Making Lemonade: The Travel Industry’s Attempts to Capitalize on Economic Woes

By B.P.T., on August 2nd, 2008

We’ve all heard the old saw, when you’re given lemons, make lemonade. The travel industry is no doubt attempting to do just that, given the current economic woes and high gas prices. The Smith Travel Research Global is reporting hotel occupancy rates are down 3.9% to 66.7% for the first half of 2008 in the Americas. The company reports that the “malaise in the U.S. economy seems to be affecting a large number of countries” and that there are drops in occupancy in 3 out of 4 world regions. The only region to see an increase in the past six months is, interestingly enough, the Middle East/Africa region, which is up a reported 4%.

Travel specials and promotions are nothing new, even in a booming economy. But when the stock market is down, gas prices are up and the general economic outlook is cloudy, travel and other disposable income dependent industries must sometimes step up their efforts. In an attempt to lure travelers and even capitalize on the trend to take vacations closer to home, hotels and resorts are offering a myriad of interesting freebies, gimmicks and other specials in attempt to recapture some of the travel market that may be losing steam as a result of a sagging economy. Here are a few of the most interesting.

While hotels have used the “extra night free” special for years, a plethora of deals is available these days, from free third night to free seventh night, and offers often include “kids eat free,” “kids stay free,” free parking and free breakfast as well.

One attempt to ease the pain at the pumps is the free gas offer that has proliferated throughout the travel industry. Recently the Mississippi Gulf Coast, a visitors and convention bureau based in Gulfport and Biloxi, Mississippi, is running a $50 gas card special for anyone who spends two nights in a qualifying hotel. Choice Hotels (the chain that includes Comfort Inn, Sleep Inn, Clarion and a few others) is also offering a $50 gas card after three individual stays at its hotels. The free gas promotion is one of the hottest gimmicks around right now, with everyone from Best Western to the Texas Campground Association to Expedia getting in on the act.

Wyndham Vacation Resorts is offering add-ons for their travel packages to Destin, Florida. For instance, couples staying three nights have the choice of a $50 dining certificate or a pair of dolphin cruise tickets. Marriott will give visitors a $25 gift card for travelers spending a weekend at certain hotels.

Credit cards are partnering up with hotels and other travel industry groups for promotions as well. MasterCard has a long list of specials for those willing to leave the house on a jaunt, and these are not limited to budget properties. These promotions include a “Special VIP Experience” at any designated Small Luxury Hotels of the World (SLH) and include such experiences as spa treatments, culinary activities or other local activities; the Sofitel “chic picnic” deal for European properties, which includes an upgraded room, a VIP gift and a special “enchanting moment,” is filled with gourmet goodies.

A few other creative offers include free cocktails, activity or entertainment credits or tickets. In Vegas, the offers get even better and include such gimmes as free chips or slot play, VIP passes to certain nightclubs, room upgrades and perhaps the best – a future flight credit of up to $350 to the Luxor or the $300 Flyback offer at the MGM Grand, which gives a $300 credit for return trip airfare.

Travel specials can be found not only in the United States but around the globe as well, with rail travel specials in Canada and Europe, Exotic Dubai travel packages that include a free desert safari with a BBQ dinner and free river cruise passes in Singapore.

Whether these specials, gimmicks, promotions and offers will help shore up a stinging travel industry remains to be seen. Perhaps the cleverest, however, is the Lehigh Valley area of Pennsylvania. This area’s lodging members offer special travel packages under the “Pain in the Gas” promotions, which consist of free gas cards or rebates with qualifying stays. A pain in the gas indeed.



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Why the Gold Standard Issue Is Here to Stay

By B.P.T., on August 2nd, 2008

Since a recent blog touched on the gold standard (plus an amusing crack about it being dropped 75 years ago), I thought it would be interesting to look back at history and how the gold standard has evolved legally over the years and possible current effects. History has not only altered the gold standard itself but the gold clauses as well, the axing of which effectively gave the entire theory a big punch in the gut back in 1935.

The gold standard, a backing of currency with gold grams in an amount determined by the government, has its roots as far back as ancient Rome, but a bit closer to home, it had major beginnings in the U.S. in the 1900 Gold Standard Act, which set the value of gold per troy ounce. For the most part, the gold standard gave up the ghost during the inflationary years of the Great Depression, but what really hit home for many people was the repealment of the Gold Clauses. (Many governments still retain gold reserves however, to give added credibility to the value of currency.)

The gold clauses were contract clauses that basically allowed an obligee to collect his or her money in gold, rather than dollars, upon demand. In 1933, Congress nixed these clauses with a resolution making these types of clauses against public policy.

A series of U.S. Supreme Court cases, The Gold Clause Cases, addressed the constitutionality of this resolution in cases that addressed the clause in private railroad bonds, Liberty Gold Bonds, and U.S. Gold certificates. The court held the resolution repealing these clauses was within Congress’ power and effectively zapped the power of gold clauses across the country, disallowing obligees – including those of the government who owned U.S. bonds – from demanding payment in gold rather than dollars.

No controversial decision is without dissenters, and in the Gold Clause Cases, the four horsemen (Justices James McReynolds, Willis Van Devanter, George Sutherland, and Pierce Butler, who basically voted against anything FDR wanted) voted against the majority, saying, “This amounts to a declaration that the Government may give with one hand and take away with the other. …The impending legal and moral chaos is appalling.” Whether or not the impending doom predicted by the horsemen actually came to pass is perhaps debatable, but it was more likely not nearly as dire as they expected.

What’s interesting is how that plays out even today. While Roosevelt re-adopted the gold standard, which was again later dropped, the gold clauses were not reinstated until the 70’s, where it was authorized only for use in private contracts (this is in stark contrast to earlier contracts, which obligated the federal government to make payment in gold).

The interesting current twist is a case that is currently awaiting a decision in the 6th U.S. District Court. The case involves a lease between a landlord and a lessee who took over an existing lease. The original lease included the 70’s approved private contract gold clauses – the question is, did the new lessee take on that portion of the contract or was a new contract effectively made? The Northern District of Ohio said the gold clause was bunk, and there’s no obligation to pay up in gold rather than good old greenbacks (which would give the owners a potentially much higher payout in terms of real value, given the dollar’s slide). What will the 6th District say? My guess is likely the same as the lower court, but if not, it might be more fodder for the gold standard proponents. Whatever the decision, watching history repeat itself will remain entertaining, interesting, and relevant.



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