Tourism becomes 'tenuous territory'

In a soft economy, hotels, attractions start to feel pinch

By Brett Zongker, Associated Press

Monday, May 19, 2008

Isaac Brekken / Associated Press

A dealer waits for gamblers at the Palazzo, a hotel and casino in Las Vegas. Room occupancy rates have fallen in Sin City.

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 in Washington, 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. The American Automobile Association 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.

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.

"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.