Travel Industry Squeezed as America Tightens Belt

As Americans evaluate and pare back their discretionary spending for the remainder of this year, the travel and leisure industries are feeling the squeeze.

Companies throughout the sector –including hotel, cruise ship, theme park and gambling companies- have all warned in recent weeks that their businesses have slowed or that things could get worse next year.

“The deteriorating outlook for the economy is impacting travel habits and spending, and hotels are expected to experience reduced occupancy levels, and to a lesser degree, some room rate erosion through 2009,” said Scott Berman, principal at consulting firm PricewaterhouseCoopers.

For hotels, the picture looks particularly grim. PwC expects that a key measure of the hotel industry’s health, revenue per available room (RevPAR) to fall 5.8 percent next year, following this year’s estimated 0.8 percent decline. That would be the industry’s first back-to-back decline in the widely watched measure since 2001-2002.

PwC said demand for hotels in 2009 is forecast to fall by 2 percent which, when coupled with an increase in supply, is expected to reduce occupancy levels to 58.6 percent, the lowest rate of occupancy since 1971.