War Jitters Take Toll on U.S. Tourism

Times Staff Writer

Noel Irwin Hentschel didn't think twice about parading around parts of Berlin on Sunday wearing an American flag lapel pin and a matching scarf to ward off the chill sweeping in from the Spree River.

"No one has said anything to me, not even the taxi drivers," Hentschel said, though she had heard reports of other American travelers experiencing anti-U.S. sentiments while abroad.

Hentschel had particular reason to be concerned: She is in the German capital this week to sell America.

As chief executive of American Tours International Inc., a Los Angeles-based packager of U.S. tours for Europeans, she is attending the International Tourism Exchange, the world's largest travel trade show.

Business at the American booth this year is slower than in 2002, something Hentschel attributes to geopolitical tensions.

But in conversation after conversation with the German, Dutch, British and Swiss companies that sell her tours to numerous U.S. destinations, Hentschel learned that travel executives attribute the slowdown to vacationers' fears of being caught far from home during a U.S.-led war with Iraq. Of less concern are the clashing views between much of Europe and the U.S. government about whether there should even be a war.

"The Germans and others say we should not misinterpret antiwar sentiment for anti-American sentiment," she said. "They say the political differences don't mean they won't come and visit." In fact, Hentschel said that she has seen very few cancellations of 2003 reservations.

"January bookings were strong, and February fell off while people wait to see if there will be a war and how quickly it will be over," Hentschel explained.

Indeed, tourism operators say the waiting for war may turn out to be more damaging to the $530-billion U.S. travel industry than the actual event itself -- especially if the conflict doesn't last very long.

Last week, the 10 biggest U.S. airlines reported declines in February passenger traffic, in part because the risk of war deterred bookings. As a result, most carriers have said they will make it easier to change flights by relaxing rescheduling rules and waiving certain fees. The hope is that customers will then have less of a reason to put off making travel plans.

Meanwhile, Carnival Corp., the world's largest cruise line, is lowering prices in hopes of luring more passengers. And Walt Disney Co.'s Walt Disney World in Florida has stopped hiring and cut some workers' hours, citing war jitters.

The travel slump is especially bad in places such as New York, Washington and Boston because tourists view them as potential targets of terrorist attacks.

A recent survey of five large hotel companies by Goldman Sachs & Co. found that "uncertainty of war and fears over terrorism" rather than the anemic economy are at the heart of the tourism industry's troubles.

In California, travel to and through the state is expected to decline at least 5% during the first quarter, according to the tourism office in Sacramento. More domestic and international travelers to the United States visit California than any other state, spending about $75 billion a year.

Yet there are some positive factors that could help the U.S. travel industry once international tensions ease. One is the euro, which is running 10% to 12% higher than the dollar. The favorable exchange rate for Europeans reduces the cost of travel to the United States, especially considering the easy availability of inexpensive transatlantic fares.

At the same time, the strong euro makes it more expensive for Americans to travel abroad, reinforcing the domestic travel trend that has swept the U.S. since the Sept. 11 terrorist attacks. The giant New York New York hotel in Las Vegas sold nearly every room this weekend, a dramatic improvement from the dark days immediately after the attacks, when business in Sin City fell by nearly 60%.

Farther up the Strip at Caesars Palace, workers and promoters are scurrying to ready a $95-million, 4,000-seat theater inspired by Rome's Colosseum for the March 25 opening of Celine Dion's new stage production. The Canadian pop star will play year round at an average ticket price of $125. Executives at Park Place Entertainment Corp., the hotel and casino company that owns Caesars and about 15,000 hotel rooms at multiple Las Vegas properties, are confident her show will be a success, war or no war.

Just last week Marriott International Inc. set a single-day company record when room bookings on its Marriott.com Web site generated more than $4.8 million in gross sales for its hotel rooms worldwide.

Despite these signs, no one in the travel industry expects 2003 to be a robust year. As war clouds loom, tourism executives are making plans to manage their way through tough times.

"This is a very difficult environment compounded by the uncertainty of war," said Marriott spokesman Roger Conner. The Bethesda, Md.-based hotel chain has identified a number of actions it plans to take to reduce expenses if hotel rooms become one of the causalities of war.

The company, for example, might close entire floors and wings if demand slackens enough. The hotel chain is also prepared to slash workers' hours, in part to help avoid layoffs, Conner said. Once travel picks up, he expects Marriott will need those workers.


Associated Press contributed to this report.

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