Brunt Last Week, Waiting For Fallout
|By Sandi Cain
Staff Reporter Orange County Business Journal
Just three weeks after Orange County’s tourism industry expressed cautious optimism about business for the rest of the year, last week's terrorist attacks dashed many of those hopes.
Local travel agencies were among the first impacted by last week's events. When the World Trade Center and Pentagon were struck by hijacked jets, travel agency revenue—like that of many companies--came to a screeching halt.
With air travel grounded and clients strewn around the world like so
many rag dolls, local agencies were left scrambling to secure lodging and
transportation for stranded clients even as the future of their businesses
were in question.
A halt in air travel for two and a half days--and the onerous task of getting passengers moving again--comes on top of airline commission cuts and an overall slowdown in the travel business.
On average, agencies contacted for this story cited losses last week at their OC offices of about $15,000 each day planes remained on the ground—and that may be just the tip of the iceberg.
With the restoration of full airline schedules still in progress, many corporate clients have put a hold on all travel for anywhere from two to four weeks. And business travel normally weakens in November and December.
“The impact (of the crisis) is huge,” said Steve Sedgwick, president of First Class International in Foothill Ranch. “If you don’t issue (airline) tickets, how long can you stay in business? We’re preparing for the worst and expecting at least a radical slowdown until January."
Last week's events have prompted gloomy predictions about the onset of recession, lost sales and shaken consumer confidence. Still others contend those factors were in play already, and the fallout from the attacks themselves are likely to be felt in the short term.
But travel agencies say they've seen this before. Shadrick likened the situation to that of the Gulf War years a decade ago.
“Corporate business dropped by half,” he said. “That means revenue drops, but overhead doesn’t.”
Shadrick said he expects a steep downturn in travel for at least the next 90 days.
At Boeing Travel Management Co., which has an office in Westminster, Boeing Co. employees account for about 80% of business.
Even so, spokeswoman Carol Lawrence said workers at the company have been asked to avoid travel until the backlog of stranded planes and passengers is cleared.
Even then, she said, the demand for business travel is likely to decrease.
First Class International's Sedgwick speculated that agencies could become the front line for security in the future, possibly checking identification and watching for unusual behavior.
He said he also expects changes in airport screening procedures, where until now airlines have been responsible for providing security personnel.
“Airlines have been charging bus fare prices to fill seats for some
time,” he said. “At those prices, how much security can you afford to provide?”
One agent said she helped a group rent a bus to drive back to New York.
“The lack of information is the most frustrating thing,” said Paula Singleton, owner of Sunrise Travel in Mission Viejo, which specializes in the Hawaii market.
Singleton said her leisure clients so far have been willing to wait out the crisis and rebook for future dates—whenever those may be. But she worries that lingering uncertainties will hurt the agency later.
“The financial loss is devastating,” she said, “but the bigger concern is the lack of future bookings (while air travel is halted).”
For the Anaheim Convention Center and OC hotels, cancellations are the bigger worry.
Just one day after the attacks, three conventions had been canceled
at the Anaheim Convention Center, a pattern echoed across the country.
Elaine Cali, director of communications for the Anaheim/Orange County Visitor & Convention Bureau, which books groups into the convention center, said the cancellations were the result of air travel concerns.
“We’re going to take a short-term hit,” she said, “but people have to understand the human side of business, too.”
The conventions would have brought about 20,000 people to OC, accounting for thousands of stays at area hotels. And that leaves hoteliers scrambling, too.
Both the Hilton Anaheim and Towers and the Anaheim Marriott—the closest hotels to the convention center—suffered the loss of significant group bookings last week.
Each hotel had big blocks of rooms reserved for conventions that have been canceled.
Hilton director of public relations Patrick Hynes said Hilton Hotels waived all cancellation and early departure fees companywide and no cancellation charges will be imposed on groups booked through October.
At the Marriott, general manager Doug Watson said the hotel expects “a pretty sizable loss in occupancy in the next few weeks.”
Costa Mesa’s Westin South Coast Plaza had three groups cancel in two days—one for 140 rooms. One group—American Airlines—is expected to bring its training sessions back once the crisis is over.
“This will have a definite impact on revenue for the month,” said Bill Allison, the hotel’s director of sales.
But at the Irvine Marriott, general manager Ned Snavely said cancellations involved one-day conferences that will likely be rescheduled.
“It’s not an overwhelming number,” he said.
But Snavely said a further downturn in business travel is likely in the coming weeks.
“We expect to see a reduction of several points in occupancy and revenue loss,” he said.
Through July, Orange County’s hotels had an average occupancy rate of
75% this year.
Orange County Business Journal
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