Hotel Online Special Report

Hoteliers Worry as War, Economy Hit Bookings; 
A Weak Tourism Industry Threatens to Get Weaker
By Sandi Cain 
April 2003

Stung by lingering effects of the terrorist attacks and a weak economy, Orange County's tourism industry had hoped 2003 would be a turnaround year.

Those hopes seem to be eroding along with the prospect of a quick war in Iraq.

Though spring break has just begun and vacation season is on the horizon, war effects are being felt at the county's hotels and visitor attractions, where short-term booking has become the norm.

And the corporate outlook isn't any better.

"I'm looking at a scary April" for corporate bookings, said Bill Allison, director of sales at the Westin South Coast Plaza in Costa Mesa.

Business travel, weak since the terrorist attacks, has continued to soften, though hoteliers and travel agents say massive cancellations haven't materialized-yet.

Travelers, they say, are playing a game of wait-and-see in firming up travel plans. No conventions have been cancelled at the Anaheim Convention Center as of last week.

A few hoteliers even say business has been up so far this year. But they all know that could change any time. The only thing certain, they say, is uncertainty.

"Obviously the war's going to have an impact," Allison said. "We're already starting to feel it."

Allison said it's too early to determine summer leisure trends, but on the corporate side, future bookings are down about 20% from a solid first quarter. Companies such as Cypress-based Mitsubishi Motors North America and Costa Mesa-based FileNet Corp. have implemented travel restrictions that put a damper on corporate travel, he said.

About half the member companies of the National Business Travel Association have restricted travel to high-risk areas and about a quarter of them have eliminated all but the most essential trips.

For the week ended March 22-the first week of the war-overall nationwide hotel occupancy was down 5% vs. a year earlier, according to Hendersonville, Tenn.-based Smith Travel Research.

Hotel bookings are expected to remain 5% below prewar projections and the prospects for summer leisure travel appear dependent on the length of the war and its aftermath.

The Hilton Anaheim-the Southland's largest hotel-is hoping for a 2% increase in vacation business during spring break thanks to earlier promotions, said Edd Karlan, director of sales and marketing.

That business was bolstered last week by college basketball fans in town for the "March Madness" tournament at the Anaheim Pond.

The Hilton hosted No. 1-ranked Arizona as well as a crew from ESPN TV. But Karlan said cancellations of future reservations have increased about 3% since the war began. Still, the downturn isn't nearly the shock post-Sept.  11.

"People can travel now, whereas they couldn't after Sept. 11," Karlan said. "The big question now is whether they want to."

Tom Jackson, president of Santa Ana-based World Travel Bureau Inc., thinks they do."People aren't going to not travel," he said.

Some people have changed their plans, he said, rather than cancel entirely.  One client substituted a trip to San Francisco's Chinatown and the Northwest for a planned trip to China.

That's not unusual in this climate, said Carol Thorp, spokesperson for the Auto Club of Southern California in Costa Mesa.

"People will wait until close to the moment to see what they're going to do," she said.

At the Ritz-Carlton Laguna Niguel, director of sales and marketing George Munz said he might have lost more business from the recent blizzard in Denver than from the war so far.

"If the war goes on another month, people might rethink their plans," he said. "Right now, it's pretty much like the prewar climate."

Transient business is up at the St. Regis Monarch Beach Resort & Spa, officials say, with fewer cancellations than a year ago. And the one-month old Montage Resort & Spa in Laguna Beach had its best one-night occupancy the weekend after the war started.

But Thorp said cancellations could come later if the war is prolonged.

A January survey from Price-waterhouseCoopers' Global Hospitality unit found that the longer the war, the longer the recovery.

"It will take until the fourth quarter of 2004 to reach 1995 levels of occupancy," said Bjorn Hanson, a partner in Pricewaterhouse-Coopers' Global Hospitality group in New York.

On a national level, occupancy last year was 59%, its lowest point in 31 years. That's enough to make hoteliers in the hardest-hit areas wistful.

"I'm almost nostalgic for the days of the energy crisis," quipped San Francisco hotelier Chip Conley, at the recent California Conference on Tourism in San Diego.

In OC, average occupancy was 66% last year, but only 59% this January, despite a busy convention calendar.

Terrorist warnings and speculation about terrorist targets that include popular visitor spots such as Disneyland aren't likely to bolster visitor numbers this summer.

Nor will an expected 8% drop in international visitors. Travel from Japan-where consumers tend to be risk-averse-is especially susceptible.

Hanson told a recent convention of meeting planners that there is "statistically significant" evidence that hotel occupancy declines every time a federal terrorist alert is issued.

Walt Disney Co. Chief Executive Michael Eisner in early March told CNBC there was an "immediate impact" on the company's theme park attendance when the terrorist alert level was raised to "orange."

Disney recently cut its profit look for the year, in part on lower theme park attendance from global tension.

The impact was somewhat mitigated in Anaheim by a regional audience that makes up as much as half of its annual attendance. But the recent declaration of a 'no-fly zone' over Disney parks added to public jitters.

A Disneyland official said the no-fly zone created more confusion than cancellations, with some people believing the airports were closed.

Disneyland Resort spokesperson Jacquee Polak said weekend visitors continue to help Disneyland's numbers.

"The uncertainty is having an impact just like in every other portion of the tourism industry," she said. "There's some reluctance to make plans very far in advance. Weekend plans are not atypical."

Another potential problem: gas prices.

Since the terrorist attacks, state tourism promoters have targeted the regional drive market, defined as a drive of eight hours or less. While the strategy initially worked, $2.50-per-gallon gas prices could be a big factor.

Whether gas prices will dampen even the regional market's enthusiasm for travel remains to be seen, but AAA's Thorp doesn't think so.

"People didn't stop driving on vacation the last time gas prices were high," she said.

And this time they may have fewer choices.

John Dekker, manager of Carlson Wagonlit Travel in Huntington Beach, said people are worried about struggling airlines.

Recent bankruptcy filings, layoffs and schedule reductions in the airline industry have resulted in fewer leisure bookings, Dekker said, as travelers hesitate to book on a carrier that might go under.

A three-month war would result in a 15% dip in air traffic during the war, according to the Air Transport Association of America, a Washington, D.C.-based trade group.

One positive for OC: the Department of Justice ranks Anaheim-the county's visitor and convention hub-as the safest U.S. city of its size for tourists.
Disneyland Resort President Cynthia Harriss said tight security is a plus in today's environment.

"It's important to be visible and clear about your safety and security," she said.

Sandi Cain is a freelance writer and contributor to the Orange County Business Journal and meetings industry
publications. She specializes in hospitality, tourism and travel. Cain holds bachelorís and masterís degrees in education from Kent State University in Ohio, where she majored in social studies. A former high school teacher, she has written for niche-market sports publications in the U.S., England and Australia and formerly worked in both the printing and high-tech industries. A Cleveland, Ohio native, Cain hasbeen a resident of Laguna Beach since the late í70s. She enjoys travel, gardening, reading and spoiling her three cats.


Sandi Cain
Laguna Beach CA

Also See Budget Ax Threatens Orange County's Tourism Comeback / Sandi Cain / February 2003
Pacific Islandia California Inc., Owner of the 489-room Sheraton Anaheim Hotel, Files for Bankruptcy Protection; Bankruptcy Over Dispute, Not Results / Sandi Cain / February 2003
Security Detail; High-Profile Meetings Have Police on Special Alert / Sandi Cain / January 2003
New Hotels, Remodelings Spur Growth in Orange County Meeting Space Amid Slow Recovery / Sandi Cain / January 2003
Security Detail; High-Profile Meetings Have Police on Special Alert / Sandi Cain - January 2003
Tarsadia Hotels Building Residence Inns in Garden Grove, San Diego, Buys the 201-room Crowne Plaza in Las Vegas / Sandi Cain / Dec 2002
Bucking Convention - Anaheim Center Expansion Seems to Pay Off as Other Cities Struggle / Sandi Cain / Nov 2002
Ayres Breaks Ground on L.A. Hotel, Expanding Two Others / Sandi Cain / Oct 2002
Orange County California's Hotels, Convention Center Upbeat Despite New Competition and Weak Economy / Sandi Cain / Aug 2002
Ritz, Surf & Sand, Vie With Beach Resort Newcomers Along California's Orange County Coast; Almost 1,000 rooms Set to be Added / Sandi Cain / Aug 2002
Orange County California's Hotels, Convention Center Upbeat Despite New Competition and Weak Economy / Sandi Cain / Aug 2002
Montage Founder, Alan J. Fuerstman Sees Big Things for Laguna Colony Luxury Hotel, Acquired from Marriott International for $190 million / Sandi Cain / July 2002
Orange Countyís $6 billion Annual Tourism Industry Shaking off the Downturn / Sandi Cain / May 2002
The Orange Riviera - New Luxury Hotels and Renovation Projects Transforming OCís Coast / Sandi Cain / May 2001 
Orange County Hoteliers Hope for a Solid Summer Season to Regain Momentum / May 2002 / Sandi Cain
Hotel Brokers: From Sales to Consultants / Sandi Cain / Jan 2002 
Tourism Officials Focus on Security of Events and Sites as Key to Attracting Visitors / Sandi Cain / Jan 2002 
Orange County Travel Agencies Bear Brunt Last Week, Waiting For Fallout / Sandi Cain / Sept 2001 
St. Regis Monarch Beach Resort & Spa Opening Adds to Competition in South Orange County California / Sandi Cain / Aug 2001 
The Orange Riviera - New Luxury Hotels and Renovation Projects Transforming OCís Coast / Sandi Cain / May 2001 
Ayres Hotel Group Expands, Rebrands / Sandi Cain / March 2001
Orange Countyís Hoteliers Relieved as Anaheim Convention Center Expansion Boosted Occupancy and Rates During Past Year / Sandi Cain / May 2001
Indomitable Disney / Bad News Doesnít Tarnish the Mouse; Slowing Economy Another Matter /  / Feb 2001 
Orange County Hotels Poised for Meetings Growth; Newcomers Help Bolster Total Space; Disneyland Hotel Still No. 1 / Sandi Cain / Jan 2001 

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