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. Continued...
