Note to Congress: Don’t Forget This Economic Engine
November 14, 2008 | Uncategorized
As the recession builds in the US and Americans trim their budgets, discretionary spending will surely take the initial hit. That’s not good news for the travel and leisure industries.
Numerous companies throughout the sector — hotels, airlines, theme parks, cruise lines, casinos, you name it — have warned that bad times are to come in the year ahead.
Hotels will certainly take a big hit and the pain is already being felt. Since March, Starwood’s stock has fallen 68.5%, Marriott’s by 53%. If you think those declines are bad, the situation at the Las Vegas Sands is nothing short of horrific — it’s stock has plummeted more than 94 percent since last December, the latest hit coming last week following an auditor’s report concerning doubts about Sands’ ability to stay in business.
PricewaterhouseCoopers is forecasting that demand for hotels will fall by 2 percent, which on the surface may not appear to be significant. But when you factor in the increase in supply in hotel rooms, real occupancy levels will fall to nearly 58%.
“This is an unprecedented period of decline in recent history,” Reuters recently quoted hotel industry veteran Bjorn Hanson of New York University as saying. “This just is unlike any period we have to compare.”
Things aren’t much better in the cruise industry where Carnival’s bookings for 2009 lag bookings for the same time in 2008. Along with Carnival, Royal Caribbean has also warned about a slowdown.
Even at Disney, which had been weathering the early days of the recession fairly well since it had begun repositioning itself as a value-oriented, family-vacation experience, things are taking a turn for the worse. The company has just reported a sharp downturn in hotel bookings, and said that attendance at its US parks was down about 1 percent this quarter. Worse, however, is the fact that bookings for the first two quarters of fiscal 2009 are currently off about 10 percent. That’s a number that could grow depending on which way the economic winds blow with a new administration arriving in Washington.
And that’s exactly where all of this is going to land: in Washington. Needless to say, as the economy continues to disintegrate around us there are very few people, John McCain and a few others notwithstanding, who’d want to be in Obama’s shoes.
Many American industries need help at the moment. Although it’s the financial and auto industries that are getting the most play in the media at the moment, let’s hope that the new administration doesn’t close its eyes to the plight of the travel industry — and more importantly, wakes up to how this industry can help in some small way to turn around the economy.
Following Obama’s historic victory, Roger Dow, president and CEO of the Travel Industry Association (TIA), pledged that the industry would support the anew administration in improving the economy and bolstering America’s international image.
Since the industry is a major economic force in every state, and not only accounts for more than $700 billion in spending but also for employing one out of every eight US workers in one capacity or another, it is quite an economic force.
The US travel industry may not be the engine that will turn the economy around, but it certainly can be one of the locomotives that can help jumpstart it. Let’s just hope all those folks in Washington stop arguing partisan politics and get this train moving down the right track.
Jim Ferri
