Sandy takes toll on travel industry

By Danny King and Kate Rice

Airports, cruise ports, subways, tunnels, bridges and roads — high winds and an unprecedented storm surge shut them all down.

The tourism industry was continuing last week to tally up the economic damages in New York and beyond after Sandy, one of the most devastating storms to hit the Northeast, paid a visit.

The price tag: an estimated $50 billion in damage and economic losses, according to the risk consulting firm Eqecat. No small sliver of that will fall on the airline industry, for which the New York metro area is a major source and destination market.

Bob Herbst, an independent aviation consultant and retired pilot who spent 30 years flying for several major carriers, said that American, United, Delta, JetBlue and US Airways, which provide much of the lift to the region that Sandy tore through, likely collectively lost an estimated $400 million in revenue. He estimated that Sandy would hurt their fourth-quarter profits by $100 million.

Darryl Jenkins, a consultant who is part of the ACG Aviation Consulting Group, estimated that airlines lose $12,000 to $15,000 for every scheduled narrow-body flight that doesn’t fly. The storm forced airlines to cancel nearly 20,000 flights, many of them high-revenue international flights serving East Coast gateways.

However, airlines seemed to be ramping up to speed quickly; all major New York-area airports were back in operation Nov. 1, with many airlines expecting to be at full capacity by Nov. 3 at the latest.

By Nov. 1, airline cancellations had dwindled from the thousands to 571,
according to the flight-tracking website FlightAware, and airlines appeared to be returning to their normal schedules swiftly out of area airports.

The airlines will save some money on fuel not consumed, and many of those passengers will rebook. But now that airlines are flying at such high load factors, rebooking could be tough for some travelers, Herbst said.

He said JetBlue was the airline hit hardest by Sandy, because nearly all of its flights go through Boston or New York every day. United was also heavily affected, Herbst added, because Newark and Washington Dulles are major international hubs for the carrier.

“A lot of revenue comes in on those big international flights, so they were hit much harder than Delta,” he said.

Airlines were able to resume operations sooner than cruise lines, as the ports remained closed as late as Nov. 1. The closure sent the Norwegian Gem, the Crystal Symphony and the Caribbean Princess to Boston, snarling plans for thousands of disembarking passengers.

Broadway bounces back

The New York hotel market is perennially strong, and tourism officials were optimistic that New York, as a tourist destination at least, would recover swiftly.

Broadway shows opened again on Oct. 31, and the subway system was running in all boroughs, although outages still existed below 34th Street in Manhattan and in some outlying areas in Brooklyn and Queens.

Major icons, such as the Empire State Building, the Metropolitan Museum of Art and the Museum of Modern Art, were open Oct. 31. Others, such as the Museum of Natural History, the Top of the Rock at Rockefeller Center and Circle Line boat tours, were open or running Nov. 1.

According to reports, the 9/11 Memorial and the unfinished 9/11 Museum suffered flood damage. The memorial is located in lower Manhattan, which was beset by flooding, and video showed waters cascading into sections of Ground Zero.

New York parks, barricaded after the storm while crews cleared fallen trees and branches and assessed other damage, were scheduled to reopen Nov. 3.

The New York City Marathon on Nov. 4 was going to be held, but Mayor Michael Bloomberg reversed course and canceled it two days before the event, amid criticism that the city would be devoting resources to the race while many New Yorkers were left homeless or without power after the hurricane.

Portions of New York and New Jersey remained without power late last week, and getting around remained an issue, as residents were lined up at gas stations, and some cabbies were exploiting the situation to charge high flat fares or refused to go to destinations where they might get tied up in traffic.

On the local tourism front, the Jersey Shore was slammed by Sandy. Photos making the rounds on social-media sites and in local newspapers showed beaches, boardwalks and towns in various stages of distress.

A hiccup for most hotels

As for New York’s lodging market, which at about 103,000 rooms is the fifth-largest in the U.S., the storm will likely be a hiccup for Q4 revenue numbers, though many in lower Manhattan and some midtown hotels near a damaged high-rise crane will be the exceptions.

Mandatory evacuations caused lower Manhattan hotels such as the Conrad, W New York Downtown, New York Marriott Downtown, Ritz-Carlton New York Battery Park and Andaz Wall Street to shut down just prior to the storm, while flooding and power outages affected operations throughout the remainder of the week.

Additionally, at least two midtown Manhattan hotels were evacuated early last week because of storm damage to the nearby high-rise construction crane. The 727-room Le Parker Meridien and the 161-room West 57th Street by Hilton Club were both closed because of concerns that part of the damaged crane would fall to the ground.

City officials evacuated West 57th Street between Sixth and Seventh avenues because of the safety risk presented by the crane. Those evacuations were likely to remain in effect for at least a week.

As for overall results, though, New York, which had an 82% occupancy rate through September and has long been the most lucrative U.S. hotel market in terms of room rates, is unlikely to receive much of a dent in its fourth-quarter lodging demand, given the number of media, federal emergency workers and insurance adjusters to the area, said Jan Freitag, senior vice president at Smith Travel Research.

And while some fourth-quarter leisure demand for New York lodging may be lost as East Coast consumers reallocate those dollars set aside for a weekend trip toward home repairs and other expenses, New York hoteliers are unlikely to have problems filling those rooms, especially as the holiday season approaches.

“Weekend travelers may curtail their travel, but you’ll only see that on the margins, and Friday and Saturday nights are super-strong for New York anyway,” Freitag said. “Manhattan is a very strong market, no matter what.”

Bjorn Hanson, divisional dean of New York University’s school of tourism and hospitality management, took a more pessimistic view of the impact on hotels, noting that the advance notice of the storm prompted increased cancellations and fewer stranded guests who would have stayed extra nights.

The timing of the storm was particularly bad because late October and early November tends to be a busy time for business meetings, he said.

“There will be demand from insurance companies, contractors, inspectors and displaced residents that will generate incremental demand, but not at levels significant when compared with cancellations and reduced travel,” Hanson said.

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