An Open Letter To Travel Industry Professionals By Philip Wolf - President and CEO PhoCusWright Inc.

New York City suffered its worst week in history. Washington, D.C. underwent its own living hell. America's heart was broken. Freedom loving people everywhere took a devastating hit. Our lifeline to the financial and military centers was severed but an amazing phenomenon ensued. We are performing bypass surgery of heroic proportions, incrementally stitching back both the logistical and spiritual infrastructure that makes life worth living. Mayor Rudolph Giuliani perhaps said it best on Sunday when he articulated what most seem to be thinking: everyone will return to business on Monday [yesterday] but no business will return to normal.

So "return" we must; we all realize that in different ways. But how we return and to what, plague us. I wrestled in college. Eight minutes on a sweaty mat with an athletic specimen of an opponent cranking your arm and neck seemed the pinnacle of endurance. However, those matches pale in comparison to the emotional wrestling matches underway today. Every time a shred of normalcy returns to our lives - playing ball with the kids, laughing during a restaurant conversation, enjoying some recreational pastime - we then toggle to mourning the dead, to sympathizing with those stricken first-hand and to bracing for what's next.

Is it okay to "return?" Does doing other things mean you are disrespectful or insufficiently compassionate? Do those familiar letters, P&L, have a place just now?

We know the answers. We just hate saying it, either to ourselves or out loud. But we must, so here's a baby step forward.

Man has an insatiable appetite for travel. From Marco Polo to Christopher Columbus to Amelia Earhart to Edmund Hillary to Neil Armstrong to Dennis Tito to… the next great trip, man will always travel while bearing horrible setbacks from the likes of the Titanic, the Holocaust, the Challenger and the World Trade Center. The debate now is about the short term, if not the very short term.

Airline executives quickly announced schedule reductions, employee furloughs and layoffs. Yesterday's Wall Street Journal reported the nine major U.S. carriers' US$9.4 billion in cash reserves (and equivalents) will last 45 days at a $210 million daily burn rate. I am reminded that economic times in general were already tough BSE (Before September Eleven) with U.S. airlines in particular headed for large losses. (Airline analysts now talk of losses over $4 billion as opposed to the BSE figure of $1.5 billion.) Business travelers were already glued to their desk chairs, contributing to low load and occupancy rates. The travel industry was waiting for an upturn after Labor Day (Sept. 3 U.S. holiday). It didn't come.

And now the absolute unexpected has occurred, the second economic ill wind of the year for the travel industry. We'll have to sort through the impact of the terrorist attack juxtaposed against an already challenging backdrop.

In January of this year, only a few long months ago, we noticed (early on in retrospect I suppose) some schizophrenic behavior in the marketplace. Although the reset button had been pressed on the NASDAQ much earlier (April 2000), signs of executives retooling their strategies for the post-bubble marketplace were just beginning to percolate. Nevertheless, we saw online travel exploding despite 1) a general economic downturn, and 2) a new economy downturn. This meant, after years of all boats rising in the same rising tide, that online travel was now unequivocally growing at the expense of traditional travel distribution channels. We dubbed the online travel marketplace an "oasis in the e-economy desert."

A lot of people have asked us what's going to happen to our forecasts. Today, to support the killer app claim, over 31 cents out of every dollar spent online is on a travel-related purchase. PhoCusWright forecasted a US$20 billion market this year in the U.S. and $30 billion worldwide. We will scrutinize these numbers frequently and adjust as necessary, but it's already clear: despite the adjustments, travel is no longer an oasis in the e-economy desert, rather it's "the new economy's killer app."

So has the killer app been killed?

No, only badly shaken, but the order of the day must be to avoid a confidence epidemic. Here are five suggestions in running your business:

1. Compete: The economic engine thrives on competition. Don't be reluctant to continue competing. Business competition should not be confused with partisan bickering.

2. Staccato: Decisions need to be made in staccato fashion until further notice. Be prepared to make a collection of moves on a day-by-day basis. These might feel a bit disjointed but that's the prudent approach for the time being.

3. Scenarios: Do what you should have been doing all along... planning for some difficult scenarios. Develop your action plans for a 30%, 40%, 50%, etc. short-term revenue drop.

4. Silver lining: Many of us suddenly have some extra time due to slower business demand. Use this time to accomplish those important, yet back-burner initiatives you never had time to tackle.

5. Tough: Are you prepared to make some very tough decisions? You better be.

Just like dice don't remember their prior roll, a coin has no memory either when it comes to the next toss. Before our civilian airline system was momentarily converted into a siege of terror and eclipsed the Civil War battle of Antietam as the bloodiest day in American history (September 17, 1862), it was already the dawn of a new era of "firsts." Ladies and gentlemen, get used to it: the past is a poorer predictor of the future than we would otherwise like.

Our industry shouldn't have been shocked that the airlines capped commissions again and that Carnival Air Lines would join the fray despite the cruise industry's prior tight connection with traditional travel agencies. We shouldn't have been shocked a major media company, USA Networks, raised the stakes in travel commerce despite previous failures by Discovery, The Travel Channel and Tribune. We shouldn't have been shocked a travel supplier will acquire a GDS after the airlines divested most of their GDS holdings. And we shouldn't lean too heavily on what transpired after Desert Storm as our periscope on what lies ahead.

We're on pins and needles awaiting America's (and its allies') next diplomatic and military moves. We are on pins and needles still grieving and dealing with the maelstrom. And we are on pins and needles anticipating just how bad, bad is going to be for the travel industry and our businesses.

What will happen next? I don't know and neither do you. Let's talk a lot. Let's listen to our customers more than ever. And let's take cues from our nation's leaders who are immersed in the thick of things, exuding confidence, talking straight and managing their daily responsibilities with determination and probity.

Winston Churchill, leading war-torn England through the Battle of Britain with bombings every day, said, "Courage is rightly esteemed the first of human qualities because it's the quality which guarantees all others."

Onward and upward everyone, lest we forget.

With regards and hope,

Philip C. Wolf

President and CEO

PhoCusWright Inc.