Pelland Blog

More Lessons from the Airline Industry

May 19th, 2016

It is not breaking news that I often turn toward the airline industry for examples of both good business practices and reprehensible business behavior. Particularly since I am writing primarily for the outdoor recreation and travel industry – and the family campground industry in particular – the airline industry is something akin to that relative from the wealthy side of the family who rarely stays in touch.

It is no secret that there is a generally low level of consumer satisfaction with the airline industry. Seats are getting smaller, fees are increasing, and fares seem to be unresponsive to lower fuel costs. When the price of crude oil fluctuates, as has been the case with recent drops, consumer prices at the pump tend to either rise like a rocket or fall like a feather. In the case of the airlines, even the feather analogy appears to be absent.

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Unless you are flying out of or into a hub airport, plan on multiple flights and sometimes lengthy layovers. I just checked rates for a round-trip flight about 5 weeks in advance from Syracuse, New York to Sacramento, California. The fares ranged from $518.00 for a 14-hour flight with two stops to $1,540.00 for a 15-hour flight also with two stops. In either case, while booking through two different airlines (American vs. Alaska Airlines), the actual flights are operated by American Eagle. It almost makes no sense. If I return to the booking engine in a few days, the rates are likely to be entirely different. Without online booking and price comparisons, as well as online airfare watchdog services, non-business airline travel would probably be out of reach for most people.

In the old days prior to the airline deregulation of the 1990s, flights were booked through travel agents who earned base commissions of 10%, with bonuses for add-ons. When that was deemed to be contrary to the interests of consumers – concurrently with the onset of the Internet – companies like Expedia, Travelocity (since acquired by Expedia) and Priceline have filled the void and earn commissions on their services, which typically involve bundling flights with hotels and car rentals.

Whether booking through one of these giant online travel agencies or directly through an airline, the fees only begin with the actual airfare. When you book a flight, you are urged to upgrade to business class, pay extra to choose your assigned seating, pay extra for priority boarding, pay for checked baggage, and of course use or earn frequent flyer miles via your airline credit card. The airlines actually sell passengers “miles” that are later used for free or discounted flights. I guess when you come right down to it, buying miles is not that much different than buying a gift card at a discount – something that is most advantageous to the companies that are using consumers’ money between the time of purchase and redemption.

The question for the owners of small travel-related businesses like campgrounds becomes how to determine what can be taken from the business model of the airlines and then successfully applied on a smaller scale. The key is to choose the profit sources that will not infuriate your customer base. For example, nobody likes the ever-shrinking leg room – what the airline industry refers to as “seat pitch”, the distance between the back of one seat and the back of the seat in the previous row. Imagine the reaction if a campground consistently reconfigured its sites to become smaller and smaller, jamming one campsite as close as possible to the next.

On the other hand, there are add-on services that are likely to be broadly accepted. Campers have long accepted the fact that a larger, full hook-up, pull-thru site is going to cost more than a tent site with no hookups, and that there will be a wide range of prices in between. They also expect to pay a premium for weekends, holidays, and your prime season. Fee-based options such as private restrooms, cottage linen service, fee-based wi-fi, higher caliber arts and crafts, and late check-outs only apply to people who choose to use those premium services, and they represents opportunities for added profits.

The fee-based airline innovation that is likely to do the most for the campground industry from this point forward is be dynamic pricing. The least expensive days to fly are not coincidentally the least popular air travel days: Tuesdays, Wednesdays and Saturdays. The best day and time to buy air travel tickets is generally Tuesday at around 3:00 PM, Eastern Time, and the best time to buy domestic fares is 30-90 days prior to departure. Notice how most flights are generally booked to capacity. Dynamic pricing will provide your guests with an incentive to book early – and ensure your highest possible occupancy rates – while maximizing your income from people who wait until the last minute. Quite likely, those dynamically priced reservations will be booked through one of a variety of online booking services.

Embrace innovations that will help you to run your business more profitably, and never fear emulating successful business practices from other industries, in this case the airlines.

This post was written by Peter Pelland

Are You an Innovator?

May 4th, 2016

We are in an election cycle here in the United States, and the parade of candidates is a reminder that both the political and the business worlds consist of innovators and those who try to “play it safe” by simply meeting expectations. In both worlds, there is an eventual process of “weeding out” those who fail to impress their respective consumers. Some succeed by telling people what they want to hear or building products that are in constant demand, but others succeed by capitalizing upon an untapped demand for new ways of thinking and new products.

We are all familiar with the most highly innovative companies in the business world. They stand out from the crowd and dominate their market shares, not because they mimic competitors and existing products or services, but because they have a sense for the next best thing that consumers will eagerly embrace. These innovators have always been in our midst. A century ago, they were typically individuals like Thomas Edison and Henry Ford, whereas today they are more likely companies like Apple, Google, Toyota, and Procter & Gamble – with extensive research and development departments and a determination to introduce new products that extend an already iconic branding and offer the promise of a uniquely superior consumer experience.

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The ability to think outside the box is not limited to multinational corporations with billion dollar research and development budgets. Innovation can still originate from modern-day equivalents of Thomas Edison and Henry Ford (or Abraham Lincoln or Franklin D. Roosevelt), even though the challenges to the individual innovator are today probably greater than ever. Some of the most highly successful innovators of the last generation were not born with silver spoons in their mouths but with an ability to see things outside of the conventional norms. These include the “rags to riches” stories of billionaires such as Steve Jobs, Jeff Bezos, Elon Musk and Larry Ellison.

Campground owners can meet innovative challenges just like any other business entrepreneur. Often overshadowed by innovations in camping equipment – most notably modern recreational vehicle and tent designs – campgrounds have opportunities to distinguish themselves in their sites, rentals, amenities, recreational programs, customer service, and in technological areas ranging from online reservations to wi-fi. Right now, one innovative rage seems to be glamping, with rentals of extremely well-appointed cottages, yurts or even treehouses.

There are parks that are known for searching out that next innovation that will give them a competitive edge. These are the types of parks that attend trade events like the IAAPA (International Association of Amusement Parks & Attractions) Expo, in Orlando each year. Their campers return year after year, knowing that they can look forward to something new and exciting. On the other hand, there are park owners who think they should be successful simply because they have an employee who dresses up in an ill-fitting Santa costume for a weekend event every July.

Clearly, there is a market for conventional campgrounds that fail to innovate. Some people are not looking for shiny objects, but just want to get away for a quiet weekend of relaxation in a natural environment. The only problem is that this market represents an ever-shrinking sliver of an age-old pie.

As a campground owner, you need to decide whether you want to be satisfied with the income you will earn by providing your guests with a somewhat stagnant but predictable experience, or whether you are ready to embrace the potential risks of innovation. Not every innovation is successful, and repeated failure is often part of the process. One way of minimizing the risk is to closely follow the leaders rather than blazing trails yourself, but you must be prepared to recognize successful ideas and to embrace them quickly.

Somebody operated the first campground to offer its guests wi-fi, another was the first with 50-amp electric pedestals, another was the first campground to replace its metal pipe playground with a modern playscape, and yet another recognized the declining popularity (and the associated maintenance costs) of tennis courts, and how the square footage that they occupied might be more profitably utilized. The challenge is to avoid being the last person to get onboard, particularly if you are introducing the latest fad rather than an innovation that capitalizes upon a long-term trend.

Part of the beauty of innovation is that it does not always involve a significant financial investment. Ideas are priceless. Although transforming ideas into realities might usually involve facilities and infrastructure, innovative thinking can also involve low-cost or self-sustaining programs such as your park’s calendar of events. When somebody looks at your calendar of activities and is interested in camping on the weekend of August 12-14, does what they read generate excitement and lead to an immediate online reservation, or does it simply lead them to click through to another park – probably your competitor down the highway?

It is time to think about what you will do next to bring a new wave of campers to your park. What really impressed you on that last cruise or your last visit to a major resort or theme park? Then think about how that great idea could be customized for your campground. Better yet, be a true trailblazer and be the first to come up with your own original ideas that your campers will immediately embrace and that your competitors will later attempt to emulate.

This post was written by Peter Pelland