Economy, Energy Seen Taking a Toll
As economic concerns proliferate, even the most recent projections for the 2001 summer tourist season appear as dated as a 14.4K modem.
John Boatright, former chairman of the Association of Travel Marketing Executives Worldwide recently told an audience of tourism officials that this summer was potentially the most unpredictable since the Gulf War.
“All bets are off,” Boatright said.
Boatright cited the economy, consumer dissatisfaction with airlines, power problems and a decline in consumer confidence as factors that could lead to decreased vacation spending.
“This year, you’re going to see more vacationers taking day and weekend trips to venues that are only a drive away, such as theme parks, state parks, historical attractions and the like,” he said.
And while that could be good news for OC destinations like the Disneyland Resort and Knott’s Berry Farm, it’s a far cry from the heady optimism county tourism officials expressed just a few months ago.
“Some of the bloom is off the tourism rose,” said Jack Kyser, chief economist for the Los Angeles Economic Development Corp. “I’m more cautious now in my projections.”
A recent survey by the Travel Industry Association projected less tourism growth on the West Coast than for other parts of the U.S. this year. Kyser said at least some of that weakness can be traced to a fear of blackouts.
Power outages, however, are not the primary concern in Anaheim, which has its own utility. Instead, all eyes are turned toward Disneyland, where new attractions once were expected to drive visitor figures through the roof in OC.
It’s no secret that attendance at Disney’s California Adventure,once projected to hit 7 million in its first year,has been light. Disney officials say the spring break season was “very strong” and steadfastly maintain that they expect summer to be even better. But the company also announced that the long-popular Main Street Electrical Parade, retired “forever” from Disneyland in 1996, is coming back July 4 to California Adventure, a move seen by many as an effort to bolster attendance.
But industry analysts are uncertain what the summer may bring. Some say energy concerns make parks in California and other areas of the West more vulnerable to the slowdown, while others say destination parks like Disney or Universal will weather the storm OK, while regional parks that rely more on day-trippers probably will do better.
Kevin Skislock, an Irvine entertainment analyst, said attendance at parks like Disneyland depend on discretionary spending by consumers and often suffer during an economic downturn.
“For any park, there’s a hierarchy of visitor you can analyze, from the local audience that has a short car drive to those who fly in to visit. Energy costs will probably impact the group with the long car drive,” he said.
In California, which is heavily reliant on intrastate travel, such projections could be either a blessing or a curse.
Day-trippers make up a hefty chunk of Disneyland’s yearly attendance, but job cuts by big technology companies and the demise of many dot-coms could cut into the number of even those visitors this year.
“Those folks might not be as likely to go on vacation,” Kyser said.
On the other hand, Michael Mahoney, director of hospitality and leisure consulting at PricewaterhouseCoopers Hospitality in Los Angeles, said Southern California has more of a cushion against recession than Northern California due to the heavy concentration of technology companies in the Silicon Valley.
“Southern California is more diverse in business,” he said.
And Charles Ahlers, president of the Anaheim/Orange County Visitor and Convention Bureau, told attendees at a town hall meeting in April that “things are positive in Anaheim”,at least through the first quarter.
Ahlers said the convention delegate count for 2001 could to reach 1.3 million,the first time convention attendance would surpass the 1 million mark since 1994. That could help offset softness in the vacation market.
However, recent weeks have brought anecdotal evidence of a drop in booth reservations at some conventions. Still, it remains unclear whether there is a slowdown in exhibitor attendance, or whether that would be accompanied by a general falloff in convention-goers.
Ahlers addressed the power issue head-on in February, sending a letter to clients to acquaint them with Anaheim’s unique position in the power crisis. Nevertheless, rolling blackouts are expected to hurt the California market. Mahoney called it “very disruptive to business.” He said he it could have a serious effect on the industry.
Another area of uncertainty for the local tourist market is hotel occupancy.
In February, Orange County’s hotel occupancy increased to 67.6%, up from 65.1% in 2000, according to data from Henderson, Tenn.-based Smith Travel Research. That was the third-best performance among the largest 25 U.S. markets.
During the same month, OC saw its average room rate rise to $95.26, an 8.6% increase from 2000. That, too, ranked third among the largest 25 U.S. markets.
Figures for March, however, tell a different story. For that month, Orange County’s overall hotel occupancy, at 75.8%, was flat compared with March 2000, dropping it to No. 6 among the country’s largest markets. And room rates, which averaged $98.48, were up only 4.6% from 2000, ranking OC No. 10 in room rate growth for the month.
But even those figures have a good news-bad news twist.
Despite the dropoff in March, year-to-date occupancy for the first quarter show Orange County with the biggest overall gain in occupancy,to 68.5%,among the largest 25 markets, while 11 markets suffered a decline,including San Francisco, which dropped 11%. And the average daily rate here showed an overall 6.4% improvement in the first quarter, sixth-best among markets measured by Smith Travel.
Hotel industry veterans seem as baffled as everyone else about what the year holds. At the recent “Meet the Money” hotel investment conference in Los Angeles, some operators said they thought the softness would show up in the second half, while others opined that the second half of the year will be better.
Adding to the confusion, Travel Industry Association data showed that spring travel is up nationwide, with Americans taking up to 147.4 million trips in March, April and May,a 1.6% increase from last year. And most local hoteliers were all smiles about spring break numbers, which this year spanned both March and April because of a late Easter.
But most privately agree that they are hoping Disney attendance will pick up to help the indus
