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Travel industry braces for potential downturn

In a soft economy, 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.
Image: Tourist in a casino
A woman sits at a slot machine on the gaming floor of the Palazzo hotel & casino in Las Vegas.Isaac Brekken / AP
/ Source: The Associated Press

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.

“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.

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.

U.S. travelers have gone to France less often since June 2007, and Americans could lose their status as the most frequent travelers that nation, Saint-Cyr said.

“If you traveled a lot in the years from, say, 1996 to 2005 or so, you were constantly aware of your dollars’ buying power and the economic advantage you had almost everywhere as an American,” said Tom Bissell, an American writer visiting Paris. “Today, you feel like a pauper from some tiny, impoverished banana republic. You find yourself literally laughing out loud in restaurants to keep from bursting into tears.”

Back in the U.S., some travelers have no choice but to cut back.

Margaret Stone, from small-town Lucas, Ohio, is hosting two exchange students from Europe and recently brought the two teenage boys to see the monuments and museums on the National Mall in Washington.

But she may have to cancel a planned trip to North Carolina in September when her newest granddaughter is born. “I'm on a fixed income,” Stone said. “It's not going to change. So I'm going to have to make some adjustments.”

On the steps of the National Air and Space Museum in Washington, Lynn Johnson, of Greenville, S.C., said she was on a trip with her daughter's fifth-grade class. But she said the family might not be able to afford another long-distance trip. They might escape to the closest beach this summer instead.

With the summer months fast approaching, tourism officials are waving discounts, freebies and other marketing ploys to draw visitors who might be reluctant to open their purse strings, especially outside major cities.

In Rehoboth Beach, Del., innkeepers are advertising free gas cards with a reservation or an extra night for free, hoping to soothe tourists’ concerns about gas prices.

Just south of Washington, George Washington's Mount Vernon estate in Virginia has created a discount promotion with the Corcoran Gallery of Art to tie in with the exhibit, “The American Evolution: A History Through Art.” A ticket purchased at one attraction is worth a half-price discount at the other. In June, Mount Vernon will try giving away reproductions of George Washington's china to one visitor each day.

“We're interested to see if it might bring out people who just need that extra little push,” said Emily Coleman Dibella, Mount Vernon's spokeswoman.

Tourism officials believe destinations in urban corridors may be most insulated from rising prices. Washington, for example, is ranked as one of the most expensive tourist destinations with an average price of $352 a day for a family of four, according to AAA figures. But local tourism officials say the city benefits from its proximity to cities within a day's driving range, and the influx of European tourists taking advantage of the dollar’s weak value.

Madame Tussauds may be missing expectations but the city also boasts a number of free attractions — namely, the Smithsonian Institution museums, that can still draw visitors.

“I think we're going to be OK,” said William Hanbury, president of Destination DC, the city’s tourism bureau.

In New York City, some officials are even more optimistic, saying the U.S. economic downturn might even benefit city businesses. In the first three months of 2008, an estimated 9.5 million people visited New York City, up by 1 million from the same period a year earlier. Visitor spending rose by an estimated $700 million.

Faced with an expensive euro and tighter budgets, Americans who might usually choose a trip to Europe are more likely to take a shorter trip to New York, said George Fertitta, who heads the city’s tourism office.

“A trip to New York versus a trip to London,”' he said, “dollar for dollar this is as good as it gets.”