Travel industry prepares for aftershocks

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An already-beleaguered travel industry is bracing for possible longer-term repercussions following last week's shutdown of airline traffic and the continued aftermath from the terrorist incidents.

How severe the effects would be, however, remain uncertain at best.

Even as hotel chains reported numerous booking cancellations and pulled back on ads, executives questioned whether the bookings would be reinstated as air travel returns to normal or if they were permanently lost.

"Right now it's too early to tell," said Wendy Falk, VP-marketing programming for Hyatt Hotels Corp. "We are hearing anecdotes in both corners. There is some knee-jerk reaction [of cancellations], but we also are hearing about pretty good bookings."

The Business Travel Coalition, a group that includes Procter & Gamble Co. and DaimlerChrysler among its 51 members, reported that a survey it took last week shortly after the terrorist activity found 88% of respondents expected employee travel to be cut back as a result of the incident.

"Most major companies already put in place cutbacks for 2001, so it probably extends ... the time before we would have an economic rebound," said Kevin Mitchell, the coalition's chairman.

John Pincavage, an airline analyst for Connecticut-based Pincavage & Associates, also predicted problems for the travel industry.

"Realistically when you think about business travel and significant restrictive check-in and carry-ons, the hassle factor goes up and productivity goes down and all of a sudden you kill too much time traveling," he said.

Leisure travel, which saw significant erosion of business during the Persian Gulf War in 1990, may be hit harder following these terrorist acts as consumers may be even more scared. "The Persian Gulf War killed leisure travel because of fear of terrorism in the air. Maybe it's even more frightening. ... How do you hijack four planes within an hour? If that doesn't shake you, what does?" he said.

A spokesman for Hertz Corp. said advance bookings, which rarely fluctuate more than a half percent, dropped 6% immediately after the terrorist attacks. A spokesman for Marriott International also reported a drop in bookings.

SEEKING OPTIONS

Yet Richard Copland, a New York travel agent who is president-CEO of the American Society of Travel Agents, said he and the group's members have seen few signs Americans are doing anything but delaying trips.

"So far, they are asking for information options. Can I exchange? Can I go by train?" he said. "I don't see it as anywhere near like 1990 with the Gulf War. There is more confidence in the government."

The potential woes come on top of significant financial hits last week. One airline, Midway Airlines, suspended all service last week as the temporary shutdown of U.S. airspace impacted its already strained bottom line. Discusstions in Washington D.C. last week led some to believe the government would offer some aid to those affected by the air traffic shutdown.

In the face of the uncertainty, most airlines and travel companies marketing reaction was to pull what ads they could.

American Airlines and United Airlines, whose planes were used in the attacks, both declined to discuss their advertising, but none of their ads were running. For part of last week, American had totally blocked access to its aa.com booking site, replacing the booking page with first a page containing announcements about the flights and later a letter from CEO Don Carty.

Other airlines also declined to discuss either their advertising or fears about long-term effects, saying they were concentrating on returning to service and the long-term effects of the terrorism were difficult to evaluate.

Hotel and rental-car companies were also uncertain of the effects but were somewhat more open about their plans and fears.

"The real issues are will people fly and will companies impose stringent policies," said Richard Broome, VP-corporate affairs for Hertz. "Those decisions will have an effect on our business. But while the initial indication is that there is a drop off, we don't know if it's a short-term phenomenon and a blip or a trend toward very serious issues ahead."

Ms. Falk said Hyatt had pulled back on some of its advertising waiting to see what will happen.

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