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The Official Monthly Newsletter Of The NJTIA |
414
River View Plaza, Trenton, New Jersey 08611-3420 Phone: 609.396.2020 • Fax: 609.393.9891 |
Gas Prices Good for Tour Operators |
Lyndhurst Sues Travel Websites |
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Report: U.S. Hotels 'Vulnerable' To Airline Woes Due to woes within the airlines industry, PKF Hospitality Research is indicating U.S. hotels could face a decline in lodging demand greater than that experienced during the turmoil following the terrorist attacks on September 11, 2001. Under a worst-case scenario, says HotelBusiness, a 1% decline in the number of seats flown within the U.S. will result in a 0.39% decline in the demand at the nation’s hotels. These findings come from an in-depth econometric analysis performed by PKF Hospitality Research. “Many industry participants have been speculating about the spillover effect a deteriorating airline industry will have on hotels,” said Mark Woodworth, president/PKF Hospitality Research. “Our research measured the historical relationship between these two components of the travel industry. This allowed us to project just how much business hotels stand to lose given the cutbacks in capacity announced by the major airlines.” Using historical data from Smith Travel Research, Moody’s Economy.com, and the Department of Transportation, and controlling for the effects of changes in income and employment, PKF-HR found what many intuitively believe: a highly significant relationship exists between available seats and hotel room night demand. “Based on our findings that a 1% decline in available airline seats results in a 0.39% decrease in hotel demand, if airline capacity is reduced by 10% as some have suggested, then lodging demand would fall off 3.9%. To put this in perspective, the decline in lodging demand experienced in 2001 was just 3.3%,” Woodworth noted.
Soaring Gas Prices Good News For Tour Operators One impact on soaring gas prices: more travelers are looking to join group tours says TravelMole. “Travel agencies say their group tours are filling up pretty quick,” says KHAS-TV in Hastings, Nebraska. Group tours are becoming a trend this year as gas prices continue to soar. The increase in gas and airline tickets has many travelers taking advantage of motor coaches, say travel observers. ”The agencies are offering group rates that some people just cannot resist,” says KHAS. One travel agency said business is up 10% over last year at the same time. Several local businesses have also been using motor coaches to take customers to events and attractions. Hotels Feeling Chill In Tourism The tourism industry appears to be slipping for the first time in recent years, slowed by a potent cocktail of rising airfares and falling economic fortunes. And the slide is likely to intensify this fall as airlines slash their flight schedules reports the Chicago Tribune. Downtown Chicago hotel occupancy rates dipped to 65.2 percent during the first five months of this year, from 67.4 percent in the year-earlier period — the first erosion of strength in such a time frame since 2004, according to data from Smith Travel Research. Nationwide, hotel occupancy dropped to 66.7 percent for those months, down from 68 percent in the year-ago period. Coming off several strong years, hotels likely will see occupancy rates downtown and nationally drop by 2 percentage points this year, though prices should hold strong, said hotel industry expert Ted Mandigo. Some observers see a potentially harsher scenario. "This is the bow wave, and the rest of the wave will wash over," said airline industry analyst Robert Mann, president of R.W. Mann & Co. in Port Washington, N.Y. "Most of the effects won't be felt until after the big schedule cuts this fall." The pain is expected to be most deeply felt in leisure destinations such as Las Vegas and Orlando, as airlines cut service more deeply to destinations that draw flocks of tourists seeking cheap flights, he said. U.S. Share Of Foreign Tourists Slipping, Travel Experts Say The Seattle Post Intelligencer says that despite the weak U.S. dollar, a boom in international travel around the world hasn't translated into a surge of foreign tourists to the United States. Explanations range from post-9/11 security headaches and lower airfares elsewhere to poor marketing by the U.S. Whatever the cause, travel industry experts say the U.S. is missing an opportunity to make up for the shortfall in domestic tourism caused by high fuel prices. Heli USA Airways is one of several operators that whisk visitors on aerial tours of the Las Vegas Strip and nearby Grand Canyon. The airline's vice president of marketing and sales, John Power, said the faltering U.S. economy and competition from other countries are crimping business. "Right now, there's some other worldwide destinations that are taking some of the marketplace," Power said. According to the U.N. World Tourism Organization, the United States had 51 million international visitors in 2000, more than 7 percent of the 682 million international arrivals worldwide. But as those travelers jumped to 846 million in 2006, the U.S. saw roughly the same number of visitors as it used to — dropping its share to 6 percent. The U.S. share of international tourism dollars has slipped too, though the U.S. still drew more money than any other country in 2006 and more than it did in 2000. From 16 percent of the market in 2000, or $82.4 billion, the U.S. took in 12 percent of the $733 billion worldwide tourism market, or $86 billion in 2006. Major destinations such as Los Angeles, Orlando, San Francisco, Miami, Honolulu, Las Vegas, Chicago, Washington, D.C., and Boston all saw 20 percent to 34 percent fewer travelers in 2006 compared with 2000. Of the top 10 cities, only New York saw more visitors in 2006 than in 2000, with a 9 percent increase to 6.2 million arrivals, according to the U.S. Commerce Department. Nearly 26 million people traveled to the United States from overseas in 2000. But that dropped drastically after Sept. 11, according to data from the Commerce Department's Office of Travel & Tourism Industries. The number bottomed out in 2003 with 18 million overseas visitors, and, with 24 million last year, still had not returned to previous levels. The figures do not include visitors from Canada and Mexico, whose numbers are up substantially from 2000 but who tend to spend less than other international travelers to the U.S. Combating Recession: The Time For Incentive Progression Call it what you want — these are rough times. Recession or not, people are making changes to their daily routines to save everything from the environment to a few bucks. The question is, are these sacrifices cutting your brands from consumers' things-to-buy list? We're all feeling the pinch. Airlines are charging for checked bags and the price on everything from diapers to table salt is rising. Corporations can no longer eat the rising energy costs, and it has to be picked up by somebody: the consumer. To help consumers look beyond the price tag, says ManageSmarter, companies have to come up with creative ways to increase brand loyalty — and nothing drives business like incentives. Incentives are critical during economic down times. If nothing else, incentive programs should be strengthened in times like this. Why? Because consumers are paying an arm and a leg for necessities like gas and food, making them more and more conscious of what they're spending on other "luxuries." Offering incentives can help guarantee consumers stay loyal to one brand over another. But doing it right takes time, research, and know-how. It's important to know the target audience, and to know what it takes to motivate them. Take something as simple as a bottle of soda. There are plenty of different brands to choose from and they all cost about the same. What can one brand do to create a loyal customer? Reward them. The leading beverage companies are putting points under the bottle caps, which can be banked and redeemed for merchandise rewards — the "if you stick to one brand, you'll earn points faster" philosophy. In order for this approach to be successful — and generate continuing consumer participation via point increments — the reward offerings must be aspirational and attainable. By offering a range of merchandise rewards that includes everything from golf clubs to designer handbags, trendy earphones and exercise equipment, the same incentive program is now appealing to an unlimited audience. But with an unlimited audience comes some more curves to take into consideration. Since your audience now really is unlimited, it's important to remember that the average American household belongs to a dozen loyalty programs. What will make yours better then the rest? Hoteliers Eligible for Economic Stimulus Benefits (Washington, D.C., July 8, 2008) – The Economic Stimulus Act of 2008 that was enacted in February included two business-related tax incentives that may be advantageous for hoteliers: increased expensing limits and a 50 percent “bonus” depreciation. Hotels and other businesses are able to deduct the first $250,000 of capital investment made in 2008 if they purchase less than $800,000 of capital assets in a year. The new law also included a 50 percent “bonus” depreciation proposed by AH&LA. This allows hoteliers and other business owners to depreciate half of the cost of capital equipment purchased and placed in service during 2008. The remaining basis of the asset is then depreciated under the regular depreciation rules. In many cases, hotels and other businesses can take advantage both of these provisions during 2008, first by applying the increased expensing deduction and then the bonus depreciation to their tax liabilities. For example, hoteliers may want to convert to digital televisions in guest rooms. The federal government has mandated that the last day for television stations to broadcast in analog will be February 17, 2009. After that date, over-the-air TV broadcasts will be only in digital. This change will only affect those hotels which use rooftop antenna or “rabbit ears” for TV reception. A qualifying hotelier who buys $250,000 in digital televisions can deduct the total cost of the equipment if it is purchased in 2008. If the televisions cost more than $250,000, but the hotel spends less than $800,000 on capital equipment during 2008, the hotelier can couple expanded expensing with accelerated depreciation. Under these provisions, $300,000 worth of televisions that are considered five-year property under tax depreciation rules would qualify for a $280,000 first year deduction (93 percent of the cost of the assets); and $500,000 worth of televisions could qualify for a $400,000 first year deduction (80 percent of the cost of the assets). Please note that this advisory does not constitute tax, legal, or other advice from AH&LA. Hoteliers are strongly encouraged to consult with their tax counsels regarding their specific investment and tax situations. For more information, contact AH&LA senior vice president for governmental affairs Shawn McBurney at (202) 289-3123 or smcburney@ahla.com Poll: Budget-Challenged Vacationers Going Online For Bargains Rising prices are affecting the travel plans of most consumers this summer, driving a growing number online to ferret out bargains, according to a recent poll by lead-generation firm Prospectiv. About 79% of the 500 consumers (drawn from Prospectiv's opt-in consumer preference database) responding to the online poll confirmed that costs are influencing their vacation plans — and 38% said they'd be going the "staycation" route as a result, meaning they would spend their vacations at home. According to Marketing Daily Prospectiv conducted the poll in conjunction with its release of a customer acquisition database based on opt-ins to a new e-newsletter, Eversave Travel, which offers travel and hospitality information and promotional offers. While its hardly surprising that record gas prices are consumers biggest travel cost concern, the fact that a whopping 84% cited gas prices, versus a mere 8% and 7% citing lodging and food costs as their biggest worries, is "a bit astonishing," observes Prospectiv President and CEO Jere Doyle. "You rarely see one choice within a multiple-choice question pull that dominantly," Doyle notes. While the cumulative impact of cost-of-living increases is the underlying driver of plunging consumer confidence levels, "clearly, gas is now a leading indicator of consumer attitudes and behavior-something that registers heavily on consumers as they fill up their tanks once or twice a week," he says. Lyndhurst is suing travel websites for its local hotel tax by Greg Saitz/The Star-Ledger Wednesday June 25, 2008, 8:35 AM When it comes to hotels, Lyndhurst isn't exactly busting at the borders with them. The 4.6-square-mile township has three, all near the Route 3 corridor. But Lyndhurst officials want to make sure they're collecting every penny of hotel occupancy tax owed. And there's one group they believe has been shirking its full responsibility on that front -- travel websites. To get what the township says is its fair share of taxes, Lyndhurst has filed a federal lawsuit against a handful of travel websites such as Priceline, Travelocity and Expedia. The complaint, which appears to be the first in New Jersey but the latest of dozens filed around the country, accuses the companies of shortchanging towns out of hotel occupancy taxes. Attorneys who filed the lawsuit said they hope to make it a class action encompassing all 147 towns in the state that impose a hotel tax. The complaint, filed last week in federal court in Newark, said the amount in question exceeds $5 million, but it was unclear how lawyers arrived at that figure. "They (towns) are getting cheated out of the differential between what the customer is paying and the travel sites are paying" to buy the rooms, Roseland attorney Lindsey Taylor said earlier this week. "If it's $5 or $10 here and there, it may not be that much on a per-customer basis, but it adds up." The state collected $39.8 million in hotel occupancy taxes during the last fiscal year, which ended in June 2007, according to the Division of Taxation. During that same period, Lyndhurst, which has an ordinance assessing a 3 percent room tax, took in $337,117. As outlined in the complaint, the internet travel sites negotiate room prices with hotels at a wholesale rate, then charge travelers who book through their websites a higher retail rate. However, the companies remit taxes only on the lower wholesale rate, the lawsuit charged. An official at a trade group representing many of the companies being sued said the websites are merely travel intermediaries that don't actually rent out hotel rooms. The difference between what those companies pay hotels for a room and what they charge customers for that same room are fees and service charges, not room markups, said Art Sackler, executive director of the Interactive Travel Services Association. "They're wrong on the facts and on the law and they are futilely pursuing what is pretty wasteful litigation," Sackler said. "There are no taxes that are being recovered that are not being sent back for remittance to the taxing authorities." Priceline and Travelocity declined to comment and referred questions to Sackler's group. Carroll Rheem, director of research at PhoCusWright, is familiar with the hotel tax debate. "It's one of those things that's a pretty unique situation," she said. The first lawsuit on the issue was filed in December 2004 by Los Angeles on behalf of all California towns. That case was thrown out on procedural grounds and the city is pursuing administrative remedies. Since then, cities in Texas, Pennsylvania, California, North Carolina and elsewhere have filed similar complaints. Sackler estimated 10 of the cases were dismissed on procedural grounds and a couple of others thrown out on merit. But last month, a federal judge in Texas granted class-action status to a lawsuit filed by San Antonio, clearing the way for as many as 175 Texas towns with a hotel tax to join the case. A trial has been set for June 2009, and the claim is furthest along in the legal process of all the pending cases, said Paul Kiesel, a Beverly Hills attorney involved in the San Antonio case who also filed the Los Angeles lawsuit. The New Jersey native said that if towns win, they would be in line to collect "a ton of dollars" from the website operators. "It won't change from the consumer standpoint," Kiesel said. "The industry would have you believe having them collect the taxes on the retail price of the room would impact tourism. But it won't." Greg Saitz may be reached at gsaitz@starledger.com or (973) 392-7946. Business Briefs..... Expert: Slumping economy could spell tough times for hotels, retail Work backward to get there on time Hotel-tax increase would rank Philly among highest in nation Nevada casinos see worst May in a decade Economy, gas prices deal a bad hand for casino industry Borgata debuts $400M expansion Submit Your News! |
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