The Long Haul

October 31, 2008  by in UnCategorized   

By Home Furnishings Business in on November 2008 More expensive fares for fewer seats on long-distance flights to Asia and South America are a necessary evil for retailers and their vendors who depend on overseas sourcing. While furniture imports slowed this year in reaction to soft retail conditions, they still play too important a role in some business models for people to stay home for too long.

“In light of the amount of business we’ll do with a collection, we don’t really focus on how much we travel,” said Keith Koenig, president of Tamarac, Fla.-based City Furniture. “We’re careful, and it costs more, but it’s not something that will keep us (from traveling).”

The same is true of American Furniture Warehouse in Thornton, Colo., which has relied heavily on direct sourcing for years. “The way we do business, we have to go,” said Jake Jabs, chief executive officer. “The expense is affecting us a little, but not that much.”

Jabs did note that it takes more digging to find acceptable air fares. “United Airlines wanted $10,000 for business class, but we went with Singapore and got it for $6,000,” he recalled. “You do have to shop around a lot more these days, but we’re finding that the American airlines seem to be doing the big price increases.”

Foreign flag carriers do seem to offer better deals, said Rob Walters, a travel agent at Worldwide Travel Associates in Avondale, Pa. He has long experience with business travel to Asia and Latin America for clients in the apparel industry.

“My experience has been that foreign carriers tend to offer lower fares and greater incentives,” Walters said. “Out of Philadelphia, the majority of my clients go (to Asia) via Europe versus the West Coast. With advance planning you can usually get a better cost from a foreign flag carrier.

“Second, we’ve seen increases in airfares because of fuel surcharges,” Walters continued. “Within the last couple of days (in mid-October) we’re seeing fuel surcharges falling because of the lower price of gas. British Airways and Singapore Airlines both lowered theirs, and once one airline starts a trend like that, they all tend to follow.”

Scheduling is more complicated as well, as cash-strapped carriers cut back on flights. “Thai Airlines, for example, canceled their non-stop from San Francisco to Bangkok,” Walters said. “That’s not just to Asia, there are fewer flights globally.”

LOOKING FOR A DEAL There are deals to be had, said another travel agent, Blake Fleetwood. His Cook American Express agency deals with a lot of discount business- and first-class tickets.

“We have found increased demand lately because business people are balking at paying the outrageous last minute prices the airlines are charging—$8,000 business class to Europe,” Fleetwood said via e-mail. “But they still have to go, so in these hard times there is great appeal for people who deal in discounts, net fares and consolidator tickets, which can bring these prices down considerably.”

Travelers to China don’t want to spend 15 hours in a cramped coach seat, but the good news is that with airlines having trouble filling business class at regular prices, Fleetwood said that more are releasing those prime spots to ticket consolidators so they don’t have to lower published rates. But the discounts come at a price.

“These fares are more restrictive and require booking in an inventory that only comes up when the airline doesn’t expect to fill the plane,” Fleetwood said. “Most importantly, you have to find reliable places to get them—only deal with established companies—and you must pay with a credit card. American Express is best, but others will do.”

While consolidators charge cancellation and change fees, he said that business people saving, say, $4,000 on a published fare don’t worry much about a $250 cancellation charge.

Fleetwood added that not every unpublished fare is a consolidator fare. There are military discounts, corporate discounts and other specially negotiated fares—such as cruise and package fares—are also considered “unpublished,” he said, and are almost never consolidator fares.

Fleetwood suggested that those interested in more about the history of such fares read Andrea Bennett’s two-part piece on aviation.com. “They are often non-refundable for sale fares, and there are cancellation and change fees for tour fares where there are hotels involved,” Fleetwood said. “Consolidator tickets also have cancellation and change fees, but when you are saving $4,000 over the published fare, business people are not so worried about a $250 cancellation fee.”

VOICES OF EXPERIENCE Vendors, of course, have been going to Asia for years, and they note that costs are up not only for air travel, but also everything from hotels to ground transport. Gil Sturtzel, vice president of purchasing at Davis International, for example, had made four trips to Asia between the April and October High Point Markets.

“Taking a shuttle from the hotel in Dongguan to Hung airport, I’ve had to pay $200 cash, and I used to be able to do that for $75,” he said. “It’s not unusual to go to Ho Chi Minh City and see hotels for $400 a night at nicer hotels. With airfare, if you’re flying on U.S. carrier business class, I’ve seen quotes as high as $13,000 for round trips from High Point to Hong Kong. Flights, business class, used to be for $2,500, if I used some miles. That was 18 months ago.”

Sturtzel also noted the impact of fuel prices and the paucity of seats, and said booking early is more important than before.

Some companies avoid some of the travel costs by having people on the ground. “You have to either do that or go over there a lot,” Sturtzel said. “You have to do it. It’s something you can’t assign. ... We don’t have an office over there.”

Emerald Home Furnishings does have personnel in Asia, said Michael Cohen, vice president of sales and marketing. The company has offices in China and Malaysia with quality-control staff members who are locals.

“We have staff everywhere we do business who live there—those costs don’t go up,” he said. When Emerald does travel—company President David Beckmann went to Asia in October and returned this month—it feels the bite.

Beckmann left two days after Cohen for a September trip to Shanghai Market and paid $7,000 for business class. Cohen paid $3,800.

“It’s a high-demand season—everybody was going over when he was going over,” Cohen said. “Last year, we were paying $4,000 to $4,500 round trip. Now he’s paying more than $7,000—that’s a big differential. Then, you look at the costs when you’re over there. Hotels are more expensive. Meals. Your actual living costs have gone up.”

Gone are the days, as well, of $85 a night in top-flight hotels. “A couple hundred dollars is common,” Cohen said, but it’s a cost of doing business, even with people on the ground. “You have to go over to manage your product development teams and design work, so we fly over there.” HFB

Senior Editor Jo Fleischer contributed to this article.