Economy’s travails and travel

Economists and experts over the past year have been sounding the alarm bells over the US economy with some claiming that the country is on the brink of a recession if not already in one while others have noted a slow down. While many economists define a recession as one of two quarters of negative GDP growth, a marker that can be only laid down ex-post, the “official” definition of a recession by the NBER, is “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”.

Regardless, a general sense of economic malaise is certainly pervasive given high fuel and food costs. Airlines have already responded by squeezing passengers into fewer flights. But the hospitality industry, unfortunately, has no such ability to shed inventory and therefore, whether or not there is a real recession with concomitant cut backs in travel is of supreme importance. The Globe and Mail based out of Toronto has a story headlined “US hotels fear year of thrifty travel”. “57 per cent of the nearly 6,700 respondents to (an) online poll said they have less money to spend this year on summer vacations than they did last year and are looking to save costs”.

But a survey co-authored by the Travel Industry Association and Ypartnership notes that “Six of ten (59%) Americans who are currently planning a trip with their car, truck or SUV this summer will not change their travel plans even with additional increases in the price of gas, according to the closely watched travelhorizons”. Which scenario is the more likely one is of obviously of paramount importance to the hotel industry. An interesting observation from the TIA survey is that “One of six (16%) of those expecting a tax rebate as part of the economic stimulus package approved by Congress is planning to spend their rebate on an overnight or day trip for leisure purposes, according to the same nationally representative survey of 2,233 adults conducted during the month of April”. But, as the Globe and Mail’s article notes, “e weak economy has already hurt profits at some hotels. Earlier this month, Marriott International Inc., the world’s No. 3 hotel operator, reported sharply lower quarterly profit, hurt by higher costs as the slowing U.S. economy takes its toll. Starwood Hotels & Resorts Worldwide Inc., which operates the W, Sheraton and St. Regis hotel brands, also reported a lower quarterly profit last week”. The only certainty for now, it seems, is uncertainty.

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Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.