83RD ANNUAL SPAA DINNER -TOAST TO WORLD TRAVEL & TOURISM
Kevin Thom - SPAA President
Ladies & Gentlemen
At this event the subject matter for the President’s speech is usually limited to ‘World Travel and Tourism’ but not being one that readily conforms to what’s expected of me, I wanted to take a little departure from the norm in my address tonight.
We are all aware of the threats and challenges that we in the UK Travel industry face. With the likes of ATOL, APD, Direct Sell, Internet have all been well publicised and discussed in the past I wanted to talk about a potential danger from within. Our staff!!
Now some of you out there might be thinking, my staff a threat, what he on about…. he’s lost it…. the boys on drugs!
Well I have to confess I was heavily medicated and very reflective when I drafted this, but to the members of the press with us this evening, I must inform you, they were prescribed drugs.
Please humour me as I share my reflections with you.
In the summer of 1977 at the ripe old age of 16 ½ years old I started work as a trainee travel agent at Ellerman Travel in Aberdeen.
Now I have to admit at that time I didn’t even know what a travel agent was. Coming from the poorer side of the tracks my only travel or holiday experience was a week at Butlins in Ayr when I was about 8yrs.
The fact I didn’t know what a travel agent was or what I was getting myself into was irrelevant and didn’t deter me.
When so many others around me couldn’t find work, I had a job, and I was proud.
My first Manager, was a character who was already in his 70’s called Bob Christensen, or Mr Christensen as we had to call him. A character, whom commanded respect and deservedly earned it from my colleagues and I.
As old and as stuffy as I perceived him to be, he did teach me so much in my early days, and I don’t mean just how to stamp a brochure, he didn’t have the foresight of the internet revolution but he taught me that people buy from people and a very important part of that transaction came down to your personality, your ability to listen, ask the right questions and your product awareness that enabled you to deliver on your clients expectations.
Now apart from teaching me the job itself, he turned my pride of having found work, into taking pride in my work and in the company I worked for.
This was much more than a job. This became a passion.
Now as I look around the room I am sure there will be a large number of you who had similar experiences when starting out in this industry, for who the job was much more than a job.
Now fast forward 35 years and I wonder how many people starting out today would say the same.
In the last 35 years the travel industry has change and with the development and introduction of today’s technologies it has, in some areas changed beyond recognition. Yes the internet and direct selling is capturing a sizeable piece of the market, but fundamentally the travel industry is still a people business. People still want to buy from people and technology is just an enabler for our people to make that shared personal experience more efficient.
It’s not only the travel industry that’s changed, society has changed, and there I believe li-eth a problem. I don’t think anybody could argue that elements of our society are in decay. Ignorance is on the rise, basic good manners on the decline. There are too many people who today believe the world owes them.
You may be thinking that is a sweeping generalisation, and it is. But with any generalisation there are many exceptions and I am sure we all know and have many shining lights within and out with our own organisations.
As an example of this decay, I know from discussions with many of our associates that they are continually disappointed by attendances to events they may be hosting and in some cases are often discouraged from doing so again.
Large numbers accept invitations to such events then just fail to turn up with no explanation. That is plain bad manners and shows a real lack of respect for our industry partners.
Many of you will remember the day when armed with a thirst for knowledge and proudly representing the company we worked for, we would willingly sacrifice our personal time and attend travel functions on a regular basis. We may have encountered the odd hangover or two as a result but we always left with a heightened awareness of our host’s product and more importantly contacts that often proved invaluable at a later date.
I accept today people have different demands on their personal time with so many options on how to fill it but all I would ask is for company owners, managers directors etc to encourage their staff to attend events where they can and if they accept an invitation ensure they do go. Having accepted an invitation then failure to do so without good reason is just downright rude and not only reflects badly on the individual but also on their employers.
OK rant over, let’s have a look at the recent past, the present and the future.
Whilst here in Scotland the Pantomime season may have come to an end, down in Westminster it is in full swing, where the ugly sisters, Cameron and Clegg, and the evil villain, Ebineezer Osborne, supported by a cast of 100’s, continue their slapstick routines at the House of Commons.
Were it not for the fact they are damaging this country and economy their performance would be comical.
In fact with is government’s handling of the following issues, APD, ATOL, Airport Capacity, West Coast Rail Franchise,etc; there would be enough material to write the script for a whole season of “Yes Minister”.
I raised this question last year, and I apologise for the repetition, but some issues just don’t go away.
How do we as an island nation develop and grow our economy through tourism, trade and industry, whilst we have a government that still seems intent on maintaining and increasing tax on aviation, which is already at one of the highest levels in the world.
In the last year, the ABTA led and excellently orchestrated “Fair Tax on Flying” campaign calling for a review of APD, has grown in members and in strength, gaining over 200,000 signatures in its email campaign and the support of 100 MP’s at Westminster, yet its voice still seems to be largely ignored by government.
During last year we had the publication of the York Aviation report, commissioned by Aberdeen, Edinburgh, Glasgow & Prestwick Airports which clearly highlighted the damage APD was doing to Scotland’s economy by potentially losing 2 million passengers per annum and a loss of £210 million pounds in lost tourism spend per annum by 2016. Once again, ignored by the government!
In January of this year, after pressure from the Fair Tax Campaign, there was a debate in the House of Lords whereby a review of the economic impact of APD was sought. This was again ignored by our government.
There was the formation of the Cross Party Aviation Group whom after studying submissions from the SPAA and many other organisations also recommended a review of APD and its impact. Guess what, that’s been ignored too.
We recently welcomed a new report by Pricewaterhouse Coopers stating that APD was clearly damaging the economy and if axed could result in the creation of 60,000 new jobs and could boost the GDP by 0.46% in the first year with continuing benefits through to 2020.
This report used a dynamic approach to modelling tax impact which has been advocated by George Osborne, states abolishing APD would pay for itself by increasing revenues from other sources such as income tax and VAT. You’ve got it..Ignored!!
Only in pantomime is the obvious so readily avoided and usually results in chants of “It’s behind you” from the audience.
Well, let this audience tell the Westminster Players that APD is wrong, an immediate economic review is a must, which should lead to the tax being reduced if not axed altogether. This government still claims it aims to boost and grow our economy through international trade.
If this is the case then please do not ignore our call for positive change.
Any other action will only lead to the UK being priced out of the international market place.
I have often questioned if anyone at Westminster actually listens to the lobbying being done against APD by the SPAA, ABTA, Advantage the GTMC and may other industry bodies and airlines.
Well I stumbled across an article that was allegedly featured in the Guardian recently that may go some way to answering my question.
Apparently a website promoting extra-marital affairs is one of the most popular website visited by the people at Westminster.
Out of Town Affairs, which brings together married men and women, was visited 52,000 times in just seven months from computers used exclusively by MPs, peers and their aides.
Let’s do the math!!
Now if every visitor were on that site for an average of 10 minutes per visit that equates to over 361 days of not listening.
Now I have to admit to being a little curious, so for research purposes only, I went onto and registered with said site.
I submitted a cheeky wee profile and within 10 minutes I was shocked to have received two very suggestive messages.
Now you would think that would be a nice little ego boost.
Well it was, till I found one was obviously from a bloke, and the other from the partner of an ex-MP, who can’t be named for legal reason, well at least he said it was her that replied.
Thankfully the IT department at Westminster, as no doubt will my own IT Department, have blocked access to the site.
Joking aside our International and domestic growth continues to be handicapped by the governments lack of a sustainable Aviation Framework and their continuing dilly dallying over a third runway at Heathrow.
I know the government have commissioned an independent review which is not due out till after the next General Election and whilst the review is welcomed the timescales are not.
This country is already falling behind our European competitors, and with the delay in this review being produced, timescales of the decision making process and in obtaining planning permissions, would result in the UK playing catch up for generations to come.
Now another issue I have often commented about is how difficult and expensive it is to obtain a visa to enter the UK, but credit where credit is due the Government have made some improvements recently but still, it would appear easier to get horsemeat into our burgers, than it is to getting cash rich tourists and global investors into our country.
The Airport Operators Association stated earlier this week that visa restrictions are deterring Chinese visitors from travelling to the Britain, costing the Treasury around £1.2 billion in lost revenue.
Chinese tour operators continue to strike Britain from their itineraries because they view the UK’s visa system as “expensive, bureaucratic and lacking in transparency”.
The only beneficiaries of our continuing reluctance to implement appropriate improvements to the visa system are our overseas competitors.
Much more has to be done.
No one can spend money in a shop that has closed doors. If they are serious about boosting and growing our economy through trade with the emerging economies and markets like those in Brazil China India etc then the UK has to be open for business.
And without compromising on security, an easy and less expensive visa process has to be introduced.
They also have to abolish or drastically reduce APD and stop putting the UK at a serious competitive disadvantage.
My final words on Westminster relate to their handling of the ATOL system and the Air Travel Fund.
Significant steps have been taken in returning the Air Travel Fund back into the black. This may be good management or just fortunate there have been no major failures in the last 12 months.
With the ATF in a much healthier position it would appear moves are afoot to change the ATOL system once again.
There is a movement that suggest the treasury want to use the fund just for emergency repatriation and all other protection is to be provided and funded by the industry.
I don’t think this will be a surprise to anyone. This is an admission that the current system does not work and it has left the CAA between a rock and a hard place trying to pick up the pieces.
Despite the previously numerous and lengthy consultations a system where all travel consumers are protected, failed to be produced, so instead we start again but with the onus and burden to do so, being pushed back to the industry to resolve.
This movement of change is not just a few tweaks here and there on the existing system. It’s wholesale, and very shortly we will be back on the ATOL merry-go-round, with a government call for evidence due mid March
There will be difficult decisions to be made ahead as each section of the industry will seek different requirements. Tour operators will differ from Travel Agents, whilst airlines don’t want any part of it at all, and the legal issues of foreign carriers just won’t go away.
Where do we go from here? Trust accounts have been suggested but are they the answer? Insurance could be a solution but it is very unlikely that any insurance company would touch this market with a barge pole.
The failure to create a robust consumer protection system, and what could be construed as an apparent attempt to pass the buck, could be a blessing in disguise.
I said at this very dinner last year let us start with a blank canvas and create a simple, modern, transparent and fair system where total consumer protection is achieved.
Well they are wonderful thoughts but in reality the travel industry is a fragmented industry littered with protagonists and a solution that suits all may be difficult to agree.
It needs the right will to be achieved, but with the help of joint up thinking there will be a solution out there.
Perhaps moving the management responsibility of this to the treasury and charging £1 tax on every ticket, for every passenger, on every airline might be the way ahead.
I don’t know if this is the answer because to make this a tax I believe would require primary legislation, but it seems eminently more sensible and would surely be easier and less complicated than trying to create and enforce alternatives that at best would be expensive, convoluted and piece-meal.
A similar set up worked in the Netherlands and with the right will to change, could work here.
In the leisure world there may not have been many significant failures in the last 12 months, but whether it be in the agency, or tour operators sector, any failure will have been very significant to those involved.
Whether you are an owner, staff member or a customer of an organisation that fails there will be an impact, and maybe that is something the drivers of some tour operators and travel agents today, need to remember.
There are many risks in chasing market share through aggressive discounting policies. By doing so you are devaluing your service, and devaluing the product you are selling, whilst at the same time creating a consumer expectation for the future, that will bite you and everyone else in this room on the bum.
It’s not just a game of numbers it’s about the livelihoods of real people, friends. I talked earlier about how today people may view their job and the company they work for. Maybe recognising your employer is gambling with your career might in some way be responsible for the level of indifference that may exist in our industry today.
The Thomas Cook recent stance on discounts has been seen as a brave move and one which I and many others see as a positive move and if only more operators and agents could see it this way, there would be far less discounting and more profit for all.
Everybody moans about having to do more work for less revenue. Well if you are in the discount game then you have no one to blame but yourselves. Less for more opportunities are right under your nose. Be brave, stop looking at what others are doing, do what’s best for business, best for the industry, stop discounting and earn what you deserve.
I said last year that we have always been advocators of the level playing field and operators advantaging their own distribution channels with preferential rates etc, would only succeed in alienating the mainstream channels, which potentially could provide them with far more growth and at a higher yield.
I believe the stance recently adopted by Thomas Cook proves my point. They are being supported and sold by many more travel agents up and down the country, and more importantly, with an improved margin for all.
As you would expect I will tonight talk about what we at the SPAA have been working on over recent months, and what we will continue to work on moving forward.
I asked Janice if she could do a brief summary of our activities over the past year and wow, it’s been a busy one.
I won’t list everything but here is an insight of what has gone on.
We drafted and provided government with submissions on
The Draft Aviation Policy
APPG Response on Competitiveness of UK Aviation
The Transport Select Committee Inquiry on Aviation Strategy
ATOL
We are involved with the Cross Party Aviation Group at Holyrood in challenging Westminster on a number of points.
As I mentioned earlier we are an active member of the Fair tax on Flying Campaign, and ran our own APD petition here in Scotland, and jointly with ABTA drove the initiative of letters on APD to all MP’s and MSPs
We held a number of meetings with the top-tier management of BA on the BMI Integration.
We had involvement in working with the EEC & ministers in promoting Virgin and their Domestic slots approval.
We have organised seminars where much needed ATOL clarification was provided and where BA were given the platform to provide our members an insight into some of the serious challenges they were facing during the integration of BMI.
We held our Question Time type session where representatives from our industry partners Superbreak, Royal Caribbean, Thomas Cook and United all found themselves in the un-enviable position of being grilled by myself and our audience on the industry challenges of today.
We’ve had meetings with most of the Major Airlines, Tour Operators, Cruise Companies and Technology partners operating in Scotland.
Socially we have had the 3 network lunches, summer ball, golf day, the SPAA Awards, SPAA Quiz and Face to Face Lunches in Aberdeen, Edinburgh and Glasgow. The 2nd STAR event.
We have worked closely with the media on breaking news within travel, doing interviews on radio, and TV for both BBC and STV and providing comment for the travel and mainstream press.
And there is of course our monthly SPAA Council meetings.
The council had been operating at a reduced level for a number of years and as a result of our increased activity we needed more support to share the burden so I was delighted that in the last year both Kennedy Cree from Scotia Travel and Douglas Morrison of HRG agreed to join council and take active roles in the SPAA as we move forward.
Again on internal changes we have revamped our SPAA today, our future SPAA Facebook has seen a much increased level of activity, much to the credit of Gayle Gordon who does a great job of managing it. The integration of the SPAA Facebook and the Future SPAA is something we wish to implement shortly along with getting the SPAA on Twitter.
The list goes on and on and I hope with this little insight you can appreciate the time, effort and commitment the council members give to the SPAA on your behalf.
Moving on ...
As I touched on earlier, APD still gives us much cause for concern, and we continue to campaign for its removal or at the very least a significant reduction. As an active member of the “Fair Tax on Flying” campaign, we have worked vigorously over the past 12 months in raising awareness of this damaging tax, supporting all the activity in lobbying Westminster and through our involvement with the Cross Party Aviation Group, we will continue to lead the push here in Scotland.
There is still a suggestion APD might eventually be devolved to the Scottish parliament so it was encouraging to hear Keith Brown’s thoughts on the matter, if this were to happen.
Away from APD but still within aviation, there has and continues to be a lot of positive news for Scotland, but before I go on to highlight those I want to mention areas of concern that I have for the future.
In the world of aviation we have seen the significant rise of low cost carriers all over the world and with it the question of what is and what is not included in the price.
Now in the interest of all our clients, and the requirement for neutrality in our offering to them, we have all had to adapt the way we do our business.
As painful as that may have been, we at least knew the differences between legacy carriers and low cost carriers.
With the likes of Easyjet and Flybe providing a range of inclusive type fares, and, as announced last week by both KLM and British Airways, fare offerings where no baggage or only hand baggage is included, those differences are now muddied.
From a consumers perspective when they chose to fly on a legacy carrier it was partly due to their inclusive nature.
A move like this adds confusion for the consumer and in the case of KLM could add a lot more work for your consultants, as this facility is not currently available through all GDS’s at this time.
I understand that for KLM in particular the European market is very difficult and that substantial losses are being incurred but still I would have hoped this move would not have been announced or introduced until such times all the GDS’s were on board.
I was hoping to look into a crystal ball and see a way ahead, see something which would inspire me to deliver some profound and visionary statement on this topic, but I am sorry to disappoint, these days I’m lucky if I can see my feet.
What I can say at this time is I find this move very worrying and I hope it does not become a trend amongst the legacy carriers.
I also have concerns on the proposed merger between American Airlines and US Air.
From a consumer standpoint, there are few benefits to offset the negative impacts of this proposed merger, such as reduced competition, an inevitable increase in fares, diminished services to small and mid-size communities.
Of course I understand the merger can bring financial viability to their air transportation network, but if I can quote Kevin Mitchell from the Business Travel Coalition based in the US. “Consumer harms from this merger are indeed exacerbated, as there are no substantial countervailing consumer benefits.
I can only hope this too does not become a trend.
I touched briefly on the readiness of the GDS’s to deal with certain changes some airlines wish to introduce, comfort seating and like I touched on earlier, baggage fees. I would implore them all to work with the airlines to achieve solutions to the problems that arise from these airlines idiosyncrasies as soon as possible.
The GDS is an integral part of any Travel Management Company’s operation. Many of us will remember life before the GDS, but for those of you who don’t, over the last 30years since it’s introduction, the GDS has been at the core of travel agency technology with all other technologies linking to or from it.
The GDS are under threat. New rounds of airline discussions will be ongoing as airlines seek to negotiate improved contracts moving forward.
Many negotiations will commence whilst in the background, driven by a handful of airlines, IATA make significant investment in a dream they call NDC.
Is this a shot across the bows of the GDS’s to maybe weaken their resolve in their airline negotiations, or a warning that you need to deliver products the airlines want.
If NDC became a reality then it would change everything about the way we currently operate.
Can NDC become a reality? I don’t know, it is way too early for me to comment, but I can say with as certain degree of confidence, it won’t be easy.
That doesn’t mean the GDS can be complacent. If they want to stop IATA trying to reinvent the wheel they have to be more innovative in their product and airline solution development.
Now on a more positive note, despite the challenging times, airlines continue to invest in Scotland through new routes or increased services.
During last year Emirates launched a second daily service Glasgow to Dubai, which has proven very popular and the Emirates success story continues.
British Airways have increased their capacity on routes into Heathrow and London City from Glasgow, including the launch of a new service between London City and Aberdeen.
Virgin Atlantic having won the slots vacated by BMI enter the domestic market for the first time with flights from Manchester, Edinburgh and Aberdeen to Heathrow all due to commence in the next few weeks.
I stated earlier that the SPAA were very supportive of Virgins bid so I have been a little concerned at the apparent lack of promotional work being done by Virgin here in Scotland and wonder whether their PR company have been too London centric in their approach to their marketing.
I appreciate commencing domestic services is completely alien to Virgin and it is a huge learning curve for all involved in the implementation, but to get the early support needed to sustain their operation, Scotland is where they need to be seen and heard.
It was great news to see the future of BMI Regional secured with their acquisition from BA last summer. This safeguards so many vital routes from the regions and will lead to further new route developments in the future.
It is also great to see the return of Ian Woodley as Chairman of BMI Regional, back in the aviation business here in Scotland. I have a lot of great memories from his early days in aviation when he first launched Business Air back in the day.
Also with BMI Regional is a man who has worn many airline hats in his 40 plus years in travel and has had more successful comebacks than Gary Barlow. Of course I’m talking about Don Yule.
Tonight is the latest in a line of Don’s last nights in travel, as yet again he is retiring.
Joking apart Don it’s been great seeing you back and I wish you all the best.
Also another person who merits a mention tonight is Stuart Sim of Oceanair who is also retiring this year.
Stuart has been an ever present guest at this dinner since 1976, and I wish to take this opportunity to thank him on behalf of the SPAA, for his support during the years and to wish him all the best for the future.
Getting back on track ...
Air Canada is making a very welcome return to Scotland with their Edinburgh to Toronto service operated by Air Canada Rouge
Lufthansa following on from the launch of their Frankfurt service from Aberdeen, have shown further belief in and commitment to Scotland with the introduction of a Glasgow Dusseldorf service.
Turkish Airlines who not so long dipped their toe into the Scottish market by launching an Edinburgh Istanbul service are, on the back of positive support for this route, increasing their schedule to a daily service.
Other carriers like Easyjet, and Jet2 have also increased their commitment to Scotland and grown the number of services to and from Scotland.
Last year Aberdeen, Edinburgh and Glasgow all reported increases in passengers numbers which is positive news and is a trend I hope carries forward for 2013, as all three airports are making significant investment to improve passenger choice and the passenger experience, through both new routes and airport terminal development.
Glasgow Airport just announced this week an additional £10m investment as it gears up for the Commonwealth Games of 2014. Amanda McMillan. Managing director of Glasgow airport stated, this week that the eyes of the world will fall on Glasgow during 2014 and that Glasgow Airport fully recognise the important role it has to play in helping deliver a successful and memorable Commonwealth Games. This significant investment will not only benefit passengers travelling to Glasgow for the Games, but will leave a legacy which will benefit passengers for years to come.
So despite my constant moaning there are a lot of positives for our industry here in Scotland and I am sure these leaps of faith by airlines and airports are welcomed by our travel community and will be supported wherever possible and I wish you all success for 2013 and beyond.
Moving away from aviation and onto cruising.
I’m not in the cruising market but even I can see this is a sector not without its troubles.
Commission cutting is on most but thankfully not all cruise company’s agenda.
They have seen over a number of years some agents giving away large chunks of their commission by discounting the price to the client which actually devalues the cruise company’s product.
In an attempt to combat this and bring some much needed parity to the market they are reducing commission.
To make this an easier sell to the trade and retain the support of the agency world they have stated they will police the on-selling and discounting of their products and anyone found guilty of discounting could find themselves in the position of not being able to sell their product in the future.
Now when I first became aware of this during a meeting with one cruise operator last year I could see the sense on what they were trying to achieve, and in some way agreed with their actions but with the major caveat being they had to police this properly and not just pay lip service.
This initiative has only been in play since the beginning of this year and I have already been made aware of numerous incidents whereby it has been obvious that there are still people willing to undercut the market by discounting.
Well the cruise company police need to start feeling some collars pretty soon, otherwise your credibility in this market is going to be trashed.
Good honest, hard- working travel agents will not continue to support your initiative if you fail to keep your promises by not dealing with the rogue element out there.
Many of these agents struggle with this reduction in commission, particularly because of the additional duties they perform on behalf of cruise companies, that they receive no remuneration for.
Shore excursions for example.
These dramatically increase the agents workload in selling the cruise, and this should be rewarded.
A cruise company may offer 10% commission on the price of the cruise but in reality the commission % of the overall cost is much less, and quite frankly, I find that unacceptable. This is a service offered which is time consuming and costly to the agent, whilst being lucrative to the cruise line.
The other concern I have is on the dangers of over capacity at certain times. What are the cruise companies going to do to fill these cabins?
After pulling the trade up for discounting are they then going to be hypocrites and go do so themselves. I hope not, but however inventive or clever the marketing adopted by cruise companies in this position might be, it must always be available through the agency world, and not limited to their own distribution channels.
This is my second and final address at this annual dinner.
My tenure as president comes to an end in November this year, when I will hand over the reins to the Vice President Jimmy Martin.
This will be Jimmy’s second term as president and having previously gone through the huge learning curve you face when you take on this role, Jimmy can hit the ground running.
Will I be sad to step down when that day comes? Absolutely yes!
It is a great honour and privilege to be the SPAA President.
So far I have thoroughly enjoyed the experience, met some wonderful and interesting people. There have been many highs and many lows, heated debates and lots of laughter, sometimes hysterical, I may add.
Well if we didn’t laugh we’d cry with frustration.
The same frustrations I know that many of you share in aspects of our industry.
But still despite this, the World of Travel is still a great industry to be involved in, and we the SPAA will continue to be your Voice of Travel in Scotland, for the rest of my tenure, and for many years to come.
Thank you all very much for your continued support and for listening this evening.
Can I please ask you now to charge your glasses and be upstanding for the toast ‘World Travel and Tourism’.
ENDS
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