Dual threats of terrorism and recession knocked travel-related stocks for a second day while businesses from hotels to travel agencies tried to get their bearings in a shaken nation in which people are sticking close to home.
Even as air travel returned to near-normal levels-- though many flights have far fewer travelers--signs point to the most difficult period since the gulf war for the $600 billion travel industry.
"This the most challenging time in recent memory," said Ty Helms, vice president of sales at Hyatt Corp., which has about 65,000 hotel rooms.
Road warriors who once hopped on short flights between major cities will be more inclined to drive or take a train rather than line up at airports two hours early, analysts say. Given the added costs, businesses will be far more selective about how many people they send to conventions, meetings and trade shows.
"There's going to be some very big changes in both business and leisure markets," said hotel industry consultant Ted Mandigo in Chicago.
Mandigo said the outlook through fall is anything but bright for the hotel business. "We'll see bankruptcies, reorganizations and sales" of weaker hotels, he said.
The fallout is also expected to be felt by hotel employees, who are already being laid off, although not on the same scale as at airlines, said John Fox, senior vice president at PKF Consulting, a hospitality specialist.
Bjorn Hanson, head of PricewaterhouseCoopers' global hospitality group, told clients after the attacks that he expected revenue per available room to fall 3.5 percent to 5 percent. He warned that "lodging demand took a full year to recover after the Persian Gulf war" in 1991.
Helms said hotel groups like his were already speaking to suppliers to try to cut costs where customers would not easily see changes. The abruptness of the cancellations after the terrorist attacks was surprising, he said, adding that "85 percent of the accounts that have canceled are in September."
Initially, hotels likely to be hit the hardest are luxury properties catering to international travelers, Mandigo said. In Chicago, that includes such properties as the new 339-room Peninsula Hotel at 108 E. Superior and the 311-room Le Meridian, 520 N. Michigan, which opened in March.
For Chicago's convention business, last week's terrorist attacks will hurt the city's busiest season--September and October. Although only one convention has been postponed so far at McCormick Place and Navy Pier, concerns remain about how many people will still attend the various events.
"I don't think we'll see a more normal travel pattern, if there is such a thing, until we reach the convention season in the spring," said Mandigo. "This fall's convention season is gong to be a challenging one."
Agencies flooded with calls
Online travel agencies--among the brightest lights in the e-commerce world before the attacks--continued scrambling Wednesday to meet high call volumes from customers canceling or changing flights.
"[Online travel] was one of the areas of e-commerce that was growing very fast and becoming profitable," said Morningstar analyst David Kathman. "All of these companies will have to adjust. If air travel stabilizes at a lower level than before, presumably these companies can adjust to that new reality. But it'll take some time."
Airline tickets were expected to generate $10.7 billion, or about 64 percent, of the total $16.7 billion in online leisure travel sales anticipated this year, according to Forrester Research, which is expected to release a revised estimate as early as Thursday.
"Everyone will see a falloff in airline tickets sales," said Forrester analyst Henry Hardeveldt. "Many business travelers will decide to opt for the railroad [for shorter trips]. We'll also see others opt for videoconferencing."
On a bright note, airlines will look increasingly to major travel Web sites such as Expedia, Travelocity, Orbitz and Priceline to promote special offers and to hold down the costs of issuing tickets, Hardeveldt said.
Online travel bookings are down precipitously in the wake of the attacks. Expedia said Monday's bookings were about 45 percent the level of a week earlier (one day before the attacks), and Priceline said daily bookings Tuesday and Wednesday were running between 60 percent and 65 percent of levels just before the attacks.
Both Travelocity and Chicago-based Orbitz, which is privately held, are controlled by airline entities: Travelocity, by airline reservations system Sabre Holdings Inc., and Orbitz by five major airlines.
Expedia is majority-owned by Microsoft Corp., which is selling its stake to USA Networks. Expedia said Wednesday that it was continuing to work to complete the acquisition, and a spokeswoman for Expedia declined to comment on whether terms of the deal will change.Copyright © 2014, Los Angeles Times