TOURISM: Amid recession, epic travel deals await consumers

As the economy goes, so go prices ---- and profits

By CHRIS BAGLEY - Staff Writer | Saturday, December 20, 2008 6:08 PM PST ∞

Numerous tourism businesses are offering deals not seen in years to lure pinched and nervous consumers, a move that is keeping airplanes and hotels less empty but not necessarily profitable.

Discounts of 20 percent are common, and even two-for-one deals are available to travelers with flexible timing.

The discounted prices and increased legroom make 2009 the best year to travel in perhaps a decade, at least for people whose jobs and finances are secure.

Las Vegas hotel stays that include New Year's Eve, for example, are on average 25 percent cheaper than last year, said Pamela Johnston, a spokeswoman for Vegas.com, that area's largest online travel agency.

Stagnating real estate markets last year prompted Americans to cut spending on travel and a range of other items.

A spike in fuel prices accelerated those cuts last summer, and a flood of scary financial news since September has made U.S. consumers gloomier than at any point in decades.

Travel and tourism are hardly the only areas in which consumers are less willing to spend, but those industries' dynamics make their profits particularly sensitive to changes in demand.

The up-front investment for a 500-room hotel, 200-seat airliner or 100,000-ton cruise ship is enormous, and an owner tries to recoup a tiny piece of that investment every single day, said Carl Winston, director of the School of Hospitality & Tourism Management at San Diego State University.

"If you don't sell the computer, television or tire today, you can sell it tomorrow," Winston said. "With the airline seat or the hotel guest bedroom, if you don't sell it on Dec. 15, you can't resell it on Dec 16. It's gone.

"Hence, when times are bad, we tend to discount much more in this industry than you do in manufacturing."

Or, as Hilton Hotels Corp. put it in a recent advertisement for its Garden Inn chain, "The economy has hit new lows. Luckily, so have our rates."

Four-night stays in Las Vegas' Stratosphere tower are being advertised for as little as $160 a night, compared with $230 or more last year.

Several dozen Vegas hotels are offering discounts of 20 percent or more.

The discounts are helping keep revenue steady during New Year's week in Las Vegas, Johnson said: Reservations are up by 25 percent over last year.

That's not happening locally, according to figures from Smith Travel Research, which tracks the nation's lodging industry.

Revenue per available room has fallen by a fraction of a percent this year in San Diego County, after several years of steady increases.

Revenue per room has fallen by a staggering 10 percent across most of Riverside County.

Data from a state agency show that local hotels kept their payrolls steady through August, but have cut jobs sharply since then to shore up profitability.

Western ski resorts are offering deals not seen in several years, said Craig McCarthy, a spokesman for the Park City Chamber of Commerce in Utah.

McCarthy said hotels are springing for goodies such as free lift tickets and even airfare.

Guests who book a week at the Silver King Hotel, for example, can slide away with a free pair of skis and poles or a snowboard with bindings.

North County travel agents say last-minute discounts on cruises have become common this year.

Paul Halem, who owns Cruise Adventures Travel Co. in San Marcos, said it's relatively easy to get a small cabin on a Panama cruise for $140 a night or on an Australia cruise for $200 a night.

Carriers typically introduce deals three months before a ship sails, he said.

Carnival Cruise Lines is advertising five-day Baja California cruises from San Diego for $279 per person.

The discounts have cut into the profits of an industry already beset by volatile costs for fuel and other commodities.

Shares of Royal Caribbean Cruises Ltd. have fallen 76 percent this year, closing at $9.82 Monday.

Those of Carnival Corp., which operates Carnival and Cunard Line, have fallen 54 percent, to $20.81.

The Standard & Poor's 500, a broad index of stocks, has fallen just 41 percent.

"People are paying now for cruises what people were paying 10, 15 years ago, when the money was worth a lot more," Halem said.

Contact staff writer Chris Bagley at (760) 740-5444 or cbagley@nctimes.com. Bagley blogs about local economic trends at http://bizblogs.nctimes.com.

Related stories:

TRAVEL: Holiday travel slows sharply (Nov. 20, 2008)

TOURISM: Lean economy pressures hotels (Oct. 27, 2008)