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The Amazing Race 4, Episode 1 (29 May 2003)

Los Angeles, CA, (USA) - Milan (Italy) - Cortina d’Ampezzo (Italy) - Cinque Torri (Italy) - Cortina d’Ampezzo (Italy)

On the Road Again for the Summer

As “The Amazing Race” enters its fourth season, the fortunes of the CBS reality-TV show about around-the-world travel continue to mirror those of the travel industry as a whole — as they have since the launch of the first season 5 September 2001, less than a week before the events of 11 September 2001 transformed the travel landscape.

“The Amazing Race 4” was filmed in January and February 2003, and was originally scheduled for broadcast beginning in March. But some combination of world events potentially related to perceptions of travel (even if they had little direct impact on most world travellers), such as the war on Iraq, and the reactions of potential sponsors, led CBS to postpone the new season until now.

CBS never lost confidence that they had a winning concept, and remained committed to successive seasons of “The Amazing Race”. But advertisers were reluctant to be associated with a show with a world travel theme at a time when air travel, foreigners, and “foreign” cultures were being equated in the public mind with fear and terrorism. The allure of travel, for many travel junkies, is the idea that variety is the spice of life. But instead of “different” meaning “new”, “fresh”, or “exotically interesting”, we’ve been going through a period when “different” has been painted as “threatening” in the media and the public mind.

Critics have been virtually unanimous in their praise for “The Amazing Race” as being among the best and most “real” of reality-TV shows. (I wouldn’t know how it compared: I hardly ever watch other TV shows, much less other reality shows. I watch and write about “The Amazing Race” for what I can learn from it, and use it to teach, about travel in the real world. Not because I’m a reality-TV junkie.)

The challenge for CBS — as for the travel industry — has been predicting when travel would return to “normal”, and to what extent the “norm” of travel might have been permanently changed. Would the low ratings for “The Amazing Race” persist, or would they recover once Americans regained their interest in world travel? And when would that be?

Fewer people are travelling since 11 September 2001, but that’s not the biggest problem for the travel industry. Regular expansion and contraction are the nature of the travel business. Travel between entire regions, such as between North America and Europe, drops by more than half every winter (or whenever the off-season is), and some popular destinations get virtually no off-season tourists. Even over longer time scales, travel is notoriously “cyclical”. (I recall hearing a lecture on this subject by billionaire Carl Icahn, explaining why he’d never again own an airline, not long before he made a bid to buy back TWA from the bankruptcy court. I guess his investment philosophy is cyclical, too.)

The travel industry can (or could) cope with these extreme, but routine, ups and down because they are predictable — or used to be. All travel companies forecast demand based on short- and long-term historical records of travel patterns. Airlines, in particular, have sophisticated systems for predicting demand and adjusting prices accordingly to maximize profits.

That’s greed (“Greed is good”, some say), but it’s also a necessity when airlines, tour operators, and the like are making reservations and selling tickets months before the flights, tours, etc., are scheduled to operate. If they know what to expect, they can schedule flights and set prices accordingly, and still make money. Despite reduced demand, airlines like JetBlue, Southwest, and Virgin Atlantic all reported profits last year.

Unanticipated spikes in travel demand, on the other hand, lead to overbooked flights and disappointed would-be travellers — not to airline or travel company profits. Unanticipated declines in demand are even worse.

When travel executives get together these days, as they do at the industry conferences I attend, what they moan about most is not the slump in travel volume — everyone expects that volume will recover, as it appears to be doing — but how unpredictable the number of travellers has become, at every time scale from the daily to the annual.

Forecasting models based on pre-11 September 2001 patterns simply aren’t working any more. The complete collapse of existing “yield and revenue management” models is the real, and unprecedented, crisis afflicting the travel industry. Earlier this year, one hotel chain had to admit to investors that they had no idea how much business they would get this year, and withdrew their income and profit projections entirely.

Without forecasts of income or profitability, return on investment can’t be predicted either. The reluctance is invest in rebuilding the travel industry — to serve what everyone agrees will be increased demand in the long term, and at depressed, and thus attractive, valuations — is directly attributable to the breakdown in travel demand forecasting, not to the current ebb in travel itself.

It’s a very positive sign , in such a climate of uncertainty, that CBS thinks the time is right to resume broadcasts of “The Amazing Race”. But are the focus groups on which they based their decision correct? Is it time for us to think about travelling again ourselves, even if we’ve postponed making travel commitments for this summer?

My crystal ball isn’t working as well as it used to, either, but here’s the way it looks right now, at least for those in North America, for the summer “travel season”:

  1. Overall, airline ticket prices remain at their lowest in history, as they have been since 11 September 2001. But the one travel prediction I am willing to make with the greatest confidence is that we are near the all-time bottom of that curve. Airlines continue to reduce capacity, in order to be able to raise prices. As travel patterns settle into a new equilibrium, airlines seem to be getting better, and much quicker, at matching supply to demand. (That’s easier with so many surplus planes now parked in the desert than can be brought into service quickly.) By next year, possibly even by later this summer, you can expect fewer choices of flights, higher prices, and a larger percentage of seats filled with paying passengers. (Use your frequent flyer mileage credit now, since it will get harder to redeem them as flights are cut back.)
  2. One change in travel patterns that’s likely to remain permanent is the reduced percentage of business travellers. Unlike folks like me who fly for fun, as tourists or to visit friends and family, most business people don’t want to travel. After 11 September 2001, many of them discovered that they didn’t really need to travel as much as they used to. That’s good news for their employers, but bad news for leisure travellers: in the past, business travellers have subsidized the back of the plane. On most airlines, what vacationers think of as a “typical” ticket price is less than the average fare needed to keep the plane flying profitably. Flights with fewer business travellers will be discontinued as unprofitable unless leisure travellers start paying more, on average, than we now are.
  3. With fewer seats available, the best deals will sell out more quickly, further in advance. There are still some deals at the last minute if seats are still available. But the chances of finding those cheap seats available at the last minute are going down rapidly with capacity cuts, especially for high-season travel. Buying tickets well in advance to get the best price will continue to get more important than ever.
  4. Because of different issues affecting travel in different parts of the world, the deals for summer travel aren’t equally distributed:
    • Prices from North America to Europe (and via Europe to Africa and west Asia) through many sources are excellent, although the strong and rising Euro could attract European summer vacationers to America to fill those flights quickly. Booking immediately is probably essential if you want to cash in on the summer sales to Europe or beyond.
    • Prices to East and Southeast Asia are spectacularly low, even to places such as Bali or the Philippines with no special concern for SARS, especially if you are willing to change planes (not even stop over) in Taiwan or Hong Kong, the hubs of some excellent airlines.
    • Prices to South Asia are fairly normal. Flights are filling up with foreign travellers, particularly form Europe, who are choosing India over East Asia as their vacation destination on account of fear of SARS.
    • Prices to Mexico, Central America, and the Caribbean are at typical summer levels, maybe even a bit higher, as flights fill with people scared to go further afield.
    • Prices to South America, particularly the Mercosur countries of southern South America, are at rock bottom, although that’s not as obvious as it is with the deals to Europe because most of the deals to South America are available only through consolidators, not directly from the airlines or through published-fare Internet travel agencies like Most seats on these routes are usually filled by travellers from South America. But the continued weakness of the Mercosur economies, especially Argentina, means that the flights are empty and cheap, and costs are low in U.S. dollar terms, for Norteamericanos headed south.
    • Prices to the South Pacific are already sharply higher than last year due to growing awareness and interest in Australia and New Zealand by tourists from the USA, limited airline competition, reduced airline capacity, and perception that this is a region safe from war, terrorism, SARS, etc. The South Pacific is “in” but expensive in airfare, although the Australian and New Zealand dollars remain despressed and local travel costs are low.
    • Finally, if you want bargains close to home, travellers from the USA should head to Canada this summer. The SARS scare about Toronto has tainted the entire country’s image abroad, and scared off intercontinental tourists, leaving many hotels empty across the country. And the exchange rate continues to make prices for hotels, meals, and locally produced goods extremely cheap compared to comparable facilities and services in the USA.

P.S. I’m even less willing to try to handicap “The Amazing Race” than to predict the future of the travel industry, especially so early in the race, when the cast’s travel skills have barely begun to be tested. But I have to point out one glaring, and gratuitous, error by host Phil Keoghan and the producers in the first episode: it’s Swiss International Air Lines (“Swiss” for short, as was plainly visible on the departure displays at LAX), not “Swissair”, as Phil kept saying in his voiceovers.

Swissair went out of business a year before this show was filmed, one of the first and largest airline casualties of the aftermath of 11 September 2001. Crossair, a Swiss-based mainly regional airline, bought some of Swissair’s planes and other assets, and renamed themselves “Swiss International” to serve long-haul routes.

The new “Swiss” still uses the former Crossair airline code “LX” on tickets and flight labels (it’s harder to change industry-standard codes than names), not Swisair’s old “SR. “Swiss” has no corporate relationship to Swissair and no responsibility to Swissair’s former creditors. (For advice on dealing with bankrupt airlines, see my FAQ on Airline Bankruptcies.)

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