War Takes its Toll on Anaemic Hotel Industry But Hoteliers Remain Optimistic

9th Apr 2003

The war with Iraq has dealt another blow to the anaemic travel industry and just when it seemed as though things couldnå‘t get any worse, the outbreak of the deadly SARS virus has sent more panic waves throughout the industry, further challenging the third millennium travel industry.

Today, hardly anyone is willing to predict what is in store for the hotel industry over the next 12 months. Many hotels including the likes of Starwood Hotels and Resorts

, have withdrawn their profit outlook and will not make any future projections.

Industry executives and analysts have said it will take an economic turnaround to bring any growth to the hotel industry, but the war with Iraq, coupled with weak consumer confidence, continues to make this increasingly unlikely. Following worldwide concerns Internet Travel News spoke to some major hotel brands to find out how they have been affected.

2003 seems to be repeating 2002, a year that initially held promise of better times that failed to materialise. In 2002 there were hopes that when the economy stabilised, people would once again spend their money on business travel—the heart of hotel demand. This hope was never realised. Then at the start of the year 2003, surveys and reports gave us good reason to be ‘cautiously optimistic’ about the future - however these hopes were soon to be demolished as both room rates and occupancy figures dropped at the onset of war.


The fate of the hotel industry seems to be out of its control. The health of the U.S. and world economies are likely to be the primary forces shaping the near-term performance of the lodging business. It has been suggested that business travel is unlikely to increase until corporate America and its European counterpart are confident that business is on the upswing.

A lack of confidence and consumer concern is at the root of problems and forecasts suggest that these effects could be long term. Key priorities for travellers are security and convenience.

A significant shift to booking closer to the time of travel has been accelerated by the war with Iraq: A spokesperson for Marriott International

,a leading worldwide hospitality company with over 2,600 properties worldwide, commented: “Since September 11, travellers have tended to book closer to their planned date of departure than in the past; on-line bookings contributed about 9% of Marriott`s total sales activity in 2002 and amounted to $1.1 billion in sales, double what it was in the previous year. Bookings from this source are continuing to grow”.
Radisson Hotels and Resorts

also revealed a very short booking pace, revealing that much of the business is now being booked within 7 days of arrival. 

At this turbulent time, consumers are cautious, selective and looking for more value. Online channels continue to grow as consumers have learned how to use the Internet to find the best hotel deals and discounts. And hotels, in an effort to boost their occupancy, have lowered rates to help increase traffic.

Another trend that has been noted is that consumers seem to feel safer travelling close to home. Travel is currently more regional in all global theatres.  Those in Asia Pacific are choosing to travel within that region: the Americas within the Americas and Europe within Europe. A survey

by Travelocity

supports these findings, revealing that American travellers plan to vacation within the U.S. during the next year. Latest research indicates that more British people are planning to take a holiday in England this year, further purporting this trend. 

Unlike 2002, many large hotel brands reported feeling more prepared for this war. Having confronted September 11th attacks and the Gulf war, a number of hotels have now implemented contingency plans and security measures to address consumer concern.

A spokesperson for Marriott International commented: “We have the benefit of learning from the Gulf War of more than a decade ago and the tragedy of September 11. Based on these learnings, we have developed contingency plans and each hotel is required to have its own contingency plans, including reducing restaurant operating hours, closing certain guest room floors or sections and reducing staff work hours while striving to maintain employment, benefits and customer service focus”. Like many others, Marriott were not willing to discuss the future, commenting “We do not speculate on future business”.

As a world leading brand in the hotel industry, Radisson Hotels and Resorts, are equally sensitive to individual consumer concern and were one of the first brands to implement a waiver to their cancellation policy as a direct address to consumer concern.

With a 50 year track record of operating in an international market, Hilton International, with 499 hotels worldwide, has broad experience of economic and political uncertainty. A spokesman commented:  “Our key priority at all times, good or bad, is the safety and security of our customers. This will continue to be the case.

“In terms of business, we must wait and see how long the present situation
lasts. Hilton has a very strong business profile with a management team
capable of coping with situations like this. We will adopt a careful,
prudent approach reflecting the rapidly changing circumstances.“For example, over the past 18 months we have been concentrating on a
programme of domestic marketing which has proven to be successful and we
will continue to monitor changing travel patterns for both business and
leisure tourism and adapt accordingly.”

Hyatt International

, who operate 61 hotels in 39 countries said that they remain optimistic in very tough conditions. Having confronted issues before, their infrastructure is such that they are aware and prepared. They are doing everything they can to encourage travel as normal and to ensure that consumer concerns are addressed.
Chris Brosnahan, Vice President Carlson Hospitality Worldwide Reservation and Distribution Services revealed that although Radisson Resorts has seen a decrease in bookings, it has not been as drastic as the Gulf War period: “Our cancellation factor has held very close to our traditional rate”. Chris disclosed: “Bookings are down; however those that book tend to travel.  Overall occupancy levels vary by brand and hotel.  The limited-service product has not seen the same impact as the full-service hotels.”
“Business travel has been down for some time, however the war seems to have more of an impact on leisure travel. It is very difficult to project 2nd quarter results.  Our hopes are that the war comes to a quick resolution and that travellers once again feel safe in both their business and leisure excursions”.
The future of travel is clearly uncertain. Continued sluggishness seems likely to prevail for at least the first half of the year and current travel spending remains frozen, yet hoteliers remain optimistic and continue to monitor changing consumer patterns, implementing strategies to adapt and evolve. We can all hope for a bounce in consumer confidence at the end of the war with Iraq, which now seems imminent.




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