Weak US economy may capture more tourists
The positive side of the US’s weak economy is its appeal to foreign visitors taking advantage of the slumping dollar but the economic situation opens up other potential travel opportunities, points out Standard & Poor’s Equity Research.
Other possible winners:
- Hotels catering to foreign travelers.
- Travel-oriented Web sites because visitors are more likely than ever to search for bargains.
- Theme parks and resorts priced below the market for first-rate attractions (Walt Disney World, Universal Studios and other popular but pricey parks).
“Even with high gas prices and an economic slowdown, there are several positives that could boost summer travel,” says Mark Basham, an S&P equity analyst. He added:
“Employment is still up year-over-year, the tax rebates are coming at the right time for vacation season, and the weak dollar means more international inbound travel and less outbound travel — both positive for US hotels and restaurants.”
For hotels, Mr Basham defines the summer travel season as Memorial Day to Labor Day, about 100 days. By his calculations, there will be about 1.65 billion hotel room nights available in the United States this year. About 455 million (27.5%) are for the nights between Memorial Day and Labor Day. This is up 2.2% from 445 million room nights during the 2007 summer travel season. This represents about one-third of room nights sold during the year.
A 5% reduction in room nights sold to domestic tourists this summer, combined with the international component, would result in 306 million nights sold this year, a 3.2% decline from 2007. This equates to occupancy of 67.3% vs. the approximate 71% occupancy rate last summer.
Some less expensive hotels may actually see higher occupancy rates, Basham suggests, as Americans seek a bargain.
“Choice Hotels is heavily into the low end of the mid-scale market and could benefit the most,” he said. Marriott, InterContinental and Wyndham are highly diversified by segment and geography, with economy and mid-scale brands, as well as upscale and luxury brands, says Mr Basham.
Bargain-seeking travelers may also help Disney, according to Tuna Amobi, an S&P equity analyst.
Management, he says, has indicated that advance bookings at the hotel/resorts (for both the June and September quarters) are outpacing last year. He attributes this to Disney’s addition of several moderate to value-priced hotels to complement the premium-priced resorts (75% of available rooms in 1991 vs. 55% currently).
David
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