Travel industry squeezed as America tightens belt

NEW YORK (Reuters) - As Americans evaluate and pare back their discretionary spending for the remainder of this year, the travel and leisure industries are feeling the squeeze.

Companies throughout the sector -- including hotel, cruise ship, theme park and gambling companies -- have all warned in recent weeks that their businesses have slowed or that things could get worse next year.

"The deteriorating outlook for the economy is impacting travel habits and spending, and hotels are expected to experience reduced occupancy levels, and to a lesser degree, some room rate erosion through 2009," said Scott Berman, principal at consulting firm PricewaterhouseCoopers.

For hotels, the picture looks particularly grim.

PwC expects that a key measure of the hotel industry's health, revenue per available room (RevPAR) to fall 5.8 percent next year, following this year's estimated 0.8 percent decline. That would be the industry's first back-to-back decline in the widely watched measure since 2001-2002.

PwC said demand for hotels in 2009 is forecast to fall by 2 percent which, when coupled with an increase in supply, is expected to reduce occupancy levels to 58.6 percent, the lowest rate of occupancy since 1971.

"This is an unprecedented period of decline in recent history," hotel industry veteran Bjorn Hanson of New York University said in an interview. "This just is unlike any period we have to compare."

In recent weeks, hotel companies have given details of the slowdown.

Marriott International Inc (MAR.N) said third-quarter profit fell 28 percent as its timeshare business slowed, and the news was not any cheerier about 2009 either.

Marriott said it may delay or cancel some projects in the current quarter and lowered its forecast for full-year 2008 earnings. Marriott's shares have declined to just under $19 on Monday from $37.88 in April.

Starwood Hotels & Resorts Worldwide Inc (HOT.N), operator of the W, Sheraton, and St. Regis brands, reported a lower quarterly profit and cut its full-year forecast.

Starwood said it would slash costs, cut jobs and scale back capital spending. Starwood's shares have fallen to just over $18 on Monday from $55.99 in March.

"With timeshare, just as with hotels, the unfavorable trend is unprecedented," said Hanson.

NO CARNIVAL

The world's two biggest cruise operators, Carnival Corp (CCL.N) and Royal Caribbean Cruises Ltd (RCL.N), have also warned of a slowdown.

Carnival said on Oct 31 it would suspend its quarterly dividend due to uncertainties in the global economy.

"Looking at the first half of 2009, occupancy levels for advance bookings lag the prior year," Carnival said.

A few days earlier, Royal Caribbean also warned that bookings were down.

"Already we can see in October a lot fewer bookings," said Robin Diedrich, cruise industry analyst at Edward Jones.

Diedrich said that although her long-term outlook for the cruise industry remains very positive, she expects "a softer year going forward."

The economic downturn hit Walt Disney Co's (DIS.N) quarterly results harder than expected, with the company last week reporting a sharp decline in hotel bookings.

Disney executives said attendance at its U.S. theme parks was down 1 percent so far in the current quarter and that bookings for the first two quarters of fiscal 2009 were down "a little under 10 percent" from last year.

Disney Chief Executive Robert Iger echoed comments by hotel company Wyndham Worldwide (WYN.N) CEO Stephen Holmes that with money being tight, consumers may now be taking "a wait-and-see approach" to booking trips.

Holmes said in an interview that customers are still traveling, but more people are booking trips at the last minute and some are cutting the length of their stays.

VEGAS TAKES A HIT

Casino companies in Las Vegas and other gambling centers have also taken a hit.

Shares of Las Vegas Sands Corp (LVS.N) plummeted last week after the casino operator's auditor said there are doubts about Sands' ability to continue as a going concern.

Las Vegas Sands' shares have fallen to under $7 on Monday from over $122 last December.

Sands' decline is a stunning reversal for the ambitious gaming company and its principal stockholder, billionaire Sheldon Adelson. Just last year the company opened the world's biggest casino in Macau.

Fellow casino operators Trump Entertainment Resorts Inc TRMP.O and Harrah's Entertainment Inc reported quarterly losses last week.

Even the business traveler, often the consumer that the travel industry can rely on, may not come to the rescue in 2009.

"Companies are saying that all travel has to be reviewed," said New York University's Hanson. "In the meetings part of the business, companies are saying 'We just can't afford these meetings, we'll hold them in-house'."