Posted on: Sunday, October 31, 2004

6.9 percent gain predicted for U.S. travel spending

By Jerry Hirsch
Los Angeles Times

The U.S. travel industry could be en route to its best year since the Sept. 11 terrorist attacks. Hotels are filling up. People are packing planes. Even Europeans are back, lured to the United States by the cheap dollar.

"In the post-9/11 world, everyone thought the sky was falling," said Carl Winston, director of the Hospitality and Tourism Management program at San Diego State University. "But in reality, the long-term health of this industry rises and falls with the economy."

If that's the case, the economy must be improving. The Travel Industry Association of America estimates that people in the United States will spend $592.6 billion on travel this year, up 6.9 percent from 2003. Furthermore, according to the forecast, for the first time since 2000, virtually every segment of the industry is seeing gains.

That a recovery is under way was evident last week when American Express Co., the fourth-largest U.S. credit card issuer, attributed a third-quarter profit increase to customers spending more on travel. Net income was up 14 percent to $879 million, or 69 cents a share, from $770 million, or 59 cents, in the year-earlier period.

What's more, Hilton Hotels Corp. said last week that its third-quarter earnings jumped 79 percent to $61 million, or 16 cents a share, compared with $34 million, or 9 cents, in the same period a year earlier. Revenue rose 9 percent to $1.03billion.

The boost for Hilton was what the company called "vibrant summer travel demand" that could be felt across the nation. The company said Hilton-owned hotels in New York and Boston showed particularly good results, in part because that's where the Republicans and Democrats held their political conventions. But Honolulu, Washington, San Diego, Portland, Ore., and Anchorage also proved to be strong markets. Hilton said that even San Francisco, hurt by a slump in the technology industry, showed signs of improvement.

"A company like Hilton is particularly well situated for this recovery, because it has so many large gateway properties in the major cities and tourist resorts," Winston said.

In Hawai'i, visitor arrivals reached 5.2 million for the first nine months of this year, an 8.7 percent increase over the same period in 2003. Visitor spending through September totaled $7.7 billion, up 6.5 percent. Hawaii's hotel occupancy rate in September rose to nearly 75 percent, in line with the high levels seen in 2000 and 1990.

Hilton expects more good times ahead, in part because it isn't as dependent on bargain-hunting leisure travelers as in recent years. Having more business travelers makes it easier to raise room rates, said Marc Grossman, the chain's senior vice president of corporate affairs. The company is seeing a turnaround in the convention business, he said, which will "really help next year, because we own a lot of these big 1,000-room hotels that cater to groups and conventions."

But tourism is only part of the story. According to the travel association, 143.7 million work-related trips will be taken this year, up 4 percent from last year. That will be below 2000 levels but will represent a healthy gain, said Suzanne Cook, the association's senior vice president of research.

Not all segments of the industry are performing equally well. Airlines may be selling more tickets, but many carriers are losing money because of high fuel expenses and lingering labor issues.

Domestic passenger volume is up almost 5 percent year to date, to 363 million passengers, according to the travel association. Still, that's down 11 percent from four years ago.

On the other hand, international air travel, to and from the United States, has soared, helped by the low value of the dollar, Cook said. Passenger volume has risen 15.4 percent to 44 million, slightly above 2000 levels.

As for hotels, there's no doubt they're having their best year since 2000, said Bobby Bowers, a spokesman for Smith Travel Research in Hendersonville, Tenn. Revenue per available room is up 7.5 percent through the first nine months of this year nationally, after a decline in the first nine months of each of the past three years.

Average daily room rates have swelled 3.8 percent over the past year to $85.52, Bowers said. One reason is that there aren't enough new rooms to meet the growing demand.

Even with mounting evidence of a recovery, lodging companies have been hesitant to build, Winston said, and it takes years to find a location and put up a hotel.