Las Vegas Sun

March 28, 2024

Growing economy, lower dollar spur summer travel

Rebecca Mercer is preparing for her first vacation in four years, a trip to Disney World with her husband and two children. "In my little world, the economy is great," says Mercer, 26, a Web site administrator from Granite City, Ill.

John Friedman, who started a new public relations job in December, is leaving tomorrow for the Outer Banks of North Carolina with his wife and 4-year-old son, Alex. "Last year, we were home recovering" after he was laid off in June, says Friedman, 42, of Annandale, Va.

With the creation of 2.2 million jobs over the past year, more Americans have money to spend on vacations. Domestic and international tourists will contribute $633.5 billion to the U.S. economy this year, a 5.6 percent increase from 2004, according to the Travel Industry Association of America.

"We're seeing very strong bookings for the summer," says Tom Hewitt, chief executive of Interstate Hotels & Resorts Inc., which manages more than 300 hotels including the Roosevelt Hotel in New York and Westin Bonaventure in Los Angeles. "The economic recovery is very broad."

Even as near-record gasoline prices eat into their budgets, a record 37.2 million Americans will have traveled 50 miles or more from home over the Memorial Day holiday, according to AAA, the biggest U.S. travel organization. Travelers will fill a record 3.21 million hotel rooms a night on average between May 30, Memorial Day, and Sept. 5, Labor Day, according to Smith Travel Research.

Sales are surging at companies such as Walt Disney Co. and Royal Caribbean Cruises Ltd. The Bloomberg U.S. Travel Stock Index rose 29 percent in the past year, four times the gain in the Standard & Poor's 500 Index.

Currency exchange rates are helping. While the dollar rose above $1.25 yesterday for the first time in seven months, it has still declined by one-third over the last four years, making the United States a bargain for foreign travelers and giving some Americans a reason to vacation closer to home.

"Tourism is going to be one of the real bright spots of the economy because of the dollar," says Dana Johnson, chief economist at Comerica Inc. in Detroit. The bank publishes a Michigan tourism index that's risen 11 percent in the past year.

Arlington, Va.-based Interstate's sales rose 13 percent in the first three months of the year. Hewitt says he expects the hotel industry to have its best summer since 2000.

Strong demand is letting hoteliers boost rates after the slump that followed the 2001 terrorist attacks. Hotel prices rose 11 percent over the past two years, almost twice as much as the consumer price index, according to the Labor Department.

The average price of a hotel room in New York City will rise 13 percent to $239 this year, according to industry consultant PKF Hospitality Research. Nationwide, the average rate will rise 5.1 percent to $103 a night, Atlanta-based PKF says.

Room rates should continue to rise, says Mark van Hartesvelt, principal of Gemstone Resorts International LLC, which manages 20 luxury hotels including the Mosaic in Beverly Hills, Calif., and the Calistoga Ranch in Napa Valley.

"Supply is not forecast to catch up with demand for at least a year or two," he says.

Developers are reluctant to build new hotels because increases in prices of concrete, steel and land have outpaced gains in hotel rates, says Mark Woodworth, executive managing director at PKF. Builders completed hotel projects at a $11.4 billion annual rate in March, a third less than they completed in the same month in 2000, according to the Census Bureau.

Tim Smith, a spokesman for Fort Worth, Texas-based AMR Corp.'s American Airlines, the world's largest air carrier, says, "We're seeing very, very strong boardings at all of our hubs."

Airlines may not benefit as much from the stronger demand because they are struggling with soaring fuel costs. The Air Transport Association said in a statement that while the number of passengers will increase 4.1 percent this summer to 200 million, "high fuel prices, excessive taxes and low fares will continue to constrain the industry's financial recovery."

The U.S. dollar's decline is attracting foreign tourists, while encouraging Americans to vacation closer to home.

"The U.S. is such a bargain now to foreigners," says Woodward. "Major gateway cities like New York, Chicago, Los Angeles, San Francisco and Miami are reaping the benefits."

Gregory Hruska, a 39-year-old New Yorker who loved his vacation in Scotland and Ireland last year, plans to stay stateside this year. Hruska plans to go to Orlando, Fla., with friends in mid-June and take a road trip to Niagara Falls, N.Y., at the end of the month.

"The freaking dollar exchange rate made me choose to travel domestically this year," Hruska says. "When I pieced together how much I spent after my trip last year, I thought, 'I can't do that again.' "

Consumers can afford to spend more because personal disposable income rose 6 percent in the past year, outpacing the 3.5 percent gain in the consumer price index. The U.S. jobless rate fell to 5.2 percent in April, down from a nine-year high of 6.3 percent in June 2003.

Rebecca Mercer was an office manager at a failing recruiting firm the last time she went on vacation, during her first pregnancy in 2001. "We're a lot better off even with the added expenses of two children," says Mercer, who now works for the Federal Reserve Bank of St. Louis.

Mercer and her husband will take their 15-month-old daughter Alyssa and 3-year-old son Bradley to Disney World in July. They'll drive her Ford Focus the 1,000 miles to Florida from their home near St. Louis. Gas will cost about $150 out of their $4,000 budget.

The average retail price of a gallon of regular gasoline was $2.11 as of May 25, up 41 percent from two years ago, according to an AAA survey of 60,000 filling stations. The national average reached a record $2.28 in April.

Still, consumers keep spending. U.S. retail sales rose 1.4 percent in April, the biggest gain since September, according to Commerce Department figures.

"You just get used to" high gas prices, says Christine Andresen, 43, vacationing in San Francisco this week with her husband Jim, a 42-year-old firefighter. The couple drove about 250 miles from their home in Eureka, Calif., to go to the Biscuits & Blues nightclub and to see a musical called "The Mambo Kings."

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