U.S. Travel Industry Evaluates Effects of Foiled Terrorist Plot

By Elizabeth Kelleher
Washington File Staff Writer

Washington – As the high cost of fuel and a slowing U.S. economy had begun to take a toll on a long run of sales growth for the U.S. tourism industry, news of a plot involving multiple explosions in multiple aircraft traveling from the United Kingdom to the United States could not have been less welcome to industry executives.

While relieved that the plot has been foiled, some travel executives expressed concern about airport disruption August 10, especially because it is occurring when workers across the two countries are most likely to be traveling, enjoying summer holidays from their offices or factories.

According to Smith Travel Research in Hendersonville, Tennessee, there recently has been softening of U.S. hotel occupancy on weekends, which is leisure-driven business.  Although weekend occupancy was relatively high (at about 80 percent), it declined by 1 percent in the July-August period, compared to a year earlier. 

Smith Travel Research reported a 13 percent decline in demand for hotel rooms in Madrid, Spain, the month following the March 2004 bombing of Madrid’s rail system, and an 11 percent drop in demand for rooms in London the month following July 2005 bombings of that city’s public transit system.

Unlike those attacks, this incident is merely bringing complications - canceled flights into and out of London and U.S. cities, plus new security measures affecting what travelers carry on planes.

Members of the U.S. hospitality industry have met repeatedly with government leaders in recent years to work out ways to keep tourists going about their business in cases like this, according to Cathy Keefe, of the Travel Industry Association. 

The communication appears to be helping.  By 10 a.m., August 10, Loews Hotels had received an email from the Department of Homeland Security with a transcript of Secretary Michael Chertoff’s morning remarks and with guidance for airline passengers on how to pack and what items would be banned from carry-on luggage (beverages, shampoo, lotion, cream toothpaste or hair gel).

“We want to communicate new rules, to make it go easier and smoother at airports,” said Jeffrey Stewart, a vice president of Loews in New York.  He said members of the Travel Business Roundtable met by conference call August 10 to discuss the unfolding situation and that they are committed to assisting Homeland Security in keeping people safe.

“We realize the potential impact that aviation screening procedures may have on our industry and will continue to work with the government for proper balance between secure borders and open doors,” Stewart said.

Helane Becker, an airline analyst for The Benchmark Company, a brokerage firm in New York, said airline stocks opened the day’s trading session down, but had recovered most of their losses by afternoon.

Becker expects vacationers to go through with their plans, even if it means getting to the airport three hours in advance of flights instead of 90 minutes early.  “Airline stocks have been under pressure for the past couple weeks,” she said.  “But it’s due to earnings reports reflecting high fuel prices and a slowing U.S. economy:  Those are the real reasons for concerns.”

And George Sakellaris, a lodging analyst for Garp Research Corporation, said that the industry’s stock prices have risks factored into them.  “The public is pretty resilient in the U.S.,” he said.  He said something like the September 11 terrorist attacks can completely ruin a half year’s results for certain travel companies.  “But arresting 20 people and shutting down airports for a couple days?  Nah.”