f the travel industry was on the road
to recovery last year, some segments were traveling different roads
at different speeds -- and none of them was traveling by air.
A quick survey of recent earnings reports from industry leaders
suggests that with the exception of the airlines, most segments of
the travel industry are poised for growth -- if war, terrorism or
economic uncertainties don't intervene.
For most firms, however, that's too many "ifs," and most company
projections for 2004 are tinged with conditions and qualifiers.
Not so with most of the major airlines. Whether it's because of
9/11, the "hassle factor," the recession, the business model or bad
karma, the airlines are in the worst slump in their history, and
they don't expect to get out soon.
Unless otherwise noted, the reports below cover the quarter and
year ended Dec. 31, and all comparisons are with the corresponding
periods in 2001.
Airlines
American's parent, AMR, lost $529 million in the fourth quarter
and $3.5 billion for the year, following a loss of $1.8 billion in
2001.
Delta fared better, but not by much, reporting a net loss of
$363 million for the quarter and $1.3 billion for the year.
Rounding out the Big Three, bankrupt UAL lost $1.5 billion in
the fourth quarter, thought to be the largest quarterly loss ever
reported for any airline. That brought its loss for the year to
$3.2 billion.
In other words, the top three airline companies lost $8
billion.
US Airways, also in bankruptcy, lost big money, as well, as did
Continental and Northwest. In sharp contrast to the big network
carriers, smaller, younger airlines with point-to-point systems and
low fares tend to be making money.
Southwest, for example, posted a $42.4 million profit for
fourth-quarter 2002 and $241 million for the full year, marking its
30th consecutive year of profitability.
Atlanta-based AirTran netted $7.5 million in the quarter and
$10.7 million for the year. Likewise, JetBlue earned $15.2 million
in the fourth quarter and $38.5 million for the year.
Lodging
Judging by the performance of its leaders, the hotel industry is
much better off. Although the lodging giants are struggling with
wavering occupancy rates and soft pricing, they remained profitable
in 2002.
Unlike the airlines, hotels can't park assets in the desert, so
capacity is growing as new properties come on line.
Marriott, for example, added 188 hotels and timeshare resorts,
with 31,605 rooms, bringing the total at year-end to 2,557
properties and 463,429 rooms. Worldwide, Marriott expects to add
25,000 to 30,000 hotel rooms annually in 2003 and 2004.
Hilton, meanwhile, added 143 hotels and 18,034 rooms to its
portfolio in 2002, ending the year with 2,084 properties and
337,116 rooms. It expects to add more than 100 hotels with up to
15,000 rooms this year.
On the money side, the ink is black. Starwood reported a $91
million profit in the fourth quarter and $355 million for the
year.
Hilton reported net income of $40 million for the quarter and
$198 million for the year, in both cases an improvement over
2001.
Marriott, whose fiscal year was a 53-week period ending Jan. 3,
reported a net profit of $277 million for the year and a net loss
of $37 million for the quarter, but both numbers are depressed by
the divestiture of two money-losing units, Marriott Senior Living
and Marriott Distribution Services.
On the basis of continuing operations, the fourth quarter showed
a profit, Marriott said.
Cruise
Cruise lines generally are credited with weathering the
aftermath of 9/11 better than most other travel modes, and their
financial performance in 2002 bears that out.
Carnival Corp. managed to increase its net income by 10% for the
year, to $1.02 billion, although overall revenue fell 3.7%, to
$4.37 billion. Note the double-digit profit margin.
On an earnings-per-share basis, Carnival set a record of $1.73,
reflecting what chairman Micky Arison called "the company's
resiliency in withstanding worldwide geopolitical events."
At Royal Caribbean, net earnings increased 38%, to $351.3
million, as revenue rose 9%, to more than $3.4 billion. The company
reported "better-than-expected yield performance" in the fourth
quarter.
Norwegian Cruise Line's parent, Star Cruises, hadn't reported
its fourth-quarter results as of this writing, but the company had
reported net income of $92 million for the first nine months, an
88% increase.
As with hotels, the word "growth" still has some meaning in the
cruise industry, partly because of the long construction process
and partly because parking cruise ships in the desert isn't
practical.
RCCL grew its capacity by 15% last year, and Carnival Corp. is
expecting a 17.5% capacity increase this year.
Distribution
Travel distribution last year also was a story more about profit
than loss for most publicly traded firms -- even those confronted
with reduced booking levels and/or declining revenue.
Navigant, whose fiscal year ended Dec. 29, reported net income
of $18.9 million on revenue of $371.2 million, after barely
breaking even in 2001. Air sales exceeded $4 billion.
As reported, travel sales fell 10%, to $15.5 billion, at
American Express, but commission and fee revenue from those sales
fell 8.4%, to $1.5 billion, as the company managed to boost its
effective commission rate from 8.9% to 9.1% of sales.
Expedia, the largest online retailer, reported a profit for the
year of $66.3 million, reversing a $21 million loss. Gross bookings
rose 8.2%, to $5.3 billion, generating net revenue of $591
million.
Travelocity reported net revenue of $308 million as gross sales
rose 11.8%, to $3.5 billion. Its parent, Sabre, reported net income
for the year of $214 million, up from $31.2 million in 2001;
revenue was off 3.5%, at $2.1 billion.
Amadeus said its net profit grew 10.8%, to $157.6 million, as
revenue rose 4%, to nearly $2 billion. Bookings increased 2.4%
worldwide but varied widely by region: up 3.9% in Europe, down
15.8% in North America and up 7.7% elsewhere.
At Pegasus Solutions, a leader in electronic hotel distribution,
revenue was off a percentage point, at $190 million, but the
company narrowed its net loss to $3.5 million from $29.7 million a
year ago.
Another sign of strength for the industry last year was the
bottom line at Cendant, which has its fingers in several pies as
the franchisor of numerous hotel brands and the owner, by
acquisition, of Avis, Budget and Galileo. The company's
consolidated net profit for the fourth quarter came to $247
million, reversing a loss of $326 million.
For the full year, earnings more than doubled, to $846 million,
as revenue increased 63%, to $14.1 billion.