At Calif. conference, officials blame media for recession fears

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SAN FRANCISCO -- Talk of recession is spooking some business and leisure travelers, who are pulling back on travel plans this year, according to economists and travel industry executives who spoke at an industry conference here.

But travelers' fears may be fueled less by facts than by sensationalized media coverage that may be leading the country to "talk itself into a recession," said David Bratton, founder of Destination Analysts, a San Francisco-based market research firm.

"There's a tremendous amount of uncertainty out there and also a tremendous amount of media hype," he said during a panel discussion at the Northern California Visitor Industry Outlook Conference.

The media has used "extreme language that sinks into people's psyches and causes people to think we are in a recession, even if we aren't."

An informal survey of the 235 Northern California tourism and hospitality industry executives who attended the conference found that the vast majority, 80%, were "very positive" about the outlook for their industries in 2008.

Only 20% said they saw "concrete signs" of a recession, he said.

Ken Goldstein, an economist with the Conference Board, the research company known for the Consumer Confidence Index and Leading Economic Indicators, said research shows that pockets of the country indeed have fallen into an economic slump. However, he added, the U.S. economy was not in a recession, at least not in January, the last month for which data was analyzed, and it might well avoid one.

Anxiety is understandable

Michael Potepan, an associate professor of economics at San Francisco State University, said there were solid reasons for the traveling public to feel uncertain, such as declining house values, the resulting credit crunch and inflationary pressures brought on by high gasoline prices.

Potepan agreed that the media was "overhyping" the potential for recession, but he said that even if there was no outright recession consumers were likely to cut back on travel and other discretionary spending because of a general feeling of uncertainty.

"There is something real out there that is happening, and psychology is very important," he said.

But travel and hospitality industries in some parts of the country may not feel a slowdown at all: the New York and San Francisco metropolitan areas, for example, are benefiting from the weakness of the dollar due to a boom in inbound travel from Europe, Goldstein said.

The travel industry can count on many years of a weak dollar vs. the euro, a result of the U.S. trade and budget deficits and interest rate policy, he said.
Goldstein said he doubted the dollar would fall much more against the euro, but he also said, "We're not going back to 1-to-1 euro-to-dollar." 

Meanwhile, gasoline prices will likely keep rising, possibly to $5 a gallon within two years, which will have an impact on both jet fuel costs and driving vacations, he added.

Tiffany Urness, research manager for the California Travel and Tourism Commission, said the commission expected international travel to California to soar and domestic travel to slow in 2008.

She cited tumbling home prices and rising foreclosures that put a damper on consumer confidence, while international tourists take advantage of a weak dollar.

On the domestic travel front, that may mean more travel to California destinations by state residents. There may also be fewer impulse trips and shorter vacations, Urness said.

Thomas Callahan, CEO-West of PKF Consulting, a hotel industry research firm, said he believed the U.S. economy would slow this year but would "dodge a recession."

The hotel industry nationally will feel a slowdown, he said, partly because the uncertainty is causing travelers and companies to "rethink their travel plans" and higher hotels rates will push down demand.

Higher rates, more vacancies

PKF is forecasting average daily rates at hotels nationwide to grow by 5.6% this year and by at least 5% in each of the next five years. Occupancy is expected to slip nationwide from 63.2% in 2007 to a projected 62.6%, mostly a result of a 2.6% increase in hotel supply brought about by building in suburban markets, Callahan said.

The bright spot is international travel, particularly in gateway cities such as San Francisco, which will have a "very strong year," according to Callahan.
In San Francisco, average daily rates are expected to rise 7.8%, to $196.50, in 2008 while occupancy rates hold steady at 78%; PKF expects that occupancy rate to hold steady for each of the next three years.

The long-term outlook for San Francisco is rosy, particularly from emerging Asian markets of South Korea, China and India, said Leonard Hoops, executive vice president of the San Francisco Convention and Visitors Bureau.

At the end of 2008, the visa waiver program will be extended to South Korea, and travel to the U.S. from that country is expected to double in the first year as a result.

San Francisco also is expected to receive growing numbers of visitors from the emerging middle class of China and India, two countries that have strong ethnic and cultural ties to the city, he said.

To contact reporter Laura Del Rosso, send e-mail to [email protected].

 

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