Delta to investors: capacity to be cut

by Tom Johansmeyer on

Yesterday, Delta CEO Richard Anderson and President Edward H. Bastian sent a memo to its 70,000 employees announcing passenger capacity cuts. Distributed with the subject line, “Responding to a Worsening Economy,” the memo outlines Delta’s proposed changes that were planned for announcement at an investor conference later the same day.

According to the memo, “In just the few months since we last announced capacity reductions, revenues have weakened, particularly in international markets. Once again, we must move quickly to adjust our capacity and stay in front of demand changes.” So, Delta is getting to trim international passenger capacity by an additional 10 percent – starting in September 2009. Flights across the Atlantic will get hit by 11 percent to 13 percent, with those across the Pacific losing 12 percent to 14 percent beginning this winter.

These cuts come on top of a previous announcement to reduce system-wide passenger capacity by 6 percent to 8 percent by December 2009. Nonetheless, capacity may be up slightly by December, as Delta takes advantage of “targeted growth opportunities through new routes and increased frequencies.”

Obama listens to travel industry gripes

by Tom Johansmeyer on

Leaders from across the travel industry met with President Barack Obama today to discuss … not a bailout. It’s no secret that luxury suffers when times are tough, and for many, any form of travel is not essential. Delta is cutting capacity, and the industry as a whole is getting ready to shed more than 200,000 jobs this year.

So, what is an industry of “frivolity” worth to our economy? A whopping $740 billion in annual spending … which fuels 7.7 million American jobs.

Travel is more important to us than we may realize. Sure, it provides some recreation and allows face-to-face business meetings. But, it also keeps the goods on grocery store shelves turning over, as each travel industry employee puts food on the table.

Unlike many corners of the economic world, this group of travel executives approached the president with a solution. They believe we need to bring more international visitors to the United States (a tough proposition with the recent turn in the U.S. dollar’s fortune) and do something to stem the downturn in meetings and events.

Roger Dow, President and CEO of the U.S. Travel Association, says, “We are pleased that President Obama recognizes the power of travel to strengthen America’s economy.” He continues, “The travel community has an ally in President Obama and we appreciate the leadership he intends to bring to increasing travel to, and within, the United States.”

Of course, no exec would give up a chance to lobby the man in the Oval Office. The travel industry pushed for the passage of the Travel Promotion Act, which would yield the first U.S. marketing campaign targeted at growing the number of international visitors. Smart idea … as the average foreign visitor drops $4,000 inside our borders per visit.

Okay, it’s kind of a bailout. But, at least it comes with a plan. The executives at the meeting are listed after the jump.

  • Roger Dow, President & CEO, U.S. Travel Association
  • Jonathan M. Tisch, Chairman and CEO, Loews Hotels; Chairman Emeritus, U.S. Travel Association
  • Jim Abrahamson, President, the Americas, IHG
  • Jim Atchison, President and COO, Busch Entertainment Corp.
  • Jeff Clarke, CEO and President, Travelport
  • Howard Frank, Vice Chairman and COO, Carnival Corporation & plc
  • Barney Harford, President and CEO, Orbitz Worldwide
  • W. Stephen Maritz, Chairman and CEO, Maritz Holdings Inc.
  • Bill Marriott, Chairman and CEO, Marriott International, Inc.
  • Jay Rasulo, Chairman, Walt Disney Parks and Resorts
  • Colin Reed, Chairman and CEO, Gaylord Entertainment
  • Frits van Paasschen, President, CEO and Director, Starwood Hotels and Resorts
  • Tom Williams, Chairman and CEO, Universal Parks and Resorts

For hotels, bankruptcies looming

by Tom Johansmeyer on

The financial crisis isn’t just a problem for the residential market – hotels are getting slammed. So are cruise lines, and we all know about the airline industry’s unending woes. The travel industry in the United States is steeling itself for a wave of foreclosures and bankruptcies.

So far, the hospitality business hasn’t been hit hard, certainly not to the extent that the residential real estate market has. But, Los Angeles hotel attorney Jim Butler was quoted in USA Today as saying that the bubble is growing, even if “it hasn’t burst yet.”

Occupancy rates, and revenue, consequently, are expected to plunge this year. We all know that. If you’ve noticed the wave of travel deals that we’ve been running here at Gadling, it’s not hard to do the math. This translates directly to their ability to meet mortgage obligations.

According to Mark Woodworth of PKF Hospitality Research, 36 percent of full-service hotels in the United States won’t have the cash flow to pay their mortgages this year – compared to 21 percent in 2008.

Ouch.

So, should you adjust your vacation plans this year? How do you avoid hotels that are in financial trouble?

The good news is that a foreclosure usually won’t shut a hotel down. Closing the property means closing any possibility of revenue, and creditors want cash more than the building. But, cuts will be common, from room service hours to staff at the front desk. You’ll pay less, and you’ll get less for your dollar. But, at least you’ll still be able to get a room.

Still, if you’re sensitive to the risk of losing your stay, try to avoid newer hotels. They are more likely to struggle, as they don’t have the brand recognition and repeat guests that benefit established properties. For the most part, though it should be business as usual, though “usual” might be a bit slimmer than you remember.

Laid off? Take off with Intrepid Travel

by Tom Johansmeyer on

Lost your job and need to get away for a bit? Intrepid Travel understands. So, you can get a 15 percent discount if you’ve been laid off recently … and you can use it one trips to more than 100 countries.

While it’s easy to see today’s economic conditions as all doom and gloom, bookings for some of Intrepid Travel’s overland trips have increased this year. Sales for trips between Kenya and Cape Town (45 days long) doubled from January to November last year. CEO and co-founder Darell Wade says, “It appears that some people see being laid off as an opportunity to take a career break, reassess where they are at and see the world. By offering this discount we hope to make this opportunity a reality for them.”

Travel to lose 200,000+ jobs

by Tom Johansmeyer on

Nearly 200,000 travel-related jobs were lost in 2008. Another 247,000 are forecasted for 2009. And, the financial crisis is still developing. While we lament the loss of six- and seven-figure investment banking jobs, let’s not forget what those big money gigs mean for the travel industry.

Consider your average Wall Street titan. He’s still pulling down more than $1 million a year (somehow). So, he’s sitting on the couch in his rather large Chelsea apartment, wondering, “Do I need to take that golf trip down to Naples for the weekend?” For him, it’s throwaway. If he doesn’t head out for a few days, his life doesn’t change much.

Now, multiply this by several Wall Street titans for that weekend. Most of them decide to stay at home. Who suffers?

Well, an empty restaurant is a waiter’s nightmare. It’s also rough for the spa therapists, housekeepers and everyone else along the “travel supply chain.” Eventually, the companies have to cut back, and we see how that 247,000 projection becomes a reality.

For this reason, 10 of the largest hotel companies in the United States have urged members of Congress to remember the importance of business travel when developing legislation and regulations that may “unintentionally hinder economic recovery and cost American jobs.”

The hotel companies are: Carlson, Walt Disney Parks and Resorts, Fairmont Hotels and Resorts, Hilton, Hyatt, InterContinental Hotels Group, Loews, Marriott, Starwood and Wyndham Worldwide.