TOURIST TRAP: Travel Picks Up, but Bumps Ahead
By SANDI CAIN
Orange County’s $6 billion annual tourism industry is shaking off the downturn brought by September’s terrorist attacks and appears ready for a rebound this summer.
But don’t look for the boom days of 1999 and 2000 just yet.
Significant growth,once expected to come with the opening of Disney’s California Adventure,is unlikely to begin before next year, officials say. And while there’s cause for optimism for summer, concerns remain that a stubborn economy and fragile consumer confidence could temper Americans’ willingness to take to the road again.
“There’s a modest improvement across all sectors,” said Jack Kyser, chief economist for the Los Angeles Economic Development Corp. “But we take tourism for granted too often.”
The industry, Kyser said, needs to entice people to get on the road.
Despite a bleak tourist trade immediately after Sept. 11, OC’s numbers have been on the rise since late last year.
Visits to the county last year inched up 1.2% to 40.7 million from the year before. Visitor spending was flat at $6.4 billion. That performance was buoyed by strong numbers at Anaheim’s newly expanded convention center,in its first year of full-facility operation,and by new theme park, Disney’s California Adventure, which drew about 5 million visitors despite a slow start and disappointment from some critics that the park isn’t more like Disneyland.
OC tourism officials are cautiously optimistic that summer crowds will at least equal last year.
“We expect an overall bounce this summer,” said Doug Traub, president of the Huntington Beach Conference and Visitors Bureau.
“I think we’ll see record revenue again by 2003.”
Anecdotal reports indicate that the spring vacation period was a winner locally.
OC’s first-quarter hotel occupancy averaged 59%,down 11% from last year. But that was still above the nationwide occupancy level of 55%, according to Hendersonville, Tenn.-based Smith Travel Research Inc.
And it looks like things are picking up.
“Spring occupancy was much better than we initially expected,” said Randy Baumberger, senior vice president of Disneyland Resort Hotels and Downtown Disney. “And it has continued to improve.”
The theme parks have seen attendance pick up, too.
In a recent conference call, Thomas Staggs, chief financial officer for Walt Disney Co., said Disneyland had a “high single-digit increase” in attendance during spring break and that international visits,though still off about 10%,had improved.
The Alexandria, Va.-based International Association of Amusement Parks and Attractions says that amusement park visits should be up 2% to 4% this year. That would put Disneyland on pace for about 13 million visitors this year and slightly more than 5 million for California Adventure. Knott’s Berry Farm,which draws about 3.5 million visitors a year, would get a boost, too.
“Everybody’s doing well,” said Charles Ahlers, association president. “The parks and Downtown Disney are jammed and the hotels have reasonable occupancy.”
Disney’s Baumberger called Downtown Disney a “tremendous success,” with 97% of guest survey respondents saying they intended to return. In an interview with the Business Journal earlier this year, Anaheim Mayor Tom Daley called it “an important amenity” for conventioneers.
Baumberger said expansion is likely sometime in the future.
A strong performance at Downtown Disney is a reflection of an overall uptick in retail sales in the first quarter. And with shopping now the No. 1 vacation activity, that trend is likely to continue if summer visitor numbers are strong.
“We had a very soft fourth quarter, but this year sales are up so far,” said Peter Wong, senior director of tourism for The Block at Orange. The Block, Wong said, is becoming better known among both domestic and international travelers and he’s optimistic that the summer will be a good one.
But anomalies exist.
Brigitte Cady, marketing director at Newport’s Fashion Island, said sectors like home furnishings are doing well, while others aren’t as strong. But overall, she said retail sales at Fashion Island held steady last year, despite a decline in both business and international travel.
“We have a strong drive-in base of tourism,” she said.
Fashion Island had taxable sales of about $500 million last year, flat vs. 2000.
Restaurants, too, have seen sales return to pre-Sept. 11 levels and are expected to generate statewide sales of $40.7 billion this year according to California Restaurant Association spokesman Mark Martin.
Cindy Crater, director of sales and marketing for Newport Beach-based Culinary Adventures said sales in the first four months of 2002 were “well beyond last year.” Culinary Adventures’ restaurants include Savannah Chop House, French 75 and Chimayo at the Beach.
Some industry watchers attribute the surprisingly strong first quarter to a surge in consumer confidence.
Leisure travel should increase about 6% this year as a result of a dramatic increase in consumer attitudes in recent months, said Peter Yesawich, president and chief executive of Orlando-based travel marketing firm Yesawich, Pepperdine & Brown, in an April report.
Sparked by that confidence, airlines have added back flight capacity that was cut in the post-September downturn and some are even adding additional flights. Alaska Airlines launched the first international service to Canada from John Wayne Airport on May 1, and a few days later start-up Jet Blue began non-stop service to Washington, D.C. from Long Beach.
While consumers may be willing to travel, they still are concerned about affordability. Thirty-seven percent of respondents to the Yesawich, Pepperdine survey said they were planning fewer trips for economic reasons,just one cautionary sign of how fragile the uptick in tourism may be. With the stock markets struggling to put together a rally and April unemployment hitting a seven-year high, the confidence bubble could burst.
And neither business nor leisure travelers have been planning ahead.
Officials from all segments of the tourism industry contacted for this story agree that travelers are increasingly making last-minute reservations as they search the Internet, wait for airline deals and examine family finances before making a decision.
“We’re seeing short-term booking more than ever,” Baumberger said.
The three Disney hotels in Anaheim are relying on vacation packages like this summer’s “Kids Play Free” promotion for a big chunk of their business, but the bulk of park attendance is still from visitors who live in the region, the so-called “drive market.”
“We’re all a little nervous about the summer,” said Debbie Golanka, general manager of the Newport Beach Marriott Suites. “Bookings are very last minute.”
That’s just one indication of uncertainty.
With every tourist destination targeting the drive market, oil companies and motor home rental outlets might end up the big winners. Motor home rentals have been booming while air travel still is below last year.
Foreign visitors, who make up about 10% of OC’s yearly total, aren’t expected to give a boost to the industry this year, largely driven by their weak economies,particularly in Japan and in Latin America.
Insurance premiums,both for the traveler and for companies providing tourist services,have gone up. There’s some fear that lenders on high-risk properties might start asking owners to purchase terrorism insurance, which has risen exponentially in price since Sept. 11.
Higher insurance rates and healthcare costs, along with a pending raise in the minimum wage, could lead to price hikes that cut into the bargains that are bringing some travelers out of their homes.
Despite the strong spring, there are still big question marks about summer travel, according to Jim Abrams, chief executive of the Sacramento-based California Hotel & Lodging Association.
He thinks the fourth quarter will be the strongest, but still holds out hope for summer.
“We’re hoping there’s a lot of pent-up demand,” he said. “Leisure areas like Orange County should do better than business-dependent areas,” he said.
