Pain in a Pleasure Industry : Travel: The business tries to put ‘The Year From Hell’ behind it. For many firms, total relief might be years away.

The summer of 1992 looks more promising than last year’s recession-scarred season for the Westin hotel chain. So why isn’t Westin executive Jim Treadway overjoyed?

“It’s better than last year, but not as good as we had hoped,” said Treadway, president of Westin’s North American operations. While reservations are up from last year, the pace is only half what the hotelier had forecast.

“I think that our recovery will be very slow and it won’t really begin until late 1992 or early ‘93,” Treadway said. “Then it will be slow from that point forward too.”

For an industry that sells pleasure, the travel and tourism business is in a lot of pain.

It is suffering from many gloomy months when traditional travel patterns went haywire as tight-fisted consumers traded down on everything from hotel rooms to airlines. Low-price, no-frills charter airlines found themselves in a price war with the upscale, scheduled airlines. The Westin chain picked up customers who might have stayed at costlier Four Seasons or Ritz Carlton hotels, Treadway said. But Westin also lost some of its traditional customers to less expensive competitors.

“We have ourselves competing with chains that have not been ranked alongside Westin,” Treadway said.

Total relief might be years away for many firms. Many travel experts say that changes in travel habits and longstanding problems that were independent of the recession will loom over the industry long after the economy recovers.

For one, the lodging industry must cope with a 1980s building boom that resulted in an explosion of luxury hotels equipped with fax machines in guest rooms and an overall glut of rooms that will depress prices and occupancy rates for years to come, according to industry analysts.

“I haven’t seen any market where there wasn’t any heavy discounting, from first-class to budget motels,” said William J. Hoffman, president of Trigild Corp., a San Diego-based hotel consulting and management firm. “We have more rooms than we need. I think there will be very little growth for three to four years and modest growth after that.”

On the other hand, “what’s going on in our industry is nothing but good news for consumers,” Treadway said.

The airlines also faced a harsh reality this past year. American, United and other carriers delayed or canceled options for the delivery of billions of dollars of new aircraft over the next five years, and several weak carriers, such as Pan American World Airways, stopped flying for good.

“The sectors that suffered the most--the airlines and hotels--were those who made the greatest expansion plans,” said industry consultant Sarita Skidmore at Menlo Consulting in Palo Alto.

As a result, many do not see a return to the heady growth the travel industry enjoyed during the latter half of the 1980s.

“In no way would I look for a strong kind of rebound,” said James Cammisa, publisher of Travel Industry Indicators, a Miami-based research newsletter. “It may shock some people into the realization that the boom-boom years may be over.”

Even the anticipated pickup in the peak summer travel season this year won’t come easy. Many hotels, airlines, cruise lines and tour operators will have to continue a costly assortment of discounts and other deals to attract bargain-minded travelers.

Slower growth and reduced expectations, however, may look appealing to an industry ravaged last year by the recession and the Persian Gulf War. Anything, travel executives say, is better than 1991, which was dubbed “The Year From Hell” by one trade journal.

The economic slump has been so deep and long that consumers are ready to travel again and in a big way, said David Berins, head of Arthur Andersen & Co.’s hospitality consulting practice. He suggested that travel will benefit from pent-up demand as the economy recovers.

“Many people are going to be tired of spending their vacations in their back yard or on short weekends. There is really no reason to suspect that there won’t be strong growth in travel again,” Berins said.

What many industry officials fear most, however, is that travelers, particularly those on business, will hang on to cost-conscious habits and patterns adopted during the recession.

Despite the recession, people did travel. But they took fewer and shorter trips, drove instead of flew, dined at fast-food outlets instead of family restaurants and stayed with friends instead of checking into hotels.

Last year, summer travel set new records for brevity and frugality. Statistics show that a record 51% of all trips during June, July and August lasted one to three nights and that 84%--another high--were made by automobile, according to the U.S. Travel Data Center.

“There is a more sober consumer,” Skidmore said. “We are very much aware of the environment, we are recycling and we are very cost-conscious. These less materialistic attitudes are going to lead (the industry) to paying higher attention to value and experiences.”

When a traveler now takes a trip, he or she is more likely to ask, “What looks good to me?” rather than how it appears to others, said Douglas K. Shifflet, who runs a Washington, D.C.-based travel research firm. “They are looking for value and they will travel if there is a deal to be had.”

Consumer spending priorities might also force the travel industry to wait longer for business to return to normal and resume growing.

“When you come out of an economic downturn, consumer spending priorities are on primarily replacing durable goods,” Cammisa said. “If the washing machine broke or the car broke, you’ve got to fix it first. Travel doesn’t rank high on the necessities list.”

Perhaps the most upsetting and unexpected development during the recession was a drop in business travel. In 1991, business trips fell 8% while overall travel held steady, according to the U.S. Travel Data Center.

The decline in business travel was particularly painful for the airlines, hotels and car-rental firms. Business people traveling on expense accounts often pay top dollar for services, and the travel industry had long counted on growing legions of corporate customers to fuel growth.

“People had thought that business travel would have held up better than it has,” Shifflet said. But “they actually cut back faster than leisure travelers did.”

The recession showed business people that “maybe we can get by on a little less travel,” said Don Tatzin, a travel industry consultant with the firm Arthur D. Little & Co. in San Francisco. “Corporate travel managers are now trying to find out how they can avoid going back to the same levels of travel.”

Tatzin also sees a protracted slowdown in business travel as companies cut deeply into their middle-management ranks and other white-collar professionals.

Despite the prospect of slower growth, some segments of the travel industry, such as cruise lines and international travel, can expect business to surge ahead.

The cruise ship business was one of the few bright spots in the travel picture last year, with an 11% increase in American and Canadian passengers. Travelers looking to stretch their budgets apparently found value in cruises, which guarantee a set price for transportation, food and lodging.

However, the cruise industry was not immune from “two-for-the-price-of-one” deals and other discounts found throughout the travel business. Fall cruises now feature $500 to $700 discounts.

“We did see, as an industry, lower (profit) yields because of discounting,” said Bob Dickinson, senior vice president of sales and marketing at Carnival Cruise Lines.

International travel continues to outpace domestic travel despite sluggish economies in Western Europe and Japan.

Last year, the number of international visitors to the United States continued to rise, according to the U.S. Travel and Tourism Administration. While international arrivals in the United States grew by an estimated 7.7% last year to more than 42.1 million, foreign-bound American travelers fell nearly 3% to 42.3 million.

Abroad, travelers from Southeast Asia’s booming economies are a major source of growth for the U.S.-based tourism and travel business. In fact, the pace of air travel among Asians in the Far East is expected to lead the world.

While U.S. travel growth may fall behind other parts of the world’s, long-term trends point to a more vigorous industry in the latter part of the decade. An increase in leisure time and the aging baby boomers are two factors that bode well, said Berins at Arthur Andersen.

The aging baby boomers are “an enormous amount of people who are coming into their prime earning years, and that is going to have a positive impact in the late 1990s and into the early part of the next century,” Berins said.

Staying Close to Home The recession and Persian Gulf War put a crimp in the travel business last year. The industry was largely stagnate in 1991 as many people vacationed closer to home. (Trips per person at least 100 miles from home.): 1987: 1.19 1988: 1.23 1989: 1.26 1990: 1.28 1991: 1.29 Source: U.S. Travel Center

Room at the Inn The recession and Persian Gulf War put a crimp in the travel business last year. Among the hardest-hit segments was the hotel business. (Average percentage of rooms filled in U.S. hotels.): 1987: 61.8% 1988: 62.7% 1989: 63.8% 1990: 61.8% 1991: 60.9% Source: Smith Travel Research