Casinos Seen with Better Luck Than Hotels

Reuters  -  Hotel companies should see some rain on their red carpets when they report second-quarter earnings in the weeks ahead, while their casino cousins should show some -- but not much -- better luck, as both groups look for signs of recovery in the downtrodden travel industry.

Unlike the hotels, none of the major casino companies has warned of earnings or revenue shortfalls, or given any new guidance at all for the second quarter.

Analysts said the group as a whole has fared well, as reflected by strong revenue trends in most states with legalized casino gambling.

Part of the reason that casinos have outperformed hotels is that gambling revenues -- like alcohol and cigarette consumption -- tend to hold up better in a downturn. By contrast, business travel has been slow to pick up despite the signs of recovery elsewhere in the economy, analysts said.

The leisure industry's second-quarter earnings derby will begin on Thursday, when the nation's largest hotel operator, Marriott International Inc. (MAR.N), reports second-quarter results.

Marriott's sister company, Host Marriott Corp. (HMT.N), will report the following week, and one of its chief rivals, Starwood Hotels & Resorts Worldwide Inc. (HOT.N), will report the week after that.

On the casino side, Harrah's Entertainment Inc. (HET.N) will be first out of the gate when it reports earnings next week, followed by MGM Mirage (MGG.N) and Park Place Entertainment Corp. (PPE.N) the following week.

Four of the top hotel companies said previously that business has been weak in the quarter, leading analysts to scale back expectations and forecast potential downside to their estimates.

Casino companies have fared better, thanks largely to their dependence on leisure travelers who continue to take vacations despite the uncertain economy. By comparison, business travel remains weak as companies rein in corporate travel until the economy shows stronger signs of improvement.

"We think hotel companies are just going to squeak by and meet consensus expectations," said Lehman Bros. analyst Joyce Minor. "We expect casino results to be somewhat stronger relative to lodging."

HOTEL WARNINGS

The warnings from hotel companies began in May, when Marriott International said it expected its second-quarter room revenues, a key industry barometer, to come in at the lower end of previous guidance for a 5 percent to 7 percent drop from a year ago.

Hilton Hotels Corp. (HLT.N) followed suit less than two weeks later, saying room revenues would be down about 5 percent for the quarter, or well below its previous forecast of a 1 percent to 2 percent drop.

Other companies that made similar announcements included two of the nation's top hotel owners, FelCor Lodging Trust (FCH.N) and MeriStar Hospitality Corp. (MHX.N).

"The real question in the next few weeks is will there be more conservative guidance for the second half of the year because there's no evidence business travel will be recovering at the rate companies were hopeful for earlier this year," said Jason Ader, an analyst at Bear Stearns.

Ader said resilient consumer spending despite the economic downturn is partially behind the expected strong performance by the top casino companies. But he added demand for casino entertainment is also less prone to downturns than demand for hotels.

"Hotel demand is much more a function of the economy and gross domestic product," Ader said. "Gambling demand is more like alcohol or tobacco consumption. There's no correlation to the business cycle."

News@PATA

PATA RELEASES Q1 2002 QUARTERLY STATISTICAL REPORT

PATA’s Strategic Information Centre has released the Quarterly Statistical Report for first quarter 2002. The report includes the latest visitor arrivals by country of origin, outbound travel data for selected PATA-member countries, percentage change over the same quarter of the previous year and an update of aggregate arrivals and departure data spanning five years for many member countries. The report costs US$200 for PATA members and US$275 for Chapters/non-members. To place an order contact Ms. Patcharin Hongprapat. Tel: (66-2) 658-2000 ext. 121. Or fax: (66-2) 658-2010. E-mail: publications@pata.th.com.

SEMONE’S PACIFIC TOUR UNDERWAY

PATA Vice President-Development, Mr. Peter Semone, is currently visiting the Pacific region to listen to PATA members’ needs. His July 10-24 itinerary includes Sydney, Melbourne, Brisbane, Nadi, Suva, Nufu’alofa, Wellington and Auckland. Mr. Semone can be contacted at pas@pata.th.com.

SALIM TO ADDRESS SUSTAINABLE EVENT

After attending the UN-sponsored World Summit on Sustainable Development in Johannesburg in September, Mr. Emil Salim, former Minister of Environment for Indonesia, will address the PATA Sustainable Tourism Conference & Mart in Banten, Western Java, October 23-26. Mr. Salim is one of a number of top level international speakers to address the PATA event. For further programme details and to register, visit www.pata.org. Or e-mail: pstcm@pata.th.com.

MASTERCARD BOOST FOR PATA MEMBERS

MasterCard International, a PATA Premier Partner, has developed a programme to promote travel to the Pacific Asia region. PATA members who supply travel products from the United States to the region are invited to create an exclusive offer for consumers. (MasterCard must be used as the form of payment.) The offers will then be promoted on www.seeyouinpacificasia.com. Additional marketing tactics will be used to drive traffic to the Web site. Members wishing to provide product should contact Mr. Paul Cohen, Vice President, Enten & Associates. Tel: (1-301) 913-0010. Fax: (1-301) 913-5484. E-mail: paul@enten.com.

SEND YOUR PRODUCT NEWS HERE

All PATA members are invited to promote their latest product news in PATA’s free monthly e-newsletter What’s New in Pacific Asia, which goes out to over 400 travel journalists. Simply send your organisation’s latest news to paveena@pata.th.com. Fax: (66-2) 658-2010.

PRICE ADVANTAGE FOR LUXURY EXPO

PATA members are eligible for the special rate of US$1,800 to join the Luxury Travel Expo, December 10-12, 2002 in Orlando, Florida. Event promoter, Advanstar predicts 3,000 travel agents will attend, along with 500 exhibitors. The opening session will be held in the Universal Studios theme park. For details on the PATA member discount, visit http://www.advanstar.com/test/lte/pata1.html.

NEW-LOOK PATA TRAVEL MART

Travel journalists interested in finding out more about the new-look PATA Travel Mart, October 1-3, 2003, can interview PATA Managing Director-Events, Ms. Sheila Leong by e-mail. PATA Events is upgrading the Mart to be the number one travel trade show for the whole Pacific Asia region. Journalists should e-mail their questions to sheila@pata.th.com.

PATA STRATEGIC INFORMATION CENTRE WORLDWATCH

An online survey of more than 14,800 respondents conducted by CoolSavings.com concerning U.S. vacation travellers found that:

-- 26 percent indicated that they would compare all travel options before making any decision

-- 22 percent said they would choose less expensive accommodation

-- 20 percent said they would not leave town at all

-- 17 percent said they would opt for a closer destination than in past travels

-- 12 percent said they would take a shorter holiday.

* It appears likely that airline pilots in the U.S. will be allowed to carry guns in aircraft cockpits. The House of Representatives accepted the idea in an almost 3:1 vote even though the Transportation Security Administration opposed the move.

* China (PRC)'s largest bank, the Industrial & Commercial Bank of China, can now conduct foreign currency transactions directly with banks in Chinese Taipei, nullifying a ban that has been in effect for half a century. The move could also open the way for some China (PRC) businesses to begin operations in Chinese Taipei.

* The Thai Chamber of Commerce is proposing a plan to facilitate ASEAN-wide visas for travellers moving within and across ASEAN member countries in Southeast Asia. The system ­ similar to the Shengen arrangement in Europe ­ could see the need for separate visas for travel between ASEAN member countries disappear. If accepted, it is likely that the first stage will include only Cambodia, Lao PDR, Thailand and Vietnam. The proposal is due to be tabled this month at a conference between the four above-mentioned countries in Vietnam.

CHASING MICE IN VIETNAM

The PATA Vietnam Chapter will run a July 30 seminar in Hanoi called "A Mission to MICE in Vietnam." Guest speakers include Mr. Anthony Wong of Malaysia-based Asian Overland Services, Mr. David Barrett of Bangkok-based Diethelm Events, Mr. Ngyuen Van Luu of the Vietnam National Administration of Tourism, Mr. Duong Tri Thanh of Vietnam Airlines and Mr. Do Dinh Cuong of VINATOUR. For programme information or to enrol, contact the PATA Vietnam Chapter. Tel: (84-4) 822-3174. Fax: (84-4) 822-3169. E-mail: nhungvnat@hotmail.com.

Broadband taking flight again?

TravelWeeklyEast.com  -  When major airlines start offering frills like onboard e-mail and online services, it’s a sign that life has returned to normal in the aviation industry.

Recently, both British Airways and Singapore Airlines announced a trial of selected onboard web services for their passengers.

BA is offering its business class passengers the chance to surf the Internet and stay in touch with the office at 35,000 feet when it introduces a three-month trial of online services from February next year.

BA is using the service by Boeing’s Connexion system, which provides the broadband technology for travellers to use their own laptop computers to surf, send e-mails with attachments and access their own corporate intranets.

It will be available in its First Class, Club World and World Traveller Plus cabins.

SIA will from July offer e-mail and SMS on board its flights. The service will eventually be offered on all its longhaul flights and installed on about 70 aircraft.

Initially the airline won’t charge passengers. SIA said it is also upgrading its planes so that economy as well as business passengers will have audio and video programmes on demand.

BA joins Lufthansa for trials of in-flight broadband Internet services provided by Connexion.

The move by the two European airlines comes as American Airlines, United Airlines and Delta Air Lines abandoned their investments in Connexion last year, citing the poor business climate following the terrorist attacks of September 11.

Before September 11, airlines were looking at the provision of Internet and broadband facilities as a way to enhance service standards and as a revenue stream thereafter. Security concerns had delayed its development in recent months.

The technology has moved on even as airlines only begin to recover now. In May this year, Connexion allowed passengers on board an aircraft over Arizona to be linked by videoconference to participants on land.

The other major player, Tenzing Communications, also successfully held a demonstration of the first in-flight two-way SMS in April.

Onboard a demonstration flight from Hong Kong to Los Angeles, Tenzing staff exchanged SMS messages with several friends and colleagues across the US and the UK.

A research report by Northern Sky Research said that despite difficulties encountered by airlines and the industry, there is optimism that the inflight Internet market will take off.

“It is clear the Internet to airline market will be dynamic; it’s a new market with considerable promise but not without its share of obstacles. Despite a healthy overall outlook, it’s birth is in the midst of very troubling times for the airline industry,” the report said.

The report titled, “Internet Service to Airlines: Will the Service Take Off?” said “the concept of being able to retrieve destination information, surf the web, stay connected to the office while 39,000 feet in the air, and send and receive e-mails makes very good sense.”

According to three scenarios painted by Northern Sky Research (see chart), Internet to airline service revenues are projected to hit an average US$1.4 billion in 2007 and $4 billion in cumulative 2001-2007 revenues.

But before those numbers come into fruition, there are hurdles to overcome, it said.

• Business travellers must adopt the service. Whether travelling in first class, business class or coach, business travellers need to adopt the service for it to gain any traction. That applies particularly to broadband, which might start with hourly user fees that are outside the reach of most leisure travellers.

• Weighted average prices need to fall. This will be important for Internet to airline service to reach critical mass and will have to occur even as more broadband service is offered.

• Costs must be contained. Internet to airline service is a high fixed-cost business. If costs aren’t kept in check, they could consume the service and the companies.

• Enjoyable user experience. The user’s experience with the service must be a good one, eg. the service has to be easy to use and understand, with minimal or no technical glitches.

• Offering the service remains important to airlines. Internet to airline service is nothing without the airlines’ commitment and cooperation. Airlines can use the service as a competitive differentiator, as a way to woo passengers, as an additional revenue stream or some combination of these factors.

• Macro-economic conditions. Macro-economic conditions drive passenger airline travel demand. A recession would lower passenger traffic with ill-effects on the airlines.

China to further open tourism sector: official

Xinhua  -  China will further open up its tourism sector to foreign competition, including allowing foreign operators to hold majority stakes in joint ventures or set up solely-owned businesses, a senior tourism official has said.

Internationally-reputed travel agencies with sound credit and management expertise will be especially welcome in China, said Zhang Jianzhong, head of the department of policy and regulations at the National Tourism Administration.

China has approved 11 Sino-foreign joint venture travel agencies, but the official said the opening process needed to be accelerated to fulfill the country's commitments to the World Trade Organization.

China would also gradually cancel regional restrictions on foreign operators, simplify procedures for the approval of foreign-invested projects and improve the regulatory system, he said.

The official also spoke of the need to fully open the tourism sector to private investment.

China is now the world's fifth largest tourist destination country, earning 17.8 billion US dollars in international tourist services in 2001

Cell phones put the pinch on hotel phones, profits

IWon.com  -  A pocket-sized vermin called the wireless phone is eating a hole in profits of the nation's hotels, taking a bite from one of their most lucrative income streams, according to hotel operators.

Hoteliers say revenues from in-room phone calls -- once an easy profit source because of high mark-ups -- are down by half or more from where they were when wireless phones began to take off in the mid-1990s after a new group of carriers entered the arena with digital service.

The topic was briefly mentioned in a conference call by industry leader Marriott International Inc. (MAR) in discussion of its second-quarter results.

Chief Financial Officer Arne Sorenson said wireless phones were taking a bite out of overall phone revenues

"At the properties ... we recognized lower profits on telephone service as travelers continued to embrace wireless technology," Sorenson told investors and analysts.

Marriott declined to provide more specifics, but other hotel operators said they too have seen a major decline in their phone revenues in recent years.

"Contrary to what it used to be, you don't make much money in the telephone department anymore," said Vijay Dandapani, chief operating officer of Apple Core Hotels, which owns and operates six hotels in New York.

"For ourselves, telephone revenues used to be about 5 percent of room revenues in 1996 and 1997," he said. "Today it's just under 2 percent."

In-room phone service was once a cash cow for most hotels, as they marked up prices to as much as six times above their actual cost, Dandapani said. Now, the mark-up is much smaller, closer to 1.5 times the actual cost.

DWINDLING PROFIT CONTRIBUTOR

On the bottom line, the loss of profits from phone calls has been even more dramatic.

Dandapani estimated that before debt service, revenues from phone calls provided between 5 percent and 7 percent of his company's cash flow. Now that number is barely 1 percent, he added.

In an acknowledgment that phone revenues were dropping fast, hotel operator Wyndham International Inc. (WYN) said last month it would waive all in-room phone, fax and Internet fees for members of its preferred guest program.

That move was prompted in part by the shrinking profitability of such phone calls, as well as the goodwill Wyndham hoped to generate from guests tired of being nickeled and dimed for in-room phone use, said spokesman Andrew Jordan.

"The No. 1 complaint from guests, according to our front desk managers, is the high cost of long-distance calls," Jordan said.

Wyndham's revenues from long-distance calls alone are down about 40 percent over the last two years alone, according to Jordan.

"While this remains a small portion of the room revenue, it is indicative of the guests working around the problem and probably using their cell phones," Jordan said.

Marriott and two of its top North American rivals, Hilton Hotels Corp. (HLT) and Six Continents Plc (SXC), said they have no plans to follow Wyndham's lead and eliminate phone charges.

But Dandapani said hotel operators may have little choice in the future if cell phones continue to grow in popularity.

"I wasn't surprised at all at what Wyndham did," he said. "You're doing yourself a big favor in winning over the customer" when you eliminate phone charges. "If there's one thing that riles hotel guests, it's these payments."

Ireland:  Tourism industry hit hard

Irish Examiner  -  AN urgent re-appraisal of Government policy for tourism-related industries in the wake of the significant downturn in US visitors to Ireland and the catastrophic impact which the poor summer is having on the home holiday industry was called for yesterday by the Small Firms Association.

SFA director Pat Delaney said the tourism industry and related leisure and entertainment industries are facing an economic crisis and the situation calls for immediate action: “Instead of waiting for these industries to simply collapse we must find new ways of maintaining the enormous investment and job creation which has taken place over the past six years.

"The impact of Foot and Mouth, September 11 and the economic downturn have seriously eroded confidence in the tourism sector. If hotels are mothballing bedrooms then many thousands of traditional seasonal jobs will disappear and it is only a matter of time before full-time jobs are lost.

"There are 30,000 employed in direct tourism, thousands more in the leisure and entertainment industries which are facing immediate threat. Add to that countless thousands of jobs in sub-supply to these industries and the bigger picture emerges.

"Best estimates show a reduction of almost 5,000 visitors a week into Ireland, mainly North Americans. With an average spend of 715.”

“The SFA is calling on the Minister for Tourism to formulate a political and diplomatic offensive to promote the Irish Tourist industry with particular emphasis on EU visitors.