For the First Time, Allegiant Air Learns What it’s Like to Configure a New Airplane

For the First Time, Allegiant Air Learns What it’s Like to Configure a New Airplane

P. Pigeyre  / Airbus

Allegiant Air soon will take delivery of its first new Airbus A320. Allegiant has never taken a new aircraft. P. Pigeyre / Airbus

Skift Take: Did you know how much effort went into designing a plane’s cabin? Skift got the scoop from Allegiant Air, which will take its first-ever new airplane from Airbus later this month.

— Brian Sumers

On 18 planes in Allegiant Air’s fleet, a bright orange stripe runs along the overhead bins, stretching from front door to the rear bathrooms. It’s an accent familiar to anyone who has flown EasyJet, the European discounter.

For its 20-year history, Allegiant, one of three ultra low cost U.S. airlines, has bought used airplanes. First, the airline took gas-guzzling MD-80s, but more recently it has preferred newer and more fuel-efficient Airbus A319s and A320s. They often come from EasyJet and three other airlines — Iberia and Vueling in Spain, and Cebu Pacific in the Philippines.

United Airlines, Southwest Airlines, and Delta Air Lines — all used-plane buyers — often spend months and significant sums reconfiguring cabins so they look identical to their other aircraft. But usually, planes join Allegiant’s fleet looking as they did when they flew from Manila to Bhutan for Cebu Pacific, or from London to Palma de Majorca for EasyJet.

Removing extras other airlines added — like orange stripes — is expensive, and Allegiant CEO Maury Gallagher figures passengers prefer cheap tickets more than matching interiors. Recently, Allegiant started retrofitting clear outliers, like one plane with an unusual tree pattern on its side walls. But when possible, it prefers only to paint the outside of planes, replace the carpet, and add seats and row numbers. Overhead bins don’t get touched.

“We just took what we could get,” Brian Davis, Allegiant’s vice president for marketing, said of the company’s historic strategy. “Our customers didn’t care.”

Given Gallagher’s frugality, few expected Allegiant would buy new planes. But the used market can be tricky because airlines only can acquire aircraft when another carrier or a lessor will sell. Last year, Allegiant wanted planes faster so it ordered 12 new Airbus A320s, and the first delivery is May 15. They’re not as cheap as used ones, but Allegiant likely got a good deal since Airbus soon will stop making the A320 in favor of a next-generation model, the A320neo. It’s like buying last year’s car model after it has been discontinued.

As part of the purchase price, Airbus configures each plane as the customer wants, including sidewalls, seats, carpeting, bathrooms, door handles, and the languages on emergency exit signs. Airbus often offers hundreds of options for each choice — enough to overwhelm employees at an airline as small as Allegiant. It has fewer than 100 aircraft.

“For every surface you see in an airplane,” Davis said, “there is a room of swatches and color palates.”

Other airlines send teams to Airbus’ Toulouse, France offices to ensure interiors meet the carrier’s standards. But Allegiant had no team, so Davis tapped one person — Kimberly Schaefer, the public relations manager — to fly to Europe to make decisions. Some carriers spend years selecting options, but because Allegiant had less than a year from order to delivery, Schaefer had a compressed schedule.

And as much as Airbus helped, the process was still daunting — less like buying a car and more like building a house, Davis said.

“They kind of walk you through the process and say, ‘Now its time to make these 14 decisions,”‘ Davis said. “That’s when we open the catalogue and say, ‘Oh, shit, there are many, many options.’”

Before she left for France, Schaefer received advice from two executives. Davis asked her to match Allegiant’s brand standards, while Jude Bricker, Allegiant’s COO, reminded her she represented a “utilitarian brand,” and told her to stay on budget. She would not be selecting in-seat television screens, nor onboard internet.

“Don’t go out and a spend a bunch of money,” Bricker told her.

EasyJet planes, including this Airbus A319, have a signature orange stripe along the bottom of the overhead bins. Adrian Pingstone/Wikipedia.

How to Get Easy Orange

Davis and Schaefer tried to keep it simple. When feasible, Allegiant would select packages, and add features already on used planes, such as EasyJet’s orange stripes. Davis likes them because the shade closely matches the color in Allegiant’s sun logo.

“It’s not obnoxiously orange,” he said.

But getting the stripe was surprisingly complicated. After Schaefer asked Airbus for it, she learned the hue was called “Easy Orange,” and Allegiant could not use it because Easy Group, the European airline’s parent, owned it. Airbus sent Schaefer swatches of similar colors, but she didn’t like them. “They were too yellow or too red,” she said.

Briefly, Schaefer considered orange mood lighting in place of stripes, but learned the lights are expensive. “The folks at Airbus were like, ‘You definitely don’t want to do that. It’s going to be way outside your budget.”’

Eventually, Allegiant executives contacted Easy Group, and the two companies reached a deal. Easy Group sent Airbus a letter showing Allegiant could use “Easy Orange” below the bins.

The rest of the interior was easier, since Airbus offers packages that include most of the basics.

Schaefer picked one called the “Enhanced Cool,” a conservative scheme featuring white sidewalls with a pattern of small gray squares. Most European and American airlines prefer something similar, and a version of this package is installed on all but eight of Allegiant’s used Airbuses. Another package, called the “Enhanced Warm Scheme,” is based on sand-like colors, and popular among Middle East and African airlines.

The package covered many elements, including bins, window panels, flight attendant jump seats, the bathroom and cockpit doors, and the toilet. Had she not selected it, Schaefer might have customized everything — even bathroom door handles.

“They could really do anything that you want as far as the design,” Schaefer said. “The door itself is the door itself. But you can really have any door handle that you want. It can be made of solid gold covered in diamonds.”

Or, as Davis put it, “If you said, ‘I want purple elephants on my side walls, they would do that for you.”‘

How long should the bathroom water run?

Designing the bathrooms was a bigger challenge.

First, Schaefer wanted an orange stripe in them because the former EasyJet planes have it. But she learned it would cost extra, so she skipped it. Then she turned her attention to choosing one of 111 options for “non-textile flooring.” Airbus sent sample swatches, and she flipped through them — a task she likened to searching for wallpaper samples at Home Depot or Lowe’s.

She skipped fake wood, preferring a composite navy pattern called Atlantis, with raised round dots, an option she wanted for safety. “It’s more slip resistant than a smooth surface,” she said. The dots are small, and Schaefer is hopeful that’ll make floors easier to clean. “The spaces between the dots are large enough that dirt or other material will not become embedded,” she said.

For counters, Schaefer picked a fake stone — one of 25 options offered by Airbus— called “duocolor white.” For sinks, she preferred stainless— for simplicity sake. Stainless was the only option Airbus offered for all three bathrooms, two in the back, and one in front.

Next, Schaefer determined how long sink water would flow from the automatic faucet. She went with 10 seconds — enough, she hopes, so passengers can wash their hands without wasting water. If that’s not enough, it’s possible to change the time to 15 seconds.

She jokes that selecting the water run time made her a more discerning traveler.

“I just flew back yesterday from Dallas on American on an A321,” Schaefer said. “Their water seems to run a little longer. It’s so weird. I have the weirdest job.”

Row 13?

For weeks, Airbus peppered Allegiant with minor questions. What light bulbs did it want? Would it have a row 13? Would exit and other signs be mounted only in English? Or Spanish, too? How would Airbus paint the aircraft’s exterior?

The row 13 question was easy. Allegiant will have one, though some carriers, including United Airlines, do not.

“It makes the most sense,” Davis said. “And nobody raised an objection.”

Spanish proved trickier. At first, Davis thought the answer was obvious. Allegiant flies charters to Mexico, and may add scheduled flights, so it wanted Spanish signs. Since some of the used planes already have Spanish, Davis figured new planes should match the old. “We thought, ‘Oh, great, we already have Spanish, so we can fly to Mexico,’” he said.

The problem? Mexican Spanish is slightly different than what’s spoken in Europe, and Allegiant executives learned signs on the former Iberia planes weren’t perfect for Latin America. After some discussion, though, they went with consistency. New planes will match Iberia’s signs.

Row numbering was another vexing issue. Some airlines only put numbers on a light above the seats, near the air vents, while others add them to overhead bins.

Numbers on lights are a standard option, but Davis is 6 feet 2, and when he flies on an airplane with seat numbers on lights, he can’t see them without bending down. Allegiant seeks to board planes quickly, and Davis said inconveniently placed numbers can confuse passengers and slow boarding.

“They kind of stop at the front of the airplane as they are trying to figure out how to sit,” he said. “You don’t want it taking a few seconds to find your seat number.”

Allegiant not only will put numbers on bins, but it also will use more prominent placards than usual. Big numbers were among the few features Allegiant paid extra for, along with a public address system that can make recorded announcements in two languages.

“It sounds crazy, but it makes a huge difference,” Schaefer said of the row numbers. “That was a conscious decision. We thought if we could expedite boarding, it would help our turn times.”

Then there was exterior paint. Allegiant has a blue tail with a sun on it, and the sun fades from yellow, in the center, to orange at the edges. But it’s not a true fade. Instead, Allegiant uses sets of hexagonal dots to create the yellow-to-orange fade.

Airbus paints new planes, and it we wanted to give Allegiant’s a real fade. Or, more specifically, it didn’t like Allegiant’s approach. “Their engineers refused to paint it with the hexagonal dots,” Davis said, because they feared producing an “inferior product.”

Airbus would send photographs of other airline paint schemes, and Davis acknowledged Airbus’ approach produced a better-looking airplane. But he didn’t want customers in Orlando to notice two tails with an Airbus sunburst and six more with hexagonal dots.

He also knew airlines and lessors who sell used planes to Allegiant would not follow Airbus’ process in the future. Sellers paint aircraft in paint shops worldwide, and consistency is a challenge.

Finally, Allegiant persuaded Airbus to match existing planes for the dozen new aircraft.

“They believe their fade to be superior,” Davis said. “We said, ‘While your 12 may look better, they are also going to look different.’”


via Skift

May 4, 2017 at 12:37AM

Craft Coffee Is Poised to Create a More Interesting Hospitality Experience

Craft Coffee Is Poised to Create a More Interesting Hospitality Experience

Bex Walton  /

Craft coffee at Stir in Cambridge, UK. Bex Walton /

Skift Take: The big idea is to make it easy for a larger, national hotel chains to conduct local, nuanced and interesting coffee programs that are cost-efficient. And without the hassle of having to do it all yourself, including equipment, roaster relationships and barista training. Craft coffee is having its moment.

— Colin Nagy

Over the past several years, almost every conceivable surface area of hospitality has been examined and re-invented. Some for the good, some for the bad.

There’s the more extraneous elements, like pillow menus and initiatives started with a cynical public relations headline in mind, but then there are also huge advancements in things like customer relationship management, the check-in process and also the ability to stream your own media in your room.

Even food and beverage has evolved. You’re getting very complicated cocktails at what used to be a the hotel watering hole, and a variety of the ever proliferating array of local craft beers.

But one of the largest areas of consumer interest, craft coffee, has been missing. One of the most contradictory experiences can be staying in a fantastic hotel that still manages to serve up a cup (or a pot) of lackluster coffee for a hefty sum.

Some people have taken to bringing their own little rig on the road, with an Aeropress, a mini-grinder, and the accouterment necessary to brew their own. It’s a kit to keep the morale up, when you can’t get the perfect dose from your local barista.

Tradecraft Outfitters

Enter Tradecraft Outfitters. Its idea is bringing craft coffee, with all of its nuances, varieties and local roasters, to hotels in a way that is scalable and sustainable.

Other category disruptors have transformed various industries by offering new and painstakingly unique choices to consumers — and the company believes that the same story is playing out in coffee and tea.

Typically hotels have one big contract with some of the massive players, including Starbucks, Royal Cup or Illy.

“The thesis of our company is that that this model is inconsistent with the consumer’s expectations, says Michael Klong, CEO of Tradecraft. “We see a massive parallel with craft beer and where craft coffee is going right now.”

The trend lines are encouraging. There’s been a 340 percent increase in Cold Brew sales from 2010 to 2015, according to the Specialty Coffee Association of America.

Tea Time

One-third of adult consumers drink specialty coffee, up from one in four just five years ago. Consumption of specialty tea, like matcha and numeric, is also surging.

Tradecraft is working directly with hotels to provide craft coffee and tea with the equipment, training, service, and accessories they need. The company has local relationships with some names that, for coffee nerds, will jump off the page at you, including Verve in Santa Cruz, California; Zingermans in Ann Arbor, Michigan, and Parlor in Brooklyn, New York.

The big idea is to make it easy for a larger, national hotel chains to conduct local, nuanced and interesting coffee programs that make sense cost-wise.

On the overall experience coming together, Klong commented, “Offering great coffee and tea from a local/unusual choice brings a high-quality experience to guests and makes a hotel feel like it’s more connected to its location. We supply with a universe of craft choices so they can deliver tailored experiences per location—which lines up perfectly with what the lifestyle brands are trying to do.”

And without the hassle of having to do it all yourself, including equipment, roaster relationships and barista training.

Some Tradecraft Outfitters’ initial launch partners include Graduate Hotels as well as Commune Hotels, with the launch of one of the nation’s largest hotel chains expected to be announced in the coming months.


via Skift

May 3, 2017 at 11:33PM

Video: Skyscanner CEO Thinks Travel Sites Could Learn From Chinese E-Commerce

Video: Skyscanner CEO Thinks Travel Sites Could Learn From Chinese E-Commerce


Skyscanner CEO Gareth Williams (left) is the rare Western executive to have played his cards right in China. Here he is, post-acquisition, talking at Skift Forum Europe in London on April 4, 2017. Skift

Skift Take: In this video from Skift Forum Europe, CEO Gareth Williams explains why his travel price-comparison is finding inspiration from Chinese online retailer Tmall. He says brands need to be able to stand out better from their competitors in search results.

— Sean O’Neill

Gareth Williams is in a great mood these days as t’s only a couple of months after having sold Skyscanner to Chinese online travel giant Ctrip in a £1.4 billion (or $1.74 billion) deal.

As co-founder of Edinburgh-based Skyscanner, Williams is focused on providing a more sophisticated price-comparison interface — one that helps brands differentiate their products, as Williams told Skift in an on-stage interview with executive editor Dennis Schaal April 4 at Skift Forum Europe in London.

Williams says he has been inspired by Alibaba-owned Tmall, a China-based online retailer, which allows brands to differentiate themselves from their competitors with distinctive marketing within the search results and listings.

Williams explains: “If you search for a phone, you’ll see a common search experience. But if you search for an iPhone, you’ll get a result that will have a look that’s more like Apple’s branded website.”

He thinks the same dynamic should happen for travel suppliers on Skyscanner.

The genesis of the concept came from what Williams calls “the moment of my greatest business embarrassment” as a chief executive. He says he had been meeting with an airline CEO, and the CEO said, “And where, Gareth, on your site can a customer tell that my airline has spent $7 billion on new planes?” That was quite cutting, he said.

Williams also speaks in the interview about how Skyscanner is experimenting with voice-enabled search. He also discusses how mobile adoption — with Skyscanner having 60 percent of its activity happening on mobile devices — changes consumer expectations and is behind the company doubling its customer service team to help ensure customers get answers from airlines and travel agencies it lists.

You can watch the full discussion below.

Note: Initial planning is in full-swing for our flagship event Skift Global Forum, which will be held September 26-27 in New York City. We wanted to make sure our most loyal Skift readers were able to purchase their tickets early and were rewarded for doing so. That’s why we’ve re-opened up our previously sold out early bird discount for an additional 35 tickets. Attendees can now save $800 per ticket on the largest creative business conference in travel.

Read more coverage of Skift Forum Europe 2017.

At this year’s inaugural Skift Forum Europe in London, travel leaders from around the world gathered for a days of inspiration, information, and conversation on the future of travel.

Visit our Skift Global Forum site for more details about 2017 events, including our New York City event September 26-27.


via Skift

May 3, 2017 at 11:05PM

Expedia CEO: Our 2 ‘Supercharger’ Brands are Leading the Way

Expedia CEO: Our 2 ‘Supercharger’ Brands are Leading the Way

Jim Cramer/Mad Money

Expedia CEO Dara Khosrowshahi called on the Trump administration to stop ruining the perception of the American Dream around the world. He appeared on Jim Cramer’s Mad Money show May 3, 2017. Jim Cramer/Mad Money

Skift Take: When it comes to growing brands — or at least buying companies with capable management teams — Expedia knows what it’s doing. You can count on Trivago and HomeAway both becoming more formidable than they are today.

— Dennis Schaal

Expedia Inc. expects to be a fast-growing company over the next few years and that spurt is led by HomeAway and Trivago, which CEO Dara Khosrowshahi characterized as “the superchargers within the portfolio.”

In the first quarter, which ended March 31, HomeAway’s revenue grew 30 percent to $185 million, and Trivago made HomeAway’s mark seem relatively ho-hum. Trivago’s revenue leaped 62 percent to $286 million. In contrast, parent company Expedia Inc. saw revenue tick upward a slower 15 percent to $2.2 billion.

Interviewed on an episode of Jim Cramer’s Mad Money show [see video embedded below], which was broadcast Wednesday, Khosrowshahi revealed that the company will be increasing HomeAway’s marketing spend by 50 percent through search engine marketing, TV and offline campaigns. The biggest push for HomeAway, which doesn’t have much experience in marketing through Google, will be coming in the second half of the year.

Trivago, a hotel-search engine is renowned on its commitment to growth through marketing as it spent 87 of its revenue on marketing last year.

Overall, Expedia GAAP selling and marketing expense grew 22 percent to $1.27 billion during the first three months of the year.

Cramer pointed out that Expedia isn’t fearful of directing marketing dollars and other resources to growth areas.


The Expedia CEO expressed frustration with financial analysts on this point, saying analysts focus on margins while Expedia is willing to sacrifice margins for growth.

“It means we are not on a quarterly game,” Khosrowshahi said. “We are on a compounding game over the long term.”

The Expedia CEO repeated talking points on how three “M’s” are transforming the travel arena. Mobile is providing the company with information about customers in a “location context;” Messaging brings engagement and the ability to individualize marketing and product, and Machine Learning enables Expedia to strive to deliver “perfect” services for the individual.

Khosrowshahi, who immigrated from Iran to the U.S. with his family when he was 9 years old, criticized the Trump administration for damaging the American brand, although he said Expedia hasn’t felt much of the impact financially because of its marketing spend and diverse, global portfolio.

“The American Dream is stronger than Apple and Google and Microsoft times 10,” he said in urging the Trump administration to keep that dream alive.

The interview follows:


via Skift

May 3, 2017 at 10:36PM

Update: On New Planes, American Will Add Seats, Reduce Space

Update: On New Planes, American Will Add Seats, Reduce Space

Thinner seats are quickly becoming the industry norm, and while they may give back some space, frequent fliers complain of discomfort.

“Airlines put in more seats by using seats with less padding, so that’s not more comfortable for the customer,” said Gary Leff, the author of the travel blog “It’s less legroom and more uncomfortable seats.”

Not long ago, in the early 2000s, American advertised itself as the airline with more room throughout coach. Instead, the industry has had more success selling seats with extra legroom in new premium economy cabins, cramming the most-cost-sensitive passengers in tighter quarters in the back.

“The lesson was, only some people care enough about it to pay for it,” said Seth Kaplan, managing partner with the industry publication Airline Weekly. “Most people just want safe, cheap transportation.”

Whether other carriers will follow American’s lead remains to be seen. Many expect United Airlines to make a similar move, given that its president, Scott Kirby, was, until August 2016, the president of American Airlines. United Airlines declined to comment.

On similar 737 economy configurations, according to SeatGuru, United offers 31 inches of pitch, Delta Air Lines 31 to 32 inches and Southwest 32 to 33 inches.

American’s reward may be more revenue, but it could lose customers.

“Even if the average traveler doesn’t pay attention to this and has an uncomfortable flight, major travel buyers with corporate contracts care about the experiences their travelers have and the airline may risk losing lucrative business travelers,” Mr. Leff said.

Continue reading the main story


via NYT > Travel

May 3, 2017 at 06:51PM

Can We All Take A Moment to Give This Dad A Round of Applause?

Can We All Take A Moment to Give This Dad A Round of Applause?

Fly frequently enough and at some point you’ll lose the airplane lottery and wind up next to a small child? Will they scream when the cabin pressure changes? Kick your seat incessantly? Peak between them to say “hi” 10 or 20 times?

You can just never tell when it comes to kids, and parents are just as nervous about what may come as the passengers they sit near. Some bribe their fellow travelers with little bags of candy, some hand out complimentary ear plugs, and some do what this dad did:

That’s right. This dad is doing his best to tire the mid-flight temper tantrum right out of his son by letting him try to walk up the escalator backward.

We don’t know what airport this is from, or how long they were at it. We’re just glad this dad put in the effort and we really want to know if it worked.


via Frugal Travel Guy

May 3, 2017 at 05:28PM

Focus: Dragons instead of stars bring Chinese Travelers to the door of Hotels and Restaurants

Focus: Dragons instead of stars bring Chinese Travelers to the door of Hotels and Restaurants

The ““Feel Like Home”” ( is the world’s first website aiming exclusively Chinese travelers, helping hospitality professionals (hotels, restaurants etc) throughout the world, to make the necessary changes to their businesses to adapt to Chinese customers, making their experience in a foreign country as pleasant as possible.


via Breaking Travel News

May 3, 2017 at 03:48PM

Financial Advice for Frugal Travelers (From Apps)

Financial Advice for Frugal Travelers (From Apps)

While we all enjoy having money, actually managing your money can be a very time-consuming and confusing affair. Thankfully, having the right apps on your smartphone can be like walking around with your very own financial advisor in your pocket. While some credit card companies offer their own apps (such as Chase’s which is great for those with a Chase card like the Sapphire Preferred) it’s always good to have some that offer more general budgeting assistance. Here are some of the most helpful and easy to use financial apps (for both Android and iOS) that will making banking a breeze. Best of all the basic model for all the apps is free!


This app is ideal for people who don’t like to spend much time thinking about how to save. You hook Digit up with your checking account and the app periodically checks your accounts to see if you have tiny amounts of money –as small as $2–that you could afford to transfer to your Digits savings account. Little by little you will be building up savings in the background that can eventually lead to big savings over the long run. It’s the passive way to save!

Credit Karma

We talk a lot about credit scores at the Frugal Travel Guy and there are few things more important than your score when it comes to success renting an apartment, applying for credit cards or getting a mortgage or loan. This app compiles your credit score from Equifax and TransUnion and keeps you up to date about any changes in your personal credit rating. It also educates you about what your score means and recommends products and credit cards based on your score. It’s also a great tool to monitor your score to make sure there is no fraudulent activity.


Considering how many bank accounts, loans, PayPal accounts and credit cards most of us have, it’s no wonder that it can be incredibly difficult to have an accurate overview of how we are doing financially.

Mint simplifies all your money matters by connecting to all your banking and credit institutions and providing you with an instant, detailed economic overview of your life. You’ll essentially have a complete overview of every aspect of your financial life in the palm of your hand.


Have you ever wondered how much you truly spend on restaurants, clothing or gas? Do you find yourself wondering where the heck your money’s gone at the end of each month? Well wonder no more. Spendee gets to the minutia of your daily spending by keeping track of where you spend your hard-earned cash.

It also gives you the option of synching the app to your bank account of just entering your spending manually. Knowing how much those daily lattes are costing you could be just the kick you need to stop spending mindlessly.


If you’re the reliable type who often finds that you’re the one paying at a restaurant while your friends promise to pay you back later, this app is for you. This digital wallet makes it easy to send and receive money between friends and to keep track of who owes what. It takes the pain out of dividing up a bill at the end of a meal. It’s easy to set up and can synch directly with your bank account.


via Frugal Travel Guy

May 3, 2017 at 03:48PM

A New Robot Can Drill Through A Skull in Under Three Minutes

A New Robot Can Drill Through A Skull in Under Three Minutes

The drill in action.
The drill in action. University of Utah/Used with Permission

Forget highly paid surgeons, the future of drilling into people’s skulls is going to the robots, and thanks to a new type of drill developed at the University of Utah, they can now do it 50 times faster than a human with a hand drill.

According to CNN Tech, medical researchers looking to improve the process of drilling through a patient’s skull during surgery have created a new automated tool that can complete the process in just two and a half minutes. A human surgeon usually takes around two hours to complete the same process with a hand drill.

This dramatic improvement is not just a timesaver, but it is also safer in some respects, as it limits the amount of time the patient needs to have an open wound.

The drill charts its path through the delicate geography of the skull based on data collected from CT scans, which create a map and allow the $100,000 drill to avoid things like nerves or the sinuses. A doctor is still required to stand by and monitor the drill’s progress.

While it is not available for widespread use, the researchers are hoping it can become commercially available soon. Just one more skilled robot to fear.


via Atlas Obscura – Latest Articles and Places

May 3, 2017 at 03:34PM

China Is Building a $3 Billion Medical Tourism Hotspot

China Is Building a $3 Billion Medical Tourism Hotspot


China is betting big on medical tourism by building a major new hospital complex on Hainan. Construction of Evergrande International Hospital. Bloomberg

Skift Take: Medical tourism is a big business, and China is looking to appeal to wealthy Asian patients who have to travel for care.

— Andrew Sheivachman

On the hilly and tropical island of Hainan, local officials and companies are investing billions of dollars to transform a string of riverside villages into a medical tourism destination.

Their aim? To lure wealthy Chinese patients, who might otherwise venture overseas, to this province in the South China Sea known for its beach-front resorts. To do so they are making an unusual promise: The hub will bring in cutting-edge treatments for diseases like cancer that are available abroad, but don’t yet have regulatory approval in China.

There’s plenty of demand. The travel site estimates about half a million Chinese traveled abroad for medical services last year. Millions are dying from cancer and heart disease, but regulatory bottlenecks have slowed approvals for the newest international therapies. Chinese hospitals are overflowing, and affluent jet-setters prefer Japan for physical check-ups or the U.S. for genetic screenings.

In 2013, the provincial government of Hainan, often known as China’s Hawaii, earmarked more than 1,600 acres of fertile farm land along a river flowing to its eastern coast for a medical tourism hub. Since then fishing villages and rice paddies are slowly being replaced by palm-tree-flanked driveways. The zone’s first hospitals are opening their doors this summer, the effective beginning of this medical experiment.

Local officials say businesses have already committed to spending 23 billion yuan ($3.3 billion) for 27 projects ranging from hospitals to plastic surgery clinics, with dozens more awaiting approval. The mission is partly to “retain domestic consumption,” the government body managing the Hainan Boao Lecheng International Medical Tourism Pilot Zone said in e-mailed comments.

New Medicines

Among the investors are Beijing-based Ciming Health Checkup Management Group and Guangzhou-based medical services firm Evergrande Health Industry Group Ltd., which is being advised by Boston’s Brigham and Women’s Hospital, a teaching hospital of Harvard Medical School.

In an early example, the zone’s Chengmei International Health Center imported 24 vials of the Merck & Co. cancer drug Keytruda for six patients under the special access channel last October, the government says.

The medicine is approved in the U.S. and elsewhere, but remains unavailable in the mainland. The special permits by the Chinese regulator only allow for a small amount of the drug to be used in the tourism hub, and it can’t be distributed elsewhere.

Merck in a statement said it’s conducting clinical trials on Keytruda in China and doesn’t sell the drug in the country. The China Food and Drug Administration and Chengmei didn’t respond to a request for comment.

Ghost Towns

By 2025, the hub’s managers want to draw more than one million tourists a year on health-related visits.

Still, China has a patchy record of managing specialized economic zones. Centers like Shenzhen, the fishing-village-turned metropolis, have thrived. But others have had a quick boom and bust, like the Caofeidian industrial zone in the northeast, which ended up as a ghost town.

The Hainan medical hub’s relatively remote location and the country’s shortage of qualified doctors make it harder to draw patients. Competition for medical resources is fierce, said Chen Bo, associate partner at consultancy McKinsey & Co.

“Building health-care capabilities there will require attracting excellent talent to work and live in the pilot zone, and good doctors are already badly needed in China’s major cities,” said Chen.

On a recent visit, the area still had the feel of an underdeveloped backwater, showing the challenges to transforming it into a flourishing tourist center. It is dotted with semi-finished hospitals that remain under construction, without medical equipment inside and prefabricated homes outside for construction workers. By the end of March, five facilities had begun operating on a trial basis, local officials say.

Evergrande has said it plans to spend 5 billion yuan on its cancer hospital there. Brigham and Women’s hospital in an e-mailed statement said it is serving as a strategic advisor as Evergrande expands its health-care network in China, helping the development of clinical programs and other aspects like training.

The hospital was slated to start operating by the end of June, according to a press release on Evergrande’s website. In late March, balloons and banners adorned the hospital’s front gate to celebrate a soft launch of the facility while a quick glance inside the bronze-colored building from a back entrance showed dark rooms with bare concrete walls, unpacked crates and cement piles.

Off the main street, behind the hospital pilot zone, was a side road yet to be paved with plywood and empty barrels of asphalt scattered around.

Evergrande didn’t respond to a request for comment on the new facility.

Li Peijuan, an analyst at Forward Industries Institute, a Chinese research firm, said the area can benefit from Hainan island’s environmental beauty, but the quality of service, the standard of medical technology as well as costs will ultimately be key to its success.

Foreign medicines have in the past taken longer to reach the Asian country partly because the regulator has been understaffed and so struggled to shepherd surging numbers of drug applications through its complex review process.

The China Food and Drug Administration is now in the midst of dramatic reforms to its approval system to reduce the so-called “drug lag” on the mainland. If that succeeds, Hainan will need to find other selling points.

“It was very appealing a few years back when approval of innovative drugs was relatively slow, but if the pilot zone can’t build full-fledged medical teams and business models in the next two to three years, its attractiveness will be greatly weakened,” said McKinsey’s Chen.


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May 3, 2017 at 03:32PM