousands of people are being affected in dozens of countries, it’s probably worth it in long-term goodwill to avoid gouging your customers for every dime you can get from them; it’s probably better not to hand your competition the opportunity to double their normal prices and still undercut you by 200%, if it comes to that. But all of the people out there in cyberspace who are wailing and gnashing about the cruel, heartless capitalists who are making money on a scarce resource by selling it for whatever the market is willing to pay for it need to take a moment and ask themselves if strict governmental control, international treaties, armed vigilante justice, or whatever other measures they’re advocating would really result in better travel experiences from the ones they’re having right now…

Large-scale experiments in Russia and certain other countries suggest that we’re better off the way we are. But that’s probably cold comfort when you find yourself with the choice of paying for another night in an expensive hotel or sleeping at the airport…

Stop Doing That!

Did you ever have one of those days when it seems like the world is messing with you? Like when you’re in the middle of telling someone that the mobile jumbotron (basically a flatbed truck with a thirty-foot television screen on either side, playing a variety of ads like the blimp in Blade Runner) is the worst idea ever, only to have the Strippermobile (essentially a large Plexiglas tank mounted on the back of a truck, with a stripper pole and several half-naked women inside it) drive past you? Or you claim that the individual you’ve just pointed to is wearing the most hideous necktie in human history, only to have someone else point to an even more reprehensible example on someone coming the other direction? When you write a blog about business topics, and particularly one that deals with business failures, this sort of thing happens a lot. But even so, it was kind of annoying to have to story about flying pay toilets break the day after I wrote in this space about airlines charging for carry-on luggage…

According to this story in the Mail Online, European discount carrier Ryanair has announced that it is going through with plans to put pay toilets on its aircraft; the company also says that it plans to remove most of the lavatories from its planes, leaving just one for every 200 passengers or so. In theory, this should save them the expense of maintaining and cleaning multiple lavatories, lower the cost of pumping the planes’ waste tanks (by encouraging people to go before they board or after the plane lands), and free up enough room to cram another half-dozen seats onto already cramped airliners. Whether or not there will be long-term consequences of these plans remains to be seen, of course…

The first question that comes to my mind is what does the airline intend to do about people who need to use the facilities but are unable to afford them? A one-pound fee (about $1.53 as of this date, although that changes from day to day) isn’t much, but it could add up over a long flight, and the people who fly no-frills airlines don’t tend to be especially flush in the first place. What about a family of five, for example, with three small kids who need to use the facilities a lot? Is it really fair to use a policy like this to squeeze, say, $20 worth of milk money out of them? My second question is, what are they going to do about people who really have to go but don’t have exact change on them? It’s already hard enough getting the cabin crew to make change for food and beverage purchases; what are you going to do about people who need lavatory change? Even more to the point, what are they going to do about people who have “accidents” because they have to go and can’t afford the pay toilet?

I’m not sure you could even pull a stunt like this in the U.S.; it seems like somebody would sue on the basis of this being unfair to people with medical conditions that make them have to use the toilet frequently, or people who can’t hold it for that long, or something. You can also imagine that the unions would kick up a fuss about maintenance personnel having to deal with biohazards when cleaning the cabin, or that other discount airlines would make a fortune off of mocking Ryanair for this policy while advertising that you don’t have to worry about having correct change when you fly their airline. It also seems like it would be difficult to develop much of a relationship with your customer base when you’re so clearly willing to demonstrate that you don’t really care about them…

The point is, I’m not trying to pick on the airline industry in particular; I don’t have any personal connection to the industry or any reason to mock them over the hundreds of other market sectors that appear to be sinking slowly into the swamp due to bad planning, laughable leadership and amateurish management practices. I didn’t even go looking for a follow-up to the last post; it just worked out that way. Like I said, some days it just seems like the world at large is messing with you…

Race to the Bottom

For some time now I’ve been watching as the airline industry indulges in a variety of new revenue-enhancing strategies – which means slapping extra fees on anything that doesn’t get up and walk away first, for the most part. With the advent of online travel sites, and their inevitable side-by-side fare comparisons functions, it isn’t possible to randomly apply higher fares without everyone in the world with Internet access knowing about it, so the airlines have started looking for other charges they can tack onto your bill to raise the amount they will make on your ticket. Which has led to some remarkably silly and counter-productive ideas, like checked bag fees, pillow and blanket fees, onboard food you have to purchase, and so on. But the latest scheme, from regional carrier Spirit Airlines, has to be the worst yet: they are now going to start charging for carry-on bags…

According to this story in USA Today, Spirit is going to be charging $45 to check a bag into the overhead bins – although this is lowered to $30 if you pay for it in advance (when purchasing your ticket, for example), and can be lowered to $20 if you join their still mysterious “$9 Fare Club” and agree to receive several dozen pieces of junk mail (and junk e-mail) each week for the rest of your life. Details of how much it will cost to join the “Club” or whether this will end up being a mileage-based perk instead are still not available. Essentially, if you purchased the right to carry on a bag you will also be allowed to board the plane first using a special boarding pass; if you didn’t, you will be stopped at the gate and required to pay the (much higher) bag fee on the spot. No one has explained how the airline plans to deal with the delays of running what amounts to a checkout lane before you get on the airplane, or what they propose to do with the luggage of people who won’t pay…

As a means of wringing money out of people who are (so far) refusing to pay to check their bags, I think it’s a remarkably silly concept, and I’d probably take a few moments here to mock them for it, but fortunately I don’t have to, because Jet Blue airlines has already done it for me. You can check out their web page about the competition’s new fee here, if you want to and I actually hope you do, because it’s hysterical – Jet Blue is advertising a carry-on bag that you wear like a shirt (or perhaps a shirt with the capacity of a carry-on suitcase) that you can wear when you’re not flying Jet Blue. It also ties nicely into Jet Blue’s positioning themselves as having the most comfort and the most leg-room of any major airline…

So can Spirit really make enough money on this stunt to make up for the fact that they’re annoying their customers, slowing down the boarding process, driving people away from using their service, and giving the competition the opportunity to not only outperform them but also mock them into the bargain? Only time will tell. And, I suppose, we must acknowledge that someday, someone might even come up with an even worse idea for an incremental increase in revenue from their business. But by the same token, we should all remember that this is how the policy of charging for checked bags got started – and that doesn’t appear to be going away any time soon…