Travel Firms Endure

Despite what looked like the end of the world after September 11, the travel business is still alive and recovery appears to be in sight, although it’s still a ways off.

The terrorist attacks on New York and Washington, D.C., sent the travel industry reeling. Public confidence in the safety of flying was shaken, and everyone associated with travel and tourism was predicting catastrophe.

Now, six months later, Americans have decided to get on with their lives — and that includes traveling. The number of travelers returning to the skies has increased every month since September.

“It was tough right through the holiday season,” said Steve Davison, vice president of marketing and client services at World Wide Travel, Arkansas’ largest travel agency with 12 offices statewide, including ones in Fayetteville and Fort Smith.

“But it’s now back to pre-September 11 levels,” Davison said, adding that the industry already was hurting from cutbacks in corporate travel because of the recession.

Although the travel industry has been steadily regaining its balance after that economic one-two punch, industry observers don’t think it’s out of the woods yet.

The U.S. airlines have made progress since September 11 and now are beginning to bring the number of seats filled back to levels last seen a year ago. Of course, much of that can be attributed to the improving economy across the country.

“The airlines are still down nationwide about 15 percent,” said Phil Mayo, who co-owns Around the World Travel in Springdale with his wife Francis.

“But that’s not true for Northwest Arkansas. We had the best December we’ve had in 13 years of business. And we matched December’s numbers during the first two weeks of January.”

The Mayos’ multimillion-dollar firm laid off two agents during the months following September 11, but it has already replaced one of them. Around the World Travel saw a particularly sharp spike in Caribbean cruise vacations this year, recording what Mayo called one of his busiest spring breaks ever.

“People have been sitting around and not traveling,” Mayo said. “They’re tired of hiding in their closets, so to speak. We’ve really seen a boom in cruising this year. People view cruises as being a very safe way to go about seeing the Caribbean. If you do a seven-night cruise you can go to five ports of call and return to your ship each night.

“Plus there were also some killer cruise prices in November and December. Royal Caribbean, for instance, had eight ships in the Mediterranean last year, and they moved all but three of those to the Caribbean for this spring.”

Carolyn Cobb, manager of corporate sales for Poe Travel in Little Rock, said her firm is also doing really well.

“In January, our corporate side was almost like nothing ever happened,” Cobb said. “Business has been picking up steadily as the economy began improving. People are resuming meetings and looking to agencies for help.”

She said Poe Travel, with about $20 million in revenue in 2000, never laid anyone off during the long economic struggle and finished 2001 with about the same amount of sales.

At World Wide Travel, however, its work force of 300 was reduced by about 30 percent. Davison said the company has started to bring people back. World Wide Travel posted $220 million in revenue in 2000, but revenue was below $200 million in 2001, he said.

About 70 percent of World Wide Travel’s business comes from corporate travel.

“But we survived,” Davison said.

World Wide Travel is the 14th-largest agency in the country with 54 offices in 12 states. There are more than 19,000 travel firms in America, according to industry trade journals.

Air Travel Promotion

Air travel has recovered slowly since October. Passenger volume for the big U.S. carriers was off 12.8 percent in January, the latest figures available, compared with last year.

A recent survey of business and leisure travelers found that 38 percent said the economy was the reason for cutting back on travel; 31 percent said security was the main issue. Airline passengers are now asked to show up between one and two hours before their flights to allow time for longer check-in and security procedures.

At last week’s six-month anniversary of the attacks, airlines and travel agents temporarily set aside a noisy feud to announce a joint promotion to boost air travel.

The public relations campaign hopes to inform the public about aviation security changes, encourage travel and tourism, and promote travel agency services.

Travel agencies are under competitive pressure from Internet-based services that generate billions of dollars in sales, including sites run or supported by most of the biggest airlines. Most major carriers have cut the commissions they pay to travel agents.

In addition to having their commissions cut, travel agents lost at least $1.3 billion in sales and commissions as a direct result of September 11, according to the National Business Travel Association.

Wal-Mart Vacations in Bentonville, a leisure travel agency owned by publicly traded Wal-Mart Stores Inc., declined to comment on the state of the industry or its business.

The Federal Aviation Administration forecast that the airline industry won’t fully recover until next year. The FAA said the number of passengers on U.S. airlines will remain below 2000 levels and won’t begin to pick up until October — if no further terrorist attacks occur.

The number of airline passengers, which hit 695.3 million in the 12 months through Sept. 30, 2000, will drop to 600.3 million in the fiscal year ending this September.

After that, however, the number of passengers is expected to grow by 14 percent to 684.3 million and then grow by an average of 4.2 percent a year, reaching 1 billion by 2013.

Another report issued last week by the Air Transport Association said the airline industry lost $7 billion in 2001, even with $5 billion in federal aid following the terrorist attacks. The association said the industry won’t be profitable again until 2003.

Airlines cut their flights by a fifth after September 11 to save money, but the FAA and airline officials say many of those flights are gradually being restored as more passengers return to the air.

Several additional Northwest Arkansas travel agents painted bleak pictures of their industry’s future but declined to comment for publication.

Business Travel

The slower economy has caused businesses to take a closer look at how they spend their travel dollars.

Business travel is the meat-and-potatoes of the airline industry, making up about two-thirds of the airline industry’s $300 billion annual revenue. Business travelers also pay higher-than-average ticket prices, a hotly debated issue.

Cobb, of Poe Travel, said the reason is simple: Business travel is not as flexible and cannot be planned far in advance.

“Businesses cannot take advantage of the discounts,” she said.

Business fare is the lowest fully refundable, economy-class fare available with no more than a three-day advance purchase. Discount fares require as much as a 21-day advance purchase, a minimum stay, refund limits and round-trip travel.

Sugar Huddleston, manager of World Wide Travel in Fayetteville, said one compromise would be for other airlines to follow Southwest Airlines’ model. Southwest, she said, “is the only airline that continues to make a profit every year,” so it must be doing something right.

“If business travelers make up more than 50 percent of your profit, then that’s who you need to be gearing your business toward,” Huddleston said. “Instead, it’s like the airlines are stealing from the mouth that feeds them.”

Huddleston said a typical “last minute” airfare, even with a couple days notice, would probably average $1,500 on most airlines. But the same fare is most often half the price on Southwest Airlines.

“When the quality of the service is basically the same, and Southwest doesn’t even require a Saturday night stay, it just begs the question that if Southwest can do it successfully then why can’t all the rest?”

Still, businesses are learning to spend more efficiently. Some large businesses can negotiate with airlines for discounts.

And businesses are booking their employees on discount airlines, on flights with earlier departure times, from alternative airports or on flights that have connecting flights — all moves that save money. Some are doing their best to book flights more than a week ahead to cut costs.

Business wants the airlines to make more discount airfares available, eliminate Saturday-night-stay rules and eliminate the 21-day advance purchase restrictions. Tighter restrictions on frequent flier programs also have irked business travelers.

The Association of Corporate Travel Executives is calling for an overhaul and simplification of the airfare structure.

Cobb, plugging the travel agencies, said that the agencies, through their online booking tools, can help companies track and manage their costs so businesses won’t “get lost in cyberspace.”

Leisure Travel

Around the World Travel is predominately a leisure travel agency with only about 20 percent of its business coming from corporate accounts. Mayo said the business was 80 percent corporate when he and his wife bought the firm more than a decade ago.

“The 20 percent of corporate business that we do now is probably worth the same that the 80 was back then,” Mayo said.

“We have really concentrated on the leisure end of the market, and we have a lot of small corporate accounts for doctors and attorneys. Then there are many representatives to Wal-Mart and Tyson, etc., that do some of their corporate business with us.

“But then we get a lot of their leisure travel, too.”

Mayo said he was on a recent Caribbean cruise with about 40 people. On their flight back through St. Louis, the airline was so tight on connections that the group’s seats had already been given away.

“And that was a Monday afternoon,” Mayo said. “We looked at all kinds of options, but this area is just booming with so much travel that they couldn’t get us back until a day later.”

Mayo said regardless of a travel agency’s focus, the key to the business is controlling costs and selling travel companies to clients. Around the World Travel, he said, has established strong relationships with Royal Caribbean and American Airlines for doing so much business with them.

Jeffrey Wood contributed to this report.