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CNN Live Saturday
Bjorn Hanson, Jason Ader Discuss Tourism and Hotel Industry
Aired October 27, 2001 - 16:21 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CATHERINE CALLAWAY, CNN ANCHOR: Well, the September 11 attacks had a distinct effect on the U.S. economy. The tourism industry was perhaps hit hardest and is likely to be slowest to recover. And joining us now to talk about all of this is Bjorn Hanson of PriceWaterhouseCoopers and Jason Ader, senior managing director for Bear Stearns. Thank you for joining us in New York today.
And let's start with you, Bjorn. Have we ever seen anything like this before in the hotel industry?
BJORN HANSON, PRICEWATERHOUSECOOPERS: We have data going back to 1927 and there's never been a month where the decline of revenue and profits that we experienced in September. And even as we look toward the balance of the year this will be the worst performance, again, measured by lost revenue and lost profits.
CALLAWAY: Quickly, Bjorn, tell us what the situation is for those of us who don't know exactly. We know it's bad but what is the situation right now for the hotel industry?
HANSON: Revenue for the third quarter, which included two months before the events of September, will have a loss of revenue of about 12.4 percent, a loss of about 15 percent for the last quarter. So about $5.9 billion in revenue lost and about $31/2 billion in profits lost. About 190,000 full-time positions, which represents -- because of the number of part-time employees in hotels -- about 260,000 employees.
CALLAWAY: We're talking about horrible losses here but certainly what we're seeing now can't continue. Certainly America will get back to its old habits and start jumping right back in there in the hotel business?
HANSON: It doesn't look that way unfortunately. Conventions booked for next year are being postponed. There's a small number of cancellations -- only about two percent. But more important is number of attendees at conventions is way down. That represents about 20 percent of lodging demand. As we toward bookings for next year we think that occupancy will probably be around 60 percent and we haven't seen those kinds of occupancies (UNINTELLIGIBLE) since the early 19702.
CALLAWAY: That's incredible. Let's go right to Jason Ader. You're good at predicting what's going to happen. Do you agree with him? What do you think is going to happen with the hotel industry?
JASON ADER, SENIOR MANAGING DIRECTOR, BEAR STEARNS: It's going to be a very difficult environment really for the next several quarters. We're seeing business travel demand at all time lows. We survey all the time business travel managers who are telling us that they're definitely going to be spending less money in 2002 in 2001. Also in our surveys of travel agents the leisure consumer isn't booking vacations.
There's the least amount of bookings over a 10 year period for Thanksgiving, Christmas, President's Day weekend, well into spring break. So it's clearly going to be a very difficult environment.
CALLAWAY: Difficult environment for the tourism -- for tourists. Though, Jason, do you think it's going to pick up for those people who want to travel?
ADER: Well, if you want to travel there's actually some great deals out there. We're seeing on the Internet sites an unprecedented level of lookers. Actually in the cruise industry you can take a cruise right now for the same price that it would have cost you in the 1970s. So there's some -- there are some great deals. And what's going on is the price discounting is driving demand in the leisure market but companies are still cutting back and that's effecting business travel, which is your mid week business.
CALLAWAY: Bjorn, what is out there for the people who do want to travel? He mentioned some of the cruises out there. Any other good deals out there in the hotel industry?
HANSON: Boy, every type of hotel in every location is discounting to try to drive demand. There's great deals for cruise, restaurants are running promotions, theme parks -- boy, just about any type of leisure activity is offering just tremendous incentives to try to build back demand.
CALLAWAY: Bjorn, we know there are certain levels of hotels out there. You have the high priced and medium priced. Are we seeing any unusual activity in there with some of upper priced hotels?
HANSON: The weakening performance is almost inverse to price -- meaning those hotel with the highest prices are being effected the most. Those hotels with the lowest prices are being effected the least although all five price categories that are defined by our industry are having declines.
Convention hotels are among the largest -- the most -- facing the most difficult circumstances. And destination resorts are also suffering the greatest.
CALLAWAY: And, Jason, let's get back to you and I should correct myself -- it's Ader. We've been saying -- I've been saying your name incorrectly. I apologize for that.
ADER: That's OK. CALLAWAY: Let's take a turn here and talk about investors. Are they looking for a good deal in the leisure industry right now do you think?
ADER: Well, you know, in Starwood's conference call this week, Barry Sternlicht said that he thought his shares were worth somewhere around $42 and, of course, the stock's trading somewhere in the low 20s. I actually agree with Barry. I think his shares are very undervalued and the whole hotel industry right now is -- Hilton, Marriott, Starwood even some of the gaming companies and cruise line companies.
But there is tremendous uncertainty out there. We're starting to see the beginnings of business and leisure travel picking up but the comparisons are difficult really until the fourth quarter of next year. I think it's just going to take time for investor confidence to return. But for long term value investors this is clearly a place to be looking because I think 2003 -- assuming there's no more major terrorist attacks -- will be a more normalized year and the values today will be quite compelling going out two to three years.
CALLAWAY: Bjorn, are you seeing the same drop in not only the people who are traveling for vacation but what about business travelers? Are they, too -- have they dramatically cut the amount of traveling that they're doing?
HANSON: Well, actually in comparison leisure travel is holding up well. The greatest decrease is for business travel . . .
CALLAWAY: That's interesting.
HANSON: . . . and that's both individual travelers and conventions.
CALLAWAY: And any positive note for the hotel industry right now?
HANSON: Hotels have been very creative and actually have done some very clever things. In New York City, for example, there are about 1,200 rooms where the beds have been removed and desks and tables have been installed and those are being used for offices. Hotels are redirecting their marketing to local residents and putting together packages for theaters and restaurants and other kinds of attractions. So hotels are really working hard to try to find ways and they're coming up with some successful solutions.
It won't help the fourth quarter be as strong as it would have been otherwise but it certainly is better because of these creative solutions.
CALLAWAY: Bjorn Hanson and Jason Ader -- thank you both for joining us this afternoon.
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