Travel Bug Bites Again

Airlines, Hotels, Car-Rental Concerns—Even National Parks—See Business Rise


Americans’ renewed urge to roam is snapping back the travel industry much faster than the rest of the economy.

Spending on airplane seats, hotel rooms and rental cars, among other tourism and travel expenses, jumped 3% at an inflation-adjusted annual rate in the second quarter, the government said Thursday, while the economy as a whole grew only 1.6%.

Other indicators, including price increases at some hotels and airlines and even gate receipts at national parks—which rose 1.2% this summer from a year ago—suggest that travel is recovering from its deep slump.

Much of the increase is fueled by businesses, which reduced employee travel during the darkest days of the recession and are now once again deploying those road warriors.

According to Smith Travel Research, which tracks hotel data, hotel occupancy overall rose 5% for the year through August compared to last year. Room rates, however, slipped 1% because many hotels remain hesitant to raise prices. Still, for the last four months in a row average room rates have risen over the same period of 2009, Smith Travel said,

“You see demand come in first and that gives the courage to the hotel owners to raise their rate,” said Stephen P. Holmes, chief executive of Wyndham Worldwide Corp., a hospitality company that includes hotel franchises and vacation rentals. Even so, he still believes “the recovery will be gradual.”

Travel and tourism spending remains far below its pre-recession peak but the latest report from the Commerce Department suggests the industry is a bright spot for an economy still burdened by high unemployment. Employment in the sector, such as hotel maids and airline pilots, rose 2.2% in the second quarter, marking the first increase after eight straight periods of decline.

That’s been the case at Wyndham, whose hotel brands include Ramada, Days Inn and Super 8. With demand improving in the second quarter for the first time in more than a year, hiring rose.

And even though rate increases are sparse, the mere sight of additional travelers has cheered those who own hotels in Wyndham’s franchises, a sentiment evident at a meeting in Las Vegas this week, Mr. Holmes said.

“I think there’s generally a feeling of improvement,” he said. “I hear them talking more about investing more in their hotels.”

Other hoteliers voiced similar optimism. “We remain cautiously confident,” said Vasant Prabhu, chief financial officer of Starwood Hotels & Resorts Worldwide Inc., which owns the W and Sheraton brands, among others. Speaking about the industry generally, Mr. Prabhu said, “As the summer played out, the leisure traveler did not disappoint. Americans are definitely willing to spend [to go] on vacation.”

The next few weeks will be a crucial test for hotels, since it is the time when the big chains negotiate their corporate rates with companies that will be locked in for the coming year.

Airlines haven’t been as reluctant as hotels to raise prices. Spending on air transportation rose 3.9% in the second quarter, the government said. After bankruptcies and consolidation in the industry, airlines have worked to improve profitability.

With demand returning, and capacity still reduced, airlines boosted their rates 16% in the second quarter, according to the government.

Car rentals also have picked up. At Hertz Global Holdings Inc., U.S. car rental revenue rose 10% in the second quarter versus a year earlier, and the company reported that customers were keeping cars longer, further bolstering revenue.

The upturn is being felt in all corners of the travel industry. At Wyoming’s Jackson Hole Mountain Resort, the ski area’s iconic red tram, which carriers riders 4,100 vertical feet up the Teton Mountains, had 110,000 unique riders this summer, up 12.5% from 2009. With increased demand, the resort’s mountain-top restaurant, Couloir, was open six days a week this summer versus five in 2009.

“What we’ve seen with spending habits this summer leads us to be cautiously optimistic about the future,” said Chip Carey, chief marketing officer of the resort.

Another tourist destination, Las Vegas, has seen visits rise after falling 7% last year from a peak of more than 39 million visitors in 2007.

This summer, the number of visitors was down just 1.4% from the 2007 high.

Las Vegas has nearly 150,000 hotel rooms, the most of any U.S. city. The problem for the city’s tourism industry is that casino resorts have slashed prices amid a glut of new hotel rooms and also seen patrons spend less on gambling.

Average daily room rates in 2009 were $93, down about 30% from 2007.

But in recent months the rates have started to creep up for the first time since the recession.

Trips to national parks also are on the rise. After tossing around possible destinations for their first trip together, Samantha Lazarus, 24 years old, and her boyfriend settled on a four-night road trip to Bar Harbor, Maine, this summer, stopping at Acadia National Park along the way.

They weren’t the only ones. The number of visitors to Acadia rose 13% to 171,000 in the June-through-August period this year versus the same period of 2009.

The couple splurged for two nights at a bed and breakfast, spent a night camping and used Priceline to find a hotel in Portland, Maine. The bed and breakfast was the most expensive stop, but at about $125 a night it was still within their budget, said Ms. Lazarus, a Brooklyn, N.Y., resident.

The trip was so affordable that the couple were able to swing it even though he’s searching for a full-time job.

“Both of us have money saved,” Ms. Lazarus said. “We didn’t take this vacation because it was cost-effective. It just worked out this way.”

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