Europe's tourism industry still suffering from Sept. 11

By David Altaner
Bloomberg News Service

LONDON — European travel companies such as Accor SA, the French owner of Red Roof Inns, and Preussag AG, Europe's largest tourism firm, aren't showing much improvement since trimming their profit forecasts after the Sept. 11 attacks.

"No one has talked about a recovery at all," said Rebecca Newstead, a fund manager who follows travel and retail stocks at Rothschild Asset Management, which controls investments worth $4 billion.

With the U.S. economy shrinking and Germany teetering on recession, tourism-related businesses are facing the worst slowdown since the Gulf War, analysts and executives said. Still, many travel stocks are starting to recover. Some investors are ignoring the "tough" environment the companies face, Schroder Salomon Smith Barney said in a report on the hotel industry.

Accor, Europe's largest hotel operator, has said it doesn't expect profit to grow this year. Hilton Group Plc said revenue per room fell 11 percent in September and October. And the Swiss government said the nation's hotels face the biggest drop in guests in more than five years.

"We're living through the worst crisis we could have," Accor Chairman Jean-Marc Espalioux, said at a recent shareholders' meeting. "There's an economic slowdown in all regions and a strong psychological element discouraging people from traveling. It's without precedent."

"Things have not changed a great deal," said Jeremy Probert, a spokesman for Whitbread. "Were we to have seen a minor improvement, that could equally well go down again."

London, Paris and other European hotel markets served by the biggest airlines probably won't rebound for another six months as international visitors stay closer to home, according to a report by Andersen LLP.

Six Continents said profit at its hotels division fell by $25 million in the second half of September because fewer people are visiting cities such as New York and London after the U.S. terror attacks.

Package-tour operators are also suffering. At Club Mediterranee SA, Europe's largest, winter bookings have fallen 50 percent since the attacks. Shares of Club Med, which announced hundreds of layoffs last week, have lost more than half their value this year.

Germany's Preussag, which owns Europe's biggest chain of travel agents, expects bookings between November and February to drop about 10 percent, said spokesman Herbert Euler.