Travel Weekly - July 27, 2009

OPINION

Our glass-half-something economy

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As things got progressively worse and the world became immersed in 24-hour doom and gloom, I listened closely. I am not naive but choose to at least hope that those with the rosiest predictions will prove to be right. After all, if you can’t change a bad situation, you might as well at least hope for the best.

But when STR President Mark Loman-no, self-professed optimist of hotel industry analysts, announced that he was nearly doubling his projections for hotel revenue declines this year — just a few months after he and executives like Bill Marriott had whispered about signs of stabilization in the market — there was no denying that the relentless free fall in rates was taking a very serious and long-term toll on the industry.

In fact, the only chatter as hoteliers calculate their Q2 numbers is very loud concerns that things are going to get even worse for hoteliers before they get better.

“There are a number of things that keep me up at night,” Wayne Goldberg, president and CEO of

LQ Management LLC, was quoted by Hotelnewsnow .com as telling the

Midwestern Lodging Investors Summit last week. “I sleep like a baby: I wake up every four hours and cry.”

While the low rates spell great deals for travelers, they are devastating for hoteliers struggling to make debt payments.

In many major markets, leisure rates have now fallen below the “discounted” rates that businesses negotiated for themselves last year. That means that when companies rene-

’ve always been a glass-half-full person. As the stock market be-
gan crashing last year, I laughed at my husband when he sug-
gested we pull our retirement investments. Don’t worry, I said,
these things always turn around.

THE HOTEL BEAT

as low as $159. And Starwood recently announced a global 50%-off sale at its hotels.

At ski resorts, the newest numbers are just as bad.

In June, occupancy was down 14.5% and room rates were down 10.2% compared with last June, according to the Mountain Travel Monitor, which tracks ski resorts in the Western U.S.

Reservations taken in June for arrivals in the June-November period were down 15.7%, which mimics the booking patterns for the past six months.

And (surprise!) luxury, group and conference travel segments are weakest.

Mountain Travel also said that May-to-October business is continuing to show significant declines from last summer, and advance reservations are down 24%, while room rates are down 15%.

Even the travel industry, which has launched aggressive lobbying and marketing campaigns to get road warriors traveling again, is doing exactly what it’s trying to prevent: canceling meetings and offering webcast options.

Earlier this year, a resort conference went Web-only due to a lack of participation, and last month, the Americas Lodging Investment Summit offered a webcast of its “ summer update” conference from Los Angeles.

Considering the dismal state of hotel performance, you can’t really blame the industry for also cutting back on travel. But it’s hard to escape the irony.

Still, I try not to forget the possible good news: The hotel industry historically lags the rest of economy in both declines and recoveries.

gotiate their corporate rates this fall, they will be armed with data that will leave hotels little choice but to keep lowering rates.

The main culprit is the continued, dramatic drop-off in business travel, which fell off a cliff earlier this year when politicians and the media went after AIG for continuing with plans to hold a meeting at a luxury resort after taking billions of dollars in federal bailout funds.

The political rhetoric railing against junkets — greatly exacerbated when President Obama declared, “You can’t take a trip to Las Vegas or down to the Super Bowl on the taxpayers’ dime” — has eased, thanks in part to aggressive lobbying by the travel industry.

But its impact appears to be long-lasting and profound.

STR reported recently that meetings business was down 23% domestically, with luxury hotels being hit hardest.

One luxury hotel executive recently admitted privately

that the meetings business has been so bad that five-star hotels have lowered their rates to the point where they are competing with Hiltons and Sheratons in desperate hopes of being able to turn that into repeat business down the road.

Indeed, travelers can now find rates at luxury meetings destinations like Colorado’s Broadmoor for as low as $125. A new meetings package from Ritz-Carlton has rates

Jeri Clausing

Hotels Editor

Contact Senior Editor Jeri Clausing at jclausing@travelweekly.com.

LETTERS

Even paranoid agents have
real enemies: The airlines

It has become truly lamentable to read let- ters to the editor in which agency owners and staff complain about the bitter pill that has befallen the retail travel agency at the instigation of airlines and every other segment of the industry that has embraced the direct-distribution network of the Internet while assuring agents at dinners and travel shows that they are our partners.

Were one truly paranoid, it would give rise to suspicions that they certainly are not our friends when their own websites’ posted rates either undercut or match the fares

available to agents through the GDS networks. That effectively removes any means of motivating the traveling public to ask their local agencies to book the same trips or itineraries with a fee on top.

An insightful comedian would describe that as “the ‘duh’ factor.”

And now “private” airline fares appear on my GDS. I would have to book that same fare the public sees on the airline’s own website with no motivation (i.e., no commission). Just how much time must I spend researching prices to be competitive?

No, the big players in the industry are not interested in keeping retail travel agencies around unless the agencies, too, are “mega” and linked to major corporate accounts.

That airlines and travel websites continue to post quarterly losses of Draconian scope seems to be of little importance in executive suites where such mind-numbing and ultimately ineffective marketing strategies are created.

Paul Groman

Gramatan Travel Bronxville, N. Y.

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