While the nation focused largely on the human tragedy
unfolding in Houston last week, analysts and suppliers thousands of miles away
began tallying the cost of Hurricane Harvey to Texas' economy, including to its
Generating $35.2 billion last year, the Texas travel
industry accounted for just over 2% of the state's total gross domestic product
(GDP), about on par with the contribution from its electronics and agriculture
sectors. Of all the state's industries, only energy made a significantly
greater contribution to its GDP.
The pain was felt across the spectrum of travel enterprises,
from cruise lines to airlines, from hotels to car rental companies. Flights and
cruises were cancelled, airports, hotels and ports were closed, and thousands
of rental cars were presumed damaged or destroyed by the storm.
What's more, Harvey forced the shutdown of multiple oil
refineries, which was expected to raise the prices of all refined fuels, from
diesel oil and gasoline to jet fuel. The
least refined petroleum product is the bunker oil that fuels most cruise ships.
While the price of gasoline jumped 6 cents a gallon in the first five days
after the storm hit, efforts to get comment from the cruise lines on bunker
fuel supplies and prices were unsuccessful.
By late last week, Harvey had already caused a significant
jump in jet fuel prices. The Gulf Coast region accounts for half of all jet
fuel produced in the U.S., and 16% of the nation's refining capacity was still
down as of Aug. 31.
According to the price-reporting firm S&P Global Platts,
jet fuel prices, not accounting for taxes and delivery costs, had increased
from $1.59 a gallon on Aug. 25 to $1.97 a gallon on the morning of Aug. 31.
Meanwhile, Matthew Kohlman, Platts' senior managing editor
for refined products for the Americas, said a gallon of jet fuel in the Gulf
Coast region was 23 cents per gallon more than the price on the New York
futures market, the largest spread since Hurricane Ike hit the Gulf Coast in
Jet fuel produced in the Gulf region not only supplies local
airports but is also shipped through pipelines to major hubs in Atlanta,
Charlotte, Philadelphia, Washington and New York.
Kohlman said prices tend to revert to normal once refineries
come back on line.
For the cruise industry, the immediate pain was relatively
short-term. Carnival Cruise Line had to cancel four voyages: one seven-day
cruise each for the Carnival Freedom and Carnival Breeze and two five-day
voyages on the Carnival Valor.
Royal Caribbean International likewise lost one cruise out
of Galveston, Texas, when it was forced to divert its Liberty of the Seas to
Miami to avoid the storm.
damage is expected to be felt in the Texas cruise market. Carnival, in
particular, has invested heavily to promote the three ships it bases year-round
in Galveston, which is primarily a drive-market port.
Roadways have been underwater, and meteorologists said last week that some might not be clear for as
long as three weeks, making it uncertain when booked guests will be able to
drive to the Port of Galveston, which reopened last Thursday after being closed
for a week. Members of the Coast Guard and U.S. Army Corps of Engineers were
surveying the port facilities to see what kind of damage the high water might
have left behind.
The personal toll and economic upheaval resulting from
Harvey also cast doubt on whether passengers from southern Texas will have the
appetite or the ability to take already-booked cruises. Demand from the area
for all cruises could be diminished as residents focus on recovery.
Hoteliers in Houston and other parts of southeastern Texas
scrambled last week to repair and reopen more than 100 hotels damaged by winds
The disaster posed yet another setback for a Houston hotel
market where demand levels had already been beset by a combination of
depressed prices in the energy sector and an influx of inventory. Through June,
Houston hotels' revenue per available room fell 4.4%, compared with a 3%
increase for the U.S. as a whole, according to STR.
InterContinental Hotels Group (IHG), whose brands include
Holiday Inn, Holiday Inn Express and Staybridge Suites, said on Aug. 31 that
about 50 of its 150 hotels in the path of the storm had been either shut down
due to damage or had seen operations affected by issues such as flooding or
loss of communications or power.
"We are working diligently to safely accommodate guests
who have reservations at impacted hotels and are remaining in close contact
with individual hotels around the clock to provide assistance and resources,"
an IHG spokesperson said in a statement last Thursday.
A half-dozen of Marriott International's properties in the
area, including five Fairfield Inns and one TownePlace Suites, had been closed
as of early last week. One Hyatt Place hotel was also closed, while another
temporarily stopped taking new arrivals.
One of Hilton's 110 hotels in the area was closed. Choice Hotels International -- whose brands include Comfort Suites, Quality Inn and EconoLodge -- has about 130 hotels in the impact area and said most are operating but some aren't. "Franchisees in
the surrounding areas are participating in the FEMA Emergency Lodging Assistance
Program, which supports communities by providing temporary housing for
emergency workers and people displaced by the flooding," Choice said in a statement.
Wyndham Hotel Group said "the vast majority of our more
than 100 hotels in the affected areas remain open" but declined to be more
All the hoteliers
declined to predict when their shuttered hotels would reopen.
On Aug. 25, Texas Gov. Greg Abbott said that Harvey victims
and relief workers would be exempt from paying hotel occupancy taxes for two
Meanwhile, car rental companies worked to move some of their
fleet to higher ground to avoid flood damage while simultaneously moving
inventory from other regions into the Houston area to serve what was expected
to be a surge in demand from both residents who have lost vehicles and arriving
Enterprise Holdings, Hertz Global Holdings and Avis Budget
Group each said last week that they were moving vehicles from other regions into
the area. Hertz said it had moved some
of its fleet to avoid the kinds of damages car rental companies sustained
during previous weather events such as Superstorm Sandy in 2012 and Hurricane
Katrina in 2005. As of last Thursday, the companies had not reported how many
vehicles had been damaged by Harvey.
Bush Intercontinental and Hobby airports in Houston reopened
late Wednesday afternoon after having been closed since the prior Sunday, and
while airlines planned to ramp up operations at both, they emphasized that it
would take time.
"We must ensure that we have adequate staffing and
functional concessions, airport facilities, roadways and parking to serve our
customers," said Brandy King, a spokeswoman for Southwest, which with
approximately 150 flights per day is the largest carrier at Hobby.
Added Charles Hobart, a spokesman for United, "It's a
matter of making sure we have the right crews and equipment and employees in
place to operate a full schedule. That is going to take some time."
United, which maintains its second-largest hub at Bush, has
the largest airline operation in Houston. The airline, which typically runs
some 500 flights per day out of Houston, said it would take weeks to resume
Southwest waited until Saturday to resume flying into and
out of Hobby. As of last Thursday, the carrier had not provided an estimate for
when its full Houston schedule would be operational.
Neither carrier was talking last week about the size of the
financial hit they expect to take as a result of Harvey.
"The business implications, who cares? We'll [worry]
about that later," Southwest's chief revenue office, Andrew Watterson,
told the audience at the Boyd Group's International Aviation Forecast Summit in
Las Vegas last Monday as the storm still raged.
Helane Becker, a transportation investment analyst for Cowen
& Co., estimated that Harvey would cost United $265 million, according to
the website Seeking Alpha. Jim Corridore, an analyst with the investment
research firm CFRA, also said United's losses could be in the hundreds of
millions of dollars.
"We note that this disaster, while monumental in scale
and damage to the city, is a one-time event," Corridore was quoted by
Barron's as saying.
"We expect demand to return to normal eventually."
Robert Silk, Danny King, Tom Stieghorst and Michelle Baran
contributed to this report.