Stumbling economy?

Restaurants, travel agencies, other services getting back on feet after Sept. 11 attacks.

By: George Frey
   Along with the attacks of Sept. 11 came a significant hit to economies great and small around the world. The Princeton area was no exception in the immediate aftermath, and while business is starting to pick up again in some industries, notably at non-fine dining bars and restaurants, other sectors of the economy will be slower to rebound.
   Take the travel industry, for example. Travel agents in the area said their business, already hammered by cutbacks in airline commissions, was severely affected by the attacks in New York and Washington.
   "Can you spell devastating? That’s what this situation has been to us," said Eileen Walling, a partner at Edwards Travel Service on Tulane Street in Princeton. "OK, the interview is over," she said trying to keep a good sense of humor about the situation.
   Ms. Walling and her colleagues agreed they have managed to survive the discontinuation of the commissions from airlines — but since the events in Washington and New York, far fewer people are coming through the door. People are still reluctant to fly and want to stay home.
   Ms. Walling’s partner at Edwards Travel, Margaret Young, said business travel in particular had declined in the immediate aftermath of Sept. 11, but she was beginning to see it return. Leisure travel was also hard-hit; vacationers were canceling and the agency was just starting to see reductions in the prices of travel packages, especially in the cost of hotel rooms, around the third week after the attack.
   Ms. Walling said as of Oct. 4, airline tickets prices had not been reduced. In some cases, she said, fares had gone up, with some cheaper flights, known as excursion fares, eliminated.
   But late that same day, Delta, American, United and other airlines announced that they were reducing their fares, some by as much as 50 percent on select routes with advance notice, targeting both business and vacation travelers.
   Most area travel agencies interviewed would not reveal the amount of refunds they had made or the decline in sales compared to past months, though one small Bucks County, Pa. firm said it lost booked business valued at more than $200,000, as airlines started refunding cancellations. That agency is expecting to lay off some of its staff and move to a smaller location.
   A leading global distribution system, Amadeus, which links airlines, hotels, rental car companies and other travel products to travel agents, said airline sales were down 74 percent during the period between Sept. 10 and Sept. 14 in the North American market. Amadeus said worldwide airline bookings for that same period were down 28 percent compared with the same period last year. The company reported the rest of the world saw airline reservations decrease by an average of 1.6 million bookings during this period.
   The Amadeus service, based in Madrid, Spain, processed 394 million travel reservations in 2000 and is used by 63,000 travel agencies and airline sales offices around the world. It is just one of several GDS services in the world.
   "Everyone tells the same story, big or small," said Gary Walker, whose family has owned the Kuller Travel agency at 108 Nassau St. in Princeton for nearly 55 years.
   Mr. Walker said the refund rush would stop because the more lenient cancellation policies the airlines put into effect following the Sept. 11 attacks ended on Sept. 25, and fewer people are expected to cancel now that the cost of doing so has risen substantially.
   "The airlines have gone back to the nonrefundable procedures which were put in place since the attacks. People may think twice about changing their minds now," Mr. Walker said. "The grace period is over."
   While travel agents are still feeling the pinch, hotels in the area said the crunch on them was starting to subside, and that they were starting to reinstate their regular cancellation policies as well. Hotel salespeople and managers agreed cancellations were rampant in the first and second weeks following the attacks, but that life and business go on — and bookings are starting to resolidify for the coming month.
   "Initially we saw some cancellations because of air travel setbacks," said Michael Schwartz, the front office manager at the Novotel, a 182-room hotel on Route 1 in South Brunswick. The hotel also has five rooms for conferencing.
   "Business needs to get done and strategy needs to be planned. Dow Jones and Merrill Lynch are still going to need hotels for business activities," he said.
   Mr. Schwartz said he was not aware of any cutbacks or layoffs that Novotel was making, and said he would not know any occupancy figures, or other numbers which could give a year-to-year comparison, for some time.
   Another hotel industry expert said he thought the way in which businesses would meet would change significantly in the coming months, and that it might be a benefit to the local hotel industry on some levels.
   "You are going to see 200 people driving to the Doral Forrestal for a one-day conference instead of seeing those 200 fly to Phoenix," said Hal Clark, the director of sales and marketing at the Doral Forrestal, a hotel in Plainsboro with about 300 rooms. With 35,000 square feet of meeting space, the hotel is also host to many business meetings.
   "People need to sell. It will continue. Businesses have to meet," Mr. Clark said. "The end result when this all shakes down is that some companies will realize savings by conducting business more locally. Will we see that trend for the first quarter of 2002? Absolutely. Probably for the first half. But we’ll have to wait to see, beyond that is anybody’s guess."
   Mr. Clark said the hotel’s room occupancy was down to 50 percent in September. The occupancy rate for August was 70 percent. "October will be significantly better than September," Mr. Clark promised, though he would not make a projection of how much better.
   Mr. Clark indicated that MeriStar Hospitality Corp. of Washington D.C., the company that owns the Doral Forrestal and about 200 other hotels in the country, would lay off some employees in "cost-saving measures," but said the moves would not be on a large scale.
   Inquiries to the Princeton Marriott Forrestal Village were referred to its corporate offices, which released its third quarter earnings reports on Oct. 4. The company reported that since the attacks occurred, in the first week of Marriott’s fourth quarter, lodging demand declined to unprecedented levels across the United States.
   For the two weeks ending Sept. 28, the company’s hotels in the United States, all brands combined, reported a 49-percent decline in revenue per available room.
   Scott Carmen, a spokesman for Marriott, said the company was literally directly hit, losing two hotels in downtown Manhattan: The Marriott World Trade Center was irreparably damaged, and the Marriott World Financial Center was also damaged, though the company hopes to reopen that hotel within the next six months.
   "Business booked for the month of October, corporate meetings and association conferences, saw significant cancellations," Mr. Carmen said of Marriott’s overall situation. "September business was down, but business for October looks like it will be holding steady."
   Dining out — especially at non-fine dining bars and restaurants — could be one of the few bright spots in the wake of Sept. 11. Restaurant operators said they thought people wanted to get out of their homes, either to forget about the situation or go out to talk about it with other people, after being glued to their television sets for the first few days.
   "The entire restaurant industry shows a 1.4-percent gain for the week (of Sept. 10 through 16)," reported the NPD Group Inc., a Port Washington, N.Y. industry research firm which follows trends in a number of industries, including restaurants. The firm said most of the sales that generated the gain were from fast-food takeout receipts.
   A number of bars and restaurants in the Princeton area said they had not seen their business curbed, and that business had, in fact, increased. In Princeton Borough, where business is heavily dependent on students from Princeton University, September is the month when restaurants and other establishments usually get back into their normal routine as students and residents return from their summer vacations.
   Bar-restaurant managers in the area said business was generally up, though it was too early to tell what the numbers for the full month of September would look like. They also would not make any dollar or percentage gains projections.
   "At 5, the bar was full yesterday," said Douglas Bork, director of operations at The Tiger’s Tale in Montgomery, a popular area bar and restaurant which has seen business improve since Sept. 11. "Usually, the bar didn’t fill up until around 6. Most of the TVs used to be tuned into sports stations, now they’re tuned in to MSNBC and CNN. Almost 100 percent of the conversation has been about New York," he said about two weeks after the attacks.
   Mr. Bork sits on the board of the New Jersey Restaurant Association and said the talk at recent meetings has indicated that other restaurants similar to The Tiger’s Tale were having comparable experience. Mr. Bork said he expects moderately priced restaurants to weather both the immediate economic downturn and any broader, longer-term recession better than pricier establishments.
   "When the country went into the Gulf War, we went into a war but there wasn’t a recession too. Now we’re in a recession and we may be going into a war too." Mr. Bork said. What his restaurant could do to react to changing economic conditions, he said, would include making changes to the menus and staff to increase the value of the dishes and service, if that’s what customers and the economy demanded.
   Lahiere’s, a fine dining restaurant which has been in Princeton for more than 80 years, remains basically unaffected, according to owner Joseph Christen. He explained that September was the month in which the restaurant returned to its normal busy fall-winter cycle "like a light switch."
   But, Mr. Christen added, the restaurant lost 50 percent of its business in corporate functions and meetings in the immediate aftermath of the attacks. And he said he thought fewer parents came to town with returning Princeton University students this year than in the past.
   Despite these setbacks, Mr. Christen said he was seeing the rebound in business by the end of the second week after the attacks.
   "The nice thing about all this is that I’ve been seeing a lot more locals come into the restaurant that I haven’t seen in a long time," he said. "People want to go somewhere that they know and which they are familiar with. A lady told me the other night she wanted to come here because she felt comfortable here and that was nice to hear."