This week’s musings, reflections and observations about travel affiliate marketing…

1. I think there is a gem of a finding for travel affiliates in Jones Lang LaSalle Hotels, one of the world’s leading professional services firms that specializes in hotel real estate, just released analysis of the U.S. lodging industry.

In their FocusOn: Seven Winners in the Current Market research study, Jones Lang LaSalle reveals that despite the deep stress reverberating throughout the lodging market as a result of the poor overall economy, there are “…segments and players that are more resilient, are performing better, or are less affected by the slowdown in economic fundamentals and the liquidity drought.”  Amongst all of the lodging segments it tracks in this study, the company notes that those properties in the mid-scale market that do not offer on-site food and beverage are weathering the recession better than competitors in any other hotel segment, both in terms of revenue and operating margins.

Jones Lang Lassalle attributes this segment’s success to travelers (corporate and leisure) trading down to less expensive hotel chains, either to reduce overall trip expenditures or, in the case of business travelers, to also “avoid scrutiny from the public.”

It is interesting to note that the mid-scale hotels without food and beverage also outperformed the rest of the lodging and hospitality market following 9/11.  For example, in 2002, this segment had the lowest revenue per available room (RevPAR) decline (-0.6 percent) and strongest room revenue rebound (5.5 percent).  Jones Lang Lassalle believes that mid-scale hotels without food and beverage will continue to outperform the other hotel segments going forward, at least until the economy turns around.

TravelDividends thinks travel affiliates would do well to look at their hotel/resort affiliate campaigns and assess if there is an opportunity to leverage the traveling public’s current proclivity for choosing properties in the mid-scale hotels without food and beverage sector.

2. I think that Carnival Inc’s performance since the barrage of bad economic and health news in March indicates once again why this company remains the undisputed leader in the cruise industry.  Despite experiencing pricing pressure following the outbreak of the H1N1 Influenza in Mexico, rising fuel prices and the huge impact that these forces had on its Mexican and western Caribbean itineraries, Carnival has apparently offset much of that by driving efficiencies in its cost structure and strategically redeploying its ships worldwide.

Although Carnival continues to expect full year net revenue yields to decrease 10%-12% on a constant dollar basis, ticket prices for forward bookings are projected to remain at substantially lower levels than last year.  For example, since March, booking volumes for the second half of 2009 are running 26% ahead of the prior year; however, discounting has negated any financial improvement from this surge.  Instead, improvements came from Carnival’s ability to manage its costs – including distribution costs – and redeploying its fleet to less volatile geographies.

I think some of the cost efficiencies Carnival is enjoying comes from the fact that their largest brand, Carnival Cruise Lines (CCL), distributes through travel affiliates.  The travel affiliate distribution channel delivers customers to CCL at a fraction of the cost of other channels (online travel agencies, bricks and mortar travel agencies, tour operators and even Carnival Cruise Line’s own direct to consumer efforts).

I also think that travel affiliates can increase their overall sales and revenues by taking advantage of CCL’s (and every other cruise line’s) strategy of unbundling the traditional cruise line product.  For example, air/sea packages – once a staple of the industry – are becoming scarce, and even when offered, the air portion is now non-commissionable.

This and other examples of cruise package fragmentation whereby cruise lines increasingly offer travel affiliates (and travel agents) just cruise-only rates, provides travel affiliates the opportunity to dynamically sell air and other pre- and post-cruise travel products to their cruise customers, which in turn, can potentially generate higher returns for the travel affiliate than what the traditional bundled cruise package offered.

Travel affiliate friendly companies like activities aggregators Viator, Isango!, and Octopus Travel, or airline consolidators like Vayama, or specialty lodging players  like condos, timeshare, vacation properties and boutique hotels distribution leader LeisureLink are prime examples of vendors that travel affiliates can craft successful, ‘ancillary’ revenue generating flight, ground and other pre- and post-cruise programs around their client’s cruise vacation.

So, rather than fear the winnowing of cruise line bundled product or view the deep discounting in the cruise sector as Armageddon as some industry observers have concluded, TravelDividends thinks this a great opportunity for travel affiliates to sell CCL’s (and hopefully down the road, other cruise lines’ once they’ve had their ‘epiphany’ about the value of the travel affiliate channel) cruise product to their customers in a far more personalized, customized and value-laden way.

3. I think that Six Flags’ Chapter 11 bankruptcy filing last week shouldn’t deter travel affiliates from working with this major amusement parks operator. Forced into court reorganization as a result of its high debt load, the Company had the blessings of its major creditors, as they had reached a pre-arranged debt restructuring plan prior to the bankruptcy filing.

Six Flags’ 20 US amusement parks will continue to maintain normal operations during the restructuring process.  More importantly, from a travel affiliate perspective, they have a fairly strong travel affiliate program, which is run through Commission Junction, which represents a great opportunity for travel affiliates despite Six Flags’ woes.

Offering travel affiliates 5% commission on everything from one-day admissions, unlimited park passes, other ancillary in-park revenue generating activities (e.g., Brunch with Bugs, Frightfest, concerts) as well on the sale of Six Flags gear and merchandise, we think their travel affiliate program is an attractive package.  This travel affiliate program should be even more appealing to the average travel affiliate when you factor in the millions of Americans who will be taking closer-to-home vacations this year, and the summer bargain entertainment activities like those that Six Flags offers sought by these travelers from their trusted travel affiliates.  Add to this a 3 month EPC of $23.86 and $21.58 for 7 days, we think most of you will agree with our strong recommendation for Six Flags and their travel affiliate program.

As always, TravelDividends is interested in hearing from our readers…send us an email and share your thoughts on these or other subjects.  We look forward to hearing from you!