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Not yet giving thanks.
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Author: Unknown
Section: Business
Travel and tourism
The industry has been bruised, but it will heal
WORLD Travel Market,
one of the tourism industry's biggest annual jamborees, opened in
London on November 12th. No sooner had delegates begun to compare notes
on how bad their business was than news reached them of the crash of
American Airlines flight 587 shortly after take-off from New York's JFK
airport. All their worst forecasts instantly dipped further into gloom.
The tourism industry
has known nothing like this since it became a recognised business. The
biggest impact is in America, where fears of recession and terrorist
attacks have emptied flights, despite cuts in capacity in September.
Although the airlines are using just four-fifths of their capacity,
their planes are only 66% full. They need to be 88% full, on average,
merely to break even, says Randy Baseler, vice-president of marketing
for Boeing's civil-aviation arm. This week, America West became the
first carrier to ask for a loan guarantee under the federal rescue plan
put in place after September 11th. Airlines in America are now expected
to lose more than $7 billion this year.
For American
Airlines, the country's largest carrier, this week's crash--its third
in two months--is a severe blow. It comes just as it and other airlines
were dusting off plans to cut fares and lure back travellers. Early
indications pointing to an accident at least spare the airlines a long
period of uncertainty in which travellers stay away for fear of a fresh
wave of attacks.
Before this week's
crash the Travel Industry Association of America (TIA) was already
forecasting (optimistically) that overall business would be down by
only 6% over the traditionally busy Thanksgiving weekend which starts
on November 22nd. It has not yet revised its forecast in the light of
the crash, but it has postponed (by a week) a $20m national advertising
campaign that had been scheduled to begin on November 14th. The ad
features snippets from recent speeches of President Bush exhorting
Americans to live their lives as normal.
By some measures, the
crash came just as the first signs of recovery were appearing. The
TIA's most recent survey of travel confidence showed that the number of
Americans planning to take leisure trips in the next six months had
risen to its highest since September 11th. Many are being lured by the
discounts that hotels and airlines are being forced to offer. Stay a
night at an American Holiday Inn, for instance, and you get a second
night free. Even top-of-the-range hotels such as the Plaza and the
Carlyle in New York have very special offers. For some, pricing is
based on what a customer is prepared to pay.
Outside America, it
is Muslim countries that have been hardest-hit. Travel-industry people
in Istanbul say that foreign visitors to the Turkish city in the past
two months are 50-60% down on the same period last year. In Indonesia,
1.3m tourists cancelled trips in the month after September 11th. Even
mainly Hindu Bali is bereft, with once lively temple guides reduced to
begging. As for Egypt, its stand at the World Travel Market was at
times attracting even less interest than that of Belarus.
The industry's pained
cries for government help are increasingly being heeded. Egypt is
subsidising charter flights into the country, and Mexico has eliminated
sales taxes on conventions. Some, though, worry about how all this is
going to distort business. Charles Gurassa, boss of the Thomson Travel
Group, part of Preussag, a tourism giant, says it should not be "an
opportunity to give state aid to those who are already struggling, and
always will be." Even without aid, distortions are appearing: cruise
ships and hotels are offering deals at well below cost--and in the
process forcing small travel companies out of business.
When the weak and
over-leveraged flounder, there are always financially stronger sharks
circling. Several parts of the industry are likely to see further
consolidation in the difficult months to come, although Francesco
Frangialli, secretary-general of the World Tourism Organisation, points
out that further consolidation in some areas, such as package tours for
Europeans, might come up against objections from antitrust authorities.
Leading Hotels of the
World, a New York-based group, has designed a scheme to protect its 380
independent luxury hotels from the clutches of large predators. Welf
Ebeling, the group's chief operating officer, says it has set up a
trust with a private-equity firm and other investors to help endangered
members through temporary financial difficulties.
Meanwhile, firms
everywhere are trying to cut costs, to reassure customers about
security, and to persuade suppliers to be more flexible over pricing.
Come next summer, the sun may be shining again. The industry has proved
remarkably robust in the past, and as Mr Ebeling says: "People today
consider it to be their birthright to be mobile."
PHOTO (COLOR): It's a desert out there
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