Newsletter - January 3, 2002

MARRIOTT PLANS TO SELL 8 HOTELS

Hotel operator Marriott International Inc. (MAR) said on Wednesday that it has agreed to sell a total of eight hotels for about $181 million in cash, though it will continue to operate the properties.

Chief Financial Officer Arne Sorenson said the company sold $730 million worth of real estate assets and investments, including a total of 18 hotels, in 2001.

Washington, D.C.-based Marriott will sell one Residence Inn, three Courtyard by Marriott hotels, three SpringHill Suites hotels and one TownePlace Suites hotel to Orlando, Florida-based CNL Hospitality Corp.

Two of the sales have already closed, while sales of the remaining six are expected to close in the first three quarters of 2002.

Shares of Marriott closed Monday trading at $40.65 on the New York Stock Exchange.

ONLINE TRAVEL BUSINESS REGAINS ALTITUDE

(AP) -- Jolted by the September 11 attacks, online travel agency Orbitz evacuated its headquarters near the Sears Tower that morning and watched its business plummet for weeks afterward. But Orbitz and its competitors have now regained altitude -- and then some.

Thanks to bargain-hunting leisure travelers and the growing use of Internet sites for more than just airplane tickets, the Web travel business is strong, and the outlook is brighter than that of the industry as a whole.

"All of a sudden consumers are realizing this isn't just something for the most technologically advanced. It's for everybody," said Henry Harteveldt, a travel analyst at Forrester Research.

While overall industry revenue is expected to finish the year down 20 percent from last year, online leisure travel sales will wind up at a healthy $14.2 billion, according to Forrester.

That is scaled back from the $16.7 billion forecast before the weakened economy and the terrorist attacks took their toll, but still 16 percent higher than a year ago.

Nearly 3 million more U.S. households, or 17.8 million in all, bought travel online this year.

Price is right

Customers have been flocking to online travel sites of late largely because the price is right.

Six-month-old Orbitz is the newcomer among the five busiest travel sites -- behind Travelocity and Expedia and ahead of deep discounters Hotwire and Priceline. Backed by five major U.S. airlines, Orbitz saw a post-September 11 falloff in travel before recovering by early November to a new sales high of 30,000 to 60,000 tickets a day. Its goal is to turn a profit by mid-2002.

"Since September 11, people have been really hungry for a deal. And they come to the Internet to get it," said Jeffrey Katz, who was chief executive at Swissair and an executive with American Airlines before becoming Orbitz's president and CEO. "In my 20 years in the airline business, I've never seen as many deals for travel as there are now."

More than prices have changed since September 11. Internet travel sites are also providing more information about weather, security requirements and potential snags. The airlines' own Web sites, where bookings have also risen dramatically lately, are doing the same thing.

Orbitz was ready for the trend before September 11. From an electronic command center in a downtown Chicago high-rise, a former air traffic controller and other specialists have been pumping out thousands of daily flight alerts and other information for Orbitz customers.

Some of Orbitz's strength may be attributable to intensive advertising. According to Jupiter Media Matrix, Orbitz accounted for 44 percent of all online travel advertising the week after Thanksgiving; Internet surfers are seeing Orbitz's ubiquitous pop-up windows. Other travel sites have been having equally happy holidays. Analysts say customers have increasingly been going to Web agencies to look not just for cheap air fares but for good hotel rates, vacation homes or ski packages.

9/11 SPELLS EMPTY ROOMS FOR HOTELS IN INDIA

Sharp falling occupancy levels of hotels by up to 40 per cent following September 11 attacks knocked down the revenues and expansion plans of hotel industry, which was eyeing to add 63,000 rooms to accommodate targeted 3.5 million tourists in the tenth five-year plan.

The industry was struck hard by global developments just at the onset of peak business season, which was as such clouded by the domestic slowdown.

Unruffled by bottoming profit-lines of the hotel industry, the government pushed ahead with its programme of disinvestment of hotels of ITDC, all of which were making losses sans one -- Hotel Ashok in Mysore last year - amidst apprehension by experts that sell off might not get good response now.

No sooner had government awarded sales contract in case of six hotels under the first tranche of disinvestment, than a controversy arose with ITDC chief, Ashwini Lohani, raising serious objections to clubbing of a profitable restaurant at Bangalore airport with Ashok Bangalore, which was being given to Lalit Suri's Bharat Hotels.

With this he invited the wrath of disinvestment minister Arun Shourie, who lambasted Lohani for his attempts to derail the process despite being party to the decision taken at various levels for clubbing restaurant.

Notwithstanding the downtrend in the industry, private sector hotels sought to consolidate their position and started coming out with innovative promotional packages to lure the limited tourist and business traffic in the country.

The hotel industry profits for the quarter ended September crashed to new low following estimated 70 per cent cancellations in the wake of terrorist strikes overcapacity of rooms coupled with huge discounts to attract guests in the emerging crisis resulted in hotels to shifting their strategy for the next five months, which included focus on domestic tourism and cutting costs by offering voluntary retirement schemes and putting on hold any expansion.

The rack (room) rates which normally soared up during official tourist season beginning October were not raised this year.

The problems further compounded by the complexity and multiplicity of taxes and had a cascading effect on the ultimate price that a tourist had to pay.

Prime minister A B Vajpayee in a state chief ministers' conference mentioned that there was a need to rationalise both Central and state taxes on tourism and travel industry.

The industry kept pressing for immediate rationalisation of tax regime which was hitting it badly at a critical juncture.

The department of tourism, which had conducted a study on rationalisation of taxes and had put up a paper on this subject in the conference, strongly recommended an upper limit of 10 per cent on all taxes on hotels.

The emerging tourism crisis hammered the capital intensive hotel industry during the year with virtually no hotels announcing any expansion plans for the time being.

Even if government was pressurised for reforming stiff tax regime prevailing in the industry, no major decision in this regard was taken except a minor relief of exempting banquets from service taxes.

Leading five-star hotels in metro cities, which mainly depend on foreign travellers, were likely to be far more adversely affected than hotels in non-metros and smaller cities.

Hotels in New Delhi were leading the list of cancellations. Average cancellation in the capital was reported to be at over 30 per cent, followed by Mumbai, which also reported an average cancellation of about 30 per cent.

In Chennai, average cancellations stood at 27 per cent and at Bangalore, cancellations were pegged at 22 per cent.

It was felt that foreign tourist arrivals had declined due to heightened security concerns. According to department of tourism, the growth of tourist arrivals for first six months was just pegged at 1.4 per cent compared with 8 per cent in the corresponding period last year.

However, hoteliers hoped a better performance in the last quarter of this financial year as the industry geared up with new strategies and policies to lure visitors.  Source: PTI 
 

TRAVEL PORTALS REBOUND

CHICAGO - After watching sales plummet for weeks after the Sept. 11 terrorist attacks, online travel agencies have regained business - and then some - thanks to bargain-hunting leisure travelers and the growing use of Internet sites for more than just buying airplane tickets.

''All of a sudden consumers are realizing this isn't just something for the most technologically advanced. It's for everybody,'' said Henry Harteveldt, a travel analyst at Forrester Research.

While overall industry revenues are expected to finish the year down 20 percent from last year, online leisure travel sales will wind up at a healthy $14.2 billion, according to Forrester.

That estimate is scaled back from the $16.7 billion forecast before the weakened economy and the terrorist attacks took their toll, but still 16 percent higher than a year ago.

The primary reason: Nearly 3 million more US households, or 17.8 million in all, bought travel online this year.

While experts say the long-term prosperity of the Web business depends on the quality of service, consumers have been flocking to sites of late largely because the price is right.

That's certainly the case at six -month-old Orbitz, the newcomer on the list of five busiest travel sites - behind fellow full-service sites Travelocity and Expedia and ahead of deep discounters Hotwire and Priceline.

Backed by five top US airlines, Orbitz suffered through some early hiccups with customer service and post-Sept. 11 falloff in travel before recovering by early November to a new sales high of 30,000 to 60,000 tickets a day.

For a few days or weeks in September, Orbitz's debut seemed ill-timed. Now it seems the opposite.

''Since Sept. 11, people have been really hungry for a deal. And they come to the Internet to get it,'' said Jeffrey Katz, who was chief executive at Swissair and an executive with American Airlines before becoming Orbitz's president and chief executive.

''In my 20 years in the airline business, I've never seen as many deals for travel as there are now,'' he said.

More than prices have changed since Sept. 11. Sites are meeting customer demand by providing more information about travel conditions, weather, security requirements, and potential snags.

The airlines' own sites, where bookings have risen dramatically lately, are doing the same thing - a development that travel analysts suggest may ultimately put the agencies at a disadvantage.

''The airlines are really pushing people to check their sites now for flight status, the latest sales, etc., because market conditions have changed so quickly since 9/11,'' said Jared Blank, an analyst with Jupiter Media Metrix.

''This is going to give them a bit of an advantage over the agencies like Orbitz, because they're providing all of this information in one place.''

Source: The Boston Globe

CANADA’S TRAVEL INDUSTRY CLAWS ITS WAY BACK

Financial Post, with files from The Canadian Press

Canada's travel sector is slowly making its way back to pre-Sept. 11 sales levels, with more people spending more money to go abroad, industry observers said yesterday.

And though the low dollar is expected to slow traffic from Canada to the United States this winter, recent cold weather is encouraging travel and contributing to the industry's resurgence.

"It's helping us in that people are booking either ski or sun vacations," said Martha Chapman, director of corporate communications for Signature Vacations. "As well, the average sale per passenger is higher."

Randy Williams, president and chief executive of the Association of Canadian Travel Agents, said some businesses are enjoying a small boom in sales as people start to regain confidence in the airline industry.

"There's been a rebound in travel, especially among those agencies servicing destinations other than the U.S., where it's still down," he said. "And we are also seeing an upswing in corporate travel."

The terrorist attacks sent the airline industry into a tailspin, although the pinch began in the final quarter of 2000, when the technology sector began to implode and stock markets headed down. As the economic slump took hold, travellers started making other plans, many choosing short car trips over airline vacations.

Earlier this year, Canadian travel agencies said that between 6,000 and 10,000 agents -- a third of all agents in Canada -- could be laid off over the next few months as travel continued to decrease across North America, in some cases by as much as 40% year over year. At the time, both Signature Vacations said its bookings were down, as were reservations at now-defunct Canada 3000 Holidays.

Mr. Williams said that as many as 4,000 travel agents were laid off, with many still out of work.

"They have not been brought back yet and likely won't be until we see a recovery in the economy, which we think will be some time in the second or third quarter of next year," he said.

Ms. Chapman said travel agents are bracing for a tough year in 2002, but nothing like the past 12 months.

"No one could have foreseen what happened on Sept. 11," she said. "But turning toward the new year, I think everyone in the business is prepared to roll up their sleeves and work harder. We all anticipate it getting back to business as usual."

However, the job cuts and airline bankruptcies caused by the terrorist attacks have actually boosted the fortunes of online travel Web sites.

Bargain-hunting leisure travellers are flocking to Web-travel business such as Travelocity, Expedia and Orbitz.

While overall industry revenues are expected to finish the year down 20% from last year, online leisure-travel sales will wind up at a healthy US$14.2-billion, , according to Forrester Research, a technology research firm based in Cambridge, Mass.

The estimate is scaled back from the $16.7-billion forecast prior to the economic downturn and the terrorist attacks, but it's still 16% higher than a year ago.

While experts say the long-term prosperity of the Web business depends on the quality of service, consumers have been flocking to such sites largely because the price is right.

"Since Sept. 11, people have been really hungry for a deal and they come to the Internet to get it," said Jeffrey Katz, president of Orbitz and a former executive at Swissair and American Airlines.

"In my 20 years in the airline business, I've never seen as many deals for travel as there are now."

BUSINESS REBOUNDING IN JAMAICA’S HOTELS

MONTEGO BAY, Jamaica -- (AP) -- The number of tourists visiting many Jamaican hotels is rising, resort managers say, suggesting business is rebounding nearly four months after the Sept. 11 attacks.

Major hotels in the northern resort areas of Montego Bay and Ocho Rios said they were nearly full through mid-Janaury, and the rest were at least 55 percent occupancy.

After the September terrorist attacks in the United States shook confidence in air travel, occupancy fell as low as 15 percent in some Jamaican hotels.

``We were bracing ourselves for the poorest season yet,'' regional chairman of the Jamaica Hotels and Tourist Association Godfrey Dyer said Sunday. ``The industry is of the hope that the occupancy will at least stay at this level for the most part of the season.''

Jamaica's high tourism season begins in December and runs through March. Around this time of year, hotel occupancy rarely dips below 85 percent.

HOTEL SECTOR IN INDIA GETS SERVICE TAX WAIVER TILL MARCH 31

The government has decided to exempt the hotel industry from service tax till March 31, 2002. The exemption would, however, be available for only those services that involve food catering, an official release said.

Hotel industry attracts five per cent service tax on the billed amount. A rebate of 40 per cent was being given on the billed amount if food catering was involved.

According to the notification, a 100 per cent rebate would now be provided on all services involving catering in hotels.

While welcoming the move, Federation of Hotels and Restaurants Association of India (FHRAI) secretary general Shyam Suri said that the association had been demanding this since the last three years.

"It is a move towards rationalisation in tax structure in the hotel industry," Suri said. The exchequer is expected to loose about Rs 35 crore annually because of this exemption, he said.

Suri added that by bringing down the cost for the customers, the move is expected to give a boost to the hotel business in the country. He, however, urged the government to make it into a regular feature.

The release said that the finance ministry's approval came following a proposal by the tourism ministry in a bid to bail out the hotel industry hit hard after September 11 terrorist attacks in the United States.

The government has also announced several measures to encourage tourism by aggressively marketing India as a safe and secure destination.

Planning commission has agreed to enhance the outlay for overseas marketing of India as a tourist destination from Rs 25 crore to Rs 51 crore during this financial year, the release said.

Tourism ministry has also taken certain steps on integrated development of tourist circuits, the release said.

He emphasised on the infrastructure development of the Buddhist circuits of Ajanta-Ellora and Bodhgaya-Rajgir and Nalanda.