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Old 03-20-2003, 08:28 PM   #1
Luv2Roam
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Unhappy More Cuts in Store?

U.S. hotels could cut services if war slows demand
Reuters, 03.20.03, 12:36 AM ET

By Peter Henderson

LOS ANGELES, March 19 (Reuters) - U.S. hotels and resorts could close restaurants early, limit hours of health clubs and cut other services if the outbreak of war discourages more Americans from traveling for business and leisure.

"We've got a checklist of things that we are looking at doing at the hotel level," Marc Grossman, a spokesman for Hilton Hotels (nyse: HLT - news - people), said. Restaurants could be closed or shut early and staff hours cut quickly if demand dropped, he said.

"We are not going to do anything reckless with pricing," he added.

Grossman and other hoteliers spoke with Reuters on the eve of the U.S. war against Iraq which began on Wednesday evening.

Rival hotel chains have similar contingency plans to cut the hours and staffing at their health clubs and cut the number of restaurant menu items, while theme park operator Walt Disney Co. (nyse: DIS - news - people) is prepared to run fewer shows and cut park hours a bit if need be.

The recent shock of the Sept. 11 attacks and years of responding to natural disasters and ebbs and flows in demand have honed their plans, the operators say.

"We have emergency operations centers, we have emergency operations plans, and we have contingency planning that we have done for a very long time, that can happen with things a lot less significant than war," said Disney parks spokeswoman Leslie Goodman.

BUSINESS ALREADY OFF

Hoteliers say business travel has slackened in the last few weeks, with revenue per available room down 5 percent from a year earlier in the week to March 15, according to Smith Travel Research.

Room revenue weakened after Iraq invaded Kuwait in 1990, and the fall accelerated when the United States went to war in January 1991, with a 4.3 percent decline in January worsening to a 7.7 percent fall in March, a study by investment bank Deutsche Bank that was released on Wednesday showed.

However, Deutsche Bank analyst Marc Falcone said that the industry, which took 17 months for room revenue and four years for occupancy levels to return to those prior to Iraq's invasion of Kuwait in 1990, could recover much quicker this time.

There is less of a glut of rooms than in the previous war and hotel companies are in better financial shape, although the threat of domestic terrorism could ruin recovery, he said.

Lodging stocks may jump back even faster, Falcone said. "investors who wait for tangible signs of a turn in fundamentals may have waited too long," he wrote in a note.

Many analysts and investors have virtually written off hopes of a recovery in 2003, and some wonder if one will materialize in 2004.

DRIVE MARKETS STRONGER

The limited bright spots are in drive-related markets, which fared much better than big-city hotels after the Sept. 11 attacks. Disneyland, which mostly serves close-by Southern Californians, is ahead of last year in bookings while Disney World, which mostly serves tourists from outside its Florida base, is behind 2002, the company said.

Competitor Six Flags (nyse: PKS - news - people), which says 95 percent of visitors drive to its parks, saw a small rise in revenue after the 1991 war and sees same-park revenue up 4-5 percent this year, although executives in a Wednesday conference call said they had contingency plans to cut costs if business fell off.

"We are seeing a bigger increase in the drive market, versus the fly," said Bob Diener, president of online booking company Hotels.com.

Mike Kennedy of Marblehead, Mass., said he canceled a trip to California he was planning to take in April with his wife and kids because of the war. But he said he may take a shorter trip instead, perhaps to go skiing in New Hampshire.

"I just don't want to get stranded too far from home," Kennedy said.

Copyright 2003, Reuters News Service
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Old 03-20-2003, 08:41 PM   #2
raidermatt
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The rumors have been that we would see further significant cuts soon after the annual meeting and once the war began. Since both happened on the same day, its probably just a matter of time.
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Old 03-20-2003, 09:39 PM   #3
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Ironically (and for the time being) attendance in Florida is half decent for Disney right now. At both Disney and Universal attendance this week was WAY higher than expected (I can only speak for Monday-Wednesday though). At Disney this mean't that attendance was as high as what they had projected at the beginning of the year, which means that a lot of the cuts in hours made at the MK based on later projections had to be reinstated. At Universal this only added to the increases they have already seen this year.

However, it is pretty much a done deal that more cutbacks will be made as soon as it is convienient, which will probably be after Spring Break if even that long.
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