Travel industry braces for potential downturn

updated 10:47 a.m. ET May 20, 2008

WASHINGTON - It seemed like a can't-miss tourist attraction that would pull in visitors to the nation's capital: a new Madame Tussauds wax museum.

But since opening last fall, the attraction featuring likenesses of Barack Obama and Hillary Clinton — among many others — hasn't been a big enough draw. Crowds dwindled after the opening, and Madame Tussauds is cutting prices. Adult tickets, previously selling for $21.15, have been lowered by more than $3, and local residents will be offered even better deals.

In a soft economy, Madame Tussauds and other businesses in the tourism industry are starting to feel the pinch. Big cities such as New York and Washington may attract more foreign visitors, thanks to the weak dollar, but ticket sales can be erratic, and Americans are thinking about fewer, shorter, less-expensive trips.

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“We're really in kind of tenuous territory,” said Suzanne Cook, research vice president at the Travel Industry Association.

A new Rand McNally survey says two-thirds of Americans planning road trips this summer are either altering their plans to shorten their trips or canceling altogether. AAA predicted the number of Americans planning to drive more than 50 miles over Memorial Day weekend is down by 1 percent. Air travel will decline slightly as well, AAA said.

In the casino capital of Las Vegas, things already are tough.

Room occupancy rates have fallen slightly, forcing casinos to lower hotel room prices. Gambling giant MGM Mirage Inc. and local casino operator Station Casinos have cut their work forces. Las Vegas Sands, which opened a massive new casino on the Strip in January, unexpectedly swung to a loss of $11.2 million in the first quarter of the year.

Analysts expect the slowdown to be most dramatic at mid-market Las Vegas resorts that rely on tourists driving in from southern California. Those tourists already began staying away in the early part of the year, before gas prices rose again.

The skittishness among American tourists is also rippling overseas.

The number of Americans in Britain declined slightly last year, according to the government-funded Visit Britain, and those who have come to the country have spent less money.

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A Continental Airlines cabin crew from Ohio, peering through the gates at Buckingham Palace recently on a 24-hour layover in London captured the mood. Amy Nalepa said their flight from Cleveland was quite empty.

“Who can afford this?” she said. “I changed 50 bucks and got 22 pounds. And that got me lunch.”

France is seeing a similar trend. About 12 percent fewer Americans visited the country in January and February of this year versus the same period in 2007, said Christine de Gouvion Saint-Cyr, a top official at the Paris Office of Tourism and Trade.

“In 2008 we are being very cautious and attentive, because at any time the impact can take effect,” Saint-Cyr said.

CONTINUED: Americans may lose their French crown

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