International travel seen slackening a bit amid terrorism fears

  • Business
  • Friday, 08 Jul 2005

WASHINGTON (AP) - International travel bookings are expected to soften slightly as Thursday's deadly explosions in London stoke tourists' terrorism fears. 

A slump in trans-Atlantic tourism would hurt what has been a bright spot for the beleaguered airline industry, though analysts said the impact should be minor and short-lived, reflecting travelers' increasing resilience to unsettling world events. 

Any negative effects for the travel industry will likely be most acute in London, where dozens were killed and more than 700 were wounded on Thursday by explosions set off in the city's subway system and on a double-decker bus. 

Industry officials said that based on recent experiences with terror attacks - most notably the commuter train bombings that killed 191 people in Madrid in March 2004 - trips to the affected region wane somewhat and would-be travelers hold off on making future plans. 

Robin Tauck, the president of Tauck World Discovery, an upscale tour operator based in Norwalk, Connecticut, said that trips to Spain have experienced "a soft period of sales in 2004 and 2005.'' 

Tauck, which has a group of tourists in London and has other trips planned for later this summer, said no guests have canceled upcoming trips. 

"People are watching the news and making their own decisions,'' Tauck said. That is in stark comparison with the reaction that followed the attacks of Sept. 11, which prompted 11,000 Tauck customers to cancel their trips and 8,000 of them to return home from abroad. 

Bob Whitley, president of the United States Tour Operators Association, said members reported Thursday that some travelers scheduled to leave for Europe this week are postponing their trips, though there has been no evidence so far of mass cancellations. 

Whitley and other industry officials said the fallout would have been more severe had the attacks affected air travel. 

Hospitality and leisure analyst Anthony Rodolakis at PriceWaterhouseCoopers in Tampa, Florida, said the attacks nevertheless will crimp what has been a strong period of growth for London's tourism industry. 

Hotel room rates surged by 9.7 percent in April, compared with a year earlier, and the city's hotel occupancy rate climbed 3.6 percent during the same period, Rodolakis said. 

With London hotels more than 80 percent full, PriceWaterhouseCoopers had forecast room rates to continue growing at a strong pace in 2005, but now "all bets are off,'' Rodolakis said. 

The stock prices of major airlines fell in response to the blasts, as did oil prices, in part because of the possibility that jet fuel demand would weaken. 

Airline analyst Jim Corridore at Standard & Poor's in New York said the skittish reaction from investors was to be expected given terrorism's potential chilling effect on tourism. 

However, barring any follow-up attacks, he and other analysts said airline shares would recover quickly. 

"We don't expect that there will be a major impact on international travel,'' Corridore said. 

"Bookings today will obviously not be good, but I'm sure they'll pick up again,'' he added. 

Airline analyst Jamie Baker at J.P. Morgan Securities said "given the size of the U.K. tourist market and disruptions to its infrastructure, it is reasonable to expect a slight decline in U.K. booking levels for at least the next six to 10 weeks.'' 

While limited in scope, the blow to the industry comes at a time when airlines are already struggling to overcome soaring oil prices and growing competition from low-cost carriers. 

Analysts said Thursday's decline in airline stock prices probably had as much to do with oil prices hovering above $60 a barrel as the London blasts. 

With business conditions toughest within the U.S., carriers such as American, United and Delta have been expanding their schedules internationally, where ticket prices and profit margins are higher. 

For example, in 2004 U.S. airlines lost $9.5 billion (euro8 billion) from their domestic businesses, while eking out a profit of $386 million from their international operations, according to the Air Transport Association. 

International traffic accounted for $32 billion (euro27 billion) in revenue last year, or one quarter of the U.S. industry's total. 

Baker said in a research note that revenue generated from trans-Atlantic flights has grown by 6.6 percent since the start of the year, compared with a gain of 2.9 percent in trans-Pacific flights and 1.1 percent for domestic flights. 

U.S.-traded shares of British Airways PLC fell $1.55 to close at $46.32 on the New York Stock Exchange, where shares of AMR Corp., the parent of American Airlines, slipped by 14 cents to $12.08. 

Marriot International Inc.'s stock fell 24 cents to close at $68.59 on the NYSE, while shares of Starwood Resorts and Hotels Worldwide Inc. declined by 7 cents to $61.23. - AP 

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